<PAGE>

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

                                   FORM 10-K

           [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                     For the year ended December 31, 1999
                                      or
    [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934

                  For the transition period from      to

                          Commission File No. 0-21974

                             UnitedGlobalCom, Inc.
            (formerly known as United International Holdings, Inc.)
            (Exact name of Registrant as specified in its charter)

           State of Delaware                         84-1116217
                                        (I.R.S. Employer Identification No.)
    (State or other jurisdiction of
    incorporation or organization)

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

    4643 South Ulster Street, #1300
           Denver, Colorado                             80237
    (Address of principal executive                  (Zip code)
               offices)

      Registrant's telephone number, including area code: (303) 770-4001

       Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                Class A Common Stock, par value $0.01 per share

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

  Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

  The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, computed by reference to the last sales price of such stock, as of
the close of trading on March 13, 2000 was approximately $7.75 billion.

  The number of shares outstanding of the Registrant's common stock as of
March 13, 2000 was:

    Class A Common Stock--76,299,885 shares
    Class B Common Stock--19,321,940 shares

                      DOCUMENTS INCORPORATED BY REFERENCE

  The information required by Part III of this Annual Report, to the extent
not set forth herein, is incorporated herein by reference from the
registrant's definitive proxy statement relating to the annual meeting of
stockholders to be held in June 2000, which definitive proxy statement shall
be filed with the Securities and Exchange Commission within 120 days after the
end of the fiscal year to which this Annual Report relates.

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<PAGE>

                             UnitedGlobalCom, Inc.
        Annual Report on Form 10-K for the Year Ended December 31, 1999

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                    Number
                                                                                                    ------

                                     PART I

<S>       <C>                                                                                       <C>
Item 1.    Business...............................................................................     1
Item 2.    Properties.............................................................................    29
Item 3.    Legal Proceedings......................................................................    29
Item 4.    Submission of Matters to a Vote of Security Holders....................................    29

                                    PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters..................    30
Item 6.    Selected Financial Data................................................................    31
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations..    32
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.............................    50
Item 8.    Financial Statements and Supplementary Data............................................    53
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...    53

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant.....................................    53
Item 11.   Executive Compensation.................................................................    53
Item 12.   Security Ownership of Certain Beneficial Owners and Management.........................    53
Item 13.   Certain Relationships and Related Transactions.........................................    53

                                    PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K........................    54
</TABLE>

                                       i
<PAGE>

Item 1. BUSINESS

(a) General Development of Business

UnitedGlobalCom, Inc. (formerly known as United International Holdings, Inc.,
together with its majority-owned subsidiaries, the "Company" or "United") is a
leading broadband communications provider outside the United States. We
provide multi-channel television services in 23 countries worldwide and
telephone and Internet/data services in a growing number of our international
markets. Our operations are grouped into three major geographic regions:
Europe, Asia/Pacific and Latin America. Our European operations are held
through our 53.2% owned, publicly traded subsidiary, United Pan-Europe
Communications N.V. ("UPC"), which is the largest Pan-European broadband
communications company providing multi-channel television, telephone and
Internet/data services to 12 countries in Europe and Israel. Our Asia/Pacific
operations are primarily held through our 75.4% owned, publicly traded
subsidiary, Austar United Communications, Limited ("Austar United"), which
owns the largest provider of multi-channel television services in regional
Australia, various Australian programming interests and the only full service
provider of broadband communications in New Zealand. Our primary Latin America
operation is our 100% owned VTR Global Com S.A. ("VTR"), Chile's largest
multi-channel television provider and a growing provider of telephone
services.

Our operating companies consist primarily of highly penetrated, mature
broadband systems that generate stable cash flow. We also operate a number of
earlier stage broadband businesses. Our primary goal in the majority of these
markets is to capitalize on the opportunity to increase revenues and cash
flows through the introduction of new and expanded video programming services
and the launch of telephone and Internet/data services over our broadband
communications networks. Today, we are a full-service provider of these video,
voice and Internet/data services in most of our Western European markets and
in Chile and New Zealand.

(b) Financial Information about Industry Segments

  In the following tables we show certain operating and financial data for the
systems we own for each of the last two years:

                                       1
<PAGE>

                          GROSS OPERATING SYSTEM DATA

<TABLE>
<CAPTION>
                                                 As of and for the Year Ended December 31, 1999
                         -----------------------------------------------------------------------------------------------
                                     Homes in             Two-way     Basic                                      Long-
                           United    Service     Homes     Homes   Subscribers/    Basic             Adjusted     Term
                         Ownership     Area     Passed    Passed      Lines     Penetration Revenue  EBITDA(1)  Debt(2)
                         ---------- ---------- --------- --------- ------------ ----------- -------- ---------  --------
                                                                                                 (In thousands)(3)
<S>                      <C>        <C>        <C>       <C>       <C>          <C>         <C>      <C>        <C>
UPC (EUROPE)
Multi-channel TV
 Subscribers:
 The Netherlands.......    53.2%     1,714,607 1,660,171 1,376,147  1,517,432      91.4%    $158,586 $  66,869  $    --
 Poland................    53.2%     1,950,000 1,756,200       --   1,277,914      72.8%    $ 78,997 $(122,131) $    --
 Hungary (UPC
  Magyarorszag)........    42.2%       901,500   655,272    83,291    518,577      79.1%    $ 33,478 $  11,098  $    --
 Austria...............    50.5%     1,081,100   906,340   753,050    470,543      51.9%    $ 79,648 $  42,490  $    --
 Israel................    24.8%       660,000   608,817   380,698    424,987      69.8%    $159,312 $  70,794  $207,078
 Czech Republic........  50.3-53.2%    817,138   736,462    10,000    374,332      50.8%    $ 26,680 $   2,936  $    --
 France................  50.7-53.0%  1,265,827   927,000    95,174    334,609      36.1%    $ 51,702 $   2,446  $    --
 Norway................    53.2%       529,000   468,095    55,519    327,520      70.0%    $ 46,784 $  19,607  $    --
 Slovak Republic.......  50.3-53.2%    417,813   304,360       --     244,733      80.4%    $  7,289 $   2,378  $    --
 Sweden................    53.2%       770,000   421,624   167,700    243,006      57.6%    $ 29,990 $  10,137  $    --
 Belgium...............    53.2%       133,120   133,000   130,835    125,082      94.0%    $ 14,968 $   3,738  $    --
 Romania...............  27.1-53.2%    284,320   166,394       --     112,099      67.4%    $  2,766 $   1,120  $    --
 Malta.................    26.6%       177,000   173,503       --      76,522      44.1%    $ 15,172 $   5,251  $ 27,669
 Hungary (Monor).......    51.7%        85,693    70,061    84,916     32,369      46.2%    $  5,774 $   3,737  $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
  Total................             10,787,118 8,987,299 3,137,330  6,079,725               $711,146 $ 120,470  $234,747
                                    ---------- --------- ---------  ---------               -------- ---------  --------
Telephone Lines:
 The Netherlands.......    53.2%     1,714,607   989,364       N/A     96,996      9.8%     $ 40,978 $ (22,528) $    --
 Hungary (Monor).......    51.7%        85,693    84,916       N/A     73,221      86.2%    $ 13,063 $   8,453  $    --
 Austria...............    50.5%     1,081,100   585,215       N/A     40,291      6.9%     $  6,963 $ (10,843) $    --
 France................  50.7-53.0%  1,265,827    93,983       N/A     14,135      15.0%    $  2,578 $  (5,621) $    --
 Norway................    53.2%       529,000    37,025       N/A      3,991      10.8%    $    347 $  (6,762) $    --
 Czech Republic........  50.3-53.2%    817,138    10,000       N/A      3,051      30.5%    $    172 $      51  $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
  Total................              5,493,365 1,800,503       N/A    231,685               $ 64,101 $ (37,250) $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
Data Subscribers:
 Internet..............  42.2-53.2%  6,395,154 2,616,083       N/A    121,550      4.6%     $ 29,477 $ (80,455) $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
Programming
 Subscribers:
 Ireland...............    42.6%           N/A       N/A       N/A  1,760,000       N/A     $    951 $  (4,003) $    --
 Spain/Portugal........    26.6%           N/A       N/A       N/A  1,137,000       N/A     $ 26,794 $  11,472  $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
  Total................                    N/A       N/A       N/A  2,897,000               $ 27,745 $   7,469  $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
AUSTAR UNITED (AUSTRALIA/NEW ZEALAND)
Multi-channel TV
 Subscribers:
 Australia.............    75.4%     2,085,000 2,083,108       --     381,763      18.3%    $144,643 $  (7,837) $    --
 New Zealand...........    75.4%       141,000    87,029    87,029     16,723      19.2%    $  2,303 $  (3,326) $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
  Total................              2,226,000 2,170,137    87,029    398,486               $146,946 $ (11,163) $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
Telephone Lines:
 New Zealand...........    75.4%       141,000    87,029       N/A     24,678      28.4%    $  7,388 $  (2,630) $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
Data Subscribers:
 New Zealand...........    75.4%       141,000    87,029       N/A      6,772      7.8%     $  1,320 $     --   $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
Programming
 Subscribers:
 Australia.............    37.7%           N/A       N/A       N/A    934,000       N/A     $ 30,764 $  14,207  $    --
                                    ---------- --------- ---------  ---------               -------- ---------  --------
OTHER ASIA/PACIFIC
Multi-channel TV
 Subscribers:
 Philippines...........    19.6%       600,000   477,448       --     191,521      40.1%    $ 18,671 $   6,188  $ 18,761
                                    ---------- --------- ---------  ---------               -------- ---------  --------
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                               As of and for the Year Ended December 31, 1999
                          ------------------------------------------------------------------------------------------
                                    Homes in            Two-way    Basic                                      Long-
                           United    Service    Homes    Homes  Subscribers/    Basic             Adjusted    Term
                          Ownership   Area     Passed   Passed     Lines     Penetration Revenue  EBITDA(1)  Debt(2)
                          --------- --------- --------- ------- ------------ ----------- -------- ---------  -------
                                                                                              (In thousands)(3)
<S>                       <C>       <C>       <C>       <C>     <C>          <C>         <C>      <C>        <C>
LATIN AMERICA
Multi-channel TV
 Subscribers:
 Chile..................   100.0%   2,350,000 1,616,141 390,126    386,967      23.9%    $113,004 $ 27,725    $--
 Mexico.................    49.0%     341,600   229,451     --      59,708      26.0%    $ 12,946 $  2,018    $--
 Brazil (Jundiai).......    46.3%      70,200    66,623     --      17,720      26.6%    $  6,172 $  1,394    $--
 Brazil (TV Show
  Brasil)...............   100.0%     437,000   306,000     --      16,100      5.3%     $  4,645 $ (1,863)   $--
 Peru...................    62.2%     140,000    63,735     --       8,896      14.0%    $  2,334 $ (1,176)   $--
                                    --------- --------- -------  ---------               -------- --------    ----
  Total.................            3,338,800 2,281,950 390,126    489,391               $139,101 $ 28,098    $--
                                    --------- --------- -------  ---------               -------- --------    ----
Telephone Lines:
 Chile..................   100.0%   2,350,000   390,126     N/A     66,718      17.1%    $ 14,467 $ (4,388)   $--
                                    --------- --------- -------  ---------               -------- --------    ----
Data Subscribers:
 Chile..................   100.0%   2,350,000   390,126     N/A        998      0.3%     $    --  $    --     $--
                                    --------- --------- -------  ---------               -------- --------    ----
Programming Subscribers:
 Latin America..........    50.0%         N/A       N/A     N/A  5,120,249       N/A     $  7,374 $(12,193)   $--
                                    --------- --------- -------  ---------               -------- --------    ----
</TABLE>

<TABLE>
<CAPTION>
                                        As of and for the Year Ended December 31, 1999
                         ----------------------------------------------------------------------------------
                          Homes in              Two-Way     Basic                                  Long-
                          Service     Homes      Homes   Subscribers/               Adjusted        Term
                            Area      Passed    Passed      Lines      Revenue      EBITDA(1)     Debt(2)
                         ---------- ---------- --------- ------------ ----------    ---------    ----------
                                                                             (In thousands)(3)
<S>                      <C>        <C>        <C>       <C>          <C>           <C>          <C>
TOTAL COMPANY BASED ON
 GROSS DATA(4):
 Multi-channel TV
  Subscribers........... 16,951,918 13,916,834 3,614,485  7,159,123   $1,015,864    $ 143,593    $  253,508
 Telephone Lines........  7,984,365  2,277,658       N/A    323,081   $   85,956    $ (44,268)   $      --
 Data Subscribers.......  8,886,154  3,093,238       N/A    129,320   $   30,797    $ (80,455)   $      --
 Programming
  Subscribers...........        N/A        N/A       N/A  8,951,249   $   65,883    $   9,483    $      --
TOTAL COMPANY BASED ON
 CONSOLIDATED
 SYSTEMS(5):
 Multi-channel TV
  Subscribers........... 15,103,118 12,360,992 3,233,787  6,388,665   $  614,849    $ 132,422    $1,625,344
 Telephone Lines........  7,984,365  2,277,658       N/A    323,081   $   56,594    $ (48,574)   $      --
 Data Subscribers.......  8,886,154  3,093,238       N/A    129,320   $   27,240    $ (81,226)   $      --
 Programming
  Subscribers...........        N/A        N/A       N/A  1,760,000   $   12,029(7) $(81,496)(7) $      --
TOTAL COMPANY BASED ON
 PROPORTIONATE DATA(6):
 Multi-channel TV
  Subscribers........... 10,207,638  8,272,736 1,980,797  3,790,278   $  565,137    $  59,595    $   62,374
 Telephone Lines........  5,329,505  1,396,250       N/A    203,199   $   53,747    $ (26,018)   $      --
 Data Subscribers.......  5,727,568  1,824,166       N/A     69,630   $   16,319    $ (42,776)   $      --
 Programming
  Subscribers...........        N/A        N/A       N/A  3,963,741   $   22,817    $     607    $      --
</TABLE>

                                       3
<PAGE>

                          GROSS OPERATING SYSTEM DATA

<TABLE>
<CAPTION>
                                                  As of and for the Year Ended December 31, 1998
                         -------------------------------------------------------------------------------------------------
                                     Homes in               Basic                                                Long-
                           United     Service    Homes   Subscribers/    Basic                   Adjusted         Term
                          Ownership    Area     Passed      Lines     Penetration   Revenue      EBITDA(1)      Debt(2)
                         ----------- --------- --------- ------------ ----------- ------------ -------------  ------------
                                                                                             (In thousands)(3)
<S>                      <C>         <C>       <C>       <C>          <C>         <C>          <C>            <C>
UPC (EUROPE)
Multi-channel TV Subscribers:
 The Netherlands.......  25.5-51.0%  1,521,527 1,487,673  1,396,867      93.9%    $    101,710 $     28,254   $    319,706
 Austria...............     95.0%    1,073,297   900,350    454,957      50.5%    $     80,903 $     36,997   $        --
 Hungary (Kabelkom)....    79.25%      901,500   510,622    442,567      86.7%    $     11,827 $      4,264   $        --
 Israel................     46.6%      595,000   575,976    402,355      69.9%    $    161,233 $     89,073   $    281,361
 Norway................     100%       529,924   463,235    323,387      69.8%    $     43,876 $     15,647   $        --
 Belgium...............     100%       133,000   133,000    127,398      95.8%    $     16,803 $      6,059   $        --
 Malta.................     50.0%      179,000   162,996     70,363      43.2%    $     14,297 $      5,401   $     22,333
 Romania...............   51.0-100%    180,000    98,174     61,999      63.2%    $      1,004 $        460   $        --
 Czech Republic........     100%       229,531   151,716     54,153      35.7%    $      4,032 $       (854)  $        --
 Hungary (Monor).......    44.75%       85,000    68,339     30,623      44.8%    $     15,217 $      9,626   $     35,317
 France................     99.6%      150,000    74,623     29,107      39.0%    $      3,678 $     (2,317)  $        --
 Slovak Republic.......   75.0-100%     67,959    37,641     21,044      55.9%    $        693 $       (616)  $        --
                                     --------- ---------  ---------               ------------ ------------   ------------
  Total................              5,645,738 4,664,345  3,414,820               $    455,273 $    191,994   $    658,717
                                     --------- ---------  ---------               ------------ ------------   ------------
Telephone Lines:
 Hungary (Monor).......    44.75%       85,000    84,037     69,244      82.4%     [Financial information is included in
 The Netherlands.......  25.5-51.0%  1,521,527   541,613     41,180      7.6%      multi-channel TV information above.]
                                     --------- ---------  ---------
  Total................              1,606,527   625,650    110,424
                                     --------- ---------  ---------
Data Subscribers:
 Internet..............  25.5-100.0%       N/A       N/A     24,338       N/A     $        --  $     (7,116)  $        --
                                     --------- ---------  ---------               ------------ ------------   ------------
Programming
 Subscribers:
 Spain/Portugal........     33.5%          N/A       N/A    684,000       N/A     $     17,099 $      3,431   $      3,500
 Ireland...............     80.0%          N/A       N/A    597,314       N/A     $        610 $     (4,213)  $        --
                                     --------- ---------  ---------               ------------ ------------   ------------
  Total................                    N/A       N/A  1,281,314               $     17,709 $       (782)  $      3,500
                                     --------- ---------  ---------               ------------ ------------   ------------
AUSTAR UNITED (AUSTRALIA/NEW ZEALAND)
Multi-channel TV
 Subscribers:
 Australia.............     98.0%    2,085,000 2,083,108    288,721      13.9%    $     89,263 $    (24,915)  $        --
 New Zealand...........     63.7%      141,000    41,914      6,010      14.3%    $      1,669 $     (9,669)  $     20,935
                                     --------- ---------  ---------               ------------ ------------   ------------
  Total................              2,226,000 2,125,022    294,731               $     90,932 $    (34,584)  $     20,935
                                     --------- ---------  ---------               ------------ ------------   ------------
Telephone Lines:
                                                                                   [Financial information is included in
 New Zealand...........     63.7%      141,000    37,292      7,360      19.7%
                                                                                   multi-channel TV information above.]
Programming
 Subscribers:
 Australia.............     49.0%          N/A       N/A    694,600       N/A     $     17,027 $      1,433   $        --
                                     --------- ---------  ---------               ------------ ------------   ------------
OTHER ASIA/PACIFIC
Multi-channel TV
 Subscribers:
 Philippines...........     19.2%      600,000   401,818    151,543      37.7%    $     13,538 $        583   $          3
                                     --------- ---------  ---------               ------------ ------------   ------------
LATIN AMERICA
Multi-channel TV
 Subscribers:
 Chile.................     34.0%    2,321,000 1,567,871    393,851      25.1%    $    119,005 $     28,022   $    122,392
 Mexico................     49.0%      341,600   224,130     54,838      24.5%    $     10,533 $      2,953   $        --
 Brazil (Jundiai)......     46.3%       70,200    67,845     19,714      29.1%    $      9,162 $      2,863   $         86
 Brazil (TV Show
  Brasil)..............    100.0%      437,000   306,000     13,233      4.3%     $      5,994 $       (539)  $        --
 Peru..................     60.0%      140,000    57,377     10,023      17.5%    $      1,858 $     (1,117)  $        --
                                     --------- ---------  ---------               ------------ ------------   ------------
  Total................              3,309,800 2,223,223    491,659               $    146,552 $     32,182   $    122,478
                                     --------- ---------  ---------               ------------ ------------   ------------
Telephone Lines:
                                                                                   [Financial information is included in
 Chile.................     34.0%    2,321,000   218,460     20,985      9.6%
                                                                                   multi-channel TV information above.]
                                     --------- ---------  ---------
Programming
 Subscribers:
 Latin America.........     50.0%          N/A       N/A  3,449,481       N/A     $      3,671 $    (10,916)  $        --
                                     --------- ---------  ---------               ------------ ------------   ------------
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                As of and for the Year Ended December 31, 1998
                         --------------------------------------------------------------
                          Homes in               Basic                          Long-
                          Service     Homes   Subscribers/          Adjusted     Term
                            Area     Passed      Lines     Revenue  EBITDA(1)  Debt(2)
                         ---------- --------- ------------ -------- ---------  --------
                                                                (In thousands)(3)
<S>                      <C>        <C>       <C>          <C>      <C>        <C>
TOTAL COMPANY BASED ON
 GROSS DATA(4):
 Multi-channel TV
  Subscribers........... 11,781,538 9,414,408  4,352,753   $706,295 $190,175   $802,133
 Telephone Lines........  4,068,527   881,402    138,769   $    --  $    --    $    --
 Data Subscribers.......        N/A       N/A     24,338   $    --  $ (7,116)  $    --
 Programming
  Subscribers...........        N/A       N/A  5,425,395   $ 38,407 $(10,265)  $  3,500
TOTAL COMPANY BASED ON
 CONSOLIDATED
 SYSTEMS(5):
 Multi-channel TV
  Subscribers...........  5,927,211 4,815,846  1,826,589   $249,289 $ 13,836   $751,898
 Telephone Lines........        --        --         --    $    223 $ (4,423)  $    --
 Data Subscribers.......        N/A       N/A     24,338   $  3,989 $ (9,505)  $    --
 Programming
  Subscribers...........        N/A       N/A    597,314   $    567 $ (3,851)  $    --
TOTAL COMPANY BASED ON
 PROPORTIONATE DATA(6):
 Multi-channel TV
  Subscribers...........  7,795,338 6,352,996  2,705,262   $430,741 $ 96,668   $321,697
 Telephone Lines........  1,545,457   313,403     58,538   $    --  $    --    $    --
 Data Subscribers.......        N/A       N/A     15,956   $    --  $ (7,116)  $    --
 Programming
  Subscribers...........        N/A       N/A  2,772,086   $ 16,395 $ (6,977)  $  1,173
</TABLE>
-------
(1) Adjusted EBITDA represents net operating earnings before depreciation,
    amortization and stock-based compensation charges. Industry analysts
    generally consider Adjusted EBITDA to be a helpful way to measure the
    performance of cable television operations and communications companies.
    We believe Adjusted EBITDA helps investors to assess the cash flow from
    our operations from period to period and thus to value our business.
    Adjusted EBITDA should not, however, be considered a replacement for net
    income, cash flows or for any other measure of performance or liquidity
    under generally accepted accounting principles, or as an indicator of a
    company's operating performance. Our presentation of Adjusted EBITDA may
    not be comparable to statistics with a similar name reported by other
    companies. Not all companies and analysts calculate Adjusted EBITDA in the
    same manner.
(2) The amounts disclosed herein represent unconsolidated debt. Debt for
    consolidated operating systems is included in the footnotes to the
    consolidated financial statements.
(3) The financial information presented herein has been taken from unaudited
    financial information of the respective operating companies that were
    providing service as of December 31, 1999. Certain information presented
    herein has been derived from financial statements prepared in accordance
    with foreign generally accepted accounting principles which differ from
    U.S. generally accepted accounting principles. In addition, certain
    amounts have been converted to U.S. dollars using the December 31, 1999
    exchange rates for the convenience translation.
(4) Summation of the gross operating system data on the previous page.
(5) Summation of the gross operating system data on the previous page, for
    those systems that we consolidate in our financial statements due to
    majority ownership and control.
(6) Summation of the gross operating system data on the previous page,
    multiplied by our ownership percentage for each respective system.
(7) The consolidated financial information for @Entertainment (Poland) is
    included in Programming. The financial information for @Entertainment
    (Poland) within Gross Data is included in Multi-channel TV.

                                       5
<PAGE>

(c) Narrative Description of Business

For strategic purposes and, in some cases, because of foreign ownership
restrictions, we have often initially invested in operating systems with local
strategic partners. In some cases, such as in many of our European and
Australian systems, we subsequently acquired our partners' interests in these
systems. Below is a summary of the ownership structure of our three regional
holding companies as well as our interests in our operating companies as of
December 31, 1999. Our interests in such systems are often held by various
holding companies and our voting rights and rights to participate in earnings
of such entities may differ from the interests indicated in the chart below.

<TABLE>
<CAPTION>

                                                              United
              100.0%                                                      100.0%
    United Europe Inc.("UEI")                         United International Properties, Inc. ("UIPI")
<S>                                          <C>                                               <C>
          53.2%                                            100.0%                                     100.0%
United Pan-Europe Communications N.V.        United Asia/Pacific Communications, Inc.        United Latin America, Inc.
            ("UPC")                                        ("UAP")                                    ("ULA")
                                                           100.0%
 Austria:                                        United Australia/Pacific, Inc.              Brazil:
  Telekabel Group             95.0%                      ("United A/P)                        TV Show Brasil   100.0%
 Belgium:                                                   75.4%                             Jundiai           46.3%
  UPC Belgium                100.0%           Austar United Communications, Limited          Chile:
 Czech Republic:                                       ("Austar United")                      VTR              100.0%
  Kabel Net                  100.0%               Australia:                                 Mexico:
  Kabel Plus                  94.6%                 Austar                   100.0%           Megapo            49.0%(4)
 France:                                            XYZ Entertainment         50.0%          Peru:
  UPC France                  99.6%(1)            New Zealand                                 Cable Star        62.2%
 Germany:                                           Saturn                    100.0%        Latin American
  PrimaCom                    18.2%(2)                                                       Programming:
 Hungary:                                       * Other UAP                                   MGM Networks LA   50.0%
  UPC Magyarorszag            79.3%             China:
  Monor                       97.1%               Hunan International TV        49.0%
 Ireland:                                       Philippines:
  Tara                        80.0%               Pilipino Cable Corporation    19.6%
 Israel:
  Tevel                       46.6%
 Malta:
  Melita                      50.0%
 The Netherlands:
  UPC Nederland              100.0%
 Norway:
  UPC Norge                  100.0%
 Poland:
  @Entertainment             100.0%
 Romania:
  UPC Romania          51.0%-100.0%
 Slovak Republic:
  UPC Slovak           95.0%-100.0%
 Spain/Portugal:
  Iberian Programming         50.0%
 Sweden:
  Stjarn                     100.0%
 United Kingdom:
  Xtra Music                  41.0%
 Other Business Lines:
  SBS                         13.3%(3)
  Priority Telecom           100.0%
  chello broadband           100.0%
  UPCtv                      100.0%
</TABLE>

(1) In February 2000, UPC's interest decreased to 92.0%.
(2) Subsequent to December 31, 1999, UPC increased its interest to 24.9%.
(3) In February 2000, UPC acquired an additional 10.2% interest in SBS for
    (Euro) 162.5 million.
(4) In January 2000, ULA purchased an additional 41.3% interest in Megapo for
    $22.8 million.

                                       6
<PAGE>

Europe

Our European operations are held through our 53.2% owned subsidiary, UPC,
which owns and operates the largest Pan-European group of broadband
communication networks and is one of the most innovative broadband
communications companies in Europe. UPC provides multi-channel television,
telephone, high-speed Internet/data services and programming services in 12
countries in Europe and in Israel. UPC completed an initial public offering in
February 1999 and is publicly traded on the Amsterdam Stock Exchange under the
symbol "UPC" and on The Nasdaq Stock Market, Inc. ("Nasdaq") under the symbol
"UPCOY". UPC had a market capitalization of approximately $30.2 billion based
on the closing price on Nasdaq on March 13, 2000.

UPC's western European systems are located in Vienna (Austria), Brussels
(Belgium), Paris (France), Amsterdam (The Netherlands), Oslo (Norway) and
Stockholm (Sweden). UPC recently acquired a minority interest in a German
cable television operator. UPC's Central and Eastern European systems are
located in Prague (Czech Republic), Budapest (Hungary), Warsaw (Poland),
Bucharest (Romania), and Bratislava (Slovak Republic). UPC has operations in
distinct regions in the Czech Republic, Romania and the Slovak Republic and,
in the case of Poland, in regional clusters centered around eight of the ten
major cities. UPC also has systems in Tel Aviv (Israel) and Valletta (Malta).
UPC has undertaken a significant upgrade of its cable television
infrastructure, beginning in 1994 with its western European systems. When it
upgrades, UPC replaces parts of the coaxial cable with fiber optic lines and
upgrades the remaining coaxial cable to increase transmission speed and enable
signals to be sent both to and from the subscriber's home. This upgrading
enables UPC to provide digital video, telephone and Internet/data services. As
of December 31, 1999, approximately 57.0% of the network in UPC's western
European systems had been upgraded. UPC continues to evaluate upgrading its
network in its other systems.

Video

UPC offers some of the most advanced analog video services available today and
a large choice of FM radio programs and plans to further increase its
offerings through an integrated digital set-top box. In addition, because many
of its operations are two-way capable, UPC has been able to add more
interactive services. In many systems, for example, UPC has introduced impulse
pay-per-view services, which enable subscribers to UPC's expanded basic tier
to select and purchase programming services, such as movies and special
events, directly by remote control.

UPC plans to continue increasing its revenue per subscriber by expanding its
video services program offerings in the expanded basic tier service, pay-per-
view and digital audio areas. UPC plans to continue improving its expanded
basic tier offerings by adding new channels and, where possible, migrating
popular commercial channels into an expanded basic tier service. Generally,
basic tier pricing is regulated while the expanded basic tier is not price-
regulated. In addition, UPC plans to offer subscribers additional choice by
offering thematic groupings of tiered video services in a variety of genres
and by increasing the number and time availability of pay-per-view offerings.

UPC is constructing a satellite-based pan-European digital distribution
platform that will enable digital distribution of its new channels and other
television signals to its upgraded networks. UPC is scheduled to launch its
digital distribution platform in 2000. When this digital distribution platform
is constructed, UPC will convert its impulse pay-per-view services into a near
video on demand service that would be able to provide up to 75 channels of
programming. Near video on demand is achieved by broadcasting movies as
frequently as every 15 minutes, thus enabling subscribers to choose a movie at
a convenient start time. UPC is negotiating to acquire rights to broadcast
first-run hit movies, adult programming and special events over this planned
digital distribution platform.

Full digitalization of UPC's television signals, to be made possible by UPC's
network upgrade to full two-way capability, will provide UPC's Western
European systems with substantially more channel capacity. This increased
channel capacity will enable subscribers to customize their subscriptions for
UPC's products and

                                       7
<PAGE>

services to suit their lifestyles and personal interests. When the planned
digital distribution platform is completed, UPC intends to provide its
subscribers with customizable programming guides that would enable them to
program their favorite channels and also allow parents to restrict their
children's viewing habits. The construction of the planned digital
distribution platform will involve significant capital investment and the use
of new technologies. We cannot assure you that we will be able to complete the
construction of the digital distribution platform on the planned schedule.

Competition. In areas where UPC's cable television franchises are exclusive,
UPC's operating companies generally face competition only from digital direct-
to-home ("DTH") satellite service providers and television broadcasters. UPC
has faced the most competition from DTH providers in Amsterdam, France and
Sweden. In those areas where UPC's cable television franchises are non-
exclusive, including France, Sweden and Poland, UPC's operating companies face
competition from other cable television service providers, DTH satellite
service providers and television broadcasters. In the programming business,
UPC competes with other programming suppliers for sales to systems other than
its own.

Voice

We believe that UPC's existing customer base and upgraded network give it a
unique opportunity to provide telephone services in Europe. UPC offers local
telephone services over its cable network, under the brand name Priority
Telecom, in its Austrian, Dutch, French and Norwegian systems. UPC also has a
traditional telephone network in Hungary. UPC also provides national and
international long distance voice telephone services. UPC believes that its
fiber and broadband, coaxial cable and cable-based subscriber relationships
provide ready access to potential residential telephone subscribers. UPC
believes its networks and facilities also provide the opportunity for cost-
effective access to potential business telephone customers.

Market. We believe there are significant growth opportunities in the European
telecommunications market as a result of the January 1, 1998 liberalization of
the telephone industry in most European Union ("EU") member countries and
Norway. This liberalization allows new providers to offer telephone and other
telecommunications services in markets that have historically been dominated
by incumbent national operators. Priority Telecom will be positioned as UPC's
Pan-European competitive local exchange carrier ("CLEC") via both organic
growth and acquisitions. Priority Telecom will offer telephone services to its
residential customers and package voice and data services in the small, medium
and large business market.

Network and Equipment. Traditional telephone service is carried over twisted
copper pair in the local loop. The cable telephone technology that UPC is
using allows telephone traffic to be carried over its upgraded network without
requiring the installation of twisted copper pair. This technology only
requires the addition of equipment at the master telecom center, the
distribution hub and in the customer's home to transform voice communication
into signals capable of transmission over the fiber and coaxial cable. UPC has
installed telephone switches in its master telecom center in each of the
countries in which it has launched Priority Telecom. UPC has supply agreements
from multiple suppliers for the rest of the equipment.

Residential Market. UPC generally prices its Priority Telecom offering in the
residential market at a discount compared to services offered by incumbent
telecommunications operators. Because of the relatively high European local
tariff rates, UPC believes potential customers will be receptive to its
telephone services at this price. In addition to offering competitive pricing,
UPC offers a full complement of services to telephone subscribers including
custom local access services, "CLASS," including caller ID, call waiting, call
forwarding, call blocking, distinctive ringing and three-way calling. UPC is
also able to provide voice mail and second lines. The introduction of number
portability in some of its markets, including The Netherlands, Norway and
France, provides an even greater opportunity as potential customers will be
able to subscribe to UPC's service without having to change their existing
telephone numbers.


                                       8
<PAGE>

Business Market. Priority Telecom offers product packages of traditional voice
and data services to small and medium sized business customers. For the large
segment, tailor-made solutions are currently offered in The Netherlands and
Priority Telecom aims at marketing these solutions on a Pan-European scale.

Carriers' Carrier Market. Priority Telecom is building a Carriers' Carrier
business through leveraging the existing AORTA backbone and the cable
footprint. UPC's extensive coverage within the local loop and termination
ability creates a strong competitive advantage for Priority Telecom compared
to other wholesale operators.

UPC intends to concentrate on building brand awareness for Priority Telecom as
a Pan-European telecommunications brand, which may be co-branded with its
existing local video services brands. UPC also plans to integrate Priority
Telecom's residential and small office/home office telephone products with its
video services and chello broadband's Internet access services, thus enabling
it to offer pricing packages designed to encourage multiple product purchases
and minimize churn.

UPC believes the residential and business market sectors represent a
significant business opportunity for Priority Telecom. Simple marketing offers
are being used to encourage rapid take-up by overcoming consumer inertia and
increasing brand awareness of our products. The approach includes, for
example, innovative offers and periodic deep discounts. Large and medium-sized
business customers are marketed through a key account management direct sales
force targeting specific industry sectors.

Interconnection Agreements. Each of UPC's operating companies that offers
telephone services has entered into an interconnection agreement with the
incumbent national telecommunications service provider. In addition, certain
of these operating companies have also entered into interconnection agreements
with other telecommunications service providers, providing alternative routes
and additional flexibility. Even though UPC has secured interconnection
arrangements, UPC may still experience difficulty operating under them. In its
Amsterdam system, for example, capacity constraints at the interconnection
have lowered the quality of its telephone service, resulting in a higher rate
of customer loss than its system has experienced before. In Austria, while UPC
secured its interconnection arrangement with the support of the Austrian
telecommunications regulator, the Austrian incumbent telecommunications
operator is challenging the arrangement in the Austrian courts.

Pan-European Backbone. UPC is developing a pan-European backbone and
telecommunications carrier business. This backbone is designed to link its
major cable and telephone networks through a combination of leased capacity
arrangements to allow it to capture more traffic between its operating areas
and to leverage UPC's national assets to lower the termination cost and
thereby create a strong competitive cost advantage relative to other carriers.
In October 1998, UPC entered into a contract with Hermes Europe Railtel for
the purchase of high speed fiber optic-based transmission capacity. The first
phase is expected to be in place for international telephone traffic by the
first half of 2000.

Competition. In the provision of telephone services, Priority Telecom and
UPC's operating companies face competition from the incumbent
telecommunications operator in each country. These operators have
substantially more experience in providing telephone services and have greater
resources to devote to the provision of telephone services. In many countries,
UPC's operating companies also face competition from other new telephone
service providers like UPC, including traditional wireline providers, other
cable telephone providers, wireless telephone providers and indirect access
providers.

Data

UPC's chello broadband subsidiary is a leading international provider of
broadband Internet services. chello broadband has long-term agreements for the
distribution of Internet services to residential and business customers using
cable television, fixed wireless and satellite infrastructure of local
operators, including our operating companies, covering 14.9 million homes in
Europe, Australia, New Zealand and Latin America. chello

                                       9
<PAGE>

broadband currently provides its services through UPC's operating companies in
Austria, Belgium, France, The Netherlands, Norway and Sweden, and through our
operating companies in Australia and New Zealand, covering a total of
approximately 8.3 million homes.

chello broadband launched its services in March 1999, and at December 31,
1999, it had approximately 118,000 residential subscribers, as well as
approximately 3,500 business subscribers. chello broadband was voted Best
European Consumer ISP at the European ISP Awards in December 1999. In each of
its existing markets, chello broadband offers high-speed Internet access and
local language portals that integrate multimedia, locally relevant content and
services specially designed for the broadband environment.

Market. There are significant growth opportunities in the Internet market both
within and beyond Europe, and chello broadband's position as a leading
provider of broadband Internet services in Europe gives us an opportunity to
participate in one of the fastest growing and highest value-added Internet
segments. The use of the Internet in Europe has grown substantially in recent
years and while still less widespread than in the United States, Internet
usage in Europe is expected to increase and ultimately reach levels similar to
those in the United States. Today, however, the total number of Internet users
in Europe is relatively low.

Operations. chello broadband is designed to be a leading provider of broadband
Internet services to residential customers and small and medium-sized
businesses. chello broadband has taken a comprehensive approach to broadband
services that encompasses technological versatility and excellence across
platforms, compelling content, customer network support with aggressive
marketing and brand-building.

The table below shows selected information for the countries in which chello
broadband currently offers its services at December 31, 1999:

<TABLE>
<CAPTION>
                          Homes in                        Upgraded
                         Operator's   Homes      Video      Homes     chello         Date of
        Country             Area     Passed   Subscribers  Passed   Subscribers Launch of Service
        -------          ---------- --------- ----------- --------- ----------- -----------------
<S>                      <C>        <C>       <C>         <C>       <C>         <C>
Europe--UPC Systems..... 5,493,654  4,516,230  3,018,192  2,578,425   121,550   April--June 1999
Europe--Non-system......   169,000    100,000     68,000     91,000     1,050   June 1999
Other(1)................ 2,226,000  2,170,137    398,486  2,172,029    Trials   Trials
                         ---------  ---------  ---------  ---------   -------
  Total................. 7,888,654  6,786,367  3,484,678  4,841,454   122,600
                         =========  =========  =========  =========   =======
</TABLE>
--------
(1) chello broadband's services in Australia are provided through satellite
    and fixed wireless distribution technologies. The flow of Internet data
    from customers' homes to the Internet is transmitted via telephone lines.
    The number of upgraded homes passed in Australia refers to those homes
    passed that are able to upstream Internet data via their telephone lines.
    chello broadband's services in Australia and New Zealand are being tested
    with a limited number of users prior to full commercial launch.

chello broadband has agreements to launch its services on UPC's networks in
the Czech Republic, Hungary, Poland, the Slovak Republic and Chile. At
December 31, 1999, these networks had a total of 6.4 million homes in their
service areas, 5.1 million homes passed, of which 0.5 million were upgraded,
and 2.8 million video subscribers. These agreements are in addition to its
current service areas described above. At December 31, 1999, chello
broadband's total coverage rights included 14.9 million homes in the local
operators' service areas and 11.9 million homes passed (of which 5.2 million
were upgraded).

chello broadband's agreements with local operating companies cover all the
homes in their territory. Therefore, as local operating companies' networks
expand, other than through acquisitions, chello broadband's exclusive rights
to distribute its services expand as well.

Residential Subscribers. chello broadband offers one of the most compelling
consumer Internet experiences currently available in its markets. Upon
installation, each new subscriber's personal computer is configured for

                                      10
<PAGE>

chello broadband's services, which provides easy access to the chello
broadband portals and the Internet. chello broadband offers residential
subscribers the following significant benefits:

  .  High-speed access;
  .  Flat fee;
  .  User friendly, always-on Internet access;
  .  Higher quality services; and
  .  Local language portals with compelling broadband content.

chello broadband has developed nine local language portals with the objective
of making them the leading broadband Internet portals in their markets. Each
of these portals brings together locally relevant content with broadband
content and is managed and supported locally by a chello office. chello
broadband plans to offer an expanding variety of multimedia programming, e-
commerce and services specifically designed to take advantage of the speed and
versatility provided by broadband access. Currently, subscribers are able to
listen to music and watch videos, news, and sporting events at near
television-quality.

Business Subscribers. chello broadband provides basic broadband Internet
access to local area networks, or LANs, designed to support between one and
twenty-five personal computers. This service, called Small LAN Connect,
currently supports over 3,500 businesses. In addition, chello broadband is
conducting trials of its service, called Remote LAN Connect, in Austria and
Norway. This service offers, among other features, enhanced two-way security,
Internet access for an unlimited number of personal computers and enhanced
email.

chello broadband Technology. The main technologies designed to deliver content
at high-speed include cable technologies using cable modems, telephone
technologies such as digital subscriber line ("DSL") and emerging fixed
wireless technologies. UPC intends to offer subscribers a number of new ways
to access chello broadband's services, including through television via
digital set-top boxes.

chello broadband's technology, network and supporting systems play a central
role in the design and delivery of its services. The primary components of the
network used to deliver chello broadband's services are its network operations
center, its backbone infrastructure named AORTA, its master and regional data
centers and UPC's local operating companies' networks. chello broadband relies
on its network operations center to monitor the quality of its services. From
this center in Amsterdam, which operates 24 hours per day, 7 days per week,
chello broadband can manage AORTA, regional data centers, regional networks,
headend facilities, servers and other components of the network
infrastructure.

AORTA allows Internet traffic to be routed or rerouted if parts of the network
are congested or impaired. The core of AORTA connects Amsterdam, Stockholm,
Vienna, Paris, Brussels and London, while additional links connect Oslo, New
York, San Jose and Sydney. chello broadband signed a capacity right of use
agreement in August 1999 with GTS for a transatlantic fiber-optic cable link,
which is to operate from London and Paris to New York. We expect this link to
be operational by January 2001. chello broadband's agreement with GTS is for a
minimum of 15 years.

chello broadband's master data center in Amsterdam, as well as its regional
and local data centers, act as service hubs for defined areas ranging from
major metropolitan areas to smaller areas of an individual local operating
companies' networks. They provide key services, including email, chat and news
to subscribers. They also provide a cost-efficient infrastructure to cache and
multicast data throughout a region and store local content and subscribers'
web pages.

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


                                      11
<PAGE>

Programming

UPC has been involved in several country-specific programming ventures
including those dedicated to creating channels for Spain, the Slovak Republic,
Poland, Israel and Malta. Together, these programming ventures have developed
channels in key genres including sports, children, documentaries and movies,
which are subtitled or dubbed in the local language. We believe that UPC's
programming ventures add value to its video distribution business by providing
compelling content to its subscribers.

UPC's programming operations encompass the following: a 100% interest in UPCtv
which develops and produces multiple proprietary channels of television
programming for distribution on UPC systems throughout Europe; an 80.0%
interest in Tara which provides a general entertainment channel for the United
Kingdom; and a 50.0% interest in Iberian Programming which produces a movie
channel, a documentary channel, a children's channel and a music channel
independently, as well as a history channel in joint venture with A&E Networks
for the Spanish and Portuguese markets.

As of December 31, 1999, UPC owned 13.3% of SBS. In February 2000, UPC
increased its ownership in SBS to 23.5%. UPC has recently announced its
intention to offer to acquire the remaining shares of SBS. SBS creates,
acquires, packages and distributes programming and other media content in many
of UPC's territories and elsewhere in Europe via television channels, radio
stations and the Internet. SBS owns and/or operates ten television and 16
radio stations across ten European countries in addition to various
promotional websites.

Western Europe and Israel

Austria: Telekabel Group. UPC owns 95.0% of the Telekabel Group, which
provides communications services to the Austrian cities of Vienna, Klagenfurt,
Graz, Baden and Wiener Neustadt and is the largest video distribution system
in Austria with over 40.0% of the market. Telekabel Group's largest
subsidiary, Telekabel Wien, which serves Vienna and represents approximately
87.0% of Telekabel Group's total subscribers, owns and operates one of the
larger clusters of cable systems in the world in terms of subscriber numbers
served from a single headend.

UPC is capitalizing on Telekabel Group's strong market position and positive
perception by its customers by aggressively expanding Telekabel Group's
service offerings as its network is upgraded to full two-way capability. The
upgraded network enabled Telekabel Group to launch an expanded basic tier,
impulse pay-per-view services and Internet/data services in 1997. Telekabel
Group also offers Priority Telecom cable telephone services in Vienna.

As of December 31, 1999, approximately 51.9% of the homes passed by Telekabel
Group's network subscribed to its basic cable television services. Telekabel
Group's service includes substantially all of the broadcast channels from
Austria and Germany, as well as other popular channels not available by
broadcast. Telekabel Group also offers subscribers an expanded basic tier of
additional programming as well as an impulse pay-per-view service. The pay-
per-view buy rate has grown to more than two movies per expanded basic tier
subscriber per month, although Telekabel Group expects this average to
decrease because high-demand customers subscribed early to the expanded basic
tier and later subscribers will likely have a lower demand for pay-per-view
services.

TeleKabel Group launched Priority Telecom's cable telephone service in Vienna
on a commercial basis in early 1999. As of December 31, 1999, Telekabel Group
had subscribers for approximately 40,291 telephone lines.

Telekabel Group launched an Internet access service in September 1997 and the
chello broadband service in June 1999. Telekabel Group had approximately
42,125 Internet access subscribers as of December 31, 1999. Telekabel Group is
currently averaging monthly additions of 2,625 customers for its Internet
service.

Telekabel Group consists of five Austrian corporations, each of which owns a
cable television operating system. UPC owns 95.0% of, and manages, each
Telekabel Group company. Each of the respective cities in which the operating
systems are located owns, directly or indirectly, the remaining 5.0% interest
in each company. The cities do not own any interest in UPC's Austrian chello
broadband businesses.

                                      12
<PAGE>

Belgium: UPC Belgium. UPC Belgium, UPC's 100% owned subsidiary, provides cable
television and communications services in selected areas of Brussels and
Leuven. UPC estimates that there are at present approximately 133,100 homes
under license in UPC Belgium's franchise areas.

UPC Belgium, which currently has 94.0% penetration in its franchise areas,
plans to increase revenues through the introduction of new services that
currently are not subject to price regulations. UPC Belgium offers an expanded
basic tier cable television as well as UPC's chello broadband Internet access
service. As UPC Belgium upgrades additional portions of its network to full
two-way capability, it plans to introduce impulse pay-per-view in Brussels,
which was implemented in Leuven in November 1999. UPC Belgium intends to
provide cable telephone services beginning in the first half of 2001.

As of December 31, 1999, UPC Belgium had approximately 125,100 basic
subscribers and 6,425 expanded basic subscribers. UPC Belgium also distributes
three premium channels, two in Brussels and one in Leuven, which are provided
by Canal+.

UPC Belgium began offering internet access services in September 1997 and
introduced the chello broadband service in early 1999. As of December 31,
1999, UPC Belgium had 5,325 residential, 1,450 student and 655 business
Internet access subscribers.

France: UPC France. UPC has been constructing and operating cable television
systems in France since 1996. During 1999 UPC acquired several additional
major cable television systems and UPC France is now one of the largest cable
television providers in France. UPC currently owns 92.0% of UPC France. As of
December 31, 1999, UPC France's systems held franchises covering an aggregate
of 1,265,800 homes, of which approximately 927,000 homes were passed by
activated network. UPC France had an aggregate of 334,600 basic cable
television subscribers as of the same date. UPC France's major operations are
located in suburban Paris, the Marne-la-Vallee area east of Paris, Lyon,
Limoges and in other towns and cities throughout France.

In February 2000, UPC acquired Intercomm, a cable television operator with
about 500,000 homes in its franchise area, 80,000 of which are passed by
Intercomm's activated cable network. The purchase price was Euro36.0 million
plus an 8.0% interest in UPC's combined French system.

Mediareseaux, UPC France's initial system, has constructed its network with
technology and capacity to offer integrated video, voice and Internet/data
services. UPC is upgrading the networks of its recently acquired French
systems to be able to offer these services as well. UPC expects this upgrade
to be completed in 2002. To further expand its French operations, UPC is
pursuing potential acquisition opportunities and plans to develop these
franchises as one clustered system offering a full package of video, telephone
and Internet/data services.

Most of UPC's French systems offer various tiers of cable television service.
To increase its average monthly revenue per subscriber, Mediareseaux began
offering pay-per-view services in May 1998, and to date, the pay-per-view buy
rate is approximately 0.5 movies per expanded basic tier subscriber per month.
As UPC integrates its recent acquisitions and completes upgrading their
networks, UPC intends to offer similar revenue-generating services in these
systems as well.

In June 1998, UPC France's subsidiary, Mediareseaux, obtained a 15 year
telephone and network operator license for an area that includes 1.5 million
homes in the eastern suburbs of Paris. Mediareseaux began offering telephone
services in March 1999 within its cable television franchise area.

Mediareseaux also offers chello broadband's Internet access services via its
cable systems, and is carrying out a trial offering of broadband fixed
wireless local loop service in two towns in the eastern suburbs of Paris under
a temporary license. One of UPC's recently acquired systems began offering
Internet/data services at the end of 1997. UPC intends to launch chello
broadband's internet access service on its remaining systems in the second
quarter of 2000.


                                      13
<PAGE>

UPC France owns between 95.0% and 100% of each of its systems. As a result of
the Intercomm transaction that closed in February 2000, UPC's interest in UPC
France is now 92.0%.

Germany: PrimaCom. Since December 1999, UPC has purchased shares totaling
approximately 24.9% of PrimaCom which owns and operates cable television
networks in Germany. As of December 31, 1998, PrimaCom reported subscribers of
approximately 877,150.

The Netherlands: UPC Nederland. UPC's Dutch systems, with 1,660,171 homes
passed and 1,517,432 basic tier subscribers as of December 31, 1999, are its
largest group of cable television systems. UPC has had operations in The
Netherlands since it was formed in 1995, but substantially all of its
operations in The Netherlands have come from acquisitions. UPC's systems are
located in the regions of Brabant, Flevoland, Friesland and Gelderland, and
include A2000, its 0.5 million subscriber system located in Amsterdam.

In August 1999, UPC won a bid to purchase the municipality-owned cable
television network in Haarlem. As of December 31, 1999, this system passed
approximately 70,000 homes and had approximately 66,000 basic cable television
subscribers. We expect the Haarlem acquisition to close during the second
quarter of 2000. In March 2000, we acquired K&T Group, which owns and operates
cable networks in Rotterdam, Dordrecht and the surrounding municipalities.
These systems had approximately 588,000 basic tier subscribers and 43,000
serviceable businesses as of December 31, 1999. In February 2000, UPC acquired
Tebecai, which operates cable television networks in the eastern regions of
the Netherlands.

UPC began upgrading a portion of its Dutch networks in 1997 and expects that
all of its network in The Netherlands will be fully upgraded by the end of
2000. Due to the large number of current subscribers located in four large
clusters in The Netherlands, UPC has constructed a fiber backbone to
interconnect these region-wide networks. In addition to cable television
services, UPC Nederland offers Internet and telephone services over its
upgraded network.

As of December 31, 1999, UPC's Dutch systems had average cable television
penetration rates of 91.4%. As a result of this high penetration and the rate
regulation of the basic tier in many of UPC Nederland's franchise areas, UPC
has focused its efforts on increasing revenue per subscriber in these systems
through the introduction of new video, telephone and Internet/data services.
Many of UPC's Dutch systems have offered an expanded basic tier since late
1996. UPC launched impulse pay-per-view services in April 1997 in A2000 and in
June 1998 in some of its other Dutch systems.

In April 1999, A2000 and the municipality of Amsterdam reached an agreement on
a large scale introduction of digital set-top boxes and a reduction of the
rate regulated basic cable television package to 15 public channels. This
agreement allows A2000 to migrate a number of popular commercial channels to
its expanded basic tier. During the period preceding the introduction of and
migration of channels to its digital platform, A2000 and the municipality of
Amsterdam have agreed to increasing A2000's current 26 channel basic package
to 32 channels with an increase in the monthly subscription fee. Once the
digital set-top boxes are introduced, the price for the rate-regulated 15
public channel basic service will be reduced and the price for the expanded
basic tier will increase over time until it becomes unregulated in 2001. The
agreement requires A2000 to provide UPC's integrated digital set-top box to
customers requesting the expanded basic tier. UPC's set-top boxes will enable
these customers to receive chello broadband Internet service over a computer
or a television. UPC expects the introduction of the digital set-top boxes to
occur in the fourth quarter of 2000. A similar agreement has been reached with
the municipality of Haarlem, where the introduction of digital set-top boxes
is planned in the fourth quarter of 2000.

UPC's Amsterdam system launched its cable telephone service in July 1997. UPC
Nederland launched Priority Telecom cable telephone service in many other
parts of its network in May 1999. UPC expects to launch these services in 2000
in some of its more recently acquired systems. As of December 31, 1999, UPC
Nederland had subscribers for 97,000 telephone lines. In Amsterdam, where it
has offered telephone services the longest, approximately 9.0% of the homes
serviceable subscribe for telephone services.

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Some of UPC's Dutch systems had Internet access services as early as 1997. UPC
launched chello broadband's Internet/data services in some of UPC Nederland's
systems in early 1999. The media launch of chello broadband services in the
remainder of UTH's service areas took place in June 1999. UPC Nederland has
been migrating all existing Internet customers to the chello broadband
service. As of December 31, 1999, UPC Nederland had 58,500 residential and
1,550 business Internet/data services customers.

Norway: UPC Norge. UPC Norge is Norway's largest cable television operator
with approximately 42.0% of the total Norwegian cable television market as of
December 31, 1999. UPC Norge's main network is located in Oslo and its other
systems are located primarily in the southeast and along the southwestern
coast. UPC Norge is upgrading its network to two-way capacity. The upgrade,
which began in 1998, is scheduled to be completed in 2002/2003. During 1999,
UPC Norge began offering subscribers chello broadband service and Priority
Telecom's cable telephone service.

Approximately 70.0% of the homes passed by UPC Norge's systems subscribe to
UPC's cable television service. UPC currently offer four tiers of video
services. Approximately 32.0% of UPC Norge's subscribers subscribe for one or
more higher tiers of service. UPC's goals for UPC Norge's cable television
business are to continue to increase its penetration rate, to improve its
revenue per subscriber generally by providing additional programming and
services and to increase average revenue per subscriber in systems in which
expanded basic tiers are more recent additions.

UPC Norge introduced Priority Telecom's cable telephone service in April 1999
in the upgraded portions of its network. As of December 31, 1999, UPC had
3,991 telephone lines in Norway.

UPC Norge launched an Internet access service in March 1998 and introduced
chello broadband service in June 1999. UPC Norge has migrated all of its
existing Internet access subscribers to chello broadband. As of December 31,
1999, UPC Norge had 3,270 residential and 3 business chello broadband
subscribers.

Sweden: Stjarn. In July 1999, UPC acquired Stjarn. Stjarn operates cable
television systems servicing the greater Stockholm area and leases a fiber
optic network with 770,000 homes and 30,000 businesses in its franchise area.

As of December 31, 1999, Stjarn provided analog television services across its
broadband network to approximately 243,000 subscribers out of a total of
approximately 421,600 homes passed. Stjarn currently offers six tiers of
programming. Upon upgrade of its network, it plans to offer additional tiers
of programming.

Stjarn launched Internet services in one area in the City of Stockholm in
April 1999 and introduced chello broadband service in November 1999. As of
December 31, 1999, Stjarn offered high speed Internet services to
approximately 167,700 connected homes, of which 5,240 homes had at that date
subscribed.

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

Israel: Tevel. Tevel has exclusive cable television broadcasting franchises
for the entire Tel Aviv metropolitan area, the region of Ashdod-Ashkelon,
which is 30 miles south of Tel Aviv, and the Jezreel Valley, which is 80 miles
northeast of Tel Aviv. In April 1998, Tevel acquired 100% of Gvanim Cable
Television Ltd. and has since fully integrated Gvanim's operations with its
own. The Gvanim acquisition increased franchise area coverage to approximately
40.0% of the total homes in Israel.

Tevel is upgrading all of its systems to be able to provide additional cable
television services, as well as cable telephone and Internet/data services.
Should liberalization occur, Tevel may consider launching its own telephone
and Internet/data services. Tevel offers basic subscribers approximately 40
channels of programming, including

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<PAGE>

a wide range of entertainment, news, sports, performing arts and educational
channels. Five pay-per-view channels are also available in all of Tevel's
areas other than the Gvanim franchise areas. Tevel has applied for a license
to provide pay-per-view services in Gvanim's franchise areas. The Israeli
Communications Ministry has indicated that it intends to change a number of
terms of Tevel's pay-per-view license, and has offered Gvanim a pay-per-view
license on terms incorporating these changes. Tevel is opposed to these term
changes and is negotiating with the Communications Ministry over the terms of
the extension of its pay-per-view license and Gvanim's pay-per-view license.
Tevel's current pay-per-view license has been extended until March 2000.

In addition to its cable operations, Tevel owns 50.0% of Globkol, a
telecommunications equipment company that designs, installs and maintains
switching systems for businesses. As of December 31, 1999, Globkol served
approximately 1,350 sites with a total of approximately 98,900 outlets. Tevel
also owns 45.0% of Netvision, one of Israel's leading Internet service
providers and has the right to increase its interest to 50.0%.

Central and Eastern Europe

Czech Republic: KabelNet and Kabel Plus. KabelNet, UPC's Czech Republic
subsidiary, provides cable and "wireless" cable television services in the
cities of Prague and Brno, the Czech Republic's second largest city. In
October 1999, UPC acquired 94.6% of Kabel Plus, the leading provider of cable
television services in the Czech Republic. Combined, these systems passed
about 736,460 homes and served about 374,300 television subscribers in the
Czech Republic as of December 31, 1999. Approximately 12.0% of these are
served by UPC's wireless MMDS network.

UPC offers a number of tiers of programming services in the Czech Republic.
UPC has no current plans to launch telephone or Internet/data services in its
Czech systems.

Hungary: UPC Magyarorszag. UPC has owned and operated systems in Hungary for
nearly a decade. In June 1998, UPC combined its Hungarian operations with
Kabeltel, Hungary's second largest operator of cable television systems,
creating Telekabel Hungary, in which UPC retains a 79.3% interest. Telekabel
Hungary's operating system, UPC Magyarorszag, passed about 655,270 homes and
served about 518,580 television subscribers as of December 31, 1999.

UPC is rebuilding its Budapest network to be able to provide new services. As
of December 31, 1999, approximately 68,970 homes were already served by the
rebuilt network. Approximately 75.0% of all subscribers passed by UPC's
upgraded network subscribe to its expanded basic tier package.

Hungary: Monor. Monor, one of UPC's Hungarian operating companies, has offered
traditional telephone services since December 1994. Monor has the exclusive,
local-loop telephone concession for the region of Monor, Hungary with a term
through 2002. Monor has 85,700 homes in its franchise area. UPC has an
economic ownership interest in Monor of approximately 97.1%.

Poland: @Entertainment, Inc. In August 1999 UPC acquired @Entertainment, which
owns and operates the largest cable television system in Poland.
@Entertainment's cable subscribers are located in regional clusters
encompassing eight of the ten largest cities in Poland. @Entertainment
expanded its distribution capacity with the launch of its DTH broadcasting
service for Poland, targeted at homes outside of its cable network coverage
area. As of December 31, 1999, @Entertainment had 1,023,800 traditional cable
subscribers and 254,100 DTH subscribers. DTH subscribers receive Wizja TV,
UPC's multi-channel Polish-language DTH service, the first such service
available in Poland. @Entertainment is also trying to sell Wizja-TV
programming to third party cable systems in Poland.

The portions of @Entertainment's cable television networks currently being
constructed are being constructed with the flexibility and capacity to be
cost-effectively reconfigured to offer an array of interactive and integrated
entertainment, telecommunications and information services. UPC intends to
upgrade selected portions of

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existing cable networks to meet similar standards. The Company has applied for
the data license for the territory of Poland and plans to start providing
Internet services during the year 2000.

@Entertainment has been able to avoid constructing its own underground
conduits in certain areas by entering into a series of agreements with TPSA
(the Polish national telephone company) which permit @Entertainment to use
TPSA's infrastructure for an indefinite period or for fixed periods up to 20
years. Over 80.0% of @Entertainment's cable television plant has been
constructed using pre-existing conduits from TPSA. A substantial portion of
these contracts to use TPSA conduit permits termination by TPSA without
penalty upon breaches of specified regulations. Any termination by TPSA of
such contracts could result in @Entertainment losing its permits, the
termination of agreements with co-op authorities and programmers, and an
inability to service customers with respect to the areas where its networks
utilize the conduits that were the subject of such TPSA contracts. In
addition, some conduit agreements with TPSA provide that cables can be
installed in the conduits only for the use of cable television. If
@Entertainment uses the cables for a purpose other than cable television, such
as data transmission, telephone, or Internet access, such use could be
considered a violation of the terms of certain conduit agreements, unless this
use is expressly authorized by TPSA. There is no guarantee that TPSA would
give its approval to permit other uses of the conduits.

@Entertainment's DTH service is encoded and transmitted, or "uplinked," from
its Maidstone, U.K. facility to geosynchronous satellites that receive,
convert and amplify the digital signals and retransmit them to earth in a
manner that allows individual subscribers to receive and be billed for the
particular programming services to which they subscribe. @Entertainment has an
eight-year contract with British Telecommunications for the provision and
maintenance of its uplink equipment at Maidstone. @Entertainment leases
transponders on Astra satellites 1E and 1F.

@Entertainment offers cable subscribers two tiers of service. Some areas are
offered a package of up to 70 channels. @Entertainment's DTH subscribers
currently receive @Entertainment's Wizja TV programming, which consists of
approximately 25 channels. For an additional monthly charge, certain of its
cable networks currently offer two premium television services, the HBO Poland
service (a Polish-language premium movie channel owned in part by Home Box
Office) and, since September 18, 1999, Wizja Sport, a Polish-language premium
sport channel. @Entertainment plans to create additional pay-per-view channels
that will also be offered to cable customers for an additional charge.

Romania. UPC is currently involved in the operations of seven cable companies
in Romania. Since 1993, when UPC first entered the Romanian market, it has
widened its customer base through acquisition and marketing activities in
conjunction with build out. UPC's Romanian systems offer subscribers three
different tiers of programming. UPC currently has plans to launch telephone or
Internet/data services in the Romanian systems.

UPC recently entered into a joint venture with the owners of two Romanian
cable television companies (collectively, "AST") to which UPC's and AST's
Romanian assets were contributed. UPC holds a 70.0% interest in the joint
venture and the former owners of AST hold the remaining 30.0%. Together, the
joint ventures systems have more than 250,000 subscribers.

Slovak Republic: UPC Slovensko. UPC entered the Slovak market in 1995 and in
June 1999 completed the acquisition of additional cable systems in Bratislava,
the capital of the Slovak Republic, and several other cities. This acquisition
made UPC the largest cable operator in the Slovak Republic. UPC offers
subscribers three tiers of cable television service. UPC plans to introduce
Internet services in Bratislava in 2000 and in other Slovak cities by 2003.
UPC intends to introduce telephone services in all systems by early 2003.

Other Systems

Malta: Melita. Melita, of which UPC owns 50.0%, operates an exclusive
franchise network in Malta. Melita currently offers general cable television
services and is upgrading its system to be able to provide Internet access and
other enhanced services. Pending litigation and recent legislation may,
however, affect UPC's ability to offer Internet/data services in Malta.

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<PAGE>

SBS Tender Offer

UPC owns approximately 23.5% of the outstanding stock of SBS. On March 9,
2000, UPC announced its intention to commence a tender offer to acquire all
the shares of SBS that UPC does not already own. SBS owns and operates
television and radio broadcasting stations in Scandinavia and other European
markets. SBS currently owns and operates television stations that broadcast
into Norway, Sweden, Denmark, Flemish Belgium and the Netherlands, and
together with two European partners, operates the first national private
television network in Hungary. Additionally, SBS owns a minority interest in a
national television network in Italy, operates a television station in
Slovenia under the terms of a management and funding agreement and owns 50.0%
of a Swiss company which in March 1999 was awarded a national terrestrial
broadcasting license to broadcast in Switzerland. SBS also owns and operates
radio stations, which broadcast in Denmark, Sweden and Finland.

The supervisory boards of both companies have approved the transaction. UPC
has agreed to initiate an exchange offer to acquire SBS's shares at a per
share price of $40.00 in cash plus 0.57144 of a share of UPC's Ordinary Shares
A, subject to adjustment. UPC will adjust the stock portion of the purchase
price under certain circumstances so that SBS shareholders will receive not
less than $77.50 and not more than $86.00 for each SBS share exchanged, based
on UPC's average closing share price prevailing on the trading days ending
shortly prior to making the exchange offer. UPC intends that all shares not
purchased in the exchange offer will be converted into the right to receive
the same cash and stock consideration as provided in the exchange offer, in a
second step transaction following consummation of the exchange offer. This
transaction is subject to a number of conditions, including regulatory
approval.

Asia/Pacific

Our Asia/Pacific operations are primarily held through our 75.4% owned
subsidiary, Austar United, which is the fastest growing broadband
communications company in Australia and New Zealand. Austar United provides
multi-channel television, telephone, Internet/data services and programming
services through its three core businesses: Austar, XYZ Entertainment and
Saturn. Austar United completed an initial public offering in July 1999 and is
publicly traded on the Australian Stock Exchange under the symbol "AUN".
Austar United had a market capitalization of approximately $2.8 billion based
on the closing price on the Australian Stock Exchange on March 23, 2000.

Austar (Australia)

Austar is the largest provider of pay television services in regional
Australia with a service area encompassing approximately 2.1 million homes, or
approximately one-third of Australia's total homes. Austar is the only pay
television provider in substantially all of its service area. Due to the low
housing densities that characterize Austar's service area, Austar primarily
employs digital DTH satellite and wireless cable technologies to deliver its
service. These technologies have enabled Austar to deploy its services quickly
and achieve rapid subscriber growth.

Distribution Systems. Austar uses both digital DTH and wireless cable
distribution technologies in certain cities with more than 20,000 homes. In
its other service areas (except Darwin), Austar distributes its service
exclusively utilizing digital DTH. At present, approximately 72.0% of Austar's
subscribers are serviced by digital DTH, while 25.0% receive service via
wireless cable. Austar constructs and owns the MMDS transmission facilities
and installs and retains ownership of all customer premises equipment for both
its DTH and wireless cable customers.

In addition to digital DTH and wireless cable, Austar is constructing a cable
network in Darwin, a market containing approximately 29,000 serviceable homes.
Darwin is outside the satellite's footprint and dense vegetation makes
wireless cable service impractical. As of December 31, 1999, this system
passed approximately 23,000 homes and had a penetration rate of approximately
33.3%.

Programming and Pricing. Austar offers the widest range of programming
available in Australia. Its favorable programming agreements allow Austar to
establish different service levels of tiers at multiple price points. Austar

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began tiering its program offerings in October 1998. By tiering its services,
Austar permits its subscribers to select programming that is customized to
their interests, which we believe is a valuable tool in ensuring our product
meets customer value expectations. Tiering also provides customers with a
lower-priced basic service that both enhances sales opportunities and helps
reduce the level of customer churn.

Programming Agreements. Austar's programming agreement with Foxtel provides it
with the exclusive rights to distribute Showtime, Encore and TV-1 via digital
DTH and wireless cable throughout Austar's service area until December 2006.
In addition, Austar has an agreement with a News Corporation Limited
subsidiary pursuant to which Austar has the exclusive right to distribute Fox
Sports and Fox Sports Two over the same technologies throughout Austar's
service area until 2006. Austar's programming agreement for C7 Sports provides
Austar with non-exclusive Australian Football League ("AFL") coverage. Austar
has also entered into an agreement with C&W Optus that provides Austar with
non-exclusive distribution rights for the three C&W Optus movie channels,
Movie Network, Movie Greats and Movie Extra, until December 2006. Austar has
another agreement with C&W Optus giving it rights to distribute additional C&W
Optus programming.

Austar has exclusive rights in its service area to distribute via DTH and
wireless cable five channels of programming supplied by XYZ Entertainment:
Discovery Channel, Nickelodeon, The Lifestyle Channel, Channel [V] and arena.
Austar also obtains at competitive price levels additional programming from a
number of independent sources, including Time Warner, ESPN, Seven Network,
National Geographic, CMT and Sky Racing. Weather 21, the Adults Only channel
and certain pay-per-view events are sourced from entities in which we have an
interest.

Austar's rights to distribute certain programming are dependent on its
supplier's ability to provide such programming to Austar. In the event that
any of Austar's programming suppliers are unable to supply programming to
Austar, we are confident that we will be able to secure alternative sources of
programming.

Marketing, Billing and Customer Support. Austar has focused its marketing and
sales efforts to support a strategy of rapid penetration of its markets.
Austar's comprehensive marketing and sales organization consists of
approximately 250 direct sales representatives and over 250 national customer
service and telemarketing personnel at Austar's National Customer Operations
Center ("NCOC"). These sales channels are supported by an integrated marketing
program of television, radio and print advertising and extensive use of direct
mail.

Austar's 25 offices, located throughout its operating area, serve its
customers in surrounding areas and provide Austar with a local presence. These
offices perform several key functions, including responding to customer
inquires, booking installations, providing customer maintenance services,
collecting subscription fees, liaising with installation contractors and
marketing Austar's services.

Austar uses contractors to install reception equipment at the customer
premises. We believe Austar achieves significant savings through the
outsourcing of these services. Austar has established installation guidelines,
quality assurance standards and training seminars for installation
contractors. In addition, Austar's own installation teams perform quality
assurance checks on its contractors, as well as conduct difficult
installations and installations at multiple dwelling units.

The NCOC, which services all of Austar's subscribers, is a technologically
advanced, scalable, fully integrated subscriber facility that features
sophisticated subscriber management software, an automated response unit and
predictive dialer technology. It also manages Austar's digital virtual private
network. Incoming calls from Austar's service area are directed to the NCOC
where customer service representatives provide sales and service information.
The NCOC's on-site customer service professionals undergo training in all
aspects of customer support to efficiently process installation orders, handle
customer inquiries including programming and technical questions and implement
Austar's customer retention program, which includes contacting customers
immediately after installation to ensure satisfaction and monitoring
cancellation requests.

Billing services are also handled through the NCOC. Austar bills for its
services in advance on a monthly basis. Customers have several methods by
which they can pay including direct debit from their bank account, automatic

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<PAGE>

credit card billing, in person at one of Austar's local offices or at the post
office, or by mail. Austar has implemented a number of procedures for managing
customers with delinquent accounts.

Austar's monthly churn averaged 2.9% during 1999, 3.9% during 1998 and 4.2%
during 1997. Austar believes that this ratio is likely to continue to decline
in the future, although there can be no such assurances. Factors which Austar
believes will contribute to the decline in customer churn include: the
continued enhancement of the price value relationship as more content is added
and the existing content improves, the tiering of services and tailoring
packages to customers, a further reduction in the level of product sampling in
a maturing market, the introduction in 1998 of annual and six-month subscriber
contracts and improved customer communications combined with loyalty programs.

Competition. Austar is the sole provider of pay television services in
substantially all of its service area. Its only major pay television
competitor is Foxtel, which operates a cable system in a segment of Austar's
116,000-home Gold Coast service area. As of December 31, 1999, Austar had
approximately 24,200 subscribers in the Gold Coast. Austar also experiences
limited competition from free-to-air channels.

We do not believe that Austar's market generally has sufficient housing
density to justify the construction of competitive cable systems. The majority
of Austar's market consists of small cities and towns with less than 20,000
homes and relatively low household densities of 25 to 75 homes per square
kilometer as compared to 100 to 130 homes per square kilometer in Australia's
largest cities. While we believe that household densities could support
wireline cable construction in areas representing approximately 20.0% of
Austar's total homes passed, the small size of these markets reduces the
attractiveness of such construction. Furthermore, Austar holds the exclusive
satellite and wireless cable distribution rights to key sports, movie and
other programming for its service area, thus limiting the programming that a
satellite or wireless cable competitor could offer in Austar's service area.

New Business Opportunities. Austar launched high-speed and traditional
Internet access services in markets in early 2000. These services were
delivered using both digital DTH and wireless cable technologies. Austar will
benefit from United's experience in rolling out Internet/data services. In
particular, Austar intends to use chello broadband, UPC's Internet portal and
content service, to support the deployment of its Internet/data offerings to
its service area. Austar's initial tests of these high-speed services provided
customers with downstream transmission speeds (from the Internet to the
subscriber) that were much faster than traditional dial-up modems. We believe
that the provision of Internet/data services represents a significant market
opportunity due to the combination of substantial consumer demand for Internet
access, the limited capacity of the public switched telephone network in
regional Australia and the lack of a broadband alternative.

Austar has licensed its operating system for digital set-top boxes with Open
TV, Inc. The Open TV operating system enables Austar to introduce an enhanced
electronic programming guide, interactive television applications and
transactional services such as home banking and other electronic commerce. The
introduction of these services should continue to help Austar realize its
objectives of increasing revenue and decreasing churn. Moreover, these
services should also generate incremental revenues with minimal capital
expenditures because these applications utilize existing customer premise
equipment.

Saturn (New Zealand)

Saturn is the only provider of integrated telephone, pay television and
Internet services in New Zealand. These services are currently provided in the
greater Wellington area over a hybrid fiber cable network with an overlay of
traditional telephone lines. Austar United owns 100% of Saturn, which launched
pay television service in 1996 on the initial portions of its network.
Wellington, which encompasses 141,000 homes, is New Zealand's capital and
second largest city. As of December 31, 1999, Saturn's network had 87,029
serviceable homes for pay television, telephone and Internet/data. As of that
date, Saturn had 16,723 cable television subscribers (19.2% penetration),
24,678 residential and business telephone customers (28.4% penetration), and
6,772 Internet/data subscribers (7.8% penetration). In April 1998, Saturn
launched a bundle of telephony and pay television services

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to both residential and business markets, including enhanced switch-based
services. In mid-1998, Saturn launched Internet/data services via cable modems
to the business market and began offering residential dial-up Internet/data
services in November 1998. Saturn is evaluating whether to expand into other
major New Zealand markets. In February 2000, Austar United agreed to form TSL,
a 50/50 joint venture between Saturn and Telstra's New Zealand operation. TSL
plans to create a state-of-the-art national broadband network which will
include a submarine fiber backbone linking Auckland, Wellington and
Christchurch during the next five years.

Other UAP Operations

Through UAP, we also provide multi-channel television services in the
Philippines, which are held through our approximately 19.6% economic interest
in Pilipino Cable Corporation, which operates a wireline cable service
providing service to 191,521 subscribers and passing 477,448 homes as of
December 31, 1999.

Latin America

Video. Our largest operation in Latin America is our 100% owned Chilean
operation, VTR. Through VTR we are the largest provider of wireline cable
television, MMDS and DTH technologies and a growing provider of telephone
services in Chile. Wireline cable is VTR's primary business representing
approximately 93.0% of VTR's subscribers while MMDS and DTH represent
approximately 4.0% and approximately 3.0%, respectively. VTR has an estimated
56.0% market share of cable television services throughout Chile and an
estimated 40.0% market share within Santiago, Chile's largest city. In 1998,
VTR began the wide-scale roll-out of residential cable telephone service in
six communities contained within Santiago and one major city outside Santiago
and is currently expanding its efforts to include additional areas throughout
Chile.

As of December 31, 1999, VTR's systems passed approximately 1.6 million homes
throughout Chile and approximately 22.3%, or approximately 360,872 homes,
subscribed to its cable television services. VTR also served 14,923 customers
via MMDS and approximately 11,172 customers via DTH. As of December 31, 1999,
approximately 390,126 of VTR's cable homes passed were capable of using VTR's
telephone services and approximately 66,718 homes subscribed to these
services. Approximately 35.0% of VTR's telephone subscribers also subscribe to
VTR's cable services.

Programming. VTR's channel line-up consists of 50 to 65 channels segregated
into two tiers of service--a basic service with 45 to 60 channels and a
premium service with five channels. VTR offers basic tier programming similar
to the basic tier program line-up in the United States plus more premium-like
channels such as HBO, Cinemax and Cinecanal on the basic tier. As a result,
subscription to VTR's existing premium service package is limited because
VTR's basic cable package contains similar channels. In order to better
differentiate VTR's premium service and increase the number of subscribers to
premium service and, therefore, average monthly revenues per subscriber, VTR
anticipates gradually moving some channels out of its basic tier and into
premium tiers or pay-per-view events. VTR launched the Playboy channel as a
premium service in January 2000. VTR is also considering offering additional
movies and believes it may be possible to offer additional adult programming
on premium tiers in the future. For the programming services necessary to
compile its channel lineups, we rely mainly on international sources including
the United States, Europe, Argentina and Mexico. Domestic cable television
programming is only just beginning to develop around local events such as
soccer matches.

Video Competition. There is only one other major cable television provider in
Chile, Metropolis-Intercom ("Metropolis"). Metropolis overlaps approximately
60.0% of VTR's homes passed and VTR overlaps approximately 90.0% of its homes
passed. VTR's head-to-head competition with Metropolis in many areas affects
its pricing and programming flexibility. We believe that VTR's churn
(subscriber turnover) is the result, in part, of Metropolis' marketing
efforts. Due to the high capital expenditures required to build-out a new
wireline network, we believe significant barriers to entry exist. Metropolis
is the only other potential MMDS competitor, and controls the licenses for 4
of the 16 MMDS analog frequencies available in Chile but does not currently
transmit any channels. Because MMDS is only capable of providing 16 analog
channels of service in

                                      21
<PAGE>

comparison to the wireline cable offering of 50 to 65 channels, we do not
believe analog MMDS is a viable competitor to cable as a whole. There is only
one other major DTH provider in Chile, Sky, which launched service last year.
Because wireline cable is significantly penetrated and offered at lower rates
than DTH, we do not believe that DTH poses an immediate significant threat in
Chile.

Telephone Services. VTR began marketing cable telephone services to
residential customers in several communities within Santiago in 1997. VTR
offers basic dial tone service as well as several value added services
including voice mail, caller I.D., 3-way calling, speed dial, wake up service,
call waiting, call forwarding, local bill detail, unlisted number and
directory assistance. VTR primarily provides service to residential customers
who require one or two telephone lines. VTR also provides service to small
businesses and home offices requiring up to twelve telephone lines. In
general, VTR has been able to achieve approximately 20.0% to 30.0% penetration
of its new telephone markets within the first year of marketing. As of
December 31, 1999, VTR was offering services in two additional cities outside
Santiago, and by the end of 2000, VTR plans to provide cable telephone service
to four additional cities outside Santiago and four additional communities in
Santiago.

As of December 31, 1999, approximately 24.0% of VTR's network was capable of
providing cable telephone service. Since 74.0% of VTR's network currently has
750 MHz of capacity, VTR's costs to upgrade to two-way capable architecture
are relatively low. In areas where VTR's network has less than 750 MHz of
capacity, VTR either has to retrofit existing network or rebuild the network
to upgrade to two-way capability. VTR's plan is to be technologically capable
of providing service to approximately 200,000 to 300,000 additional two-way
homes during 2000 and to be able to provide telephone service to 1.4 million
homes by 2002.

VTR has the necessary interconnect agreements with local carriers, cellular
operators and long distance carriers to allow VTR to provide its telephone
services. Interconnect agreements are mandatory for all local carriers.

Telephone Competition. CTC is VTR's only major competitor for local
residential telephone services in Chile. CTC provides telephone service to
approximately 91.0% of the total telephone lines throughout Chile. Other local
residential telephone service providers include Telefonica Manquehue S.A. and
Complejo Manufacturero de Equipos Telefonicos in Santiago. There are also two
other telephone providers in Chile who primarily serve business customers.
Because of VTR's geographically extensive cable network, VTR believes it is
the only company capable of competing with CTC for residential telephone
business. Metropolis currently leases its cable network from CTC and currently
does not provide cable telephone service. VTR believes it is in a strong
position to compete with CTC as a result of its extensive cable network, its
quality cable telephone technology and its good relationships with its
customers. In addition, VTR does not believe that wireless local loop
telephone technology will be a competitive threat to traditional or cable
telephone because the mountainous topography of Chile makes it difficult and
expensive to implement.

Data. VTR began offering Internet/data services in 1999. VTR projects that
there will be increasing demand for Internet services. Currently, there are no
providers of high-speed Internet access beyond the trial stages in Chile.

Other ULA Operations

We also provide multi-channel television services in Brazil and Mexico. We
have ownership interests in two systems in Brazil: (i) a 46.3% interest in
Jundiai, which holds nonexclusive cable television licenses for the city of
Jundiai in southern Brazil and (ii) a 100% interest in TVSB, an owner and
operator of a 31 channel exclusive license MMDS system in Fortaleza, on the
Northeast coast of Brazil. We also have a 90.3% interest in Megapo, based in
Cuernavaca, South of Mexico City.

Programming. ULA provides programming services to various Latin American
countries through its 50.0% ownership interest in MGM Networks LA. MGM
Networks LA currently produces and distributes three pan-regional channels
including: MGM Gold, a Portuguese language movie and television series channel
for Brazil; MGM, a Spanish language movie and television series channel; and
Casa Club TV, a Spanish and Portuguese language lifestyle channel dedicated to
home, food and lifestyle programming featuring a significant block of

                                      22
<PAGE>

original productions. These three channels are currently distributed on most
major cable and satellite systems in 17 countries throughout Latin America.

Employees

As of December 31, 1999, we, together with our consolidated subsidiaries, had
approximately 10,000 employees. Certain of our operating subsidiaries,
including our Austrian, Dutch, Norwegian and Australian systems are parties to
collective bargaining agreements with some of their respective employees. We
believe that our relations with our employees are good.

Regulation

The provision of video, telephone, Internet/data and broadcasting networks and
services in the countries in which we operate is regulated. The scope of
regulation varies from country to country, although in some significant
respects regulation in UPC's Western European markets is harmonized under the
regulatory structure of the EU. Adverse regulatory developments could subject
us to a number of risks. These regulations could limit our growth plans, limit
our revenues, and limit the number and types of services we offer in different
markets. In addition, regulation may impose certain obligations on our systems
that subject them to competitive pressure, including pricing restrictions,
interconnect obligations and open-network provision obligations. Failure to
comply with current or future regulation could expose us to various penalties.

Set forth below is an overview of the types of regulation that affects our
video, telephone and Internet/data services as well as a summary of the
regulatory environment in the EU and the countries in which our more major
systems operate.

Video Services

In the provision of video services, our operating companies are generally
required to either obtain licenses or permits from or notify or register with
the relevant regulatory authorities. In some countries we pay annual franchise
fees based on the amount of our revenues.

In many countries where we operate, we are required to transmit to subscribers
certain "must carry" channels, which generally consist of public national and
local channels. Some countries may require a certain amount of local content
or impose restrictions on certain types of programming.

The regulatory authorities in many countries where we operate also impose
pricing restrictions. Generally, basic tier price increases must be approved
by the relevant local or national authority. In certain countries, price
increases will only be approved if the increase is justified by an increase in
costs associated with providing the service or if the increase is less than or
equal to the increase in the consumer price index.

Telephone

The liberalization of the telecommunications market in Europe and Chile
allowed new entrants like us to enter the telephone services market.
Generally, our operating companies are required to obtain licenses to offer
telephone services. Our operating companies have, to date, not been subject to
telephone rate regulation but would become subject to such regulation in a
number of jurisdictions upon becoming a significant market power.

Incumbent telephone providers in many market are often required to offer new
entrants into the telephone market interconnection with their networks on a
non-discriminatory basis. In some countries, including Austria, The
Netherlands and Norway, we have had to seek the intervention of the regulatory
authority in interconnection agreement negotiations with the incumbent
operators. Following regulatory intervention in Austria, the incumbent
operator brought an action in the Austrian courts seeking to revise certain
terms of its interconnection agreements with a number of other telephone
service providers. This action is still pending before the Austrian Supreme
Administrative Court.

                                      23
<PAGE>

Internet/Data

UPC's chello broadband subsidiary and most of our operating companies must
comply with relevant laws in the provision of Internet access services and on-
line content. In several countries, including Norway and Hungary, the
provision of Internet/data services does not require any sort of license or
notification to a regulatory body. Other countries, including Austria, Belgium
and The Netherlands, require that providers of these services register with or
notify the relevant regulatory authority of the services they provide and, in
some cases, the prices charged to subscribers for such services. Our operating
companies that provide Internet services must comply with both Internet-
specific and general legislation concerning data protection, content provider
liability and electronic commerce. As regulation in this area develops, it
will likely have a significant impact on the provision of Internet services by
our operating companies.

Competition Law and Other Matters

EU directives and national consumer protection and competition laws in UPC's
Western European markets impose limitations on the pricing and marketing of
integrated packages of services, such as video, telephone and Internet/data
services. These limitations are common in developed market economies and are
designed to protect consumers and ensure a fair competitive market. While UPC
may offer our services in integrated packages in our Western European markets,
UPC is generally not permitted to make subscription to one service, such as
cable television, conditional upon subscription to another service, such as
telephone, that a subscriber might not otherwise take. In addition, we must
not abuse or enhance a dominant market position through unfair anti-
competitive behavior. For example, cross-subsidization between our business
lines that would have this effect would be prohibited. We have to be careful,
therefore, in accounting for discounts in services provided in integrated
packages.

European Union

Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, The Netherlands, Portugal, Spain, Sweden and the United Kingdom
are all member states of the EU. As such, these countries are required to
enact national legislation which implements directives issued by the EU
Commission and other EU bodies. Although not an EU Member State, Norway is a
member of the European Economic Area and has generally implemented or is
implementing the same principles on the same timetable as EU member states.
The Czech Republic, Hungary, Malta, Poland, Romania and Slovak Republic, which
are in the process of negotiations of its membership into the EU, started
adjusting its regulatory system to EU requirements. As a result, most of the
European markets in which UPC operates have been significantly affected by
regulation initiated at the EU level.

On November 10, 1999, the European Commission released a report proposing new
EU policies for telecommunications regulation and requested comments on its
proposals. The proposed regulatory framework would attempt to decrease
national variations in regulations and licensing systems and further increase
market competition. The European Commission is also proposing to use
competition laws rather than regulation to prevent dominant carriers from
abusing their market power.

Video Services

Conditional Access. EU member states regulate the offering of conditional
access systems, such as program decoders used for the expanded basic tier
services offered by many of our operating companies. Providers of such
conditional access systems are required to make them available on a fair,
reasonable and non-discriminatory basis to other video service providers, such
as broadcasters.

Broadcasting. Generally, broadcasts emanating from and intended for reception
within a country have to respect the laws of that country. Other EU member
states are required to allow broadcast signals of broadcasters in other member
states to be freely transmitted within their territory so long as the
broadcaster complies with the

                                      24
<PAGE>

law of the originating member state. An EU directive also establishes quotas
for the transmission of European-produced programming and programs made by
European producers who are independent of broadcasters.

Another major EU directive for broadcasting, requires member states to permit
a satellite broadcaster to obtain the necessary copyright license for its
programs in just one country (generally, the country in which the broadcaster
is established), rather than obtaining copyright licenses in each country in
which the broadcast is received.

Telephone and Internet/Data Services

Liberalization of Telecommunications Services and Infrastructure. A central
aim of the liberalization process has been to reduce the monopoly power of the
incumbent telecommunications operators in order to introduce competition in
the European telecommunications market. Liberalization measures have been
adopted under the EU Treaty's competition rules and harmonization measures
based on the principle that special and exclusive rights should be abolished
and that public telecommunications networks have to be made accessible on the
basis of objective, transparent, public and non-discriminatory conditions.
Many measures apply only to providers of public telecommunications networks or
services having significant market power in a particular market. The exclusive
rights of incumbent operators in the EU to provide telecommunications services
were gradually removed so that competing operators and service providers would
be entitled to offer all telecommunications services other than public voice
telephone. The incumbent telecommunications operator invariably owned the
national networks, however, and the lack of an alternative infrastructure to
provide such liberalized services operated as a major barrier to entry into
the market by competitors. In an effort to overcome this barrier, the EU
introduced a directive that required member states to remove existing
restrictions on the use of cable television networks to provide
telecommunications services. As a result of these directives, UPC's Western
European operating companies may establish and provide telecommunications
networks and/or services, including public voice telephone and Internet/data
services, through their cable networks, subject to obtaining the necessary
licenses and authorizations.

In June 1999, the European Commission adopted a directive requiring member
states to enact legislation directing certain telecommunications operators to
separate their cable television and telecommunications operations into
distinct legal entities. This directive is intended to aid the development of
the cable television sector and to encourage competition and innovation in
local telecommunications and high speed Internet access. The directive
includes competition safeguards to deter anticompetitive cross-subsidies or
discrimination by incumbent telecommunications operators as they enter into
cable television or broadband services.

Interconnection. An EU directive sets forth the general framework for
interconnection, including general obligations for telecommunications
operators to interconnect with their networks. The directive requires member
states to impose obligations on public telecommunications network operators to
negotiate interconnection agreements on a non-discriminatory basis. Public
telecommunications network operators with significant market power (which,
although it may vary, is presumed when an operator has 25.0% or more of the
relevant market) are subject to additional obligations. They must offer
interconnection without discriminating between operators that offer similar
services, and their interconnection charges must follow the principles of
transparency and be based on the actual cost of providing the interconnection.
The directive also contains provisions on collocation of facilities, number
portability with certain exceptions, supplementary charges to contribute to
the costs of universal service obligations and other interconnection
standards. As a result, if the principles in the directive are fully applied,
our operating companies in the EU and Norway should be able to interconnect
with the public fixed network and other major telecommunications networks on
reasonable terms in order to provide their services.

Licensing. EU member states are required to adopt national legislation so that
providers of telecommunications services generally require either no
authorization or a general authorization which is conditional upon "essential
requirements," such as the security and integrity of the network's operation.
Licensing conditions and procedures must be objective, transparent and non-
discriminatory. Member states may issue individual licenses in certain

                                      25
<PAGE>

situations. For example, the provision of public voice telephone services and
the establishment or provision of public telecommunication networks may be
subject to individual licenses. In addition, telecommunications operators with
significant market power may be required by member states to hold individual
licenses carrying more burdensome conditions than the authorizations held by
other providers. Significant market power is typically 25.0% of the relevant
market. License fees can only include administrative costs except in the case
of scarce resources where additional fees are allowed.

Regulation of the Internet. Although Internet-specific regulations have not
been issued, EU policy may develop harmonized principles of "responsibility of
content" to apply to Internet access providers analogous to those applicable
to publishing companies. We do not expect such regulations to materially
adversely affect our Internet business plans.

Austria

Video Services. The city of Vienna's approval is required for changes in
subscriber rates for basic tier service.

Telephone Services. Telekabel Wien has received a license to provide public
voice telephone services in the entire Republic of Austria and a license for
the public offer of leased lines through its cable network. These licenses are
granted for an unlimited period of time.

In November 1998, Telekabel Wien entered into an interconnection agreement
with TA, the incumbent operator. Difficulty and delay in negotiations and
agreement led Telekabel Wien to seek the intervention of the Austrian
telecommunications regulator, which determined the principal terms of the
agreement. TA brought an action in the Austrian courts against some of the
major carriers to revise the terms of the interconnection arrangement. The
Supreme Constitutional Court ruled in March 1999 that the TA's
constitutionally guaranteed rights were not infringed. However, the court left
open the issue of whether the decree issued by the telecommunications
regulator was otherwise lawfully issued. The case is now pending before the
Austrian Supreme Administrative Court.

Recently, the TA brought an action before the Austrian Supreme Administrative
Court against a decision of the telecommunications regulator, which determines
the principal terms of granting Telekabel Wien direct access to telephone
customers. If the court decides in favor of TA, the telecommunications
regulator will have to make a new decision and lay down new conditions for the
direct access to the telephone customers. This may also lead to the payment of
additional costs for the direct access, even for past periods.

Although there are no voice telephone pricing regulations currently applicable
to Telekabel Wien, the Telekom Control Commission must be notified of the
tariff structure and any subsequent rate increases. In addition, if Telekabel
Wien were held to have significant market power (as defined in Austria's
Telecommunications Act) with respect to the services offered, certain matters
including tariffs would become subject to the approval of the Telekom Control
Commission.

France

Video Services. Cable television operators must obtain licenses granted by the
Conseil Superieur de l'Audiovisuel and must also enter into agreements, with
local authorities covering public service delegation and/or public domain
occupancy. Some of UPC France's agreements with local authorities require the
local authorities' approval for a change of basic rates. Cable television
operators are required to transmit particular channels as part of their basic
tier service. Various other national laws also restrict the content of
programming distributed by cable television operators.

Telephone Services. Mediareseaux holds licenses granted by the Minister of
Telecommunications for a public telecommunications network and voice telephony
services in three French departments in the Paris region. Mediareseaux has
applied for a nation-wide license. Mediareseaux was granted temporary licenses
in December 1998 and April 1999 to conduct experimental business in the field
of wireless local loop in the Champs sur Marne area. UPC France's other
operating companies do not hold any telecommunications licenses.

                                      26
<PAGE>

The Netherlands

Video Services. Operators in The Netherlands do not require a license for the
installation, maintenance or operation of a cable network. Network operators
need only register with Dutch Telecommunications Act, the Dutch Independent
Post and Telecommunications Authority ("OPTA"). Cable television network
providers must transmit to all its subscribers at least 15 programs for
television and at least 25 programs for radio, including approximately seven
television and nine radio "must carry" channels. Our Dutch operating companies
often purchased their cable television networks from the local municipalities.
Pursuant to the terms of the agreements with the municipalities, the Dutch
operating companies were obligated to continue to provide basic tier services
of between 20 and 30 television channels, including the 15 required under the
media laws.

In April 1999, A2000 and the municipality of Amsterdam reached an agreement on
a large-scale introduction of digital decoders and a reduction of the basic
cable television package to 15 public channels. The agreement allows A2000 to
migrate a number of popular commercial channels to its expanded basic tier.
Once the digital decoders are introduced, the price for the rate regulated 15
public channel basic fee will be reduced and the price for the expanded basic
tier will increase over time until it becomes unregulated in 2001. The
agreement will initially affect approximately 390,000 customers in the greater
Amsterdam area. Negotiations with the remaining municipalities are in process.

Telephone Services. Until recently, the fixed telecommunications
infrastructure was a statutory monopoly of KPN. Cable television networks may
now be used for the provision of all telecommunications services. Number
portability was introduced in The Netherlands in 1999.

UPC Netherlands has entered into a total of three interconnection agreements
with KPN, WorldCom and Enertel networks. In a decision of November 29, 1999,
OPTA ruled that the temporary tariffs (based on KPN's expected costs) that KPN
can charge for interconnection for the period between July 1, 1999 and July 1,
2000 will be higher than the temporary tariffs that KPN was allowed to charge
for the previous period. The costs for Priority Telecom for interconnection
with KPN are therefore likely to rise. In its decision of December 16, 1999,
OPTA ruled that the temporary interconnection tariffs that it set for the
period of July 1, 1998 to July 1, 1999 will not be corrected pursuant to
calculations based upon KPN's actual costs over that period. The OPTA has
therefore decided to consider these temporary interconnection tariffs as the
definitive tariffs (although on the basis of the calculation that OPTA made,
the tariffs for this period should be higher, it decided not to allow a raise
since that would have a negative effect on the position of new entrants in the
market). In the event that this decision of OPTA is challenged and the
definitive tariffs are consequently determined on the basis of KPN's actual
costs as calculated by OPTA, Priority Telecom may have to reimburse KPN on the
basis of the difference between the temporary and the definitive tariff.

While Priority Telecom's telephone service is not currently subject to price
regulation, the prices of its competitor, KPN, are. OPTA indicated that KPN
should during 1999 reduce its end-user tariffs in accordance with principles
of cost orientation as set forth by OPTA. The fact that KPN's end-user tariffs
for all of its basic telephone services (with the exception of international
calls but including ISDN) must be cost orientated may have a negative effect
on Priority Telecom's ability to compete.

Norway

Video Services. Under Norway's Telecommunications Act, the installation and
operation of the cable infrastructure and equipment must be authorized by and
registered with the Norwegian Post and Telecommunications Authority on the
basis of certain necessary technical qualifications. Cable television
providers have "must-carry" obligations obliging them to include three
national channels and typically one local television channel in their basic
tier services.

Telephone Services. For telephone operators and service providers without
significant market power, as is currently the case with UPC Norge, no license
is required to offer voice telephone services. Such providers need only
register with the Norwegian Post and Telecommunications Authority.

                                      27
<PAGE>

UPC Norge has entered into an interconnection agreement with Telenor.
Mediation proceedings before the Norwegian Post and Telecommunications
Authority between UPC Norge and Telenor concluded in July 1999. The mediation
related to certain changes that UPC Norge wished to make to its current
interconnection agreement with Telenor. As a result of the mediation, an
amendment protocol was added to the interconnection agreement. According to
this amendment protocol, UPC Norge and Telenor have agreed that the current
interconnection agreement will remain in force until a new interconnection
agreement has been negotiated. Negotiation of the new interconnection
agreement commenced in September 1999.

Australia

The provision of subscription television services in Australia is regulated by
the Australian federal government under various Commonwealth statutes. In
addition, State and Territory laws, including environmental and consumer
contract legislation, may impact the construction and maintenance of a
transmission system for subscription television services, the content of those
services, as well as on various aspects of the subscription television
business itself.

The Australia Broadcasting Services Act of 1992 ("BSA") regulates the
ownership and operation of all categories of television and radio services in
Australia including wireline cable, DTH, MMDS or any other means of
transmission. The BSA regulates subscription television broadcasting services
by requiring each service to have an individual license. Companies associated
with Austar hold approximately 150 television broadcasting licenses. Each
license is issued subject to certain conditions. The government may vary or
revoke license conditions or may, by written notice, specify additional
conditions.

Foreign ownership of "company interests" of pay television broadcasting
licenses is limited to 20.0% by a single foreign person and an aggregate of
35.0% by all foreign persons. The BSA licenses used for distributing Austar's
pay television services are held by Australian companies for the purposes of
the BSA.

Chile

Cable and telephone applications for concessions and permits are submitted to
the Ministry of Transportation and Telecommunications which, through the
Subsecretary of Telecommunications, is the government body responsible for
regulating, granting concessions, and registering all telecommunications.
Wireline cable television licenses are non-exclusive and granted for
indefinite terms, based on a business plan for a particular geographic area.
There is an 18.0% Value Added Tax levied on multi-channel television services
but no royalty or other charges associated with the re-transmitting of
programming from off-air broadcasting television networks. Wireless licenses
have renewable terms of 10 years. VTR has cable permits in most major and
medium sized markets in Chile. Cross ownership between cable television and
telephone is also permitted.

The General Telecommunications Law of Chile allows telecommunications
companies to provide service and develop telecommunications infrastructure
without geographic restriction or exclusive rights to serve. Chile currently
has a competitive, multi-carrier system for international and local long
distance telecommunications services. Prices for local services are currently
determined by regulatory authorities until the market is determined to be
competitive. The maximum rate structure is determined every five years. Local
service providers with concessions are obligated to provide service to all
concessionaires who are willing to pay for an extension to get service. Local
providers must also give long distance service providers equal access to their
network connections.

(d) Financial Information About Foreign and Domestic Operations and Export
Sales

For information applicable to this item, see the notes to the consolidated
financial statements contained in Item 8 "Financial Statements and
Supplementary Data".


                                      28
<PAGE>

Item 2. PROPERTIES

We lease our executive offices in Denver, Colorado, as well as our regional
corporate offices. Our various operating companies lease or own their
respective administrative offices, headend facilities, tower sites and other
property necessary for their operations.

Item 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings, nor are we currently
aware of any threatened material legal proceedings. From time to time, we may
become involved in litigation relating to claims arising out of our operations
in the normal course of our business.

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

There were no votes by security holders in the fourth quarter ended December
31, 1999.

The 2000 Annual Meeting of Stockholders will be held on or about June 27,
2000. The deadline for submitting stockholder proposals for inclusion in the
Company's proxy statement and form of proxy for the 2000 Annual Meeting of
Stockholders is April 14, 2000. Proposals received after such date will be
considered untimely.


                                      29
<PAGE>

                                    PART II

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

Our Class A Common Stock trades on Nasdaq under the symbol "UCOMA." On
November 11, 1999, the Board of Directors authorized a two-for-one stock split
effected in the form of a stock dividend distributed on November 30, 1999 to
shareholders of record on November 22, 1999. The effect of the stock split has
been recognized retroactively in all share and per share amounts in this
Annual Report on Form 10-K. The following table shows the range of high and
low sale prices reported on Nasdaq for the periods indicated:

<TABLE>
<CAPTION>
                                                                   High   Low
                                                                  ------ ------
   <S>                                                            <C>    <C>
   Year ended December 31, 1999:
     First Quarter............................................... $33.00 $ 9.38
     Second Quarter.............................................. $37.56 $21.75
     Third Quarter............................................... $46.00 $32.00
     Fourth Quarter.............................................. $72.50 $35.50
   Ten months ended December 31, 1998:
     First Quarter............................................... $ 9.63 $ 7.00
     Second Quarter.............................................. $ 9.72 $ 5.09
     Third Quarter............................................... $ 8.44 $ 3.88
     December, 1998.............................................. $10.25 $ 7.94
</TABLE>

As of March 13, 2000, there were approximately 100 holders of record of our
Class A Common Stock and 27 holders of record of our Class B Common Stock.

We have never paid cash dividends on our common stock and we are currently
restricted from paying cash dividends by the terms of the indentures governing
our senior secured discount notes. See Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Item 8
"Financial Statements and Supplementary Data".

UPC's ordinary shares trade on the Amsterdam Stock Exchange and American
Depositary Shares evidencing its ordinary shares trade on Nasdaq under the
symbol "UPCOY". In March 2000, at an extraordinary general meeting of
shareholders, shareholders of UPC approved an amendment to UPC's Articles of
Association to effect a three-for-one stock split. All share and per share
amounts in this Annual Report on Form 10-K have been retroactively restated to
reflect the three-to-one share split. The following table shows the range of
high and low sales prices reported on Nasdaq since UPC's initial public
offering on February 12, 1999:

<TABLE>
<CAPTION>
                                                                   High   Low
                                                                  ------ ------
   <S>                                                            <C>    <C>
   Year ended December 31, 1999:
     First Quarter (from February 12, 1999)...................... $15.00 $10.38
     Second Quarter.............................................. $22.33 $12.96
     Third Quarter............................................... $23.67 $18.54
     Fourth Quarter.............................................. $46.83 $20.17
</TABLE>

Austar United's ordinary shares are traded on the Australian Stock Exchange
under the symbol "AUN." The following table shows the range of high and low
sales prices reported on the Australian Stock Exchange since Austar United's
initial public offering in July 1999:

<TABLE>
<CAPTION>
                                                                    High   Low
                                                                   ------ ------
   <S>                                                             <C>    <C>
   Year ended December 31, 1999:
     Third Quarter (from July 1999)............................... A$5.51 A$4.46
     Fourth Quarter............................................... A$6.70 A$4.35
</TABLE>

                                      30
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following selected annual consolidated financial data have been derived
from our audited consolidated financial statements. Our consolidated financial
statements do not consolidate the operating results of our minority-owned
affiliates, including UPC prior to December 11, 1997. The data set forth below
is qualified by reference to, and should be read in conjunction with, our
audited consolidated financial statements and notes thereto and also with Item
7 "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
                                                         For the Years Ended
                         For the Year For the Ten  ----------------------------------
                            Ended     Months Ended     February 28,
                         December 31, December 31, ----------------------   February
                             1999         1998        1998        1997      29, 1996
                         ------------ ------------ ----------  ----------  ----------
                              (In thousands, except share and per share data)
<S>                      <C>          <C>          <C>         <C>         <C>
Statement of Operations
 Data:
  Revenue...............  $  719,524   $  254,068  $   98,622  $   31,555  $    2,870
  System operating
   expense..............    (452,515)    (122,811)    (65,631)    (26,251)     (4,224)
  System selling,
   general and
   administrative
   expense..............    (300,674)    (105,226)    (62,803)    (33,655)     (3,524)
  Corporate general and
   administrative
   expense..............    (318,251)    (194,767)    (28,553)    (20,365)    (18,959)
  Depreciation and
   amortization.........    (418,714)    (159,045)    (91,656)    (38,961)     (2,331)
                          ----------   ----------  ----------  ----------  ----------
      Operating loss....    (770,630)    (327,781)   (150,021)    (87,677)    (26,168)
  Gain on issuance of
   common equity
   securities by
   subsidiaries.........   1,508,839          --          --          --          --
  Interest income.......      54,238       10,464       7,806      13,329       8,417
  Interest expense......    (399,999)    (163,227)   (124,288)    (79,659)    (36,045)
  Gain on sale of
   investments in
   affiliates...........         --           --       90,020      65,249      16,013
  Other expense, net....     (61,269)     (11,622)    (19,881)     (6,850)     (5,974)
                          ----------   ----------  ----------  ----------  ----------
      Income (loss)
       before income
       taxes and other
       items............     331,179     (492,166)   (196,364)    (95,608)    (43,757)
  Income tax expense....        (198)        (610)        --          --          --
  Minority interests in
   subsidiaries.........     360,444        1,410       1,568       4,358       1,081
  Share in results of
   affiliates, net......     (55,107)     (54,166)    (68,645)    (47,575)    (48,635)
  Extraordinary charge
   for early retirement
   of debt..............         --           --      (79,091)        --          --
                          ----------   ----------  ----------  ----------  ----------
      Net income
       (loss)...........  $  636,318   $ (545,532) $ (342,532) $ (138,825) $  (91,311)
                          ==========   ==========  ==========  ==========  ==========
  Net income (loss) per
   common share:
    Basic net income
     (loss).............  $     7.53   $    (7.43) $    (4.46) $    (1.79) $    (1.35)
                          ==========   ==========  ==========  ==========  ==========
    Diluted net income
     (loss).............  $     6.67   $    (7.43) $    (4.46) $    (1.79) $    (1.35)
                          ==========   ==========  ==========  ==========  ==========
  Weighted-average
   number of common
   shares outstanding:
    Basic...............  82,024,077   73,644,728  77,033,786  78,071,552  68,035,320
                          ==========   ==========  ==========  ==========  ==========
    Diluted.............  95,331,929   73,644,728  77,033,786  78,071,552  68,035,320
                          ==========   ==========  ==========  ==========  ==========
</TABLE>


                                      31
<PAGE>

<TABLE>
<CAPTION>
                                                   As of
                         -----------------------------------------------------------
                                                      February 28,
                         December 31, December 31, -------------------- February 29,
                             1999         1998        1998       1997       1996
                         ------------ ------------ ----------  -------- ------------
                                               (In thousands)
<S>                      <C>          <C>          <C>         <C>      <C>
Balance Sheet Data:
  Cash, cash
   equivalents,
   restricted cash and
   short-term liquid
   investments..........  $2,573,821   $   94,321  $  358,122  $140,743   $161,983
  Other current assets,
   net..................     412,445       94,206      52,877    28,934     32,461
  Investments in
   affiliates, net......     309,509      429,490     341,252   253,108    272,205
  Property, plant and
   equipment, net.......   2,379,837      451,442     440,735   219,342     31,102
  Goodwill and other
   intangible assets,
   net..................   2,944,802      424,934     409,190   132,636     45,629
  Other non-current
   assets...............     382,439       47,702      77,659    45,173     36,826
                          ----------   ----------  ----------  --------   --------
      Total assets......  $9,002,853   $1,542,095  $1,679,835  $819,936   $580,206
                          ==========   ==========  ==========  ========   ========
  Current liabilities...  $  908,700   $  326,552  $  291,390  $ 88,941   $ 13,255
  Senior notes and other
   long-term debt.......   5,989,455    1,939,289   1,702,771   675,183    371,227
  Other non-current
   liabilities..........      95,502      184,928      30,204     9,116        --
                          ----------   ----------  ----------  --------   --------
      Total
       liabilities......   6,993,657    2,450,769   2,024,365   773,240    384,482
  Minority interests in
   subsidiaries.........     867,970       18,705      15,186       307      2,509
  Preferred stock and
   other................      26,920       56,286      32,564    31,293     41,239
  Stockholders' equity
   (deficit)............   1,114,306     (983,665)   (392,280)   15,096    151,976
                          ----------   ----------  ----------  --------   --------
      Total liabilities
       and stockholders'
       equity
       (deficit)........  $9,002,853   $1,542,095  $1,679,835  $819,936   $580,206
                          ==========   ==========  ==========  ========   ========
</TABLE>

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

The following discussion contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. These
forward-looking statements may include, among other things, statements
concerning our plans, objectives and future economic prospects, expectations,
beliefs, future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. These forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause our actual results, performance or achievements, or
industry results, to be materially different from what we say or imply with
such forward-looking statements. These factors include, among other things,
changes in television viewing preferences and habits by our subscribers and
potential subscribers, their acceptance of new technology, programming
alternatives and new video services we may offer. They also include
subscribers' acceptance of our newer telephone and Internet/data services, our
ability to manage and grow our newer telephone and Internet/data services, our
ability to secure adequate capital to fund other system growth and
development, risks inherent in investment and operations in foreign countries,
changes in government regulation, changes in the nature of key strategic
relationships with joint venturers. We and our subsidiaries have announced
many potential acquisitions, many of which are subject to various conditions,
some of which may not occur. These forward-looking statements apply only as of
the time of this report, and we have no obligation or plans to provide updates
or revisions to these forward-looking statements or any other changes in
events, conditions or circumstances on which these statements are based. The
following discussion and analysis of financial condition and results of
operations cover the year ended December 31, 1999, the ten months ended
December 31, 1998 and the year ended February 28, 1998 and should be read
together with our consolidated financial statements and related notes included
elsewhere herein. These consolidated financial statements provide additional
information regarding our financial activities and condition.


                                      32
<PAGE>

Introduction

United was formed in 1989 for the purpose of developing, acquiring and
managing foreign multi-channel television, programming and telephone
operations outside the United States. Today we are a leading broadband
communications provider outside the United States. We provide multi-channel
television services in 23 countries worldwide and telephone and Internet/data
services in a growing number of our international markets. Our operations are
grouped into three major geographic regions: Europe, Asia/Pacific and Latin
America. Our European operations are held through our 53.2% owned, publicly
traded subsidiary, UPC, which is the largest Pan-European broadband
communications (multi-channel television, telephone and Internet/data)
provider in terms of the number of subscribers. Our Asia/Pacific operations
are primarily held through our 75.4% owned, publicly traded subsidiary, Austar
United, which owns the largest provider of multi-channel television services
in regional Australia, various Australian programming interests and the only
full service provider of broadband communications in New Zealand. Our primary
Latin American operation is VTR, Chile's largest multi-channel television
provider and a growing provider of telephone services.

For the year ended December 31, 1999, we consolidated the results of
operations from our systems in Austria, Belgium, Czech Republic, France,
Hungary, Ireland, The Netherlands, Norway, Poland (from August 1, 1999),
Romania, Slovak Republic, Sweden (from July 1, 1999), Australia, New Zealand
(from August 1, 1999), Chile (from May 1, 1999), Peru and Brazil (Fortaleza).
Unconsolidated systems include our interests in certain systems in Israel,
Malta, Brazil (Jundiai), Mexico, the Philippines and China and programming
interests in Spain, Australia and Latin America. We account for these
unconsolidated systems using the equity method of accounting. Under this
method, the investment, originally recorded at cost, is adjusted to recognize
our proportionate share of net earnings or losses of the affiliate, limited to
the extent of our investment in and advances to the affiliate, including any
debt guarantees or other contractual funding commitments. Our proportionate
share of net earnings or losses of each affiliate includes the amortization of
the excess of our cost over our proportionate interest in each affiliate's net
tangible assets. During the ten months ended December 31, 1998, we
consolidated certain of our Dutch systems for the period ended July 31, 1998.
Thereafter, all of our Dutch systems were accounted for using the equity
method until February 17, 1999. On December 11, 1997, we purchased the
remaining 50.0% of UPC we did not already own, and as a result began
consolidating UPC's operating results. We had historically accounted for UPC
under the equity method.

Prior to the ten months ended December 31, 1998, our fiscal year-end was the
last day of February, and we accounted for our share of the income or loss of
our operating companies based on the calendar year results of each operating
company. This created a two-month delay in reporting the operating company
results in our consolidated results for our fiscal year-end. On February 24,
1999, we changed our fiscal year-end from the last day in February to the last
day in December, effective December 31, 1998. To effect the transition to the
new fiscal year-end, the combined results of operations of the operating
companies for January and February 1998, a loss of $50.4 million, has been
reported as a one-time adjustment to our retained deficit as of March 1, 1998,
in our consolidated statement of stockholders' equity (deficit). Consequently,
the consolidated statement of operations presents the consolidated results of
the Company and its subsidiaries for the ten months ended December 31, 1998.

Services

To date, our primary source of revenue has been video entertainment services.
We believe that an increasing percentage of our future revenues will come from
telephone and Internet/data services. Within a decade, video services could
account for half of our total revenue, as our other services increase. These
are forward-looking statements and will not be fulfilled unless our new
services grow dramatically. Our capital constraints, technological
limitations, competition, lack of programming, loss of personnel, adverse
regulation and many other factors could prevent our new services from growing
as we expect. The introduction of telephone and Internet/data services had a
significant negative impact on operating income (loss) and Adjusted EBITDA
during 1999. We expected this negative impact due to the high costs associated
with obtaining subscribers, branding, and launching these new services against
the incumbent operator. This negative impact is expected to decline.

                                      33
<PAGE>

We intend for these new businesses to be Adjusted EBITDA positive after two to
three years following introduction of the service, but there can be no
assurance this will occur.

Video. Our operating systems generally offer a range of video service
subscription packages including a basic tier and an expanded basic tier. In
some systems, we also offer mini-tiers and other premium programming.
Historically, video services revenue has increased as a result of acquisitions
of systems, subscriber growth from both well established and developing
systems, and increases in revenue per subscriber from basic rate increases and
the introduction of expanded basic tiers and pay-per-view services.

Voice. Our operating systems offer a full complement of telephone services,
including caller ID, call waiting, call forwarding, call blocking, distinctive
ringing and three-way calling. In addition, we have begun to offer business
services, including dedicated leased lines, LAN interconnection services and
cable ISDN.

Data. We are in the early stages of executing our Internet/data business, and
the profitability of both the Internet as a mass market delivery vehicle and
our business is unproven. Our expansion plans contemplate geographic coverage
across several continents, with locally tailored content and products and
services in multiple languages.
chello broadband, which launched its service in April 1999, provides high-
speed Internet access and local portal and integrated broadband content to our
local operating companies and non-affiliated operating companies through a
franchise agreement. Under the franchise agreement chello provides our non-
affiliated local operators with high-speed connectivity, caching, local
language broadband portals, and marketing support for a fee based upon a
percentage of subscription and installation revenue. In the future the
franchise agreement provides that the local operator will receive a percentage
of the revenue from chello generated e-commerce and advertising. The local
operator is responsible for the local network including the upgrade,
management and maintenance, sales and training, customer support and service,
installation and cost of customer premise equipment. During 1999,
substantially all of chello's revenues were subscription based and derived
from our local operating companies. These intercompany revenues have been
eliminated in our consolidated operating results. We believe we have an
opportunity to grow non-affiliated revenue through chello in future years,
however we cannot predict whether our products and services, including
broadband Internet services in general, will become accepted or profitable in
these markets.

Pricing

Video. We usually charge a one-time installation fee when we connect video
subscribers, a monthly subscription fee that depends on whether basic or
expanded basic tier service is offered, and incremental amounts for those
subscribers purchasing pay-per-view and premium programming, which are
generally offered only to expanded basic tier subscribers.

Voice. Revenue from residential telephone usually consists of a flat monthly
line rental and a usage charge based upon minutes. Other telephone revenue
includes IP data services to the small and medium-sized business customers,
carrier select revenue as well as lease line and other business revenue. In
order to achieve high growth from early market entry, we price our telephone
service at a discount compared to services offered by incumbent
telecommunications operators. In addition, we may waive or substantially
discount our installation fees.

Data. To date, virtually all of our revenues have been derived from monthly
subscription fees. Most local operators have chosen to waive installation
charges. In the future, we expect to generate revenues from advertising and e-
commerce as we develop our portals and our digital set-top box services.
Currently, our services are offered to residential subscribers at flat
subscription fees. Our flat fee is designed to be generally lower than the
costs associated with dial-up Internet access, including the access fees and
phone charges with dial-up access. For business subscribers to services other
than our standard broadband Internet access services, we generally agree on
the pricing with local operators on a case by case basis, depending on the
size and capacity requirements of the businesses.


                                      34
<PAGE>

Costs of Operations

Video. Operating costs include the direct costs of programming, franchise fees
and operating expenses necessary to provide the service to the subscriber.
Direct costs of programming are variable, based on the number of subscribers.
The cost per subscriber is established by negotiation between us and the
program supplier or rates negotiated by cable associations. Franchise fees,
where applicable, are typically based upon a percentage of revenue. Other
direct operating expenses include operating personnel, service vehicles,
maintenance and plant electricity. Selling, general and administrative
expenses include personnel-related costs such as stock-based compensation
expenses, marketing, sales and commissions, legal and accounting, office
facilities and other overhead costs.

Voice. Operating costs include interconnect costs, number portability fees,
network operations, customer operations and customer care. Interconnect costs
are variable based upon usage as determined through negotiated interconnect
agreements. Selling, general and administrative expenses include branding,
marketing and customer acquisition costs, personnel-related costs such as
stock-based compensation expense, legal and accounting, human resources,
office facilities and other overhead costs.

Data. Operating costs consist primarily of leased-line and network development
and management costs, as well as portal design and development, local
connectivity costs, help desk and customer care costs. Stock-based
compensation expenses related to operations personnel are also part of our
operating costs. Selling, general and administrative expenses include
branding, customer acquisition costs, personnel-related costs, legal and
accounting, office facilities and other overhead.

                                      35
<PAGE>

Results of Operations

The following table sets forth information from our major consolidated
operating systems for the last three years:

<TABLE>
<CAPTION>
                                                        For the Year Ended
                                                           December 31,
                                                     --------------------------
                                                       1999     1998     1997
                                                     --------  -------  -------
                                                          (In thousands)
   <S>                                               <C>       <C>      <C>
   UPC Revenue (Euro):
     Video..........................................  363,348  171,446  145,409
     Telephone......................................   40,273      241      --
     Internet/Data..................................   25,055    4,295      347
     Programming and DTH............................   11,370      611       45
     Other..........................................    7,455    8,989    7,239
                                                     --------  -------  -------
       Total UPC Revenue............................  447,501  185,582  153,040
                                                     ========  =======  =======
   UPC Adjusted EBITDA (Euro):
     Video..........................................  116,509   76,600   60,155
     Telephone......................................  (42,099)  (5,249)     --
     Internet/Data..................................  (76,267) (11,281)     174
     Programming and DTH............................  (76,565)  (4,570)  (5,233)
     Other..........................................  (41,405)  (4,933)  (7,678)
                                                     --------  -------  -------
       Total UPC Adjusted EBITDA(1)................. (119,827)  50,567   47,418
                                                     ========  =======  =======
   Austar Revenue (A$):
     Video..........................................  220,493  136,072   86,470
                                                     --------  -------  -------
       Total Austar Revenue.........................  220,493  136,072   86,470
                                                     ========  =======  =======
   Austar Adjusted EBITDA (A$):
     Video..........................................  (11,946) (37,981) (26,027)
                                                     --------  -------  -------
       Total Austar Adjusted EBITDA(1)..............  (11,946) (37,981) (26,027)
                                                     ========  =======  =======
   VTR Revenue (USD):
     Video..........................................  113,004  116,488  114,423
     Telephone......................................   14,467    2,516      263
                                                     --------  -------  -------
       Total VTR Revenue............................  127,471  119,004  114,686
                                                     ========  =======  =======
   VTR Adjusted EBITDA (USD):
     Video..........................................   27,725   30,763   23,687
     Telephone......................................   (4,388)  (2,741)  (1,687)
                                                     --------  -------  -------
       Total VTR Adjusted EBITDA(1).................   23,337   28,022   22,000
                                                     ========  =======  =======
</TABLE>
--------
(1) "Adjusted EBITDA" represents net operating earnings before depreciation,
    amortization and stock-based compensation charges. Stock-based
    compensation charges result from variable plan accounting for our
    subsidiaries' phantom stock option plans and are generally non-cash
    charges. Industry analysts generally consider Adjusted EBITDA to be a
    helpful way to measure the performance of cable television operations and
    communications companies. We believe Adjusted EBITDA helps investors to
    assess the cash flow from our operations from period to period and thus to
    value our business. Adjusted EBITDA should not, however, be considered a
    replacement for net income, cash flows or for any other measure of
    performance or liquidity under generally accepted accounting principles,
    or as an indicator of a company's operating performance. Our presentation
    of Adjusted EBITDA may not be comparable to statistics with a similar name
    reported by other companies. Not all companies and analysts calculate
    Adjusted EBITDA in the same manner.


                                      36
<PAGE>

The spot rates and average rates for the primary currencies that impact our
financial statements are shown below per one U.S. dollar:

<TABLE>
<CAPTION>
                                                      Dutch  Australian Chilean
                                             Euro(1) Guilder   Dollar     Peso
                                             ------- ------- ---------- --------
   <S>                                       <C>     <C>     <C>        <C>
   Spot rate December 31, 1999.............. 0.9938  2.1900    1.5244   529.7500
   Average rate 1999........................ 0.9528  2.0994    1.5488   507.8951
   Spot rate December 31, 1998.............. 0.8576  1.8900    1.6332   472.5000
   Average rate 1998........................ 0.9030  1.9900    1.6102        N/A
   Spot rate December 31, 1997.............. 0.9166  2.0200    1.5378        N/A
   Average rate 1997........................ 0.8849  1.9500    1.3584        N/A
</TABLE>
--------
(1) The Dutch guilder is fixed to the Euro as of January 1, 1999 at a rate of
    2.20371 to 1.

Revenue. Revenue increased $465.5 million, or 183.2%, during the year ended
December 31, 1999 and increased $155.4 million, or 157.6% during the ten
months ended December 31, 1998, the detail of which is as follows:

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
                                                      (In thousands)
   <S>                                    <C>          <C>          <C>
   Europe................................   $473,422     $172,287     $ 9,996
   Asia/Pacific..........................    150,932       77,269      68,961
   Latin America.........................     94,893        4,512      19,244
   Corporate and Other...................        277          --          421
                                            --------     --------     -------
     Total revenue.......................   $719,524     $254,068     $98,622
                                            ========     ========     =======
</TABLE>

Europe

Revenue for UPC in U.S. dollar terms increased $267.9 million, or 130.4%, from
$205.5 million for the year ended December 31, 1998 to $473.4 million for the
year ended December 31, 1999, despite a 15.9% devaluation of the Dutch guilder
to the U.S. dollar. On a functional currency basis, UPC's revenue increased
(Euro) 261.9 million, or 141.1%, from (Euro) 185.6 million for the year ended
December 31, 1998 to (Euro) 447.5 million for the year ended December 31,
1999, primarily due to an increase in cable television revenue of (Euro) 191.9
million. The increase in cable television revenue attributable to acquisitions
made during 1999 totaled (Euro) 160.8 million, or 83.8% of the total increase.
Of this increase, acquisitions in the Netherlands represent 59.3%,
acquisitions in France represent 12.7%, the acquisition in Poland represents
15.8% and acquisitions in Sweden and other represent 12.2%. The remaining
increase in cable television revenue of approximately 16.2% came from
subscriber growth, increased revenue per subscriber in Austria, Norway, UPC's
existing system in France, and UPC's systems in Eastern Europe and the
inclusion of a full year of operations in 1999 for acquisitions completed in
1998. UPC's telephone revenue increased (Euro) 40.1 million to (Euro) 40.3
million for the year ended December 31, 1999 from (Euro) 0.2 million for the
year ended December 31, 1998. During 1999, we launched local telephone
services, under the brand name Priority Telecom, in our Austrian, Dutch,
French and Norwegian systems. In addition, A2000, which we consolidated
effective September 1, 1999, had an existing telephone service from July 1997.
UPC's Internet/data revenue increased (Euro) 20.8 million to (Euro) 25.1
million for the year ended December 31, 1999 from (Euro) 4.3 million for the
year ended December 31, 1998. The increase is primarily due to the launch of
residential and business cable-modem high-speed Internet access services.
During the second quarter of 1999, we launched chello broadband on the
upgraded portion of our networks in Austria, Belgium, France, the Netherlands
(with the exception of A2000) and Norway. We launched chello broadband in
A2000 and Sweden in the fourth quarter of 1999. Internet/data revenue from
1998 primarily relates to revenue from Austria, Belgium and Norway, which
provided Internet access service from 1997.


                                      37
<PAGE>

Revenue for UPC in U.S. dollar terms increased $32.5 million, or 18.8%, from
$173.0 million for the year ended December 31, 1997 to $205.5 million for the
year ended December 31, 1998. On a functional currency basis, UPC's revenue
increased (Euro) 32.6 million, or 21.3%, from (Euro) 153.0 million for the
year ended December 31, 1997 to (Euro) 185.6 million for the year ended
December 31, 1998, primarily due to an increase in cable television revenue of
(Euro) 26.0 million. The increase in cable television revenue resulted
primarily from the acquisition of Combivisie in January 1998 which was
consolidated through July 31, 1998 (21.6%) and the consolidation of Telekabel
Hungary effective July 1, 1998 (48.5%). The remaining increase in cable
television revenue came from subscriber growth and in revenue per subscriber
in Austria, Norway, our existing system in France, and our systems in Eastern
Europe.

We began consolidating the results of UPC effective December 11, 1997.
Accordingly, we recorded $9.9 million of revenue from UPC during the three
weeks ended December 31, 1997.

Asia/Pacific

Revenue for Austar in U.S. dollar terms increased $57.3 million, or 67.3%,
from $85.2 million for the year ended December 31, 1998 to $142.5 million for
the year ended December 31, 1999, including a positive impact of $4.3 million
due to exchange rate fluctuations. On a functional currency basis, Austar's
revenue increased A$84.4 million, or 62.0%, from A$136.1 million for the year
ended December 31, 1998 to A$220.5 million for the year ended December 31,
1999. This increase was primarily due to subscriber growth (381,763 at
December 31, 1999 compared to 288,721 at December 31, 1998) and increased
average monthly revenue per subscriber as Austar continues to expand the
content of its television service. The average monthly revenue per subscriber
increased A$6.71 ($4.40) from an average per subscriber of A$47.00 ($30.83)
for the year ended December 31, 1998 to an average of A$53.71 ($35.23) per
subscriber for the year ended December 31, 1999, a 14.3% increase.

Revenue for Austar in U.S. dollar terms increased $21.4 million, or 33.5%,
from $63.8 million for the year ended December 31, 1997 to $85.2 million for
the year ended December 31, 1998, despite a negative impact of $15.0 million
due to exchange rate fluctuations. On a functional currency basis, Austar's
revenue increased A$49.6 million, from A$86.5 million for the year ended
December 31, 1997 to A$136.1 million for the year ended December 31, 1998, a
57.3% increase. This increase was primarily due to subscriber growth (288,721
at December 31, 1998 compared to 196,205 at December 31, 1997) as Austar
continued to roll-out its services.

Latin America

We began consolidating the results of operations of VTR effective May 1, 1999.
Revenue for VTR in U.S. dollar terms increased $8.5 million, or 7.1%, from
$119.0 million for the year ended December 31, 1998 to $127.5 million for the
year ended December 31, 1999, despite a 12.1% devaluation in the Chilean peso
to the U.S. dollar. The increase in revenue primarily resulted from telephony
subscriber growth volume (66,718 at December 31, 1999 compared to 20,985 at
December 31, 1998). The average monthly revenue per subscriber for telephony
service was $18.07 for the year ended December 31, 1999, compared to $10.00
for the year ended December 31, 1998. VTR experienced increased churn and
lower sales volume than expected for its multi-channel television service
during the year ended December 31, 1999 due to an economic recession in Chile
and increased competition. The number of subscribers decreased from 393,851 as
of December 31, 1998 to 386,967 as of December 31, 1999. The average monthly
revenue per subscriber for multi-channel television was $24.34 for the year
ended December 31, 1999, compared to $24.67 for the year ended December 31,
1998.

Revenue for Cable Star in U.S. dollar terms increased $1.4 million, or 93.3%,
from $1.5 million for the year ended December 31, 1997 to $2.9 million for the
year ended December 31, 1998. The remainder of Latin America's revenue for the
year ended December 31, 1998 was attributable to our system in Brazil.

We consolidated the results of Bahia Blanca effective November 1, 1996 through
August 31, 1997. Bahia Blanca's revenue, consisting primarily of service fees,
was $17.6 million through the eight months ended August 31, 1997. The
remainder of Latin America's revenue for the year ended December 31, 1997 was
attributable to our systems in Peru.


                                      38
<PAGE>

Adjusted EBITDA. Adjusted EBITDA decreased $124.2 million during the year
ended December 31, 1999, and increased $54.4 million during the ten months
ended December 31, 1998, the detail of which is as follows:

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
                                                      (In thousands)
   <S>                                    <C>          <C>          <C>
   Europe................................  $(124,009)    $ 42,608     $ (9,204)
   Asia/Pacific..........................    (11,141)     (33,380)     (37,962)
   Latin America.........................      6,859      (10,264)      (8,278)
   Corporate and Other...................        109       (2,907)      (2,921)
                                           ---------     --------     --------
     Total Adjusted EBITDA...............  $(128,182)    $ (3,943)    $(58,365)
                                           =========     ========     ========
</TABLE>

Europe

Adjusted EBITDA for UPC in U.S. dollar terms decreased $180.1 million from
$56.0 million for the year ended December 31, 1998 to negative $124.1 million
for the year ended December 31, 1999, despite a 15.9% devaluation of the Dutch
guilder to the U.S. dollar. On a functional currency basis, UPC's Adjusted
EBITDA decreased (Euro) 170.4 million from (Euro) 50.6 million for the year
ended December 31, 1998 to negative (Euro) 119.8 million for the year ended
December 31, 1999, primarily due to the continued introduction of its
telephone and Internet/data businesses. In addition, as a percentage of
revenue, operating expense for cable television increased 6.9% from 32.5% for
the year ended December 31, 1998 to 39.4% for the year ended December 31,
1999. This increase is primarily due to higher operating costs as a percentage
of revenue for systems we acquired during 1999. As a percentage of revenue,
operating expenses in our new acquisitions was approximately 38.3%. We expect
to reduce this percentage in future years through revenue growth and operating
efficiencies. UPC expects to incur substantial operating losses related to its
programming and DTH businesses for the next two years, while UPC develops and
expands its subscriber base. During the year ended December 31, 1999, UPC's
significant negative Adjusted EBITDA from its local telephone services was due
to the recent launch of Priority Telecom in its Austrian, Dutch, French and
Norwegian systems. During the year ended December 31, 1999, UPC's significant
negative Adjusted EBITDA from its Internet/data service was due to the launch
of chello broadband on the upgraded portion of its networks in Austria,
Belgium, France, The Netherlands (with the exception of A2000) and Norway in
the second quarter. UPC launched chello Broadband in A2000 and Sweden in the
fourth quarter of 1999.

Adjusted EBITDA for UPC in U.S. dollar terms increased $2.4 million from $53.6
million for the year ended December 31, 1997 to $56.0 million for the year
ended December 31, 1998. On a functional currency basis, UPC's Adjusted EBITDA
increased (Euro) 3.2 million from (Euro) 47.4 million for the year ended
December 31, 1997 to (Euro) 50.6 million for the year ended December 31, 1998.
Adjusted EBITDA for cable television increased as a percentage of revenue from
1997 to 1998 primarily due to lower operating costs as a percentage of revenue
for systems UPC acquired in 1998. This was offset by negative Adjusted EBITDA
from telephone services due to the launch in several markets in 1998.

Asia/Pacific

Austar's Adjusted EBITDA loss improved by $15.4 million, or 66.7%, from
negative $23.1 million for the year ended December 31, 1998 to negative $7.7
million for the year ended December 31, 1999, including a negative impact of
$0.2 million due to exchange rate fluctuations. On a functional currency
basis, Austar's Adjusted EBITDA loss improved by A$26.1 million from negative
A$38.0 million for the year ended December 31, 1998 to negative A$11.9 million
for the year ended December 31, 1999, a 68.7% improvement. The improvement in
Adjusted EBITDA loss for the comparable periods from year to year is primarily
due to Austar achieving incremental sales growth while keeping certain costs
fixed, such as the NCOC, corporate management staff and media-related
marketing costs.


                                      39
<PAGE>

Austar's Adjusted EBITDA loss increased $3.9 million, or 20.3%, from negative
$19.2 million for the year ended December 31, 1997 to negative $23.1 million
for the year ended December 31, 1998, including a positive impact of $4.8
million due to exchange rate fluctuations. On a functional currency basis,
Austar's Adjusted EBITDA loss increased A$12.0 million from negative A$26.0
million for the year ended December 31, 1997 to negative A$38.0 million for
the year ended December 31, 1998, a 46.2% increase. Although revenue increased
compared to the same periods in the prior year, increases in operating expense
and selling, general and administrative expense outpaced the revenue increase,
primarily due to higher short-term programming costs in connection with the
receivership of Australis, Austar's previous programming supplier, and the
subsequent May 1998 joint venture with Optus Vision, as well as increases in
salaries and benefits for additional personnel necessary to support the growth
of Austar's NCOC.

Latin America

We began consolidating the results of operations of VTR effective May 1, 1999.
VTR's Adjusted EBITDA in U.S. dollar terms decreased $4.7 million, or 16.8%,
from $28.0 million for the year ended December 31, 1998 to $23.3 million for
the year ended December 31, 1999, partly due to a 12.1% devaluation in the
Chilean peso to the U.S. dollar. Although revenue increased compared to the
same periods in the prior year, increases in operating expense and selling,
general and administrative expense outpaced the revenue increases, primarily
due to the focus on the continued development of VTR's telephone services and
an increase in senior management personnel hired from the former shareholders
of VTR.

Corporate General and Administrative Expense. Corporate general and
administrative expense increased $123.5 million from $194.8 million for the
ten months ended December 31, 1998 to $318.3 million for the year ended
December 31, 1999, and increased $166.2 million from $28.6 million for the
year ended February 28, 1998 to $194.8 million for the ten months ended
December 31, 1998. This increase from 1998 to 1999 was primarily attributable
to a stock-based compensation charge of $202.2 million from UPC's phantom
stock option plans for the year ended December 31, 1999, compared to $162.1
million for the ten months ended December 31, 1998, as well as a full year of
results compared to ten months. These plans include the UPC phantom stock
option plan and the chello phantom stock option plan, which continue to
require variable plan accounting. Under this method of accounting, increases
in the fair market value of these shares result in non-cash compensation
charges to the statement of operations for vested options. In addition, UAP
and Austar United recorded a total of $22.5 million of non-cash stock-based
compensation expense for the year ended December 31, 1999 compared to nil for
the year ended December 31, 1998. The increase in the ten months ended
December 31, 1998 compared to the year ended February 28, 1998 was primarily
due to stock-based compensation expense totaling $164.8 million, $162.1
million of which was attributable to UPC's stock option plans. Corporate
general and administrative expense also increased due to the consolidation of
UPC effective December 11, 1997. These increases were offset by reporting ten
months of results in the transition period compared to twelve in the prior
year, as well as the non-recurrence of certain prior year charges.

Depreciation and Amortization. Depreciation and amortization expense increased
$259.7 million during the year ended December 31, 1999 and $67.4 million
during the ten months ended December 31, 1998 the detail of which is as
follows:

<TABLE>
<CAPTION>
                                        For the Year For the Ten  For the Year
                                           Ended     Months Ended    Ended
                                        December 31, December 31, February 28,
                                            1999         1998         1998
                                        ------------ ------------ ------------
                                                    (In thousands)
   <S>                                  <C>          <C>          <C>
   Europe..............................   $280,442     $ 76,550     $ 6,343
   Asia/Pacific........................    104,723       79,746      80,802
   Latin America.......................     32,142        1,637       3,503
   Corporate and other.................      1,407        1,112       1,008
                                          --------     --------     -------
     Total depreciation and
      amortization expense.............   $418,714     $159,045     $91,656
                                          ========     ========     =======
</TABLE>


                                      40
<PAGE>

Europe

UPC's depreciation and amortization expense in U.S. dollars increased $186.1
million, or 197.3%, from $94.3 million for the year ended December 31, 1998 to
$280.4 million for the year ended December 31, 1999, including a positive
impact from the 15.9% devaluation of the Dutch guilder to the U.S. dollar. On
a functional currency basis, UPC's depreciation and amortization expense
increased (Euro) 180.9 million, or 212.3%, from (Euro) 85.2 million for the
year ended December 31, 1998 to (Euro) 266.1 million for the year ended
December 31, 1999. This increase resulted primarily from acquisitions
completed during 1999 in the Netherlands and Poland, as well as additional
depreciation related to additional capital expenditures to upgrade the network
in our Western European systems and new-build for developing systems.

Depreciation and amortization expense for UPC in U.S. dollar terms increased
$26.1 million, or 38.3%, from $68.2 million for the year ended December 31,
1997 to $94.3 million for the year ended December 31, 1998. On a functional
currency basis, UPC's depreciation and amortization expense increased
(Euro) 24.9 million to (Euro) 85.2 million from (Euro) 60.3 million for the
year ended December 31, 1997, a 41.3% increase. Of this increase, (Euro) 11.9
million was attributable to the application of push-down accounting, including
goodwill created in connection with the acquisition of UPC on December 11,
1997. The remaining increase comprised of additional depreciation related to
the acquisitions of Combivisie and Telekabel Hungary, additional capital
expenditures to upgrade the network in our Western European systems and new-
build for developing systems.

We began consolidating the results of UPC effective December 11, 1997.
Accordingly, we recorded $6.1 million of depreciation and amortization expense
from UPC during the year ended February 28, 1998.

Asia/Pacific

Depreciation and amortization expense for Austar increased $2.2 million, or
2.3%, from $95.4 million for the year ended December 31, 1998 to $97.6 million
for the year ended December 31, 1999, including a negative impact of $2.8
million due to exchange rate fluctuations. On a functional currency basis,
Austar's depreciation and amortization expense increased A$3.9 million, from
A$143.0 million for the year ended December 31, 1998 to A$146.9 million for
the year ended December 31, 1999, a 2.7% increase.

Depreciation and amortization expense for Austar in U.S. dollar terms
increased $18.5 million, or 24.1%, from $76.9 million for the year ended
December 31, 1997 to $95.4 million for the year ended December 31, 1998,
including a positive impact of $15.2 million due to exchange rate
fluctuations. On a functional currency basis, Austar's depreciation and
amortization expense increased A$43.4 million, from A$99.6 million for the
year ended December 31, 1997 to A$143.0 million for the year ended December
31, 1998, a 43.6% increase. These increases were primarily due to the larger
fixed asset base due to the significant deployment of operating assets to meet
subscriber growth as well as increases related to subscriber disconnects.

Latin America

The increase in the year ended December 31, 1999 is due to consolidating the
results of operations of VTR effective May 1, 1999.

Gain on Issuance of Common Equity Securities by Subsidiaries. In February
1999, UPC successfully completed an initial public offering selling 133.8
million shares on the Amsterdam Stock Exchange and Nasdaq, raising gross and
net proceeds at NLG21.30 ($10.93) per share of NLG2,852.9 ($1,463.0) million
and NLG2,660.1 ($1,364.1) million, respectively. Concurrent with the offering,
a subsidiary of DIC exercised its option and acquired approximately 4.7
million ordinary shares of UPC, resulting in proceeds to UPC of $45.0 million.
Based on the carrying value of our investment in UPC as of February 11, 1999,
we recognized a gain of $822.1 million from the resulting step-up in the
carrying amount of our investment in UPC, in accordance with Staff Accounting
Bulletin No. 51 ("SAB 51").

In July 1999, Austar United successfully completed an initial public offering
selling 103.5 million shares on the Australian Stock Exchange, raising gross
and net proceeds at A$4.70 ($3.03) per share of A$486.5 ($313.6)

                                      41
<PAGE>

million and A$453.6 ($292.8) million, respectively. Based on the carrying
value of our investment in Austar United as of July 27, 1999, we recognized a
gain of $248.4 million from the resulting step-up in the carrying amount of
our investment in Austar United, in accordance with SAB 51.

In August 1999, UPC partially funded the acquisition of Videopole with 2.9
million ordinary shares of UPC. Based on the carrying value of our investment
in UPC as of July 31, 1999, we recognized a gain of $34.9 million from the
resulting step-up in the carrying amount of our investment in UPC, in
accordance with SAB 51.

In October 1999, UPC completed a second public offering of 45.0 million
ordinary shares, raising gross and net proceeds at (Euro) 19.92 ($21.58) per
share of (Euro) 896.3 ($970.9) million and (Euro) 851.5 ($922.4) million,
respectively. Based on the carrying value of our investment in UPC as of
October 19, 1999, we recognized a gain of $403.4 million from the resulting
step-up in the carrying amount of our investment in UPC, in accordance with
SAB 51.

No deferred taxes were recorded related to these gains due to our intent on
holding our investment in UPC and Austar United indefinitely.

Interest Income. Interest income increased $43.8 million and $2.7 million
during the year ended December 31, 1999 and the ten months ended December 31,
1998, respectively, compared to the amounts for the corresponding periods in
the prior year. The increase in the year ended December 31, 1999 was due to
higher cash balances related to the issuance of new debt and equity in 1999
and the increase in the ten months ended December 31, 1998 was due to higher
cash balances related to the issuance of our senior notes in February 1998.

Interest Expense. Interest expense increased $236.8 million from $163.2
million during the year ended December 31, 1998 to $400.0 million during the
year ended December 31, 1999. These increases were primarily due to the
continued accretion of interest on our $1,375.0 million aggregate principal
amount 1998 senior notes, our 1999 senior notes and new debt in 1999 at UPC,
including their senior notes and new debt facilities.

Interest expense increased $38.9 million, or 31.3%, from $124.3 million during
the year ended February 28, 1998 to $163.2 million during the ten months ended
December 31, 1998. This increase was primarily due to the continued accretion
of interest on our $1,375.0 million aggregate principal amount 1998 senior
notes and continued accretion on the $492.9 million aggregate principal amount
senior notes at United A/P.

Provision for Losses on Marketable Equity Securities and Investment Related
Costs. The provision for losses on marketable equity securities and investment
related costs consists of our write-off of various non-strategic investments.

Gain on Sale of Investments in Affiliates. In October 1997, we sold all of our
Argentine multi-channel television system assets for approximately $211.1
million cash, resulting in a gain of approximately $90.0 million.

Foreign Currency Exchange (Loss) Gain. Foreign currency exchange loss
increased $41.1 million from $1.6 million gain for the ten months ended
December 31, 1998 to $39.5 million loss for the year ended December 31, 1999,
primarily due to UPC and VTR, which have notes payable that are denominated in
U.S. dollars.

Minority Interests in Subsidiaries. The minority interests' share of losses
increased $359.0 million from $1.4 million for the ten months ended December
31, 1998 to $360.4 million for the year ended December 31, 1999. The initial
public offerings of UPC (February 1999) and Austar United (July 1999) reduced
our ownership from 100% and 98.0% as of December 31, 1998 to 53.2% and 75.4%
as of December 31, 1999 for UPC and Austar United, respectively. For
accounting purposes we continue to consolidate 100% of the results of
operations of UPC and Austar United, then deduct the minority interests' share
of losses before arriving at net income. Of the $359.0 million increase for
the year ended December 31, 1999, $344.5 million related to UPC and $13.6
million related to Austar United.


                                      42
<PAGE>

Share in Results of Affiliates. Our share in the results of affiliates totaled
a loss of $55.1 million, $54.2 million and $68.6 million for the year ended
December 31, 1999, the ten months ended December 31, 1998 and the year ended
February 28, 1998, respectively, as follows:

<TABLE>
<CAPTION>
                                        For the Year For the Ten  For the Year
                                           Ended     Months Ended    Ended
                                        December 31, December 31, February 28,
                                            1999         1998         1998
                                        ------------ ------------ ------------
                                                    (In thousands)
   <S>                                  <C>          <C>          <C>
   Europe:
     UPC...............................   $    --      $    --      $(42,236)
     A2000(1)..........................    (16,750)     (11,515)         --
     UTH(2)............................     (1,436)      (9,850)         --
     Hungary...........................        (41)      (3,446)         --
     Melita, Princes Holdings and
      Tevel(3).........................        --          (288)         --
     Tevel(3)..........................     (8,402)         --           --
     Melita(3).........................       (687)         --           --
     Monor.............................      1,630       (1,848)      (4,590)
     Iberian Programming...............      2,455          (77)      (2,348)
     SBS...............................     (5,557)         --           --
     Other.............................     (3,120)        (457)        (195)
                                          --------     --------     --------
                                           (31,908)     (27,481)     (49,369)
                                          --------     --------     --------
   Asia/Pacific:
     Saturn(4).........................     (6,262)      (8,628)         --
     XYZ Entertainment(5)..............     (5,290)         506       (2,408)
     Pilipino Cable Corporation........        (55)      (1,383)        (656)
     Hunan International TV............        (42)      (2,092)        (220)
                                          --------     --------     --------
                                           (11,649)     (11,597)      (3,284)
                                          --------     --------     --------
   Latin America:
     VTR(6)............................     (5,507)      (5,427)      (7,805)
     Megapo............................       (346)         253         (386)
     TV Show Brasil(7).................        --          (891)        (616)
     MGM Networks LA...................     (6,223)      (9,221)      (7,477)
     Jundiai...........................        526          198          426
                                          --------     --------     --------
                                           (11,550)     (15,088)     (15,858)
                                          --------     --------     --------
   Other...............................        --           --          (134)
                                          --------     --------     --------
   Total share in results of
    affiliates.........................   $(55,107)    $(54,166)    $(68,645)
                                          ========     ========     ========
</TABLE>
--------
(1) Effective September 1, 1999, we increased our ownership interest in A2000
    from 50.0% to 100% and began consolidating its results of operations.
(2) Effective February 1, 1999, we increased our ownership interest in UTH
    from 51.0% to 100% and began consolidating its results of operations.
(3) Historically we held our interests in Melita, Princes Holdings and Tevel
    through UII, a general partnership. In November 1998 we acquired our
    partner's interest in Tevel and Melita and sold our interest in Princes
    Holdings.
(4) Effective January 1, 1998, we discontinued consolidating the results of
    operations of Saturn and returned to the equity method of accounting due
    to certain minority shareholder's rights. Effective August 1, 1999, we
    increased our ownership interest in Saturn to 100% and began consolidating
    its results of operations.
(5) In September 1998, we acquired an additional 25.0% interest in XYZ
    Entertainment, increasing our ownership to 50.0%.
(6) Effective May 1, 1999, we increased our ownership interest in VTR to 100%
    and began consolidating its results of operations.
(7) Effective October 2, 1998, we increased our ownership interest in TV Show
    Brasil to 100% and began consolidating its results of operations.


                                      43
<PAGE>

Extraordinary Charge for Early Retirement of Debt. In connection with the
issuance of our senior notes in February 1998, we paid $531.8 million to
repurchase the existing old notes which had an accreted value of $466.2
million as of February 5, 1998. This tender premium of $65.6 million, combined
with the write off of unamortized deferred financing costs and other
transaction related costs totaling $13.5 million, resulted in an extraordinary
charge during the year ended February 28, 1998 of $79.1 million.

Liquidity and Capital Resources

Sources and Uses

We have financed our acquisitions and funding of our video, voice and data
systems in the three main regions of the world in which we operate primarily
through public and private debt and equity as well as cash received from the
sale of non-strategic assets by certain subsidiaries. These resources have
also been used to refinance certain debt instruments and facilities as well as
to cover corporate overhead. The following table outlines the sources and uses
of cash, cash equivalents, restricted cash and short-term liquid investments
(for purposes of this table only, "cash") for United (parent only) from
inception to date:

<TABLE>
<CAPTION>
                                                     For the Year
                                   Inception to          Ended
   United (Parent Only)          December 31, 1998 December 31, 1999   Total
   --------------------          ----------------- ----------------- ---------
                                                 (In millions)
   <S>                           <C>               <C>               <C>
   Financing Sources:
     Gross bond proceeds.......      $ 1,138.1         $  208.9      $ 1,347.0
     Gross equity proceeds.....          408.9 (1)      1,277.8        1,686.7
     Asset sales, dividends and
      note payments............          224.4             94.7          319.1
     Interest income and
      other....................           32.7             62.3           95.0
                                     ---------         --------      ---------
         Total sources.........        1,804.1          1,643.7        3,447.8
                                     ---------         --------      ---------
   Application of Funds:
     Investment in:
       UPC.....................         (454.7)            (4.4)        (459.1)
       UAP.....................         (256.4)(1)        (59.2)        (315.6)
       ULA.....................         (292.3)          (331.3)        (623.6)
       Other...................          (25.8)             --           (25.8)
                                     ---------         --------      ---------
         Total.................       (1,029.2)          (394.9)      (1,424.1)
     Repayment of bonds........         (531.8)(2)         (0.3)        (532.1)
     Offering costs............          (64.5)           (37.7)        (102.2)
     Corporate equipment and
      development..............          (25.7)            (5.3)         (31.0)
     Corporate overhead and
      other....................         (106.5)           (16.1)        (122.6)
                                     ---------         --------      ---------
         Total uses............       (1,757.7)          (454.3)      (2,212.0)
                                     ---------         --------      ---------
     Period change in cash.....           46.4          1,189.4        1,235.8
     Cash, beginning of
      period...................            --              46.4            --
                                     ---------         --------      ---------
     Cash, end of period.......      $    46.4         $1,235.8      $ 1,235.8
                                     =========         ========      ---------

<CAPTION>
   United's Subsidiaries
   ---------------------
   <S>                           <C>               <C>               <C>
   Cash, end of period:
     UPC.......................                                        1,049.1
     UAP.......................                                          279.4
     ULA.......................                                            7.6
     Other.....................                                            1.9
                                                                     ---------
         Total United's
          subsidiaries.........                                        1,338.0
                                                                     ---------
         Total consolidated
          cash, cash
          equivalents,
          restricted cash and
          short-term liquid
          investments..........                                      $ 2,573.8
                                                                     =========
</TABLE>
--------
(1) Includes issuance/use of $29.8 million and $29.5 million in convertible
    preferred stock in 1995 and 1998, respectively, to acquire interests in
    Australia as well as $50.0 million in common stock in 1995 to acquire the
    initial interest in UPC.
(2) Includes tender premium of $65.6 million.

                                      44
<PAGE>

United Parent

We had $1,235.8 million of cash, cash equivalents, restricted cash and short-
term liquid investments on hand as of December 31, 1999. Additional sources of
cash in 2000 may include the raising of additional private or public debt
and/or equity and/or the receipt of sales proceeds from the disposition of
non-strategic assets by certain subsidiaries. Uses of cash in the next year
will include continued funding to the Latin America region to meet the
existing growth plans of our systems in that region and corporate overhead. We
do not expect to contribute additional capital to UPC and Austar United for
their on-going operating or development requirements, as they will finance
their operating systems and development opportunities with their operating
cash flow and debt and equity financings. We estimate approximately $141.8
million of United Parent funding will be required by systems in the Latin
America region during 2000. We believe that our existing capital resources
will enable us to assist in satisfying the operating and development
requirements of our subsidiaries and cover corporate overhead for the next
year. To the extent we pursue new acquisitions or development opportunities,
we will need to raise additional capital or seek strategic partners. Because
we do not currently generate positive operating cash flow, our ability to
repay our long-term obligations will be dependent on developing one or more
additional sources of cash.

UPC

UPC had $1,049.1 million in cash, cash equivalents, restricted cash and short-
term liquid investments on hand as of December 31, 1999. During February 1999,
UPC successfully completed an initial public offering selling 133.8 million
shares on the Amsterdam Stock Exchange and Nasdaq, raising gross and net
proceeds at NLG21.30 ($10.93) per share of NLG2,852.9 ($1,463.0) million and
NLG2,660.1 ($1,364.1) million, respectively. Concurrent with the offering, a
subsidiary of DIC exercised one of its two option agreements acquiring
approximately 4.7 million shares of UPC for $45.0 million. Proceeds from the
offering and option exercise were used to repay certain debt facilities and
finance acquisitions.

In July 1999, UPC completed a $1.5 billion bond offering. Proceeds from this
bond offering were primarily used to fund acquisitions. Also in July 1999, UPC
entered into a (Euro) 1.0 billion credit facility. Proceeds from this senior
credit facility were used to refinance the existing credit facility, repay
certain intercompany debts, fund general corporate purposes and fund capital
expenditures. UPC completed another bond offering in October 1999 totaling
$1.0 billion. Proceeds from this bond offering were primarily used to fund
acquisitions.

In October 1999, UPC completed a second public offering of 45.0 million
ordinary shares, raising gross and net proceeds at (Euro) 19.92 ($21.58) per
share of (Euro) 896.3 ($970.9) million and (Euro) 851.5 ($922.4) million,
respectively. The proceeds were used to finance acquisitions.

In January 2000, UPC completed a $1.6 billion bond offering consisting of
$600.0 million and (Euro) 200.0 million of ten-year 11.25% Senior Notes due
2010, $300.0 million of ten-year 11.5% Senior Notes due 2010 and $1.0 billion
aggregate principal amount of ten-year 13.75% Senior Discount Notes due 2010.
The Senior Discount Notes were sold at 51.2% of the face amount yielding gross
proceeds of $512.0 million and will accrue but not pay interest until 2005.

The proceeds from the debt and equity offerings, in addition to borrowing
capacity on UPC's facilities at the corporate and project debt level, are
expected to be used primarily for acquisitions, capital expenditures and other
costs associated with UPC's network upgrade and the continued development of
UPC's telephone and Internet/data services businesses. UPC may need to raise
additional capital in the future to the extent UPC pursues additional
acquisitions or development opportunities or if cash flow from operations is
insufficient to satisfy UPC's liquidity requirements.

UAP

UAP had $279.4 million of cash, cash equivalents and short-term liquid
investments on hand as of December 31, 1999. On July 27, 1999, Austar United
successfully completed an initial public offering selling 103.5 million shares
on the Australian Stock Exchange, raising gross and net proceeds at A$4.70
($3.03) per share of A$486.5

                                      45
<PAGE>

($313.6) million and A$453.6 ($292.8) million, respectively. These proceeds,
in addition to borrowing capacity on the New Austar Bank Facility and Saturn
Bank Facility, will be used to expand Austar United's customer base, complete
the build-out of its network and introduce new services such as telephone and
Internet/data.

ULA

ULA had $7.6 million of cash, cash equivalents, restricted cash and short-term
liquid investments on hand as of December 31, 1999. ULA's systems, which are
at various stages of construction and development, will generally depend on
funding from us and project financing to meet their growth needs. ULA's
Chilean system, VTR, has capacity for borrowing under the VTR Bank Facility as
of December 31, 1999. With this facility and positive operating cash flow, the
business needs an additional $115.1 million from us through 2000 to continue
to grow its telephony business. ULA anticipates continued nominal funding from
us for Latin America programming and projects in Brazil. In January 2000, we
funded $22.8 million to ULA for the purchase of an additional 41.3% interest
in Megapo. To the extent ULA pursues additional acquisitions or development
opportunities, ULA will need to raise additional capital or seek strategic
partners.

Statements of Cash Flows

We had cash and cash equivalents of $1,925.9 million as of December 31, 1999,
an increase of $1,890.3 million from $35.6 million as of December 31, 1998.
Cash and cash equivalents as of December 31, 1998 represented a decrease of
$267.8 million from $303.4 million as of February 28, 1998, and cash and cash
equivalents as of February 28, 1998 represented an increase of $234.6 million
from $68.8 million as of February 28, 1997.

<TABLE>
<CAPTION>
                                        For the Year  For the Ten  For the Year
                                           Ended      Months Ended    Ended
                                        December 31,  December 31, February 28,
                                            1999          1998         1998
                                        ------------  ------------ ------------
                                                    (In thousands)
   <S>                                  <C>           <C>          <C>
   Cash flows from operating
    activities........................  $  (117,084)   $   1,988     $(60,652)
   Cash flows from investing
    activities........................   (4,353,364)    (433,460)     (73,096)
   Cash flows from financing
    activities........................    6,308,415      158,815      369,089
   Effect of exchange rates on cash...       52,340        4,824         (684)
                                        -----------    ---------     --------
   Net increase (decrease) in cash and
    cash equivalents..................    1,890,307     (267,833)     234,657
   Cash and cash equivalents at
    beginning of period...............       35,608      303,441       68,784
                                        -----------    ---------     --------
   Cash and cash equivalents at end of
    period............................  $ 1,925,915    $  35,608     $303,441
                                        ===========    =========     ========
</TABLE>

Year Ended December 31, 1999

Principal sources of cash during the year ended December 31, 1999 included
$2,540.8 million in proceeds from the issuance of senior notes and senior
discount notes by UPC, $1,409.1 million in proceeds from UPC's initial public
offering and DIC's exercise of its option to acquire shares in UPC, $922.4
million in net proceeds from UPC's second public offering of equity
securities, $571.4 million in net proceeds from the issuance of our Class A
Common Stock in a public offering, $381.6 million in net proceeds from the
issuance of our Series C Convertible Preferred Stock, $375.3 million of
borrowings on UPC's senior credit facility, $292.8 million in net proceeds
from the Austar United initial public offering, $257.2 million of borrowings
on the Telekabel Group facility, $259.9 million in net proceeds from the
issuance of our Series D Convertible Preferred Stock, $229.9 million of
borrowings on Austar's bank facility and Saturn's bank facility, $208.9
million in proceeds from the private issuance of our debt securities due 2009,
$61.0 million of borrowings on VTR's bank facility, $141.2 million of other
borrowings, $50.0 million from the exercise of stock options and warrants,
$18.0 million of proceeds from the sale of UPC's Hungarian programming assets,
$52.3 million positive exchange rate effect on cash and $3.1 million from
other investing and financing sources.

Principal uses of cash during the year ended December 31, 1999 included $848.2
million of net cash invested in short-term liquid investments, $794.2 million
of capital expenditures for system upgrade and new-build activities,

                                      46
<PAGE>

$744.5 million for the acquisition of @Entertainment, $521.7 million for the
repayment of UPC's existing senior revolving credit facility, $306.1 million
for the repayment of an existing facility at UPC Nederland, $293.2 million for
the acquisition of Stjarn, $252.7 million for the acquisition of the
additional 66.0% interest in VTR, $252.0 million for the acquisition of the
additional 49.0% interest in UTH, $228.5 million for the acquisition of A2000,
$150.0 million for the acquisition of Kabel Plus, $109.7 million for the
acquisition of GelreVision, $291.2 million for other acquisitions, $373.5
million of investments in affiliates, including UPC's acquisition of an
interest in PrimaCom for $227.9 million and SBS for $100.2 million, $129.1
million for the repayment of Austar's existing bank facility, $320.1 million
for the repayment of other loans, $100.7 million for deferred financing costs,
$18.0 million for payment of a note, and $151.2 million for operating
activities and other investing and financing uses.

Ten Months Ended December 31, 1998

Principal sources of cash during the ten months ended December 31, 1998
included $321.2 million from short-term and long-term borrowings, primarily on
UPC's senior revolving credit facility, CNBH's major facility, the DIC Loan
and Austar's bank facility, $27.9 million from the net release of restricted
funds, primarily the Janco deposit, $20.0 million from the sale of Portugal
and other systems, $12.2 million from the issuance of our equity securities
and $6.8 million from operating activities and other investing and financing
sources.

Principal uses of cash during the ten months ended December 31, 1998 included
capital expenditures totaling $217.1 million for system upgrades and new-build
activities, $168.4 million of debt repayments, primarily on UPC's bridge bank
facility and other bank facilities, $139.0 million of funding to our operating
systems including the acquisition of additional interests in Tevel, Melita,
Janco and TVSB, $109.9 million primarily for the new acquisitions of
Combivisie (The Netherlands) and Kabelkom (Hungary) and $21.5 million for
other investing and financing uses.

Year Ended February 28, 1998

Principal sources of cash during the year ended February 28, 1998 included
gross proceeds of $812.2 million from the sale of our 1998 senior notes,
$211.1 million net cash proceeds from the sale of our Argentine cable systems,
$110.0 million of borrowings by ULA to finance acquisitions in Argentina,
$85.2 million of borrowings on Austar's bank facility, $38.0 million from
ULA's revolving credit facility, net proceeds from the net change in short-
term investments of $36.6 million, $29.9 million gross proceeds from the
issuance of United A/P senior notes in September 1997, $22.0 million from cash
contributions from minority interest partners and $1.3 million of repayments
on notes receivable and other sources.

Principal uses of cash during the year ended February 28, 1998 included
redemption of our old senior notes of $531.8 million, investments in our
affiliated companies totaling $177.6 million, repayment of debt under the
Argentina acquisition financing of $110.0 million, purchases of property,
plant and equipment totaling $115.0 million to continue the build-out of
existing projects, payments on our seller notes for Comodoro, Trelew, Santa Fe
and Bahia Blanca, Argentina totaling $46.4 million, debt financing costs of
$30.9 million, $8.4 million deposited in restricted cash, $30.8 million for
repayment of other debt and other investing and financing uses, and the
funding of operating activities of $60.7 million during the period.

New Accounting Principles

The Financial Accounting Standards Board ("FASB") recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that companies recognize
all derivatives as either assets or liabilities in the balance sheet at fair
value. Under this statement, accounting for changes in fair value of a
derivative depends on its intended use and designation. SFAS 133 is effective
for fiscal years beginning after June 15, 2000. We are currently assessing the
effect of this new standard.

                                      47
<PAGE>

In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Views on Selected Revenue Recognition
Issues" ("SAB 101"), which provides the staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB 101
is effective for the second quarter of 2000. We are currently assessing the
effect of SAB 101.

European Economic and Monetary Union

On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing sovereign
currencies and the Euro, including The Netherlands. The participating
countries adopted the Euro as their common legal currency on that day. The
Euro trades on currency exchanges and is available for non-cash transactions
during the transition period between January 1, 1999 and January 1, 2002.
During this transition period, the existing currencies are scheduled to remain
legal tender in the participating countries as denominations of the Euro and
public and private parties may pay for goods and services using either the
Euro or the participating countries' existing currencies. During the
transition period, all UPC operating companies' billing systems will include
amounts in Euro as well as the respective country's existing currency. All of
UPC's accounting and management reporting systems currently are multi-
currency. We do not expect the introduction of the Euro to materially affect
UPC's cable television and other operations. However, we do believe the
introduction of the Euro will reduce our exposure to risk from foreign
currency and interest rate fluctuations.

Year 2000 Conversion

Our multi-channel television, programming and telephony operations are heavily
dependent upon computer systems and other technological devices with embedded
chips. Such computer systems and other technological devices did not
experience any problems related to recognizing dates of January 2000 and
thereafter. In all material respects, our multi-channel television and
telephony systems or programming services continued to operate during the
period December 31, 1999 to March 30, 2000.

Year 2000 Program. In response to possible Year 2000 problems, the Board of
Directors of United established a Task Force to assess the impact that
potential Year 2000 problems might have on company-wide operations, including
the Company and its operating companies, and to implement necessary changes to
address such problems. The Task Force reported directly to the United Board.
In creating a program to minimize Year 2000 problems, the Task Force
identified certain critical operations of our business. These critical
operations were identified as service delivery systems, field and headend
devices, customer service and billing systems and corporate management and
administrative operations (e.g., cash flow, accounts payable and accounts
receivable, payroll and building operations).

The Task Force established a three-phase program to address potential Year
2000 problems:

(a) Identification Phase: identify and evaluate computer systems and other
    devices (e.g., headend devices, switches and set-top boxes) on a system by
    system basis for Year 2000 compliance.
(b) Implementation Phase: establish a database and evaluate the information
    obtained in the Identification Phase, determine priorities, implement
    corrective procedures, define costs and ensure adequate funding.
(c) Testing Phase: test the corrective procedures to verify that all material
    compliance problems will operate on and after January 1, 2000, and
    develop, as necessary, contingency plans for material operations.

The Task Force completed these Phases on substantially all critical operations
prior to year-end 1999. As a result, we believe all material corporate
operations are in compliance for Year 2000 and do not require material
remediation or replacement. During the period December 31, 1999 to March 30,
2000, our worldwide operations continued to function in the ordinary course in
all material respects. We experienced no material business interruptions or
material problems, with respect to our operations arising from Year 2000
issues. We know of no remaining contingencies.

                                      48
<PAGE>

Third-Party Dependencies. Although we believed our largest Year 2000 risk was
our dependency upon third-party products, we experienced no Year 2000 issues
as a result of such dependency. To our knowledge, no further significant
contingencies exist based on our dependency upon third-party products. We
cannot, however, give any assurance concerning compliance of our equipment
because our responses from third-party vendors have been limited and cannot be
independently verified.

Costs of Compliance. The Task Force is not able to determine the full cost of
its Year 2000 program and its related impact on our financial condition. In
the course of our business, we have made substantial capital adjustments over
the past few years in improving our systems, primarily for reasons other than
Year 2000. Because these upgrades also resulted in Year 2000 compliance,
replacement and remediation costs have been low. Therefore, the Task Force's
estimate of the cost of the Year 2000 program at $7.3 million remains
unchanged. Included in such costs is approximately $2.3 million spent on our
billing systems for Year 2000. The Task Force accelerated these expenditures
to 1999 to insure Year 2000 compliance; otherwise these costs would have been
incurred over approximately two to three years. The cost of the Year 2000
program does not, however, include internal costs because we did not
separately track the internal costs incurred for the Year 2000 program. The
costs incurred for Year 2000 compliance issues did not have a material
financial impact on the Company. We anticipate no additional significant
expenditures for the Year 2000 program.

                                      49
<PAGE>

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Investment Portfolio

We do not use derivative financial instruments in our non-trading investment
portfolio. We place our cash and cash equivalent investments in highly liquid
instruments that meet high credit quality standards with original maturities
at the date of purchase of less than three months. We also place our short-
term investments in liquid instruments that meet high credit quality standards
with original maturities at the date of purchase of between three and twelve
months. We also limit the amount of credit exposure to any one issue, issuer
or type of instrument. These investments are subject to interest rate risk and
will fall in value if market interest rates increase. We do not expect,
however, any material loss with respect to our investment portfolio.

Impact of Foreign Currency Rate Changes

We are exposed to foreign exchange rate fluctuations related to our operating
subsidiaries' monetary assets and liabilities and the financial results of
foreign subsidiaries when their respective financial statements are translated
into U.S. dollars during consolidation. Our exposure to foreign exchange rate
fluctuations also arises from intercompany charges such as the cost of
equipment, management fees and certain other charges that are denominated in
U.S. dollars but recorded in the functional currency of the foreign
subsidiary. In addition, certain of our operating companies have notes payable
and notes receivable which are denominated in a currency other than their own
functional currency, as follows:
<TABLE>
<CAPTION>
                                                         Amount Outstanding
                                                       as of December 31, 1999
                                                       -----------------------
                                                           (In thousands)
   <S>                                                 <C>
   U.S. Dollar Denominated Facilities:
     Stjarn Seller's Note due 2000(1).................       $  100,000
     UPC 12.5% Senior Discount Notes due 2009(1)......       $  421,747
     UPC 13.375% Senior Discount Notes due 2009.......       $  255,786
     PCI Discount Notes(1)............................       $   16,457
     @Entertainment 1999 Senior Discount Notes(1).....       $  141,807
     @Entertainment 1998 Senior Discount Notes(1).....       $  115,984
     @Entertainment 1999 Series C Senior Discount
      Notes(1)........................................       $   11,841
     UPC DIC Loan(1)..................................       $   39,366
     Monor Facility(1)................................       $   33,488
     VTR Bank Facility(2).............................       $  176,000
     Intercompany Loan to VTR(2)......................       $  108,000
                                                             ----------
                                                             $1,420,476
                                                             ==========
</TABLE>
--------
(1) Functional currency is Euros.
(2) Functional currency is Chilean Pesos.

Occasionally we will execute hedge transactions to reduce our exposure to
foreign currency exchange rate risk. Concurrent with the closing of the UPC
July senior notes offering, UPC entered into a cross-currency swap, swapping
the $800.0 million UPC 10.875% USD Senior Notes due 2009 into fixed and
variable rate Euro notes with a notional amount totalling (Euro) 754.7
million. Concurrent with the closing of the UPC October senior notes offering,
UPC entered into cross-currency swaps, swapping the $252.0 million UPC 11.25%
USD Senior Notes due 2009 into fixed and variable Euro notes with a notional
amount of (Euro) 240.2 million, and swapping the $200.0 million UPC 10.875%
USD Senior Notes due 2007 into fixed and variable rate Euro notes with a
notional amount of (Euro) 190.7 million.


                                      50
<PAGE>

Interest Rate Sensitivity

The table below provides information about our primary debt obligations. The
fixed rate financial instruments are sensitive to changes in interest rates.
The information is presented in U.S. dollar equivalents, which is our
reporting currency.

<TABLE>
<CAPTION>
                                   As of
                             December 31, 1999          Expected payment as of December 31,
                           --------------------- -------------------------------------------------
                           Book Value Fair Value 2000  2001  2002  2003   2004 Thereafter  Total
                           ---------- ---------- ----- ----- ---- ------- ---- ---------- --------
                                                   (U.S. dollars, in thousands, except interest
                                                                      rates)
<S>                        <C>        <C>        <C>   <C>   <C>  <C>     <C>  <C>        <C>
Fixed rate United USD
 1998 Notes..............   $991,568   $880,000  $ --  $ --  $--  $   --  $--   $991,568  $991,568
 Average interest rate...      10.75%     12.55%
Fixed rate United USD
 1999 Notes..............   $224,426   $205,265  $ --  $ --  $--  $   --  $--   $224,426  $224,426
 Average interest rate...     10.875%     13.05%
Variable rate UPC USD
 Senior Notes due 2009...   $759,442   $775,969  $ --  $ --  $--  $   --  $--   $759,442  $759,442
 Average interest rate...     10.875%     10.58%
Fixed rate UPC Euro
 Senior Notes due 2009...   $301,878   $305,652  $ --  $ --  $--  $   --  $--   $301,878  $301,878
 Average interest rate...     10.875%     10.63%
Fixed rate UPC USD Senior
 Discount Notes due
 2009....................   $421,747   $415,275  $ --  $ --  $--  $   --  $--   $421,747  $421,747
 Average interest rate...      12.50%     12.71%
Fixed rate UPC USD Senior
 Notes due 2007..........   $191,852   $206,525  $ --  $ --  $--  $   --  $--   $191,852  $191,852
 Average interest rate...     10.875%     10.30%
Fixed rate UPC Euro
 Senior Notes due 2007...   $100,625   $102,639  $ --  $ --  $--  $   --  $--   $100,625  $100,625
 Average interest rate...     10.875%     10.49%
Fixed rate UPC USD Senior
 Notes due 2009..........   $239,905   $262,080  $ --  $ --  $--  $   --  $--   $239,905  $239,905
 Average interest rate...      11.25%     10.48%
Fixed rate UPC Euro
 Senior Notes due 2009...   $100,894   $103,665  $ --  $ --  $--  $   --  $--   $100,894  $100,894
 Average interest rate...      11.25%     10.86%
Fixed rate UPC USD Senior
 Discount Notes due
 2009....................   $255,786   $272,460  $ --  $ --  $--  $   --  $--   $255,786  $255,786
 Average interest rate...     13.375%     12.48%
Fixed rate UPC Euro
 Senior Discount Notes
 due 2009................   $102,847   $106,669  $ --  $ --  $--  $   --  $--   $102,847  $102,847
 Average interest rate...     13.375%     12.86%
Fixed rate @Entertainment
 USD 1999 Senior Discount
 Notes...................   $141,807   $146,007  $ --  $ --  $--  $   --  $--   $141,807  $141,807
 Average interest rate...      14.50%     13.01%
Fixed rate @Entertainment
 USD 1998 Senior Discount
 Notes...................   $115,984   $147,948  $ --  $ --  $--  $   --  $--   $115,984  $115,984
 Average interest rate...      14.50%     13.12%
Fixed rate @Entertainment
 USD 1999 Series C
 Notes...................   $ 11,841   $ 11,841  $ --  $ --  $--  $   --  $--   $ 11,841  $ 11,841
 Average interest rate...       7.00%      7.00%
Fixed rate PCI USD
 Discount Notes..........   $ 16,457   $ 16,457  $ --  $ --  $--  $16,457 $--   $    --   $ 16,457
 Average interest rate...      9.875%     9.875%
</TABLE>

                                      51
<PAGE>

<TABLE>
<CAPTION>
                                   As of
                             December 31, 1999                    Expected payment as of December 31,
                           ----------------------  ------------------------------------------------------------------
                           Book Value  Fair Value    2000     2001     2002     2003     2004   Thereafter   Total
                           ----------  ----------  -------- -------- -------- -------- -------- ---------- ----------
                                                          (U.S. dollars, in thousands, except interest rates)
<S>                        <C>         <C>         <C>      <C>      <C>      <C>      <C>      <C>        <C>
Fixed rate United USD A/P
 Notes...................  $  407,945  $  414,008  $    --  $    --  $    --  $    --  $    --  $  407,945 $  407,945
 Average interest rate...       14.00%      13.73%
Variable rate UPC NLG
 Senior Credit Facility..  $  359,720  $  359,720  $    --  $    --  $ 58,971 $ 73,715 $ 92,142 $  134,892 $  359,720
 Average interest rate...        5.67%       5.67%
Variable rate Telekabel
 Euro Facility...........  $  256,861  $  256,861  $    --  $    --  $ 12,830 $ 25,660 $ 51,319 $  167,052 $  256,861
 Average interest rate...        4.90%       4.90%
Variable rate A2000 NLG
 Facilities..............  $  209,132  $  209,132  $209,132 $    --  $    --  $    --  $    --  $      --  $  209,132
 Average interest rate...        5.90%       5.90%
Variable rate CNBH NLG
 Facility................  $  122,317  $  122,317  $  1,035 $  8,453 $ 15,698 $ 21,735 $ 22,943 $   52,453 $  122,317
 Average interest rate...        4.50%       4.50%
Variable rate Rhone
 Vision Cable FFR Credit
 Facility................  $   61,360  $   61,360  $    --  $ 61,360 $    --  $    --  $    --  $      --  $   61,360
 Average interest rate...        3.72%       3.72%
Variable rate RCF FFR
 Facility................  $   31,852  $   31,852  $ 31,852 $    --  $    --  $    --  $    --  $      --  $   31,852
 Average interest rate...        4.35%       4.35%
Fixed rate UPC USD DIC
 Loan....................  $   39,366  $   39,366  $ 39,366 $    --  $    --  $    --  $    --  $      --  $   39,366
 Average interest rate...        8.00%       8.00%
Variable rate
 Mediareseaux FFR
 Facility................  $   45,193  $   45,193  $    --  $ 45,193 $    --  $    --  $    --  $      --  $   45,193
 Average interest rate...        4.88%       4.88%
Fixed rate Monor USD
 Facility................  $   33,488  $   33,488  $ 33,488 $    --  $    --  $    --  $    --  $      --  $   33,488
 Average interest rate...        6.66%       6.66%
Fixed rate Videopole FFR
 Facility................  $    7,752  $    7,752  $  7,752 $    --  $    --  $    --  $    --  $      --  $    7,752
 Average interest rate...        6.60%       6.60%
Variable rate VTR USD
 Bank Facility...........  $  176,000  $  176,000  $    --  $    --  $176,000 $    --  $    --  $      --  $  176,000
 Average interest rate...       11.41%      11.41%
Variable rate Austar A$
 New Austar Bank
 Facility................  $  202,703  $  202,703  $    --  $    --  $  9,184 $ 50,512 $ 80,687 $   62,320 $  202,703
 Average interest rate...        7.58%       7.58%
Variable rate Saturn NZ$
 Saturn Bank Facility....  $   57,685  $   57,685  $    --  $    577 $  4,615 $  8,307 $ 11,537 $   32,649 $   57,685
 Average interest rate...        8.63%       8.63%
                           ----------  ----------  -------- -------- -------- -------- -------- ---------- ----------
                           $5,988,433  $5,975,889  $322,625 $115,583 $277,298 $196,386 $258,628 $4,817,913 $5,988,433
                           ==========  ==========  ======== ======== ======== ======== ======== ========== ==========
</TABLE>

We use interest rate swap agreements from time to time, to manage interest
rate risk on our floating rate debt facilities. Interest rate swaps are
entered into depending on our assessment of the market, and generally are used
to convert floating rate debt to fixed rate debt. Interest differentials paid
or received under these swap agreements are recognized over the life of the
contracts as adjustments to the effective yield of the underlying debt, and
related amounts payable to, or receivable from, the counterparties are
included in the consolidated balance sheet.

Currently, we have four interest rate swaps to manage interest rate exposure
on the New Austar Bank Facility. Two of these swap agreements expire in 2002
and effectively convert an aggregate principal amount of A$50.0 ($32.8)
million of variable rate, long-term debt into fixed rate borrowings. The other
two swap agreements expire in 2004 and convert

                                      52
<PAGE>

an aggregate principal amount of A$100.0 ($65.6) million of variable rate,
long-term debt into fixed rate borrowings. In addition, we have an interest
rate swap to manage our exposure on the Saturn Bank Facility which effectively
converts an aggregate principal amount of NZ$60.6 ($31.7) million of variable
rate, long-term debt into fixed rate borrowings. The interest rate swap
includes an increasing fixed rate with an additional margin which is expected
to decline as the debt to EBITDA ratio declines.

Inflation and Foreign Investment Risk

Certain of our operating companies operate in countries where the rate of
inflation is extremely high relative to that in the United States. While our
affiliated companies attempt to increase their subscription rates to offset
increases in operating costs, there is no assurance that they will be able to
do so. Therefore, operating costs may rise faster than associated revenue,
resulting in a material negative impact on reported earnings. We are also
impacted by inflationary increases in salaries, wages, benefits and other
administrative costs, the effects of which to date have not been material.

Our foreign operating companies are all directly affected by their respective
countries' government, economic, fiscal and monetary policies and other
political factors. We believe that our operating companies' financial
conditions and results of operations have not been materially adversely
affected by these factors.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company and the financial
statement schedules and separate financial statements of collateral
subsidiaries and significant equity investees required by Regulation S-X are
filed under Item 14 "Exhibits, Financial Statement Schedules and Reports on
Form 8-K."

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

None.

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item appears in the Company's Proxy Statement
for the 2000 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item appears in the Company's Proxy Statement
for the 2000 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item appears in the Company's Proxy Statement
for the 2000 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item appears in the Company's Proxy Statement
for the 2000 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.

                                      53
<PAGE>

                                    PART IV

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

(a) Index to Financial Statements

<TABLE>
<CAPTION>
                                                                           Page
                                                                           -----
<S>                                                                        <C>
UnitedGlobalCom, Inc.
Report of Independent Public Accountants.................................    F-1
Consolidated Balance Sheets as of December 31, 1999 and 1998.............    F-2
Consolidated Statements of Operations for the Year Ended December 31,
 1999, the Ten Months Ended December 31, 1998 and the Year Ended February
 28, 1998................................................................    F-3
Consolidated Statements of Stockholders' Equity (Deficit) for the Year
 Ended December 31, 1999, the Ten Months Ended December 31, 1998 and the
 Year Ended February 28, 1998............................................    F-4
Consolidated Statements of Cash Flows for the Year Ended December 31,
 1999, the Ten Months Ended December 31, 1998 and the Year Ended February
 28, 1998................................................................    F-7
Notes to Consolidated Financial Statements...............................   F-11

UnitedGlobalCom, Inc. (Parent Only)
Report of Independent Public Accountants on Schedules....................   F-62
Condensed Financial Position of Registrant (Parent only Schedule I)......   F-63
Condensed Information as to the Operations of Registrant (Parent only
 Schedule I).............................................................   F-64
Condensed Information as to the Cash Flows of Registrant (Parent only
 Schedule I).............................................................   F-65
Valuation and Qualifying Accounts (Schedule II)..........................   F-66

United International Properties, Inc.
Report of Independent Public Accountants.................................   F-67
Consolidated Balance Sheets as of December 31, 1999 and 1998.............   F-68
Consolidated Statements of Operations for the Year Ended December 31,
 1999, the Ten Months Ended December 31, 1998 and the Year Ended February
 28, 1998................................................................   F-69
Consolidated Statements of Parent's Deficit for the Year Ended December
 31, 1999, the Ten Months Ended December 31, 1998 and the Year Ended
 February 28, 1998.......................................................   F-70
Consolidated Statements of Cash Flows for the Year Ended December 31,
 1999, the Ten Months Ended December 31, 1998 and the Year Ended February
 28, 1998................................................................   F-71
Notes to Consolidated Financial Statements...............................   F-73

United Europe, Inc.
Report of Independent Public Accountants.................................   F-98
Consolidated Balance Sheets as of December 31, 1999 and 1998.............   F-99
Consolidated Statements of Operations for the Year Ended December 31,
 1999, the Ten Months Ended December 31, 1998 and the Year Ended February
 28, 1998................................................................  F-100
Consolidated Statements of Parent's Equity (Deficit) for the Year Ended
 December 31, 1999, the Ten Months Ended December 31, 1998 and the Year
 Ended February 28, 1998.................................................  F-101
Consolidated Statements of Cash Flows for the Year Ended December 31,
 1999, the Ten Months Ended December 31, 1998 and the Year Ended February
 28, 1998................................................................  F-102
Notes to Consolidated Financial Statements...............................  F-105

United Telekabel Holding, N.V.
Independent Auditors' Report.............................................  F-136
Consolidated Balance Sheet as of December 31, 1998.......................  F-137
Consolidated Statement of Operations from August 6, 1998 (commencement of
 operations) until December 31, 1998.....................................  F-138
Consolidated Statement of Cash Flows from August 6, 1998 (commencement of
 operations) until December 31, 1998.....................................  F-139
Notes to Consolidated Financial Statements...............................  F-140
</TABLE>


                                       54
<PAGE>

(b) Reports on Form 8-K

<TABLE>
<CAPTION>
Date of Report                                    Item Reported
--------------                                    -------------
<S>                                               <C>
November 15, 1999                                 Item 5--Announcement of
                                                   two-for-one split of Common
                                                   Stock
</TABLE>

(c) Exhibits

<TABLE>
 <C>   <S>
   3.1 Second Restated Certificate of Incorporation of United International
       Holdings, Inc. (the "Company", or "UIH") filed June 4, 1993.(1)

   3.2 Certificate of Amendment to the Certificate of Incorporation dated
        February 7, 1994.(2)

   3.3 Certificate of Designation with respect to Convertible Preferred Stock,
       Series B of the Company.(3)

   3.4 Corrected Certificate of Designation for the Company's 7% Series C
       Senior Cumulative Convertible Preferred Stock.(4)

   3.5 Corrected Certificate of Designation for the Company's 7% Series D
       Senior Cumulative Convertible Preferred Stock.(4)

   3.6 Restated Bylaws of the Company amended and restated as of May 25,
       1993.(1)

   4.1 Specimen of Class A Common Stock certificate of the Company.(1)

   4.2 The Second Restated Certificate of Incorporation, as amended, and
       Restated Bylaws of the Company are included as Exhibits 3.1-3.6.

   4.1 Indenture dated as of February 5, 1998, between the Company and First
       Bank of Minnesota N.A. (the "Trustee").(5)

   4.2 Indenture dated as of April 29, 1999 between the Company and the
       Trustee.(6)

  10.1 Stockholders' Agreement dated as of April 13, 1993, among the Company,
       United International Holdings (the "Partnership"), certain partners of
       the Partnership and Apollo Cable Partners L.P. ("Apollo").(7)

  10.2 UIH Registration Rights Agreement dated as of April 13, 1993, between
       the Company and the Partnership.(1)

  10.3 *1993 Stock Option Plan of the Company.(1)

  10.4 *Stock Option Plan for Non-Employee Directors.(8)

  10.5 Form of Indemnification Agreement between the Company and its
       directors.(1)

  10.6 Pledge Agreement dated as of February 5, 1998, between the Company and
       the Morgan Stanley & Co.(9)

  10.7 Indenture dated as of May 14, 1996, between United Australia/Pacific,
       Inc. ("United A/P") and Trustee (the "1996 Indenture").(10)

  10.8 Indenture dated as of September 23, 1997, between United A/P and Trustee
       (the "1997 Indenture").(11)

  10.9 Supplemental Indenture dated as of July 20, 1999, between United A/P and
       Trustee with respect to the 1996 Indenture.(12)

 10.10 Supplemental Indenture dated as of July 20, 1999, between United A/P and
       Trustee with respect to the 1997 Indenture.(12)
</TABLE>


                                       55
<PAGE>

<TABLE>
 <C>   <S>
 10.11 Indenture dated as of July 30, 1999, between UPC and Citibank N.A, as
       Trustee, with respect to UPC 10.875% Senior Notes.(13)

 10.12 Indenture dated as of July 30, 1999, between UPC and Citibank N.A., as
       Trustee, with respect to UPC 12.5% Senior Discount Notes.(13)

 10.13 Indenture dated as of October 29, 1999, between UPC and Citibank N.A, as
       Trustee, with respect to UPC 10.875% Senior Notes.(14)

 10.14 Indenture dated as of October 29, 1999, between UPC and Citibank N.A, as
       Trustee, with respect to UPC 11.25% Senior Notes.(14)

 10.15 Indenture dated as of October 29, 1999, between UPC and Citibank N.A.,
       as Trustee, with respect to UPC 13.375% Senior Discount Notes.(14)

 10.16 Indenture dated as of January 20, 2000, between UPC and Citibank N.A.,
       as Trustee with respect to 11 1/2% Senior Notes due 2010.(15)

 10.17 Indenture dated as of January 20, 2000, between UPC and Citibank N.A.,
       as Trustee with respect to 11 1/4% Senior Notes due 2010.(15)

 10.18 Indenture dated as of January 20, 2000, between UPC and Citibank N.A.,
       as Trustee with respect to 13 3/4% Senior Discount Notes due 2010.(15)

 10.19 Loan and Note Issuance Agreement between UPC Facility B.V., Telekabel
       Wien and Janco Multicom and Bank of America International Limited, CIBC
       World Markets plc, Citibank N.A., MeesPierson N.V., Paribas, The Royal
       Bank of Scotland plc, Toronto Dominion Bank Europe Limited, and The
       Toronto-Dominion Bank, as Facility Agent and Security Agent.(13)

 10.20 A $400,000,000 Syndicated Senior Secured Debt Facility Agreement dated
       April 23, 1999, among Austar Entertainment Pty Limited, Chase Securities
       Australia Limited, the Guarantors named herein and the financial
       institutions named herein.(16)

 10.21 Credit Agreement dated as of April 28, 1999, among UIH Chile Holding
       S.A., the subsidiary guarantors named therein, Toronto Dominion (Texas),
       Inc., TD Securities (USA), Inc. and Citibank, N.A.(6)

 10.22 Promise Agreement entered into as of October 15, 1998, among UIH Latin
       America, Inc., VTR S.A. and Compania Nacional de Telefonos, Telefonica
       del Sur S.A.(6)

 10.23 Amended and Restated Securities Purchase and Conversion Agreement dated
       as of December 1, 1997, by and among Philip Media B.V., Philips Media
       Network B.V., the Company, Joint Venture, Inc. and United and Philips
       Communications B.V.(17)

 10.24 Amended Stock Option Plan dated February 8, 1999, between UPC and
       Stichting Administratie Kantoor UPC.(18)

 10.25 Share Purchase Agreement dated as of January 19, 1999, among UPC,
       Belmarken Holding, B.V., UPC Intermediates B.V., N.V. Nuon Energie-
       Onderneming voor Gelderland, Freisland en Flevoland, N.V. Kraton, and
       UTH, as amended by letter agreements dated January 19 and 25, 1999.(19)

 10.26 Final Amendment to the Share Purchase Agreement dated as of February 17,
       1999.(20)

 10.27 Share Purchase Agreement dated June 23, 1999, between UPC and MediaOne
       International B.V.(21)

 10.28 Investment Agreement between SBS Broadcasting SA and UPC dated June 29,
       1999.(13)

 10.29 Exchange Offer Agreement, dated as of March 9, 2000, by and between UPC
       and SBS Broadcasting S.A.(22)
</TABLE>


                                       56
<PAGE>

<TABLE>
 <C>   <S>
 10.30 Share Exchange Agreement, dated as of March 9, 2000, by and between UPC
       and the shareholders named therein.(22)

 10.31 Agreement and Plan of Merger among @Entertainment, Inc., United Pan-
       Europe Communications N.V. and Bison Acquisition Corp. dated as of June
       2, 1999.(13)

 10.32 Form of Stockholders Agreement dated as of June 2, 1999 among
       @Entertainment, Inc., United Pan-Europe Communications N.V., Bison
       Acquisition Corp. and the other parties signatory thereto.(13)

 10.33 Share Purchase Agreement between the Sellers represented by EQT
       Scandinavia Limited and United Pan-Europe Communications N.V.(13)

 10.34 Share Purchase Agreement, dated February 2, 2000, among Eneco Wed-
       Activiteiten B.V., N.V. Eneco, UPC Nederland N.V., Belmarken Holding
       B.V. and UPC.(23)

 10.35 Consulting Agreement dated June 1, 1995, between the Company and Mark L.
       Schneider.(24)

 10.36 *Stock Option Plan for Non-Employee Directors, effective March 20, 1998.

 10.37 UIH Registration Rights Agreement dated as of April 8, 1999, between UIH
       and Riordan Communications Limited.

  12.1 Statement re: Ratio of Combined Fixed Charges and Preferred Stock
       Dividends.

  21.1 Subsidiaries and Restricted Affiliates of the Company.

  21.2 Unrestricted Subsidiaries of the Company.

  23.1 Consent of Independent Public Accountants--Arthur Andersen LLP
       (UnitedGlobalCom, Inc.).

  23.2 Consent of Independent Public Accountants--Arthur Andersen LLP (United
       International Properties, Inc.).

  23.3 Consent of Independent Public Accountants--Arthur Andersen LLP (United
       Europe, Inc.).

  23.4 Consent of Independent Auditors--Arthur Andersen (United Telekabel
       Holding N.V).

  24.1 Power of Attorney.

  27.1 Financial Data Schedule.
</TABLE>

--------
*   Management compensation plan.
 (1) Incorporated by reference from Amendment No. 1 to the Company's
     Registration Statement on Form S-1 (File No. 33-61376) filed with the
     Commission on June 23, 1993.
 (2) Incorporated by reference from Form 10-K for the year ended February 28,
     1994 (File No. 0-21974).
 (3) Incorporated by reference from Form 8-K dated July 9, 1998 (File No. 0-
     21974).
 (4) Incorporated by reference from the Company's Current Report on Form 8-K
     filed with the Commission on January 11, 2000.
 (5) Incorporated by reference from the Company's Registration Statement on
     Form S-4 (File No. 333-47245) filed with the Commission on March 3, 1998.
 (6) Incorporated by reference from the November 30, 1995, Form 10-Q/A dated
     January 26, 1996 (File No. 0-21974).
 (6) Incorporated by reference from Form 8-K dated April 29, 1999 (File No. 0-
     21974).
 (7) Incorporated by reference from the Company's Registration Statement on
     Form S-1 (File No. 33-61376) filed with the Commission on April 21, 1993.
 (8) Incorporated by reference from Amendment No. 2 to the Company's
     Registration Statement on Form S-1 (File No. 33-61376) filed with the
     Commission on July 19, 1993.
 (9) Incorporated by reference from Form 8-K dated February 5, 1998 (File No.
     0-21974).

                                      57
<PAGE>

(10) Incorporated by reference from Form 10-K for the year ended February 29,
     1996 (File No. 0-21974).
(11) Incorporated by reference from United A/P's Registration Statement on
     Form S-4 filed on November 6, 1997 (File No. 333-39707).
(12) Incorporated by reference from United A/P's Form 8-K filed July 28, 1999
     (File No. 333-05017).
(13) Incorporated by reference from UPC's Report on Form 8-K dated July 30,
     1999 (File No. 000-25865).
(14) Incorporated by reference from UPC's Quarterly Report on Form 10-Q for
     the quarter ended September 30, 1999.
(15) Incorporated by reference from UPC's Form 10-K for the year ended
     December 31, 1999 (File No. 000-25865).
(16) Incorporated by reference from Form 10-K for the ten months ended
     December 31, 1998 (File No. 0-21974).
(17) Incorporated by reference from Form 8-K dated December 11, 1997 (File No.
     0-21974).
(18) Incorporated by reference from UPC's Form 10-K for the year ended
     December 31, 1998 (File No. 000-25365).
(19) Incorporated by reference from Amendment No. 6 to Form S-1 Registration
     Statement filed by UPC on February 10, 1999 (File No. 333-67895).
(20) Incorporated by reference from UPC's Form 8-K dated March 4, 1999 (File
     No. 000-25365).
(21) Incorporated by reference from Amendment No. 2 to Form S-1 Registration
     Statement filed by UPC on September 30, 1999 (File No. 333-84427).
(22) Incorporated by reference from UPC's Form 8-K dated March 9, 2000 (File
     No. 000-25865).
(23) Incorporated by reference from UPC's Form 8-K dated February 3, 2000
     (File No. 000-25365).
(24) Incorporated by reference from Amendment No. 6 to UPC's Registration
     Statement on Form S-1 dated February 4, 1999 (File No. 333-67895).

(d) See index to financial statements in (a) above.

                                      58
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To UnitedGlobalCom, Inc.:

We have audited the accompanying consolidated balance sheets of
UnitedGlobalCom, Inc. (a Delaware corporation) (formerly United International
Holdings, Inc.) and subsidiaries as of December 31, 1999 and 1998 and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the year ended December 31, 1999, the ten months ended
December 31, 1998 (see Note 2) and the year ended February 28, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform these audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of UnitedGlobalCom, Inc. and subsidiaries as of December 31, 1999 and 1998,
and the results of their operations and their cash flows for the year ended
December 31, 1999, the ten months ended December 31, 1998 and the year ended
February 28, 1998 in conformity with accounting principles generally accepted
in the United States.

                                          Arthur Andersen LLP

Denver, Colorado
March 29, 2000

                                      F-1
<PAGE>

                             UnitedGlobalCom, Inc.

                          CONSOLIDATED BALANCE SHEETS
           (Stated in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                             As of
                                                         December 31,
                                                     ----------------------
                                                        1999        1998
                                                     ----------  ----------
<S>                                                  <C>         <C>
                      ASSETS
Current assets
 Cash and cash equivalents.........................  $1,925,915  $   35,608
 Restricted cash...................................      18,217      17,215
 Short-term liquid investments.....................     629,689      41,498
 Subscriber receivables, net of allowance for
  doubtful accounts of $27,808 and $5,482,
  respectively.....................................      83,388      13,788
 Costs to be reimbursed by affiliated companies,
  net..............................................      13,430      21,232
 Other receivables, including related party
  receivables of $1,680 and $2,064, respectively...     131,622      17,444
 Inventory.........................................      82,995      25,379
 Deferred taxes....................................       2,119         --
 Other current assets, net.........................      98,891      16,363
                                                     ----------  ----------
   Total current assets............................   2,986,266     188,527
Investments in affiliates, accounted for under the
 equity method, net................................     309,509     429,490
Marketable equity securities and other
 investments.......................................     235,917         --
Property, plant and equipment, net of accumulated
 depreciation of $482,524 and $201,183,
 respectively......................................   2,379,837     451,442
Goodwill and other intangible assets, net of
 accumulated amortization of $170,133 and $39,683,
 respectively......................................   2,944,802     424,934
Deferred financing costs, net of accumulated
 amortization of $17,062 and $9,923, respectively..     130,704      41,270
Deferred taxes.....................................       3,698         --
Other assets, net..................................      12,120       6,432
                                                     ----------  ----------
   Total assets....................................  $9,002,853  $1,542,095
                                                     ==========  ==========
  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
 Accounts payable, including related party
  payables of $390 and $247, respectively..........  $  306,760  $   76,696
 Accrued liabilities...............................     324,431      66,079
 Subscriber prepayments and deposits...............      41,466      24,210
 Short-term debt...................................     173,296      93,379
 Current portion of senior discount notes and
  other long-term debt.............................      52,180      62,664
 Other current liabilities.........................      10,567       3,524
                                                     ----------  ----------
   Total current liabilities.......................     908,700     326,552
Senior discount notes and senior notes.............   4,385,004   1,249,643
Other long-term debt...............................   1,604,451     689,646
Deferred compensation..............................      54,825     173,251
Deferred taxes.....................................      17,074       4,580
Other long-term liabilities........................      23,603       7,097
                                                     ----------  ----------
   Total liabilities...............................   6,993,657   2,450,769
                                                     ----------  ----------
Minority interests in subsidiaries.................     867,970      18,705
                                                     ----------  ----------
Preferred stock, $0.01 par value, 3,000,000 shares
 authorized, stated at liquidation value:
 Series A Convertible Preferred Stock, 0 and
  132,144 shares issued and outstanding,
  respectively.....................................         --       26,086
                                                     ----------  ----------
 Series B Convertible Preferred Stock, 116,185 and
  139,031 shares issued and outstanding,
  respectively.....................................      26,920      30,200
                                                     ----------  ----------
Stockholders' equity (deficit):
 Class A Common Stock, $0.01 par value,
  210,000,000 shares authorized, 81,574,815 and
  61,349,990 shares issued and outstanding,
  respectively.....................................         816         614
 Class B Common Stock, $0.01 par value, 30,000,000
  shares authorized, 19,323,940 and 19,831,760
  shares issued and outstanding, respectively......         193         198
 Series C Convertible Preferred Stock, 425,000
  shares authorized, 425,000 and 0 shares issued
  and outstanding, respectively....................     410,125         --
 Series D Convertible Preferred Stock, 287,500
  shares authorized, 287,500 and 0 shares issued
  and outstanding, respectively....................     268,773         --
 Additional paid-in capital........................   1,416,635     378,191
 Deferred compensation.............................    (119,996)       (679)
 Treasury stock, at cost, 5,569,240 shares of
  Class A Common Stock.............................     (29,061)    (29,061)
 Accumulated deficit...............................    (621,941) (1,241,986)
 Other cumulative comprehensive loss...............    (211,238)    (90,942)
                                                     ----------  ----------
   Total stockholders' equity (deficit)............   1,114,306    (983,665)
                                                     ----------  ----------
Commitments and contingencies (Notes 14 and 15)
   Total liabilities and stockholders' equity
    (deficit)......................................  $9,002,853  $1,542,095
                                                     ==========  ==========
</TABLE>

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

                                      F-2
<PAGE>

                             UnitedGlobalCom, Inc.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
           (Stated in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                     For the
                                                                       Year
                                          For the Year For the Ten    Ended
                                             Ended     Months Ended  February
                                          December 31, December 31,    28,
                                              1999         1998        1998
                                          ------------ ------------ ----------
<S>                                       <C>          <C>          <C>
Revenue.................................   $  719,524   $  254,068  $   98,622
System operating expense................     (452,515)    (122,811)    (65,631)
System selling, general and
 administrative expense.................     (300,674)    (105,226)    (62,803)
Corporate general and administrative
 expense................................     (318,251)    (194,767)    (28,553)
Depreciation and amortization...........     (418,714)    (159,045)    (91,656)
                                           ----------   ----------  ----------
    Operating loss......................     (770,630)    (327,781)   (150,021)
Gain on issuance of common equity
 securities by subsidiaries.............    1,508,839          --          --
Interest income, including related party
 income of $561, $497 and $302,
 respectively...........................       54,238       10,464       7,806
Interest expense........................     (399,999)    (163,227)   (124,288)
Provision for losses on marketable
 equity securities and investment
 related costs..........................       (7,127)      (9,686)    (14,793)
Gain on sale of investments in
 affiliates.............................          --           --       90,020
Foreign currency exchange (loss) gain...      (39,501)       1,582      (1,419)
Other expense, net......................      (14,641)      (3,518)     (3,669)
                                           ----------   ----------  ----------
    Income (loss) before income taxes
     and other items....................      331,179     (492,166)   (196,364)
Income tax expense......................         (198)        (610)        --
Minority interests in subsidiaries......      360,444        1,410       1,568
Share in results of affiliates, net.....      (55,107)     (54,166)    (68,645)
                                           ----------   ----------  ----------
    Income (loss) before extraordinary
     charge.............................      636,318     (545,532)   (263,441)
Extraordinary charge for early
 retirement of debt.....................          --           --      (79,091)
                                           ----------   ----------  ----------
    Net income (loss)...................   $  636,318   $ (545,532) $ (342,532)
                                           ==========   ==========  ==========
Foreign currency translation
 adjustments............................   $ (127,154)  $  (24,713) $  (50,274)
Unrealized gains (losses) on securities:
  Unrealized holding gains (losses)
   arising during period................        6,858         (505)     (1,593)
  Reclassification adjustment for losses
   included in net income...............          --           --        8,013
                                           ----------   ----------  ----------
    Comprehensive income (loss).........   $  516,022   $ (570,750) $ (386,386)
                                           ==========   ==========  ==========
Basic net income (loss) attributable to
 common shareholders (Note 13)..........   $  617,926   $ (547,155) $ (343,803)
                                           ==========   ==========  ==========
Diluted net income (loss) attributable
 to common shareholders (Note 13).......   $  636,318   $ (547,155) $ (343,803)
                                           ==========   ==========  ==========
Net income (loss) per common share:
  Basic income (loss) before
   extraordinary charge.................   $     7.53   $    (7.43) $    (3.43)
  Extraordinary charge..................          --           --        (1.03)
                                           ----------   ----------  ----------
  Basic net income (loss)...............   $     7.53   $    (7.43) $    (4.46)
                                           ==========   ==========  ==========
  Diluted income (loss) before
   extraordinary charge.................   $     6.67   $    (7.43) $    (3.43)
  Extraordinary charge..................          --           --        (1.03)
                                           ----------   ----------  ----------
  Diluted net income (loss).............   $     6.67   $    (7.43) $    (4.46)
                                           ==========   ==========  ==========
Weighted-average number of common shares
 outstanding:
  Basic.................................   82,024,077   73,644,728  77,033,786
                                           ==========   ==========  ==========
  Diluted...............................   95,331,929   73,644,728  77,033,786
                                           ==========   ==========  ==========
</TABLE>

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

                                      F-3
<PAGE>

                             UnitedGlobalCom, Inc.

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                  (Stated in thousands, except share amounts)

<TABLE>
<CAPTION>
                       Class A           Class B                                                                   Other
                    Common Stock      Common Stock     Additional                Treasury Stock                 Cumulative
                  ----------------- ------------------  Paid-In     Deferred   ------------------  Accumulated Comprehensive
                    Shares   Amount   Shares    Amount  Capital   Compensation  Shares    Amount     Deficit       Loss
                  ---------- ------ ----------  ------ ---------- ------------ --------- --------  ----------- -------------
<S>               <C>        <C>    <C>         <C>    <C>        <C>          <C>       <C>       <C>         <C>
Balances,
February 28,
1997............  52,194,526  $523  25,943,550   $259   $340,361     $(624)          --  $     --   $(303,553)   $(21,870)
Issuance of
Class A Common
Stock in
connection with
Company's stock
option plan.....     303,788     3         --     --         793       --            --       --          --          --
Issuance of
Class A Common
Stock in
connection with
Company's 401(k)
plan............      46,968   --          --     --         334       --            --       --          --          --
Exchange of
Class B Common
Stock for Class
A Common Stock..     216,904     2    (216,904)    (2)       --        --            --       --          --          --
Accrual of
dividends on
convertible
preferred
stock...........         --    --          --     --      (1,271)      --            --       --          --          --
Compensation
expense related
to stock
options.........         --    --          --     --         351       --            --       --          --          --
Issuance of
warrents to
purchase common
stock of
subsidiary......         --    --          --     --       3,678       --            --       --          --          --
Gain on sale of
stock by
subsidiaries....         --    --          --     --       7,614       --            --       --          --          --
Amortization of
deferred
compensation....         --    --          --     --         --        582           --       --          --          --
Purchase of
Class A Common
Stock by
subsidiary......         --    --          --     --         --        --      6,338,302  (33,074)        --          --
Net loss........         --    --          --     --         --        --            --       --     (342,532)        --
Change in
unrealized gain
(loss) on
available-for-
sale securities,
net.............         --    --          --     --         --        --            --       --          --       (1,593)
Provision for
loss on
available-for-
sale
securities......         --    --          --     --         --        --            --       --          --        8,013
Change in
cumulative
translation
adjustments.....         --    --          --     --         --        --            --       --          --      (50,274)
                  ----------  ----  ----------   ----   --------     -----     --------- --------   ---------    --------
Balances,
February 28,
1998............  52,762,186  $528  25,726,646   $257   $351,860     $ (42)    6,338,302 $(33,074)  $(646,085)   $(65,724)
                  ==========  ====  ==========   ====   ========     =====     ========= ========   =========    ========
<CAPTION>
                    Total
                  ----------
<S>               <C>
Balances,
February 28,
1997............  $  15,096
Issuance of
Class A Common
Stock in
connection with
Company's stock
option plan.....        796
Issuance of
Class A Common
Stock in
connection with
Company's 401(k)
plan............        334
Exchange of
Class B Common
Stock for Class
A Common Stock..        --
Accrual of
dividends on
convertible
preferred
stock...........     (1,271)
Compensation
expense related
to stock
options.........        351
Issuance of
warrents to
purchase common
stock of
subsidiary......      3,678
Gain on sale of
stock by
subsidiaries....      7,614
Amortization of
deferred
compensation....        582
Purchase of
Class A Common
Stock by
subsidiary......    (33,074)
Net loss........   (342,532)
Change in
unrealized gain
(loss) on
available-for-
sale securities,
net.............     (1,593)
Provision for
loss on
available-for-
sale
securities......      8,013
Change in
cumulative
translation
adjustments.....    (50,274)
                  ----------
Balances,
February 28,
1998............  $(392,280)
                  ==========
</TABLE>

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

                                      F-4
<PAGE>

                             UnitedGlobalCom, Inc.

     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
                (Statement in thousands, except share amounts)

<TABLE>
<CAPTION>
                       Class A           Class B                                                                     Other
                    Common Stock      Common Stock     Additional                Treasury Stock                   Cumulative
                  ----------------- ------------------  Paid-In     Deferred   -------------------  Accumulated  Comprehensive
                    Shares   Amount   Shares    Amount  Capital   Compensation  Shares     Amount     Deficit        Loss
                  ---------- ------ ----------  ------ ---------- ------------ ---------  --------  -----------  -------------
<S>               <C>        <C>    <C>         <C>    <C>        <C>          <C>        <C>       <C>          <C>
Balances,
February 28,
1998............  52,762,186  $528  25,726,646   $257   $351,860     $  (42)   6,338,302  $(33,074) $  (646,085)   $(65,724)
Issuance of
Class A Common
Stock in
connection with
public offering,
net of offering
costs...........     900,000     9         --     --       7,395        --           --        --           --          --
Issuance of
Class A Common
Stock in
connection with
Company's stock
option plan.....     906,288     9         --     --       4,779        --           --        --           --          --
Issuance of
Class A Common
Stock in
connection with
Company's 401(k)
plan............      35,716   --          --     --         260        --           --        --           --          --
Exchange of
Class B Common
Stock for Class
A Common Stock..   5,894,886    59  (5,894,886)   (59)       --         --           --        --           --          --
Exchange of
Series A
Convertible
Preferred Stock
for Class A
Common Stock....     850,914     9         --     --       7,436        --           --        --           --          --
Accrual of
dividends on
convertible
preferred
stock...........         --    --          --     --      (1,623)       --           --        --           --          --
Repricing of
stock options...         --    --          --     --       1,380     (1,380)         --        --           --          --
Amortization of
deferred
compensation....         --    --          --     --         --         743          --        --           --          --
Gain on deemed
issuance of
stock by
subsidiary......         --    --          --     --       5,786        --           --        --           --          --
Class A Common
Stock issued by
subsidiary for
additional
interest in
Ireland
systems.........         --    --          --     --         918        --      (769,062)    4,013          --          --
Elimination of
historical two
month reporting
difference due
to change in
fiscal year.....         --    --          --     --         --         --           --        --       (50,369)        --
Net loss........         --    --          --     --         --         --           --        --      (545,532)        --
Change in
cumulative
translation
adjustments.....         --    --          --     --         --         --           --        --           --      (24,713)
Change in
unrealized gain
(loss) on
available-for-
sale
securities......         --    --          --     --         --         --           --        --           --         (505)
                  ----------  ----  ----------   ----   --------     ------    ---------  --------  -----------    --------
Balances,
December 31,
1998............  61,349,990  $614  19,831,760   $198   $378,191     $ (679)   5,569,240  $(29,061) $(1,241,986)   $(90,942)
                  ==========  ====  ==========   ====   ========     ======    =========  ========  ===========    ========
<CAPTION>
                    Total
                  ----------
<S>               <C>
Balances,
February 28,
1998............  $(392,280)
Issuance of
Class A Common
Stock in
connection with
public offering,
net of offering
costs...........      7,404
Issuance of
Class A Common
Stock in
connection with
Company's stock
option plan.....      4,788
Issuance of
Class A Common
Stock in
connection with
Company's 401(k)
plan............        260
Exchange of
Class B Common
Stock for Class
A Common Stock..        --
Exchange of
Series A
Convertible
Preferred Stock
for Class A
Common Stock....      7,445
Accrual of
dividends on
convertible
preferred
stock...........     (1,623)
Repricing of
stock options...        --
Amortization of
deferred
compensation....        743
Gain on deemed
issuance of
stock by
subsidiary......      5,786
Class A Common
Stock issued by
subsidiary for
additional
interest in
Ireland
systems.........      4,931
Elimination of
historical two
month reporting
difference due
to change in
fiscal year.....    (50,369)
Net loss........   (545,532)
Change in
cumulative
translation
adjustments.....    (24,713)
Change in
unrealized gain
(loss) on
available-for-
sale
securities......       (505)
                  ----------
Balances,
December 31,
1998............  $(983,665)
                  ==========
</TABLE>

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

                                      F-5
<PAGE>

                             UnitedGlobalCom, Inc.

     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
                  (Stated in thousands, except share amounts)

<TABLE>
<CAPTION>
                       Class A           Class B           Series C         Series D
                    Common Stock      Common Stock     Preferred Stock  Preferred Stock  Additional
                  ----------------- ------------------ ---------------- ----------------  Paid-In      Deferred
                    Shares   Amount   Shares    Amount Shares   Amount  Shares   Amount   Capital    Compensation
                  ---------- ------ ----------  ------ ------- -------- ------- -------- ----------  ------------
<S>               <C>        <C>    <C>         <C>    <C>     <C>      <C>     <C>      <C>         <C>
Balances,
December 31,
1998............  61,349,990  $614  19,831,760   $198      --  $    --      --  $    --  $  378,191   $    (679)
Exchange of
Class B Common
Stock for Class
A Common Stock..     507,820     5    (507,820)    (5)     --       --      --       --         --          --
Issuance of
Class A Common
Stock in
connection with
exercise of
warrants........   2,883,600    29         --     --       --       --      --       --      21,598         --
Issuance of
Class A Common
Stock in
connection with
Company's stock
option plans....   1,838,089    18         --     --       --       --      --       --      10,184         --
Issuance of
Class A Common
Stock in
connection with
Company's 401(k)
plan............       1,502   --          --     --       --       --      --       --          51         --
Exchange of
Series A
Convertible
Preferred Stock
for Class A
Common Stock....   3,006,404    30         --     --       --       --      --       --      26,276         --
Exchange of
Series B
Convertible
Preferred Stock
for Class A
Common Stock....     487,410     5         --     --       --       --      --       --       5,173         --
Issuance of
Series C
Convertible
Preferred Stock,
net of offering
costs...........         --    --          --     --   425,000  395,250     --       --     (13,642)        --
Issuance of
Class A Common
Stock in
connection with
public offering,
net of offering
costs...........  11,500,000   115         --     --       --       --      --       --     571,325         --
Issuance of
Series D
Convertible
Preferred
Stock...........         --    --          --     --       --       --  287,500  267,375     (7,446)        --
Accrual of
dividends on
Series A, B, C
and D
Convertible
Preferred
Stock...........         --    --          --     --       --    14,875     --     1,398     (2,119)        --
Equity
transactions of
subsidiaries....         --    --          --     --       --       --      --       --     427,044    (221,640)
Amortization of
deferred
compensation....         --    --          --     --       --       --      --       --         --      102,323
Net income......         --    --          --     --       --       --      --       --         --          --
Change in
cumulative
translation
adjustments.....         --    --          --     --       --       --      --       --         --          --
Change in
unrealized gain
on available-
for-sale
securities......         --    --          --     --       --       --      --       --         --          --
                  ----------  ----  ----------   ----  ------- -------- ------- -------- ----------   ---------
Balances,
December 31,
1999............  81,574,815  $816  19,323,940   $193  425,000 $410,125 287,500 $268,773 $1,416,635   $(119,996)
                  ==========  ====  ==========   ====  ======= ======== ======= ======== ==========   =========
<CAPTION>
                                                       Other
                    Treasury Stock                  Cumulative
                  ------------------- Accumulated  Comprehensive
                   Shares    Amount     Deficit        Loss        Total
                  --------- --------- ------------ ------------- -----------
<S>               <C>       <C>       <C>          <C>           <C>
Balances,
December 31,
1998............  5,569,240 $(29,061) $(1,241,986)   $ (90,942)  $ (983,665)
Exchange of
Class B Common
Stock for Class
A Common Stock..        --       --           --           --           --
Issuance of
Class A Common
Stock in
connection with
exercise of
warrants........        --       --           --           --        21,627
Issuance of
Class A Common
Stock in
connection with
Company's stock
option plans....        --       --           --           --        10,202
Issuance of
Class A Common
Stock in
connection with
Company's 401(k)
plan............        --       --           --           --            51
Exchange of
Series A
Convertible
Preferred Stock
for Class A
Common Stock....        --       --           --           --        26,306
Exchange of
Series B
Convertible
Preferred Stock
for Class A
Common Stock....        --       --           --           --         5,178
Issuance of
Series C
Convertible
Preferred Stock,
net of offering
costs...........        --       --           --           --       381,608
Issuance of
Class A Common
Stock in
connection with
public offering,
net of offering
costs...........        --       --           --           --       571,440
Issuance of
Series D
Convertible
Preferred
Stock...........        --       --           --           --       259,929
Accrual of
dividends on
Series A, B, C
and D
Convertible
Preferred
Stock...........        --       --       (16,273)         --        (2,119)
Equity
transactions of
subsidiaries....        --       --           --           --       205,404
Amortization of
deferred
compensation....        --       --           --           --       102,323
Net income......        --       --       636,318          --       636,318
Change in
cumulative
translation
adjustments.....        --       --           --      (127,154)    (127,154)
Change in
unrealized gain
on available-
for-sale
securities......        --       --           --         6,858        6,858
                  --------- --------- ------------ ------------- -----------
Balances,
December 31,
1999............  5,569,240 $(29,061) $  (621,941)   $(211,238)  $1,114,306
                  ========= ========= ============ ============= ===========
</TABLE>

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

                                      F-6
<PAGE>

                             UnitedGlobalCom, Inc.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year  For the Ten  For the Year
                                             Ended      Months Ended    Ended
                                          December 31,  December 31, February 28,
                                              1999          1998         1998
                                          ------------  ------------ ------------
<S>                                       <C>           <C>          <C>
Cash flows from operating activities:
Net income (loss).......................  $   636,318    $(545,532)   $(342,532)
Elimination of historical two month
 reporting difference due to change in
 fiscal year............................          --       (50,369)         --
Adjustments to reconcile net income
 (loss) to net cash flows from operating
 activities:
 Gain on issuance of common equity
  securities by subsidiaries............   (1,508,839)         --           --
 Extraordinary charge for early
  retirement of debt....................          --           --        79,091
 Share in results of affiliates, net....       49,638       66,326       70,291
 Minority interests in subsidiaries.....     (360,444)      (1,186)      (1,568)
 Depreciation and amortization..........      418,714      192,968       91,656
 Accretion of interest on senior notes
  and amortization of deferred financing
  costs.................................      224,569      130,803      110,633
 Stock-based compensation expense.......      223,734      164,793          351
 Gain on sale of investments in
  affiliates............................          --           --       (90,020)
 Provision for losses on marketable
  equity securities and investment
  related costs.........................        7,127        9,473       14,793
 Increase in receivables, net...........      (83,611)     (12,755)      (3,222)
 (Increase) decrease in other assets....      (28,918)      (8,528)       6,993
 Increase in accounts payable, accrued
  liabilities and other.................      304,628       55,995        2,882
                                          -----------    ---------    ---------
 Net cash flows from operating
  activities............................     (117,084)       1,988      (60,652)
                                          -----------    ---------    ---------
Cash flows from investing activities:
 Purchase of short-term liquid
  investments...........................     (988,380)    (149,601)     (94,656)
 Proceeds from sale of short-term liquid
  investments...........................      140,216      141,834      131,284
 Restricted cash released (deposited),
  net...................................       (3,259)      27,904       (8,350)
 Investments in affiliates and other
  investments...........................     (373,526)    (139,011)    (177,632)
 Proceeds from sale of investments in
  affiliated companies..................       18,000       19,968      211,125
 New acquisitions, net of cash
  acquired..............................   (2,321,799)    (109,881)         --
 Capital expenditures...................     (794,177)    (217,057)    (115,033)
 Other..................................      (30,439)      (7,616)     (19,834)
                                          -----------    ---------    ---------
 Net cash flows from investing
  activities............................   (4,353,364)    (433,460)     (73,096)
                                          -----------    ---------    ---------
Cash flows from financing activities:
 Issuance of common stock in connection
  with public offerings, net of
  financing costs.......................      571,440        7,402          --
 Issuance of Series C Convertible
  Preferred Stock.......................      381,608          --           --
 Issuance of Series D Convertible
  Preferred Stock.......................      259,929          --           --
 Issuance of common stock in connection
  with exercise of warrants.............       21,627          --           --
 Issuance of common stock by
  subsidiaries..........................    2,624,306          --           --
 Issuance of common stock in connection
  with Company's and subsidiary's stock
  option plans..........................       28,355        4,789          796
 Proceeds from offering of senior notes
  and senior discount notes.............    2,749,752          --       842,125
 Retirement of existing senior notes....         (435)         --      (531,800)
 Proceeds from short-term and long-term
  borrowings............................    1,064,579      321,167      233,715
 Deferred financing costs...............     (100,679)      (5,932)     (30,868)
 Repayments of short-term and long-term
  borrowings............................   (1,277,038)    (168,358)    (120,570)
 Payment of sellers notes...............      (18,000)         --       (46,351)
 Cash (paid to) contributed from
  minority interest partners............        2,971         (253)      22,042
                                          -----------    ---------    ---------
 Net cash flows from financing
  activities............................    6,308,415      158,815      369,089
                                          -----------    ---------    ---------
Effect of exchange rates on cash........       52,340        4,824         (684)
                                          -----------    ---------    ---------
Increase (decrease) in cash and cash
 equivalents............................    1,890,307     (267,833)     234,657
Cash and cash equivalents, beginning of
 period.................................       35,608      303,441       68,784
                                          -----------    ---------    ---------
Cash and cash equivalents, end of
 period.................................  $ 1,925,915    $  35,608    $ 303,441
                                          ===========    =========    =========
</TABLE>

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

                                      F-7
<PAGE>

                             UnitedGlobalCom, Inc.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES:
 Cash paid for interest.................   $ 101,121     $40,929      $ 7,513
                                           =========     =======      =======
 Cash received for interest.............   $  41,633     $ 9,074      $ 7,694
                                           =========     =======      =======
 Issuance of preferred stock utilized in
  purchase of Australian investments....   $     --      $29,544      $   --
                                           =========     =======      =======
 Seller note for purchase of system in
  Hungary...............................   $     --      $18,000      $   --
                                           =========     =======      =======
 Seller notes for purchase of Argentine
  systems...............................   $     --      $   --       $52,061
                                           =========     =======      =======
Acquisition of 100% of @Entertainment:
 Net current assets.....................   $ (51,239)    $   --       $   --
 Property, plant and equipment..........    (196,178)        --           --
 Goodwill...............................    (986,814)        --           --
 Long-term liabilities..................     448,566         --           --
 Other..................................     (21,335)        --           --
                                           ---------     -------      -------
 Total cash paid........................    (807,000)        --           --
 Cash acquired..........................      62,507         --           --
                                           ---------     -------      -------
 Net cash paid..........................   $(744,493)    $   --       $   --
                                           =========     =======      =======
Acquisition of 100% of Stjarn:
 Property, plant and equipment..........   $ (43,171)    $   --       $   --
 Goodwill...............................    (442,094)        --           --
 Net current liabilities................      55,997         --           --
 Long-term liabilities..................      32,268         --           --
                                           ---------     -------      -------
 Total purchase price...................    (397,000)        --           --
 Seller's Note..........................     100,000         --           --
                                           ---------     -------      -------
 Total cash paid........................    (297,000)        --           --
 Cash acquired..........................       3,792         --           --
                                           ---------     -------      -------
 Net cash paid..........................   $(293,208)    $   --       $   --
                                           =========     =======      =======
Acquisition of remaining 49.0% of UTH:
 Property, plant and equipment..........   $(210,013)    $   --       $   --
 Investments in affiliated companies....     (46,830)        --           --
 Goodwill...............................    (256,749)        --           --
 Net current liabilities................       5,384         --           --
 Long-term liabilities..................     242,536         --           --
                                           ---------     -------      -------
 Total cash paid........................    (265,672)        --           --
 Cash acquired..........................      13,629         --           --
                                           ---------     -------      -------
 Net cash paid..........................   $(252,043)    $   --       $   --
                                           =========     =======      =======
</TABLE>

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

                                      F-8
<PAGE>

                             UnitedGlobalCom, Inc.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
Acquisition of remaining 50.0% of A2000:
 Receivables assumed....................   $ (13,062)   $     --      $    --
 Property, plant and equipment..........     (96,539)         --           --
 Goodwill...............................    (274,361)         --           --
 Net current liabilities................      25,044          --           --
 Long-term liabilities..................     129,918          --           --
                                           ---------    ---------     --------
 Total cash paid........................    (229,000)         --           --
 Cash acquired..........................         521          --           --
                                           ---------    ---------     --------
 Net cash paid..........................   $(228,479)   $     --      $    --
                                           =========    =========     ========
Acquisition of remaining interest in
 VTR:
 Working capital........................   $ (10,381)   $     --      $    --
 Property, plant and equipment..........    (203,154)         --           --
 Goodwill and other intangible assets...    (244,981)         --           --
 Other long-term assets.................     (14,685)         --           --
 Elimination of equity investment in
  Chilean joint venture.................      69,381          --           --
 Long-term liabilities..................     145,641          --           --
                                           ---------    ---------     --------
 Total cash paid........................    (258,179)         --           --
 Cash acquired..........................       5,498          --           --
                                           ---------    ---------     --------
 Net cash paid..........................   $(252,681)   $     --      $    --
                                           =========    =========     ========
Acquisition of 100% of GelreVision:
 Property, plant and equipment..........   $ (49,407)   $     --      $    --
 Goodwill...............................     (67,335)         --           --
 Net current liabilities................       2,682          --           --
 Long-term liabilities..................       4,236          --           --
                                           ---------    ---------     --------
 Total cash paid........................    (109,824)         --           --
 Cash acquired..........................         136          --           --
                                           ---------    ---------     --------
 Net cash paid..........................   $(109,688)   $     --      $    --
                                           =========    =========     ========
Contribution of Dutch cable systems to
 new joint venture:
 Working capital........................   $     --     $  (1,871)    $    --
 Investments in affiliated companies....         --        96,866          --
 Property, plant and equipment..........         --        85,037          --
 Goodwill and other intangible assets...         --        78,515          --
 Senior secured notes and other debt....         --      (111,553)         --
 Other liabilities......................         --       (17,417)         --
                                           ---------    ---------     --------
 Total net assets contributed...........   $     --     $ 129,577     $    --
                                           =========    =========     ========
Acquisition of Dutch cable assets:
 Property, plant and equipment and other
  long-term assets......................   $     --     $ (51,632)    $    --
 Goodwill and other intangible assets...         --       (36,416)         --
                                           ---------    ---------     --------
 Total cash paid........................   $     --     $ (88,048)    $    --
                                           =========    =========     ========
Sale of Argentine cable systems:
 Working capital, net of cash
  relinquished of $2,133................   $     --     $     --      $ (3,319)
 Investments in affiliated companies....         --           --        83,535
 Property, plant and equipment and other
  long-term assets......................         --           --         4,560
 Goodwill and other intangible assets...         --           --        60,727
 Sellers notes (assumed by the buyers)..         --           --       (24,398)
 Gain on sale...........................         --           --        90,020
                                           ---------    ---------     --------
 Cash received from sale................   $     --     $     --      $211,125
                                           =========    =========     ========
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                      F-9
<PAGE>

                             UnitedGlobalCom, Inc.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
Acquisition of additional 50.0% interest
 in UPC:
 Working capital, including cash
  acquired of $50,872...................     $ --         $ --       $  (7,158)
 Investment in UnitedGlobalCom, Inc.
  Class A Common Stock..................       --           --         (33,074)
 Investments in affiliated companies....       --           --        (167,945)
 Property, plant and equipment and other
  long-term assets......................       --           --        (273,988)
 Goodwill and other intangible assets...       --           --        (383,503)
 Elimination of United's equity
  investment in UPC ....................       --           --          46,319
 Long-term debt.........................       --           --         624,633
 Other liabilities......................       --           --          32,216
                                             -----        -----      ---------
 Total cash paid........................     $ --         $ --       $(162,500)
                                             =====        =====      =========
</TABLE>



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

                                      F-10
<PAGE>

                             UnitedGlobalCom, Inc.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Nature of Operations

UnitedGlobalCom, Inc. (formerly known as United International Holdings, Inc.,
together with its majority-owned subsidiaries, the "Company" or "United") was
formed as a Delaware corporation in May 1989, for the purpose of developing,
acquiring and managing foreign multi-channel television, programming and
telephony operations outside the United States.

The following chart presents a summary of the Company's significant
investments in telecommunications as of December 31, 1999.

<TABLE>
<CAPTION>

                                   United
         100.0%                                                     100.0%
  United Europe Inc. ("UEI")                       United International Properties, Inc. ("UIPI")
  <S>                                              <C>                                                <C>
         53.2%                                     100.0%                                             100.0%
    United Pan-Europe                        United Asia/Pacific                                United Latin America,
   Communications N.V.                        Communications, Inc.                                      Inc.
         ("UPC")                                   ("UAP") *                                          ("ULA")
                                                    100.0%
 Austria:                                           United                                   Brazil:
  Telekabel Group             95.0%          Australia/Pacific, Inc.                           TV Show Brasil   100.0%
 Belgium:                                        ("United A/P")                                Jundiai           46.3%
  UPC Belgium                100.0%                  75.4%                                  Chile:
 Czech Republic:                                Austar United                                   VTR              100.0%
  Kabel Net                  100.0%          Communications, Limited                        Mexico:
  Kabel Plus                  94.6%            ("Austar United")                                Megapo            49.0%(4)
 France:                                                                                    Peru:
  UPC France                  99.6%(1)          Australia:                                      Cable Star        62.2%
 Germany:                                        Austar             100.0%                  Latin American
  PrimaCom                    18.2%(2)           XYZ Entertainment   50.0%                    Programming:
 Hungary:                                       New Zealand:                                    MGM Networks LA   50.0%
  UPC Magyarorszag            79.3%              Saturn             100.0%
  Monor                       97.1%
 Ireland:                                       * Other UAP
  Tara                        80.0%             China:
 Israel:                                         Hunan
  Tevel                       46.6%               International TV  49.0%
 Malta:                                         Philippines:
  Melita                      50.0%              Pilipino Cable
 The Netherlands:                                 Corporation       19.6%
  UPC Nederland              100.0%
 Norway:
  UPC Norge                  100.0%
 Poland:
  @Entertainment             100.0%
 Romania:
  UPC Romania          51.0%-100.0%
 Slovak Republic:
  UPC Slovak           95.0%-100.0%
 Spain/Portugal:
  Iberian Programming         50.0%
 Sweden:
  Stjarn                     100.0%
 United Kingdom:
  Xtra Music                  41.0%
 Other Business Lines:
  SBS                         13.3%(3)
  Priority Telecom           100.0%
  chello broadband           100.0%
  UPCtv                      100.0%
</TABLE>

(1)In February 2000, UPC's interest decreased to 92.0% (See Note 19).
(2)Subsequent to December 31, 1999, UPC increased its interest to 24.9%.
(3)In February 2000, UPC acquired an additional 10.2% interest in SBS for
 (Euro)162.5 ($163.5) million.
(4)In January 2000, ULA purchased an additional 41.3% interest in Megapo for
 $22.8 million.

                                     F-11
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


2. Summary of Significant Accounting Policies

Basis of Presentation

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

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial
interest through the ownership of a majority voting interest. The following
illustrates those subsidiaries for which the Company consolidated the results
of operations for only a portion of the fiscal year ended December 31, 1999:

<TABLE>
<CAPTION>
                    Effective Date
Entity             of Consolidation  Reason
------             ----------------  ------
<S>                <C>               <C>
UPC Nederland(1)   February 1, 1999  Acquisition of remaining 49.0% interest in
                                      United Telekabel Holding N.V. ("UTH")
VTR                May 1, 1999       Acquisition of remaining 66.0% interest
UPC Slovensko      June 1, 1999      Acquisition
 (Slovak
 Republic)
GelreVision (The   June 1, 1999      Acquisition
 Netherlands)
Reseaux Cables de  June 1, 1999      Acquisition
 France ("RCF")
Saturn(2)          August 1, 1999    Acquisition of remaining 35.0% interest
Stjarn             August 1, 1999    Acquisition
Videopole          August 1, 1999    Acquisition
 (France)
@Entertainment     August 1, 1999    Acquisition
Time Warner Cable  September 1, 1999 Acquisition
 France
A2000 (The         September 1, 1999 Acquisition of remaining 50.0% interest
 Netherlands)
Kabel Plus         October 1, 1999   Acquisition
Monor              December 1, 1999  Acquisition
</TABLE>
--------
(1) Prior to the acquisition date, the equity method of accounting was used
    because of certain minority shareholder's rights.
(2) The Company consolidated the results of operations of Saturn from July 1,
    1996 to December 31, 1997. Effective January 1, 1998 the Company
    discontinued consolidating the results of operations of Saturn because of
    certain minority shareholder's rights.

The Company began consolidating UPC upon acquisition of the remaining 50.0%
interest on December 11, 1997. Prior to December 11, 1997, the Company
accounted for its investment in UPC under the equity method. All significant
intercompany accounts and transactions have been eliminated in consolidation.

Change in Fiscal Year-End

Prior to the ten months ended December 31, 1998, the Company's fiscal year-end
was February 28, and it accounted for its share of the income or loss of its
operating companies based on the calendar year results of each operating
company. This created a two month delay in reporting the operating company
results in the Company's consolidated results for its fiscal year-end. On
February 24, 1999, the Company changed its fiscal year-end from the last day
in February to the last day in December, effective December 31, 1998. To
effect the

                                     F-12
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

transaction to the new fiscal year, the combined results of operations of the
operating companies for January and February 1998, a loss of $50.4 million,
has been reported as a one-time adjustment to retained deficit as of March 1,
1998 in the consolidated statement of stockholders' equity (deficit).
Consequently, the consolidated statement of operations presents the
consolidated results of the Company and its subsidiaries for the ten months
ended December 31, 1998. For comparative purposes, the Company's consolidated
revenue, net operating loss and net loss were $84.3 million, $125.4 million
and $206.4 million, respectively, for the ten months ended December 31, 1997
and the Company's consolidated revenue, net operating loss and net loss were
$298.6 million, $350.7 million and $595.9 million, respectively, for the year
ended December 31, 1998.

Cash and Cash Equivalents and Short-Term Liquid Investments

Cash and cash equivalents include cash and investments with original
maturities of less than three months. Short-term liquid investments include
certificates of deposit, commercial paper, corporate bonds and government
securities which have original maturities greater than three months but less
than twelve months. Short-term liquid investments are classified as available-
for-sale and are reported at fair market value.

Restricted Cash

Cash held as collateral for letters of credit and other loans is classified
based on the expected expiration of such facilities. Cash held in escrow and
restricted to a specific use is classified based on the expected timing of
such disbursement.

Costs to be Reimbursed by Affiliated Companies

The Company incurs costs on behalf of affiliated companies, such as salaries
and benefits, travel and professional services. These costs are reimbursed by
the affiliated companies.

Inventory

Inventory is stated at the lower of cost (first-in, first-out basis) or
market.

Investments in Affiliates, Accounted for under the Equity Method

For those investments in unconsolidated subsidiaries and companies in which
the Company's voting interest is 20.0% to 50.0%, its investments are held
through a combination of voting common stock, preferred stock, debentures or
convertible debt and/or the Company exerts significant influence through board
representation and management authority, the equity method of accounting is
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's proportionate share of net earnings or
losses of the affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, including any debt guarantees or other
contractual funding commitments. The Company's proportionate share of net
earnings or losses of affiliates includes the amortization of the excess of
its cost over its proportionate interest in each affiliate's net assets.

Marketable Equity Securities and Other Investments

The cost method of accounting is used for the Company's other investments in
affiliates in which the Company's ownership interest is less than 20.0% and
where the Company does not exert significant influence, except for those
investments in marketable equity securities. The Company classifies its
investments in marketable equity securities in which its interest is less than
20.0% and where the Company does not exert significant influence as available-
for-sale and reports such investments at fair market value. Unrealized gains
and losses are charged or credited to equity, and realized gains and losses
and other-than-temporary declines in market value are included in operations.

                                     F-13
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Property, Plant and Equipment

Property, plant and equipment is stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for
normal repair and maintenance of property, plant and equipment are charged to
expense as incurred. Assets constructed incorporate overhead expense and
interest charges incurred during the period of construction; investment
subsidies are deducted. Upon disconnection of a subscriber, the remaining book
value of the subscriber equipment, excluding converters which are recovered
upon disconnection, and the capitalized labor are written off and accounted
for as an operating cost. Depreciation is calculated using the straight-line
method over the economic life of the asset.

The economic lives of property, plant and equipment at acquisition are as
follows:

<TABLE>
   <S>                                                                <C>
   Cable distribution networks....................................... 3-20 years
   Subscriber premises equipment and converters...................... 3-10 years
   MMDS/DTH distribution facilities.................................. 5-20 years
   Office equipment, furniture and fixtures.......................... 3-10 years
   Buildings and leasehold improvements.............................. 3-33 years
   Other............................................................. 3-10 years
</TABLE>

Goodwill and Other Intangible Assets

The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15
years. Licenses in newly-acquired companies are recognized at the fair market
value of those licenses at the date of acquisition. Licenses in new franchise
areas include the capitalization of direct costs incurred in obtaining the
license. The license value is amortized on a straight-line basis over the
initial license period, up to a maximum of 20 years.

Recoverability of Tangible and Intangible Assets

The Company evaluates the carrying value of all tangible and intangible assets
whenever events or circumstances indicate the carrying value of assets may
exceed their recoverable amounts. An impairment loss is recognized when the
estimated future cash flows (undiscounted and without interest) expected to
result from the use of an asset are less than the carrying amount of the
asset. Measurement of an impairment loss is based on fair value of the asset
computed using discounted cash flows if the asset is expected to be held and
used. Measurement of an impairment loss for an asset held for sale would be
based on fair market value less estimated costs to sell.

Deferred Financing Costs

Costs to obtain debt financing are capitalized and amortized over the life of
the debt facility using the effective interest method.

Subscriber Prepayments and Deposits

Payments received in advance for multi-channel television service are deferred
and recognized as revenue when the associated services are provided. Deposits
are recorded as a liability upon receipt and refunded to the subscriber upon
disconnection.

Revenue Recognition

Revenue is primarily derived from the sale of multi-channel television,
telephone and Internet/data services to subscribers and is recognized in the
period the related services are provided. Initial installation fees are
recognized as revenue in the period in which the installation occurs, to the
extent installation fees are equal to or less than direct selling costs, which
are expensed. To the extent installation fees exceed direct selling costs, the
excess fees are deferred and amortized over the average contract period. All
installation fees and related costs

                                     F-14
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

with respect to reconnections and disconnections are recognized in the period
in which the reconnection or disconnection occurs because reconnection fees
are charged at a level equal to or less than related reconnection costs.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of subscriber receivables. Concentrations
of credit risk with respect to subscriber receivables are limited due to the
Company's large number of customers and their dispersion across many different
countries worldwide.

Staff Accounting Bulletin No. 51 ("SAB 51") Accounting Policy

Gains realized as a result of stock sales by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which
must be credited directly to equity in accordance with the provisions of SAB
51.

Stock-Based Compensation

Stock-based compensation is recognized using the intrinsic value method for
the Company's stock option plans, which results in compensation expense for
the difference between the grant price and the fair market value at each new
measurement date. In addition to the Company's stock option plans, UPC, chello
broadband, ULA and Austar United have also adopted stock-based compensation
plans for their employees. With respect to certain of these plans, the rights
conveyed to employees are the substantive equivalents to stock appreciation
rights. Accordingly, compensation expense is recognized at each financial
statement date based on the difference between the grant price and the
estimated fair value of the respective subsidiary's common stock.

Income Taxes

The Company accounts for income taxes under the asset and liability method
which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have been
included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and income tax basis of assets, liabilities
and loss carryforwards using enacted tax rates in effect for the year in which
the differences are expected to reverse. Net deferred tax assets are then
reduced by a valuation allowance if management believes it more likely than
not they will not be realized. Withholding taxes are taken into consideration
in situations where the income of subsidiaries is to be paid out as dividends
in the near future. Such withholding taxes are generally charged to income in
the year in which the dividend income is generated.

Basic and Diluted Net Income (Loss) Per Share

"Basic net income (loss) per share" is determined by dividing net income
(loss) available to common stockholders by the weighted-average number of
common shares outstanding during each period. Net income (loss) available to
common stockholders includes the accrual of dividends on convertible preferred
stock which is charged directly to additional paid-in capital. "Diluted net
income (loss) per share" includes the effects of potentially issuable common
stock, but only if dilutive. On November 11, 1999 the Board of Directors
authorized a two-for-one stock split effected in the form of a stock dividend
distributed on November 30, 1999 to stockholders of record on November 22,
1999. All historical weighted average share and per share amounts have been
restated to reflect the stock split.

Foreign Operations and Foreign Exchange Rate Risk

The functional currency for the Company's foreign operations is the applicable
local currency for each affiliate company, except for countries which have
experienced hyper-inflationary economies. For countries which have hyper-
inflationary economies, the financial statements are prepared in U.S. dollars.
Assets and liabilities of foreign subsidiaries for which the functional
currency is the local currency are translated at exchange rates in

                                     F-15
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

effect at period-end, and the statements of operations are translated at the
average exchange rates during the period. Exchange rate fluctuations on
translating foreign currency financial statements into U.S. dollars that
result in unrealized gains or losses are referred to as translation
adjustments. Cumulative translation adjustments are recorded as a separate
component of stockholders' equity (deficit) and are included in Other
Cumulative Comprehensive Loss.

Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transaction gains and losses
which are reflected in income as unrealized (based on period-end translations)
or realized upon settlement of the transactions. Cash flows from the Company's
operations in foreign countries are translated based on their functional
currencies. As a result, amounts related to assets and liabilities reported in
the consolidated statements of cash flows will not agree to changes in the
corresponding balances in the consolidated balance sheets. The effects of
exchange rate changes on cash balances held in foreign currencies are reported
as a separate line below cash flows from financing activities.

Certain of the Company's foreign operating companies have notes payable and
notes receivable that are denominated in a currency other than their own
functional currency. Accordingly, the Company may experience economic loss and
a negative impact on earnings and equity with respect to its holdings solely
as a result of foreign currency exchange rate fluctuations.

New Accounting Principles

The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that companies recognize
all derivatives as either assets or liabilities in the balance sheet at fair
value. Under SFAS 133, accounting for changes in fair value of a derivative
depends on its intended use and designation. SFAS 133 is effective for fiscal
years beginning after June 15, 2000. The Company is currently assessing the
effect of this new standard.

In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, "Views on Selected Revenue Recognition
Issues" ("SAB 101"), which provides the staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB 101
is effective for the second quarter of 2000. The Company is currently
assessing the effect of SAB 101.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
year presentation.

3. Acquisitions and Other

UPC Stock Offerings

In February 1999, UPC successfully completed an initial public offering
selling 133.8 million shares on the Amsterdam Stock Exchange and The Nasdaq
Stock Market, Inc. ("Nasdaq"), raising gross and net proceeds at Dutch guilder
("NLG")21.30 ($10.93) per share of NLG2,852.9 ($1,463.0) million and
NLG2,660.1 ($1,364.1) million, respectively. The proceeds were used to reduce
debt facilities and finance acquisitions. Based on the carrying value of the
Company's investment in UPC as of February 11, 1999, United recognized a gain
of $822.1 million from the resulting step-up in the carrying amount of
United's investment in UPC, in accordance with SAB 51. No deferred taxes were
recorded related to this gain due to the Company's intent on holding its
investment in UPC indefinitely. UPC's offering reduced the Company's ownership
interest in UPC from 100% to 59.6%.

In October 1999 UPC completed a second public offering of 45.0 million
ordinary shares, raising gross and net proceeds at Euro ("(Euro)") 19.92
($21.58) per share of (Euro) 896.3 ($970.9) million and (Euro) 851.5 ($922.4)
million,

                                     F-16
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

respectively. The proceeds were used to finance acquisitions. Based on the
carrying value of the Company's investment in UPC as of October 19, 1999,
United recognized a gain of $403.4 million from the resulting step-up in the
carrying amount of United's investment in UPC, in accordance with SAB 51. No
deferred taxes were recorded related to this gain due to the Company's intent
on holding its investment in UPC indefinitely. This second offering further
reduced the Company's ownership to 53.2% as of December 31, 1999.

If all of the UPC stock options and warrants outstanding as of December 31,
1999 were exercised, the Company's ownership interest would be 51.7% on a
fully-diluted basis.

UTH

In August 1998, UPC merged its Dutch cable television and telecommunications
assets, consisting of its 50.0% interest in A2000 and its wholly-owned
subsidiary Cable Network Brabant Holding B.V. ("CNBH"), with those of the
Dutch energy company N.V. NUON Energie-Onderneming voor Gelderland, Friesland
en Flevoland ("NUON"), forming a new company, UTH (the "UTH Transaction"). The
transaction was accounted for as a formation of a joint venture with NUON's
and UPC's net assets recorded at their historical carrying values. Although
UPC retained a 51.0% economic and voting interest in UTH, because of joint
governance on most significant operating decisions, UPC accounted for its
investment in UTH using the equity method of accounting. On February 17, 1999,
UPC acquired the remaining 49.0% of UTH from NUON (the "NUON Transaction") for
(Euro) 235.1 ($265.7) million. In addition, UPC repaid NUON a (Euro) 15.1
($17.1) million subordinated loan, including accrued interest, dated December
23, 1998, owed by UTH to NUON. The purchase of NUON's interest and payment of
the loan were funded with proceeds from UPC's initial public offering.
Effective February 1, 1999, UPC began consolidating the results of operations
of UTH. Details of the net assets acquired, based on the preliminary purchase
price allocation, were as follows (in thousands):

<TABLE>
   <S>                                                                <C>
   Property, plant and equipment..................................... $ 210,013
   Investments in affiliated companies...............................    46,830
   Goodwill..........................................................   256,749
   Long-term liabilities.............................................  (242,536)
   Net current liabilities...........................................    (5,384)
                                                                      ---------
     Total cash paid................................................. $ 265,672
                                                                      =========
</TABLE>

                                     F-17
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following pro forma condensed consolidated operating results for the year
ended December 31, 1999 and the ten months ended December 31, 1998 give effect
to the UTH Transaction and the NUON Transaction as if they had occurred at the
beginning of the periods presented. This pro forma condensed consolidated
financial information does not purport to represent what the Company's results
of operations would actually have been if such transactions had in fact
occurred on such dates. The pro forma adjustments are based upon currently
available information and upon certain assumptions that management believes
are reasonable.

<TABLE>
<CAPTION>
                              For the Year Ended     For the Ten Months Ended
                               December 31, 1999         December 31, 1998
                            ----------------------- ----------------------------
                            Historical   Pro Forma   Historical      Pro Forma
                            ----------------------- -------------- -------------
                            (In thousands, except share and per share amounts)
   <S>                      <C>         <C>         <C>            <C>
   Revenue................. $   719,524 $   729,641 $     254,068  $     335,076
                            =========== =========== =============  =============
   Net income (loss)....... $   636,318 $   631,623 $    (545,532) $    (581,388)
                            =========== =========== =============  =============
   Net income (loss) per
    common share:
     Basic net income
      (loss)............... $      7.53 $      7.48 $       (7.43) $       (7.92)
                            =========== =========== =============  =============
     Diluted net income
      (loss)............... $      6.67 $      6.63 $       (7.43) $       (7.92)
                            =========== =========== =============  =============
   Weighted-average number
    of common shares
    outstanding:
     Basic.................  82,024,077  82,024,077    73,644,728     73,644,728
                            =========== =========== =============  =============
     Diluted...............  95,331,929  95,331,929    73,644,728     73,644,728
                            =========== =========== =============  =============
</TABLE>

VTR Acquisition

On April 29, 1999, an indirect wholly-owned subsidiary of ULA acquired a 66.0%
interest in VTR, a company that provides telephony and multi-channel
television services to the greater Santiago, Chile area (the "VTR
Acquisition"). This acquisition, combined with the interest in VTR that is
owned by another indirect wholly- owned subsidiary of the Company, gives the
Company an indirect 100% interest in VTR. The purchase price for the 66.0%
interest in VTR was approximately $258.2 million in cash. In addition, the
Company provided capital for VTR to prepay approximately $125.8 million of
existing bank indebtedness and a promissory note from the Company to one of
the other shareholders of VTR.

Acquisition of UPC Slovensko

In June 1999, UPC acquired SKT spol s.r.o. (now known as UPC Slovensko), a
company that owns and operates a cable television system in Bratislava, the
capital of the Slovak Republic, for $43.3 million.

Acquisition of GelreVision

In June 1999, UPC acquired through UPC Nederland 100% of the GelreVision
multi-channel television systems in The Netherlands for NLG233.9 ($109.8)
million.

Acquisition of Reseaux Cables de France

In June 1999, UPC acquired through UPC France 95.7% of RCF, which operates
cable television systems throughout France, for French francs ("FFR")172.0
($27.1) million.

Restructuring of United A/P Assets and Austar United Initial Public Offering

In June 1999, the Company's interest in Austar, XYZ Entertainment and Saturn
were contributed to Austar United in exchange for new shares issued by Austar
United. On July 27, 1999, Austar United acquired from SaskTel its 35.0%
interest in Saturn in exchange for approximately 13.7 million of Austar
United's shares,

                                     F-18
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

thereby increasing Austar United's ownership interest in Saturn from 65.0% to
100%. In addition, Austar United successfully completed an initial public
offering selling 103.5 million shares on the Australian Stock Exchange,
raising gross and net proceeds at Australian dollar ("A$")4.70 ($3.03) per
share of A$486.5 ($313.6) million and A$453.6 ($292.8) million, respectively.
Based on the carrying value of the Company's investment in Austar United as of
July 27, 1999, United recognized a gain of $248.4 million from the resulting
step-up in the carrying amount of United's investment in Austar United, in
accordance with SAB 51. No deferred taxes were recorded related to this gain
due to the Company's intent on holding its investment in Austar United
indefinitely. Austar United's offering reduced the Company's ownership
interest from 100% to approximately 75.5%. As a result of employee stock
option exercises subsequent to the initial public offering date, the Company's
ownership interest in Austar United decreased to 75.4% as of December 31,
1999. Including all stock options granted to employees that were vested as of
December 31, 1999, the Company's ownership interest in Austar United on a
fully-diluted basis is approximately 73.7%.

Acquisition of Interest in SBS

In July 1999, UPC purchased 4.8% of SBS for $24.3 million in cash. In August
1999, UPC acquired an additional 8.5% of SBS for $75.9 million.

Stjarn Acquisition

In July 1999, UPC acquired Stjarn for a purchase price of $397.0 million, of
which $100.0 million was paid in the form of a one-year note with interest at
8.0% per year and the balance of the purchase price was paid in cash. UPC will
have the option, at maturity of the note, to pay the note in either cash or
UPC stock. Stjarn operates cable television systems serving the greater
Stockholm area.

Acquisition of Videopole

In August 1999, UPC acquired through UPC France 100% of Videopole for a total
purchase price of $135.1 million. The purchase price was paid in cash ($69.9
million) and 2.9 million ordinary shares of UPC ($65.2 million). Based on the
carrying value of the Company's investment in UPC as of July 31, 1999, United
recognized a gain of $34.9 million from the resulting step-up in the carrying
amount of United's investment in UPC, in accordance with SAB 51. No deferred
taxes were recorded related to this gain due to the Company's intent on
holding its investment in UPC indefinitely.

@Entertainment Acquisition

In August 1999, UPC acquired 100% of @Entertainment for $807.0 million in
cash. Details of the net assets acquired, based on a preliminary purchase
price allocation using information currently available, were as follows (in
thousands):

<TABLE>
   <S>                                                                <C>
   Net current assets................................................ $  51,239
   Property, plant and equipment.....................................   196,178
   Goodwill..........................................................   986,814
   Long-term liabilities.............................................  (448,566)
   Other.............................................................    21,335
                                                                      ---------
     Total cash paid................................................. $ 807,000
                                                                      =========
</TABLE>


                                     F-19
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following pro forma condensed consolidated operating results for the year
ended December 31, 1999 and the ten months ended December 31, 1998 give effect
to the acquisition of @Entertainment as if it had occurred at the beginning of
each period presented. This pro forma condensed consolidated financial
information does not purport to represent what the Company's results of
operations would actually have been if such transaction had in fact occurred
on such dates. The pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are
reasonable.

<TABLE>
<CAPTION>
                              For the Year Ended   For the Ten Months Ended
                               December 31, 1999       December 31, 1998
                             --------------------- --------------------------
                             Historical Pro Forma   Historical    Pro Forma
                             ---------- ---------- ------------  ------------
                                (In thousands, except share and per share
                                                amounts)
   <S>                       <C>        <C>        <C>           <C>
   Revenue.................. $  719,524 $  766,503 $    254,068  $    304,446
                             ========== ========== ============  ============
   Net income (loss)........ $  636,318 $  444,151 $   (545,532) $   (725,398)
                             ========== ========== ============  ============
   Net income (loss) per
    common share:
     Basic net income
      (loss)................ $     7.53 $     5.19 $      (7.43) $      (9.87)
                             ========== ========== ============  ============
     Diluted net income
      (loss)................ $     6.67 $     4.66 $      (7.43) $      (9.87)
                             ========== ========== ============  ============
   Weighted-average number
    of common shares
    outstanding:
     Basic.................. 82,024,077 82,024,077   73,644,728    73,644,728
                             ========== ========== ============  ============
     Diluted................ 95,331,929 95,331,929   73,644,728    73,644,728
                             ========== ========== ============  ============
</TABLE>

Acquisition of Time Warner Cable France

In August 1999, UPC acquired through UPC France 100% of Time Warner Cable
France, a company that operates three cable television systems in the suburbs
of Paris and Lyon and in the city of Limoges. The purchase price was $71.1
million in cash. Simultaneous with the acquisition of Time Warner Cable
France, UPC acquired an additional 47.6% interest in one of its operating
systems, Rhone Vision Cable, in which Time Warner France had a 49.9% interest,
for FFR89.3 ($14.6) million, increasing UPC's ownership in that system to
97.5%.

Acquisition of 50.0% of A2000

In September 1999, UPC acquired through UPC Nederland, the remaining 50.0% of
A2000 that it did not already own for $229.0 million and $13.1 million in cash
and assumed receivables, respectively.

Kabel Plus Acquisition

In October 1999, UPC acquired a 94.6% interest in Kabel Plus for a purchase
price of $150.0 million, and took control of the Kabel Plus cable television
systems in the Czech and Slovak Republics.

Acquisition of Additional Interest in Monor

In December 1999, UPC acquired an additional 48.0% economic interest in Monor
from its partner and several small minority shareholders for $45.0 million,
increasing UPC's ownership to 97.1%. Monor's telephony system is located in
the Monor region, an area which borders Budapest in Hungary.

Purchase of Minority Interest in PrimaCom

In December 1999, UPC purchased a total interest of 18.2% in PrimaCom, which
owns and operates cable television networks in Germany, for (Euro) 226.5
($227.9) million. The fair value of this investment was $231.9 million as of
December 31, 1999 and is reflected in "Marketable equity securities and other
investments" on the Consolidated Balance Sheet.


                                     F-20
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Combivisie and CNBH

Effective January 1, 1998, UPC acquired certain assets, including the Dutch
cable systems of Combivisie for $88.0 million. The purchase was funded with
draws on UPC's existing credit facilities. Subsequent to the transaction, the
assets and liabilities of UPC's other Dutch systems and Combivisie were
merged, forming CNBH, a wholly-owned subsidiary of UPC Nederland.

Hungary

In June 1998, UPC acquired certain Hungarian multi-channel television system
assets for $9.5 million in cash and a non-interest bearing promissory note in
the amount of $18.0 million. These assets are now part of UPC Magyarorszag.

MGM Networks LA

In May 1998, ULA entered into a joint venture with a division of Metro-
Goldwyn-Mayer, Inc. ("MGM") to form MGM Networks LA. Under the terms of the
joint venture, ULA contributed its 100% interest in a Latin American
programming venture for a 50.0% interest in MGM Networks LA, and MGM acquired
a 50.0% interest in MGM Networks LA by contributing its Brazil channel (MGM
Gold Brazil) and committing to fund the first $9.9 million ($6.7 million of
which was funded at closing) required by MGM Networks LA. MGM Networks LA has
also entered into a trademark license agreement with MGM for the use of the
MGM brand name and also into a program license agreement to acquire
programming from MGM.

Austar

In July 1998, Austar acquired certain Australian pay television assets of East
Coast Television Pty Limited ("ECT"), an affiliate of Century Communications
Corporation ("Century"), for $6.1 million of the Company's newly-created
Series B Convertible Preferred Stock. ECT's subscription television business
includes subscribers and certain MMDS licenses and transmission equipment
serving the areas in and around Newcastle, Gossford, Wollongong and Tasmania,
Australia.

XYZ Entertainment

In September 1998, UAP acquired the Australian programming assets held by
Century, consisting of Century's 25.0% interest in XYZ Entertainment, a
programming company that owns and/or distributes five channels to the
Australian multi-channel marketplace, increasing its ownership to 50.0% in XYZ
Entertainment. The purchase price consisted of $1.2 million in cash and $23.4
million of the Company's Series B Preferred Stock.

TV Show Brasil

In October 1998, ULA increased its ownership interest in TV Show Brasil from
45.0% to 100% for $11.4 million, half of which was paid in cash, with the
remainder financed by the seller.

Cable Star

In October 1998, ULA and Arequipa Cable Vision ("ACV") each contributed their
Peruvian multi-channel television assets to Cable Star, with ULA receiving
60.0% of the outstanding shares of Cable Star and the former shareholders of
ACV receiving the other 40.0%.

Tevel and Melita

In November 1998, UPC (i) acquired from Tele-Communications International,
Inc. ("TINTA") its indirect 23.3% and 25.0% interests in the Tevel and Melita
systems, respectively for $91.5 million, doubling UPC's respective ownership
in these systems to 46.6% and 50.0%, respectively, (ii) purchased an
additional 5.0% interest in Princes Holdings and 5.0% of Tara in consideration
for 769,062 shares of United Class A Common Stock held by UPC, and (iii) sold
the 5.0% interest in Princes Holdings, together with its existing 20.0%
interest,

                                     F-21
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

to TINTA for $20.5 million. The net payment of $71.0 million to TINTA ($68.0
million after closing adjustments) was funded with the proceeds of a $90.0
million promissory note made by a subsidiary of UPC to its primary partners in
the Tevel system (the "UPC DIC Loan").

UPC

In July 1995, the Company and Philips Electronics N.V. ("Philips") contributed
their respective ownership interests in European and Israeli multi-channel
television systems to UPC. Philips contributed to UPC its 95.0% interest in
cable television systems in Austria, its 100% interest in cable television
systems in Belgium, its minority interests in multi-channel television systems
in Germany, the Netherlands (Eindhoven) and France. The Company contributed
its interests in multi-channel television systems in Israel, Ireland, the
Czech Republic, Malta, Norway, Hungary, Sweden and Spain. The Company also
contributed $78.2 million in cash to UPC and issued to Philips 6,338,302
shares of its Class A Common Stock having a value of $50.0 million (at date of
closing). In addition, UPC issued to Philips $133.6 million of convertible
subordinated pay-in-kind notes (the "PIK Notes"). As a result of this
transaction, the Company and Philips each owned a 50.0% economic and voting
interest in UPC.

On December 11, 1997, the Company acquired Philips' entire interest in UPC
(the "UPC Transaction"). As part of the UPC Transaction, (i) UPC purchased the
6,338,302 shares of Class A Common Stock of the Company held by Philips, (ii)
United purchased NLG169.9 ($84.3) million of the accreted amount of UPC's PIK
Notes and redeemed them for 45,540,783 shares of UPC, (iii) UPC repaid to
Philips the remaining NLG170.4 ($84.6) million accreted amount of the PIK
Notes, (iv) United purchased 39,364,812 shares of UPC directly from Philips,
and (v) UPC repurchased Philips' remaining equity interest in UPC (73,135,188
shares). The Company effectively owned 100% of UPC as a result of the UPC
Transaction, including shares held by a foundation controlled by United which
administers the UPC stock plan for the benefit of UPC employees and
management, pursuant to UPC's equity incentive plans. The final purchase price
(excluding transaction-related costs) was $425.2 million, comprised of $168.7
million for the purchase by the Company and repayment by UPC of UPC's PIK
Notes, $33.2 million allocated to the purchase by UPC of 6,338,302 shares of
the Company's Class A Common Stock and $223.3 million allocated to the
purchase of Philips' interest in UPC. The UPC Transaction was funded by a
long-term revolving credit facility through UPC with a syndicate of banks
($151.5 million), a bridge bank facility through a subsidiary of UPC ($111.2
million) and a cash investment by the Company of $162.5 million.

Details of the net assets acquired, based on a preliminary allocation of the
purchase price, which were denominated in Dutch guilders and translated to
U.S. dollars using the exchange rate on the date of acquisition, were as
follows (in thousands):

<TABLE>
   <S>                                                               <C>
   Working capital, including cash acquired of $50,872.............. $  (7,158)
   Investment in United Class A Common Stock........................   (33,074)
   Investment in affiliated companies...............................  (167,945)
   Property, plant and equipment and other long-term assets.........  (273,988)
   Goodwill and other intangible assets.............................  (383,503)
   Elimination of United equity investment..........................    46,319
   Long-term debt...................................................   624,633
   Other liabilities................................................    32,216
                                                                     ---------
     Total cash paid................................................ $(162,500)
                                                                     =========
</TABLE>

Argentina

In October 1997, the Company completed the sale of all of its cable television
assets in Argentina, including the regions of Bahia Blanca, Comodoro, Trelew
and Santa Fe (the "Argentina Transaction"). The sale price for

                                     F-22
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Bahia Blanca, Comodoro, Trelew and Santa Fe collectively was $268.2 million,
of which $25.3 million consisted of remaining notes payable to sellers from
the original acquisitions. From this net sales price of $242.9 million, $29.6
million was paid directly by the buyers to other minority interest
stockholders, resulting in net proceeds to the Company of approximately $211.1
million. The payment was received in full in cash. The Company recognized a
gain on the transaction of $90.0 million.

Tara

In October 1997, Tara issued shares to third parties in exchange for
consideration totaling $2.5 million, thereby diluting the Company's interest
in Tara from 100% to 75.0%. A gain of $1.6 million recognized on the
transaction was credited to additional paid-in capital in accordance with SAB
51.

Saturn

In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a
35.0% equity interest in Saturn by investing New Zealand dollars ("NZ$")29.9
($19.6) million directly into Saturn for its newly-issued shares, thereby
reducing the Company's equity interest in Saturn to 65.0%. A gain of $6.0
million recognized on the transaction was credited to additional paid-in
capital in accordance with SAB 51.

Pro Forma Financial Information for the Year Ended February 28, 1998

The following pro forma condensed consolidated operating results for the year
ended February 28, 1998 give effect to the UPC Transaction and the Argentina
Transaction as if each had occurred at the beginning of the period presented.
This pro forma condensed consolidated financial information and notes thereto
do not purport to represent what the Company's results of operations would
actually have been if such transactions had in fact occurred on such date. The
pro forma adjustments are based upon currently available information and upon
certain assumptions that management believes are reasonable.

<TABLE>
<CAPTION>
                                                    For the Year Ended
                                                     February 28, 1998
                                                -----------------------------
                                                 Historical     Pro Forma(1)
                                                -------------  --------------
                                                (In thousands, except share
                                                  and per share amounts)
   <S>                                          <C>            <C>
   Revenue..................................... $      98,622   $     244,394
                                                =============   =============
   Net loss before extraordinary charge........ $    (263,441)  $    (395,723)
                                                =============   =============
   Net loss.................................... $    (342,532)  $    (474,814)
                                                =============   =============
   Net loss per common share:
     Basic and diluted loss before
      extraordinary charge..................... $       (3.43)  $       (5.62)
     Extraordinary charge......................         (1.03)          (1.12)
                                                -------------   -------------
     Basic and diluted net loss................ $       (4.46)  $       (6.74)
                                                =============   =============
   Weighted-average number of shares
    outstanding................................    77,033,786      70,695,484
                                                =============   =============
</TABLE>
  --------
  (1) Represents elimination of historical statement of operations
      balances for the Argentina systems and elimination of the gain
      recorded on the Argentina Transaction, as well as inclusion of the
      historical amounts included in UPC's consolidated statement of
      operations for the period from January 1, 1997 to December 10,
      1997, additional depreciation and amortization related to the step-
      up in basis in tangible assets and additional goodwill, the net
      decrease in equity in losses of affiliated companies, and the net
      increase in interest expense as a result of the UPC Transaction.

                                     F-23
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Cash and Cash Equivalents, Restricted Cash and Short-Term Liquid Investments

<TABLE>
<CAPTION>
                                              As of December 31, 1999
                                   ---------------------------------------------
                                    Cash and              Short-term
                                      Cash     Restricted   Liquid
                                   Equivalents    Cash    Investments   Total
                                   ----------- ---------- ----------- ----------
                                                  (In thousands)
   <S>                             <C>         <C>        <C>         <C>
   Cash........................... $1,046,827   $18,217    $    --    $1,065,044
   Certificates of deposit........     52,000       --      293,497      345,497
   Commercial paper...............    803,088       --      182,486      985,574
   Corporate bonds................     24,000       --      126,179      150,179
   Government securities..........        --        --       27,527       27,527
                                   ----------   -------    --------   ----------
     Total........................ $1,925,915   $18,217    $629,689   $2,573,821
                                   ==========   =======    ========   ==========

<CAPTION>
                                              As of December 31, 1998
                                   ---------------------------------------------
                                    Cash and              Short-term
                                      Cash     Restricted   Liquid
                                   Equivalents    Cash    Investments   Total
                                   ----------- ---------- ----------- ----------
                                                  (In thousands)
   <S>                             <C>         <C>        <C>         <C>
   Cash........................... $   18,766   $17,215    $    --    $   35,981
   Certificates of deposit........        --        --        4,000        4,000
   Commercial paper...............     16,580       --       10,541       27,121
   Corporate bonds................        --        --       15,935       15,935
   Government securities..........        262       --       11,022       11,284
                                   ----------   -------    --------   ----------
     Total........................ $   35,608   $17,215    $ 41,498   $   94,321
                                   ==========   =======    ========   ==========
</TABLE>

                                      F-24
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


5. Investments in Affiliates, Accounted for under the Equity Method

<TABLE>
<CAPTION>
                                                As of December 31, 1999
                            ---------------------------------------------------------------
                                                  Cumulative
                            Investments            Share in  Cumulative
                                in      Dividends Results of Translation Valuation
                            Affiliates  Received  Affiliates Adjustments Allowance  Total
                            ----------- --------- ---------- ----------- --------- --------
                                                    (In thousands)
   <S>                      <C>         <C>       <C>        <C>         <C>       <C>
   Europe:
     SBS...................  $ 99,621    $   --    $ (5,421)   $ 2,858     $--     $ 97,058
     Tevel.................   100,679     (6,180)   (12,108)     3,761      --       86,152
     Melita................    14,062        --       2,066     (2,417)     --       13,711
     Iberian Programming...    11,947        --        (460)     2,828      --       14,315
     Xtra Music............     9,913        --      (2,476)      (640)     --        6,797
     Other.................    27,447        --         (65)    (1,048)     --       26,334
   Asia/Pacific:
     XYZ Entertainment.....    44,306        --     (18,564)     2,804      --       28,546
     Pilipino Cable
      Corporation..........    14,950        --      (3,004)    (2,588)     --        9,358
     Hunan International
      TV...................     6,061        --      (2,477)        16      --        3,600
     Other.................       350        --         --         --       --          350
   Latin America:
     Megapo................    32,496     (1,408)    (1,618)    (9,382)     --       20,088
     MGM Networks LA(1)....    11,988        --     (11,988)       --       --          --
     Jundiai...............     6,032     (1,572)        72     (1,334)               3,198
     Other.................         2        --         --         --       --            2
                             --------    -------   --------    -------     ----    --------
       Total...............  $379,854    $(9,160)  $(56,043)   $(5,142)    $--     $309,509
                             ========    =======   ========    =======     ====    ========
</TABLE>


                                      F-25
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                As of December 31, 1998
                            ----------------------------------------------------------------
                                                  Cumulative
                            Investments            Share in   Cumulative
                                in      Dividends Results of  Translation Valuation
                            Affiliates  Received  Affiliates  Adjustments Allowance  Total
                            ----------- --------- ----------  ----------- --------- --------
                                                    (In thousands)
   <S>                      <C>         <C>       <C>         <C>         <C>       <C>
   Europe:
     UTH...................  $135,290    $   --   $ (11,447)   $  8,288    $   --   $132,131
     Tevel.................    96,340     (6,090)      (390)       (306)       --     89,554
     Melita................    14,078        --         997         724        --     15,799
     Monor.................    11,301        --      (2,601)     (7,849)       --        851
     Iberian Programming...    14,082        --      (7,418)        (25)       --      6,639
     Xtra Music............     5,326        --        (536)        252        --      5,042
     Other.................    14,532        --      (3,876)        176        --     10,832
   Asia/Pacific:
     Saturn................    49,808        --     (23,138)     (2,881)       --     23,789
     XYZ Entertainment.....    44,306        --     (18,537)        111        --     25,880
     Pilipino Cable
      Corporation..........    11,673        --      (2,812)     (2,824)       --      6,037
     Hunan International
      TV...................     6,073        --      (2,435)         16        --      3,654
     Telefenua.............    18,599        --     (14,215)        --      (4,384)      --
     Other.................       350        --         --          --         --        350
   Latin America:
     VTR...................   112,052        --     (17,203)     (9,874)       --     84,975
     Megapo................    32,496     (1,471)    (1,122)    (11,067)       --     18,836
     MGM Networks LA(1)....     5,687        --      (5,687)        --         --        --
     Jundiai...............     6,797        --        (587)     (1,089)       --      5,121
                             --------    -------  ---------    --------    -------  --------
       Total...............  $578,790    $(7,561) $(111,007)   $(26,348)   $(4,384) $429,490
                             ========    =======  =========    ========    =======  ========
</TABLE>
  --------
  (1) Includes an accrued funding obligation of $3.0 and $2.9 million at
      December 31, 1999 and 1998, respectively. The Company would face
      significant and punitive dilution if it did not make the requested
      fundings.

                                     F-26
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


As of December 31, 1999 and 1998, the Company had the following differences
related to the excess of its cost over its proportionate interest in each
affiliate's net tangible assets included in the above table. Such differences
are being amortized over 15 years.

<TABLE>
<CAPTION>
                                 As of December 31, 1999 As of December 31, 1998
                                 ----------------------- -----------------------
                                   Basis    Accumulated    Basis    Accumulated
                                 Difference Amortization Difference Amortization
                                 ---------- ------------ ---------- ------------
                                                 (In thousands)
   <S>                           <C>        <C>          <C>        <C>
   Europe:
     SBS........................  $109,080    $ (2,828)   $    --     $    --
     Tevel......................    82,010      (7,947)     80,644      (3,351)
     Melita.....................    11,673      (1,242)     12,898        (451)
     Iberian Programming........    11,941        (521)      2,216         (85)
     Xtra Music.................     5,511        (246)      3,585         (73)
     Other......................       --          --        9,985        (404)
   Asia/Pacific:
     XYZ Entertainment..........    25,791      (1,609)     23,595         --
     Saturn.....................       --          --       12,733      (1,005)
   Latin America:
     VTR........................       --          --       19,994      (1,941)
     Megapo.....................    20,518      (6,983)     19,583      (5,767)
                                  --------    --------    --------    --------
       Total....................  $266,524    $(21,376)   $185,233    $(13,077)
                                  ========    ========    ========    ========
</TABLE>

Condensed financial information for UPC, stated in U.S. dollars, is presented
below:

<TABLE>
<CAPTION>
                                                                   For the Year
                                                                      Ended
                                                                   December 31,
                                                                     1997(1)
                                                                  --------------
                                                                  (In thousands)
   <S>                                                            <C>
   Revenue.......................................................   $ 172,951
   Operating, selling, general and administrative expense........    (121,833)
   Depreciation and amortization.................................     (68,148)
                                                                    ---------
     Net operating loss..........................................     (17,030)
   Interest, net.................................................     (32,936)
   Share in results of affiliated companies, net.................     (10,395)
   Other.........................................................     (29,820)
                                                                    ---------
     Net loss....................................................   $ (90,181)
                                                                    =========
</TABLE>
  --------
  (1) The Company consolidated the results of UPC effective December 11,
      1997.

                                     F-27
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


6. Property, Plant and Equipment

<TABLE>
<CAPTION>
                                                           As of December 31,
                                                           --------------------
                                                              1999       1998
                                                           ----------  --------
                                                             (In thousands)
   <S>                                                     <C>         <C>
   Cable distribution networks............................ $1,826,781  $255,702
   Subscriber premises equipment and converters...........    451,505   252,250
   MMDS/DTH distribution facilities.......................    144,593    62,872
   Office equipment, furniture and fixtures...............    103,869    30,415
   Buildings and leasehold improvements...................    162,522    11,236
   Other..................................................    173,091    40,150
                                                           ----------  --------
                                                            2,862,361   652,625
     Accumulated depreciation.............................   (482,524) (201,183)
                                                           ----------  --------
     Net property, plant and equipment.................... $2,379,837  $451,442
                                                           ==========  ========

7. Goodwill and Other Intangible Assets

<CAPTION>
                                                           As of December 31,
                                                           --------------------
                                                              1999       1998
                                                           ----------  --------
                                                             (In thousands)
   <S>                                                     <C>         <C>
   Europe:
     @Entertainment....................................... $  935,867  $    --
     UPC Nederland........................................    763,714       --
     Stjarn...............................................    430,606       --
     Telekabel Group......................................    177,800   206,092
     UPC France...........................................    117,787       --
     UPC Norge............................................     85,405    87,563
     Kabel Plus...........................................     85,330       --
     UPC Magyarorszag.....................................     55,068    51,550
     UPC..................................................     29,406       --
     Monor................................................     24,420       --
     UPC Slovak...........................................     23,026       --
     UPC Belgium..........................................     20,994    22,322
     Other................................................     12,932    12,971
   Asia/Pacific:
     Austar United........................................    114,882       --
     Austar...............................................        --     60,071
   Latin America:
     VTR..................................................    223,484       --
     TV Show Brasil.......................................      8,298    16,161
     Cable Star...........................................      5,916     7,887
                                                           ----------  --------
                                                            3,114,935   464,617
       Accumulated amortization...........................   (170,133)  (39,683)
                                                           ----------  --------
       Net goodwill and other intangible assets........... $2,944,802  $424,934
                                                           ==========  ========
</TABLE>

                                      F-28
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


8. Short-Term Debt

<TABLE>
<CAPTION>
                                                                As of December
                                                                     31,
                                                               ----------------
                                                                 1999    1998
                                                               -------- -------
                                                                (In thousands)
   <S>                                                         <C>      <C>
   Stjarn Seller's Note (Note 3).............................. $100,000 $   --
   Stjarn Credit Facility.....................................   39,333     --
   A2000 Bank Facility (Note 10)..............................   20,575     --
   Other UPC..................................................    4,355  33,504
   Other Latin America and Asia/Pacific.......................    9,033  59,875
                                                               -------- -------
     Total short-term debt.................................... $173,296 $93,379
                                                               ======== =======
</TABLE>

Carrying value approximates fair value for these short-term facilities.

Stjarn Credit Facility

In December 1998, Stjarn's parent company entered into a Swedish Kronor
("SEK") 521.0 ($61.3) million loan agreement with a bank to refinance certain
debt. The loan currently consists of an A facility, a medium term loan in the
amount of SEK371.0 ($43.6) million and a revolving credit facility in the
amount of SEK150.0 ($17.6) million. These facilities bear interest at the rate
of Stockholm Interbank Offered Rate ("STIBOR") plus a margin of 0.75% to
1.25%. As a result of UPC's acquisition of Stjarn, both the A facility and the
revolving facility are now due on March 31, 2000.

9. Senior Discount Notes and Senior Notes

<TABLE>
<CAPTION>
                                                          As of December 31,
                                                         ---------------------
                                                            1999       1998
                                                         ---------- ----------
                                                            (In thousands)
   <S>                                                   <C>        <C>
   United 1998 Notes.................................... $  991,568 $  893,003
   United 1999 Notes....................................    224,426        --
   United Old Notes.....................................        --         412
   UPC USD Senior Notes due 2009........................    759,442        --
   UPC 10.875% Euro Senior Notes due 2009...............    301,878        --
   UPC USD Senior Discount Notes due 2009...............    421,747        --
   UPC 10.875% USD Senior Notes due 2007................    191,852        --
   UPC 10.875% Euro Senior Notes due 2007...............    100,625        --
   UPC 11.25% USD Senior Notes due 2009.................    239,905        --
   UPC 11.25% Euro Senior Notes due 2009................    100,894        --
   UPC 13.375% USD Senior Discount Notes due 2009.......    255,786        --
   UPC 13.375% Euro Senior Discount Notes due 2009......    102,847        --
   @Entertainment 1999 Senior Discount Notes............    141,807        --
   @Entertainment 1998 Senior Discount Notes............    115,984        --
   @Entertainment 1999 Series C Senior Discount Notes...     11,841        --
   PCI Discount Notes...................................     16,457        --
   United A/P Notes.....................................    407,945    356,640
                                                         ---------- ----------
                                                          4,385,004  1,250,055
     Less current portion...............................        --        (412)
                                                         ---------- ----------
     Total senior discount notes........................ $4,385,004 $1,249,643
                                                         ========== ==========
</TABLE>

                                     F-29
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


United 1998 Notes

In February 1998, the Company sold in a private transaction $1,375.0 million
principal amount at maturity of 10.75% senior secured discount notes due 2008.
The United 1998 Notes were issued at a discount from their principal amount at
maturity, resulting in gross proceeds to United of approximately $812.2
million. The Company used approximately $531.8 million of the proceeds from
the United 1998 Notes to complete a tender offer for the Company's existing
14.0% senior secured discount notes due 1999 (collectively, the "United Old
Notes") and the consent solicitation that the Company conducted concurrently
therewith. The Company commenced the tender offer on January 7, 1998, and the
tender offer expired on February 4, 1998, with over 99.8% of the United Old
Notes being validly tendered. The Company subsequently purchased $0.5 million
principal amount at maturity of the United Old Notes on the open market,
leaving approximately $0.5 million principal amount at maturity outstanding as
of February 28, 1998. The United Old Notes redeemed had an aggregate accreted
value of approximately $466.2 million as of February 5, 1998. The tender
premium of approximately $65.6 million, combined with the write-off of
unamortized deferred financing costs and other transaction-related costs
totaling approximately $13.5 million, resulted in an extraordinary charge of
$79.1 million.

The United 1998 Notes will accrete at 10.75% per annum, compounded semi-
annually to an aggregate principal amount of $1,375.0 million on February 15,
2003, at which time cash interest will commence to accrue. Commencing August
15, 2003, cash interest on the United 1998 Notes will be payable on February
15 and August 15 of each year until maturity at a rate of 10.75% per annum.
The United 1998 Notes will mature on February 15, 2008, and will be redeemable
at the option of the Company on or after February 15, 2003.

The United 1998 Notes are senior secured obligations of the Company that rank
senior in right of payment to all future subordinated indebtedness of the
Company. The United 1998 Notes are effectively subordinated to all future
indebtedness and other liabilities and commitments of the Company's
subsidiaries. Under the terms of the indenture governing the United 1998 Notes
(the "Indenture"), the Company's subsidiaries are generally prohibited and/or
restricted from incurring any liens against their assets other than liens
incurred in the ordinary course of business, from paying dividends, and from
making investments in entities that are not "restricted" by the terms of the
Indenture. The Company has the option to invest in "unrestricted entities" in
an aggregate amount equal to the sum of $100.0 million plus the aggregate
amount of net cash proceeds from sales of equity, net of payments made on its
preferred stock plus net proceeds from certain litigation settlements. The
Indenture generally prohibits the Company from incurring additional
indebtedness with the exception of a general allowance of $75.0 million for
debt maturing on or after February 15, 2008, certain guarantees totaling $15.0
million, refinancing indebtedness, normal indebtedness to restricted
affiliates and other letters of credit in the ordinary course of business. The
Indenture also limits the amount of additional debt that its subsidiaries or
controlled affiliates may borrow, or preferred shares that they may issue.
Generally, additional borrowings, when added to existing indebtedness, must
satisfy, among other conditions, at least one of the following tests: (i) 7.0
times the borrower's consolidated operating cash flow; (ii) 1.75 times its
consolidated interest expense; or (iii) 225% of the borrower's consolidated
invested equity capital. In addition, there must be no existing default under
the Indenture at the time of the borrowing. The Indenture also restricts its
subsidiaries' ability to make certain asset sales and certain payments.

In conjunction with the United Old Notes, the Company issued 394,000 warrants,
including related put rights (the "Warrants") to purchase a total of 3,573,398
shares of Class A Common Stock at a price of $7.50 per share. At any time
between January 31, 1996 and March 1, 1996, the Warrant holders had the right
to require the Company to repurchase all or a part of the Warrants for $28.34
per Warrant. Holders of the Warrants required the Company to purchase 76,070
Warrants to purchase 689,864 shares of Class A Common Stock for a cost of $2.2
million on March 1, 1996. The remaining value assigned to the Warrants of $9.0
million was reclassified to

                                     F-30
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

additional paid-in capital on March 1, 1996. The remaining 317,930 outstanding
Warrants (representing 2,883,600 shares of Class A Common Stock) were
exercised during 1999, resulting in proceeds of $21.6 million.

United 1999 Notes

On April 29, 1999, the Company sold in a private transaction $355.0 million
principal amount at maturity of 10.875% senior discount notes due 2009. The
United 1999 Notes were issued at a discount from their principal amount at
maturity, resulting in gross proceeds to United of approximately $208.9
million. The United 1999 Notes will accrete at 10.875% per annum, compounded
semi-annually, to an aggregate principal amount of $355.0 million on May 1,
2004. Commencing November 1, 2004, cash interest on the United 1999 Notes will
begin to accrue, payable on May 1 and November 1 of each year until maturity
at a rate of 10.875% per annum. The United 1999 Notes will mature on May 15,
2009, and are redeemable after May 1, 2004 at premiums declining to par on May
1, 2007. Additionally, subject to certain limitations, prior to May 1, 2002,
United may redeem an aggregate of 35.0% of the United 1999 Notes at the
Company's option with the net proceeds from one or more public offerings or
certain asset sales. The United 1999 Notes are senior, general, unsecured
obligations, ranking equally in right of payment to existing and future
senior, unsecured obligations, senior to all future junior obligations and
effectively junior to existing secured obligations, including the United 1998
Notes.

UPC USD Senior Notes due 2009, UPC 10.875% Euro Senior Notes due 2009 and UPC
USD Senior Discount Notes due 2009 (collectively the "UPC July 1999 Notes")

In July 1999, UPC completed a private placement bond offering consisting of
$800.0 million ten-year 10.875% Senior Notes due 2009, (Euro) 300.0 million of
ten-year 10.875% Senior Notes due 2009 and $735.0 million aggregate principal
amount of ten-year 12.5% Senior Discount Notes due 2009. The UPC Senior
Discount Notes due 2009 were sold at 54.5% of face value amount yielding gross
proceeds of approximately $400.7 million, and will accrue but not pay interest
until 2005. Interest payments on the Senior Notes due 2009 will be due semi-
annually, commencing February 1, 2000. The indentures governing the UPC July
1999 Notes place certain limitations on UPC's ability, and the ability of its
subsidiaries, to borrow money, issue capital stock, pay dividends in stock or
repurchase stock, make investments, create certain liens, engage in certain
transactions with affiliates, and sell certain assets or merge with or into
other companies. Concurrent with the closing of the UPC July 1999 Notes
offering, UPC entered into a cross-currency swap, swapping the $800.0 million
UPC Senior Notes due 2009 into fixed and variable rate Euro notes with a
notional amount totaling (Euro) 754.7 million. One half of the Euro notes have
a fixed interest rate of 8.54% through August 1, 2004, thereafter switching to
a variable interest rate of Euro Interbank Offered Rate ("EURIBOR") plus
4.15%, for an initial rate of 7.1%.

UPC 10.875% USD and Euro Senior Notes due 2007, UPC 11.25% USD and Euro Senior
Notes due 2009 and UPC 13.375% USD and Euro Senior Discount Notes due 2009
(collectively the "UPC October 1999 Notes")

In October 1999, UPC completed a private placement bond offering consisting of
six tranches: $200.0 million and (Euro) 100.0 million of eight-year 10.875%
Senior Notes due 2007; $252.0 million and (Euro) 101.0 million of ten-year
11.25% Senior Notes due 2009 and $478.0 million and (Euro) 191.0 million
aggregate principal amount of ten-year 13.375% Senior Discount Notes due 2009.
The Senior Discount Notes were sold at 52.3% of the face amount yielding gross
proceeds of $250.0 million and (Euro) 100.0 million and will accrue but not
pay interest until November 2004. UPC then entered into cross-currency swaps,
swapping the $252.0 million 11.25% coupon into fixed and variable rate Euro
notes with a notional amount totaling (Euro) 240.2 million, and swapping the
$200.0 million 10.875% coupon into fixed and variable rate Euro notes with a
notional amount totaling (Euro) 190.7 million. Of the former swap,
(Euro) 120.1 million have a fixed interest rate of 9.9% through November 1,
2004, thereafter switching to a variable rate of EURIBOR + 4.8%. The remaining
(Euro) 120.1 million have a variable interest rate of EURIBOR + 4.80%. Of the
latter swap, (Euro) 95.4 million have a fixed interest rate of 9.9% through
November 1, 2004, thereafter switching to a variable rate of EURIBOR + 4.8%.
The remaining (Euro) 95.4 million have a variable interest rate of EURIBOR +
4.8%.

                                     F-31
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


@Entertainment 1999 Senior Discount Notes, @Entertainment 1998 Senior Discount
Notes and @Entertainment 1999 Series C Senior Discount Notes (collectively the
"@Entertainment Notes")

In January 1999, @Entertainment sold 256,800 units consisting of Senior
Discount Notes due 2009 and warrants to purchase 1,813,665 shares of
@Entertainment's common stock. The @Entertainment 1999 Senior Discount Notes
were issued at a discount to their aggregate principal amount at maturity
yielding gross proceeds of approximately $100.0 million. Cash interest on the
@Entertainment 1999 Senior Discount Notes will not accrue prior to February 1,
2004. Thereafter, cash interest will accrue at a rate of 14.5% per annum,
payable semi-annually in arrears on August 1 and February 1 of each year,
commencing August 1, 2004. In connection with the acquisition of
@Entertainment, UPC acquired all of the existing warrants held in connection
with the @Entertainment 1999 Senior Discount Notes.

In July 1998, @Entertainment sold 252,000 units, consisting of 14.5% Senior
Discount Notes due 2008 and warrants entitling the warrant holders to purchase
1,824,514 shares of @Entertainment common stock. This offering generated
approximately $125.1 million in gross proceeds to @Entertainment. The
@Entertainment 1998 Senior Discount Notes are unsubordinated and unsecured
obligations of @Entertainment. Cash interest will not accrue prior to July 15,
2003. After that, cash interest will accrue at a rate of 14.5% per year and
will be payable semi-annually in arrears on January 15 and July 15 of each
year, beginning January 15, 2004. The @Entertainment 1998 Senior Discount
Notes will mature on July 15, 2008. In connection with the acquisition of
@Entertainment, UPC acquired all of the existing warrants held in connection
with the @Entertainment 1998 Senior Discount Notes.

Pursuant to the terms of the @Entertainment indenture, @Entertainment
repurchased $49.1 million aggregate principal amount at maturity of these
notes for $26.5 million as a result of UPC's acquisition of @Entertainment.

In January 1999, @Entertainment sold $36.0 million aggregate principal amount
at maturity of Series C Senior Discount Notes generating approximately $9.8
million of gross proceeds. The @Entertainment 1999 Series C Senior Discount
Notes are senior unsecured obligations of @Entertainment. Original issue
discount will accrete from January 20, 1999, until maturity on July 15, 2008.
Cash interest will accrue beginning July 15, 2004 at a rate of 7.0% per year
on the principal amount at maturity, and will be payable semi-annually in
arrears, on July 15 and January 15 of each year beginning January 15, 2005.

PCI Discount Notes

Poland Communications, Inc. ("PCI"), @Entertainment's major operating
subsidiary, sold $130.0 million of discount notes in October 1996. The PCI
Discount Notes bear interest at 9.875%, payable on May 1 and November 1 of
each year. The PCI Discount Notes mature on November 1, 2003. Pursuant to the
terms of the PCI indenture, @Entertainment repurchased a majority of the PCI
Discount Notes in November 1999 as a result of UPC's acquisition of
@Entertainment.

United A/P Notes

The 14.0% senior notes were issued by United A/P in May 1996 and September
1997 at a discount from their principal amount of $488.0 million, resulting in
gross proceeds of $255.0 million. On and after May 15, 2001, cash interest
will accrue and will be payable semi-annually on each May 15 and November 15,
commencing November 15, 2001. The United A/P Notes are due May 15, 2006.
Effective May 16, 1997, the interest rate on these notes increased by an
additional 0.75% per annum to 14.75%. On October 14, 1998, United A/P
consummated an equity sale resulting in gross proceeds to United A/P of $70.0
million, reducing the interest rate from 14.75% to 14.0% per annum. Due to the
increase in the interest rate effective May 16, 1997 until consummation of the
equity sale, the United A/P Notes will accrete to a principal amount of $492.9
million on May 15, 2001, the date cash interest begins to accrue.


                                     F-32
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In November 1997, pursuant to the terms of the indentures governing the United
A/P Notes, United A/P issued warrants to purchase 488,000 shares of its common
stock. The warrants are exercisable through May 15, 2006 at a price of $10.45
per share, which would result in gross proceeds of $5.1 million upon exercise.
The warrants were valued at $3.7 million and have been reflected as an
additional discount to the United A/P Notes on a pro-rata basis and as an
increase in additional paid-in capital. Warrants to acquire 50 shares were
exercised November 24, 1999.

10. Other Long-Term Debt

<TABLE>
<CAPTION>
                                                           As of December 31,
                                                           --------------------
                                                              1999       1998
                                                           ----------  --------
                                                             (In thousands)
   <S>                                                     <C>         <C>
   UPC Senior Credit Facility............................. $  359,720  $    --
   New Telekabel Facility.................................    256,861       --
   A2000 Facilities.......................................    209,132       --
   CNBH Facility..........................................    122,317       --
   Rhone Vision Cable Credit Facility.....................     61,360       --
   RCF Facility...........................................     31,852       --
   UPC DIC Loan...........................................     39,366    84,214
   Mediareseaux Facility..................................     45,193    21,346
   Monor Facility.........................................     33,488       --
   Videopole Facility.....................................      7,752       --
   Other UPC..............................................     50,345     3,821
   UPC Senior Revolving Credit Facility...................        --    512,179
   UPC Bridge Bank Facility...............................        --     60,063
   VTR Bank Facility......................................    176,000       --
   New Austar Bank Facility...............................    202,703    67,352
   Saturn Bank Facility...................................     57,685       --
   Other Asia/Pacific.....................................      2,263     2,923
   Other Latin America....................................        594       --
                                                           ----------  --------
                                                            1,656,631   751,898
     Less current portion.................................    (52,180)  (62,252)
                                                           ----------  --------
     Total other long-term debt........................... $1,604,451  $689,646
                                                           ==========  ========
</TABLE>

UPC Senior Credit Facility

On July 27, 1999, several UPC subsidiaries and a syndicate of banks executed a
Loan and Note Issuance Agreement for a (Euro) 1.0 ($1.1) billion multicurrency
senior secured credit facility. The UPC Senior Credit Facility matures on July
27, 2006 and is comprised of two tranches. The (Euro) 750.0 ($755.1) million
Tranche A is a senior secured reducing revolving credit facility. Tranche B is
a (Euro) 250.0 ($251.7) million term loan credit facility. The UPC Senior
Credit Facility bears interest at EURIBOR (for borrowings in euro) and at the
London Interbank Offered Rate ("LIBOR") (for all other borrowings) plus a
margin of between 0.75% and 2.0% (which shall be at least 1.5% for the first
six months following closing) plus an additional cost of funding calculation.
In addition to repayment of UPC's existing revolving credit facility, proceeds
from the UPC Senior Credit Facility were used to fund acquisitions, repay
certain intercompany debts, pay interest on funds downstreamed from the
proceeds of high yield issues, general corporate purposes, capital
expenditures and other permitted distributions. Borrowings under the UPC
Senior Credit Facility are limited by financial ratio tests. The UPC Senior
Credit Facility contains change in control provisions related to UPC's
ownership in certain subsidiaries and United's ownership of UPC. In addition,
the UPC Senior Credit Facility limits acquisitions funded by loan proceeds to
(Euro) 400.0 ($402.7)

                                     F-33
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

million over the life of the UPC Senior Credit Facility. The UPC Senior Credit
Facility contains certain financial covenants and restrictions on UPC and its
subsidiaries' ability to make dividends or other payments to UPC, incur
indebtedness, dispose of assets and merge and enter into affiliate
transactions. Net proceeds of certain disposals are required to be used to
prepay the facility.

New Telekabel Facility

In March 1999, UPC Nederland replaced their existing facility with a senior
facility. The New Telekabel Facility consists of a (Euro) 340.0 ($342.3)
million revolving facility to N.V. Telekabel, a subsidiary of UPC Nederland,
that will convert to a term facility on December 31, 2001. The New Telekabel
Facility includes (Euro) 5.0 ($5.0) million in the form of an overdraft
facility that will be available until December 31, 2007. The New Telekabel
Facility bears interest at EURIBOR plus a margin between 0.75% and 2.00% based
on leverage multiples tied to certain measures of net operating cash flow.

A2000 Facilities

In January 1996, A2000 and one of its subsidiaries entered into bank
facilities of NLG90.0 ($41.1) million and NLG375.0 ($171.2) million,
respectively. In October 1996, a subsidiary of A2000 entered into a bank
facility of NLG45.0 ($20.5) million. These facilities have between nine- and
ten-year terms and interest rates of Amsterdam Interbank Offered Rate
("AIBOR") plus 0.75% or AIBOR plus 0.7% or fixed rates (fixed prior to each
advance) increased by 0.7% or 0.75% per annum. The facilities also restrict
the borrowers from incurring additional indebtedness and from paying dividends
and distributions, subject to certain exceptions.

CNBH Facility

In February 1998, CNBH entered into a secured NLG250.0 ($114.2) million ten-
year term facility with a syndicate of banks. In January 1999, this facility
was increased to NLG274.0 ($125.1) million. The CNBH Facility bears interest
at AIBOR plus a margin between 0.7% and 0.75%. Beginning in 2001, CNBH will be
required to apply 50.0% of its excess cash flow to prepayment of its facility.
In connection with this facility, CNBH also entered into a NLG5.0 ($2.3)
million ten-year term working capital facility with a bank.

Rhone Vision Cable Credit Facility

In July 1996, Rhone Vision Cable, a subsidiary of Time Warner Cable France,
entered into a FFR680.0 ($104.4) million credit facility with a bank to
finance construction and installation of Rhone Vision Cable networks. The
facility bears interest at LIBOR plus 1.0%, payable quarterly. The facility
must be repaid by the earlier of June 30, 2002 or six months after network
completion.

RCF Facility

In 1990, RCF and six of its subsidiaries entered into a FFR160.0 ($24.6)
million credit facility with a consortium of banks to finance working capital
and operations. In 1995 this facility was amended and extended to FFR252.4
($38.7) million to refinance three further credit facilities entered into by
other subsidiaries of RCF. The loan bears interest at PIBOR (the French
interbank offer rate) plus 1.5%, payable in arrears quarterly. The loan is to
be repaid in yearly installments of FFR34.6 ($5.3) million beginning at the
end of 1999 until December 31, 2005.

UPC DIC Loan

In November 1998, a subsidiary of Discount Investment Corporation ("DIC")
loaned UPC a total of $90.0 million to acquire the additional interests in
Tevel and Melita. The UPC DIC Loan matures in November 2000 and bears interest
at 8.0% and is payable, together with 106.0% of the principal amount, on
maturity. In connection with the UPC DIC Loan, UPC granted to an affiliate of
DIC an option to acquire a total of $90.0 million, plus accrued interest, of
ordinary shares of UPC at a price equal to 90.0% of the initial public
offering price. UPC allocated the $90.0 million in loan proceeds between the
debt instrument and the equity option element on the basis of relative fair
values. In February 1999, the option agreement was amended, resulting in a

                                     F-34
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

grant of two options of $45.0 million each to acquire ordinary shares of UPC.
DIC then exercised the first option for $45.0 million, paying in cash and
acquiring 4.7 million ordinary shares of UPC. UPC repaid $45.0 million of the
UPC DIC Loan and accrued interest with proceeds received from the option
exercise. The remaining option is exercisable until September 30, 2000.

Mediareseaux Facility

In July 1998, Mediareseaux entered into a 9.5 year term facility with a bank
for an amount of FFR680.0 ($104.4) million. The Mediareseaux Facility bears
interest at LIBOR plus a margin ranging from 0.75% to 2.0%. The availability
of the facility depends on revenue generated and debt to equity ratios. The
availability period ends at December 31, 2002. The repayment period starts
from January 1, 2003 to final maturity in 2007. During the repayment period,
Mediareseaux must apply 50.0% of its excess cash flow in prepaying the
facility. In July 1998, Mediareseaux secured a 9.5 year FFR20.0 ($3.1) million
overdraft facility, subject to the same terms and conditions as the
Mediareseaux Facility except that the availability tests are not applicable.

Monor Facility

In September 1997, Monor entered into a $42.0 million term loan facility with
a syndicate of banks. The proceeds of the Monor facility were used to repay
indebtedness and for capital expenditures in the build-out of Monor's network.
Monor's facility matures on December 31, 2006 and bears interest at LIBOR plus
1.5%. Monor entered into an interest rate swap agreement with a bank, swapping
the floating rate to a fixed rate of 6.7% for German marks and 7.8% for U.S.
dollars. Monor's facility is secured by a pledge over the shares of Monor and
its assets. This facility limits Monor's ability to encumber its assets, incur
indebtedness and pay dividends.

VTR Bank Facility

On April 29, 1999, VTR entered into a $220.0 million term loan facility in
connection with the VTR Acquisition. The VTR Bank Facility consists of two
tranches--Tranche A, with an aggregate principal amount of $140.0 million, and
Tranche B, with an aggregate principal amount of $80.0 million. The VTR Bank
Facility bears interest at LIBOR plus a margin of 5.0%, increasing by 0.5%
every three months beginning April 29, 2001 until maturity on April 29, 2002.
The VTR Bank Facility indenture restricts certain investments and payments,
including a ceiling on capital expenditures per fiscal year, as well as
generally prohibiting VTR from incurring additional indebtedness with the
exception of a general allowance of $15.0 million. In addition, VTR must
maintain certain financial ratios on a quarterly basis, such as total debt to
EBITDA, debt service coverage, senior debt to EBITDA, interest coverage, as
well as minimum telephony revenue amounts.

New Austar Bank Facility

On April 23, 1999, Austar executed a new A$400.0 million ($262.3 million)
syndicated senior secured debt facility to refinance the existing bank
facility and to fund Austar's subscriber acquisition and working capital
needs. The New Austar Bank Facility consists of two sub-facilities: (i)
A$200.0 million amortizing term facility ("Tranche 1") and (ii) A$200.0
million cash advance facility ("Tranche 2"). Tranche 1 was used to refinance
the existing bank facility, and Tranche 2 is available upon the contribution
of additional equity on a 2:1 debt-to-equity basis. The New Austar Bank
Facility bears interest at the professional market rate in Australia plus a
margin ranging from 1.75% to 2.25% based upon certain debt to cash flow
ratios. The New Austar Bank Facility is fully repayable pursuant to an
amortization schedule beginning December 31, 2002 and ending March 31, 2006.
As of December 31, 1999, Austar has drawn A$200.0 million under Tranche 1 and
A$109.0 million under Tranche 2, for a total outstanding balance of A$309.0
($202.7) million.

Saturn Bank Facility

On July 15, 1999, Saturn closed a syndicated senior debt facility in the
amount of NZ$125.0 ($65.4) million to fund the completion of Saturn's network.
As of December 31, 1999, Saturn had drawn NZ$109.0 ($57.7) million

                                     F-35
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

against the facility and expects to draw down the remaining balance by the end
of fourth quarter 2000. This debt facility's interest rate has averaged
approximately 8.6%, which is 3.0% over the current base rate upon draw-down.
The Saturn Bank Facility is repayable over a five year period beginning fourth
quarter 2001.

Fair Value of Senior Discount Notes, Senior Notes and Other Long-Term Debt

Fair value is based on market prices for the same or similar issues. Carrying
value is used when a market price is unavailable.

<TABLE>
<CAPTION>
                                                     Carrying Value Fair Value
                                                     -------------- ----------
                                                          (In thousands)
   <S>                                               <C>            <C>
   As of December 31, 1999:
     United 1998 Notes..............................   $  991,568   $  880,000
     United 1999 Notes..............................      224,426      205,265
     UPC USD Senior Notes due 2009..................      759,442      775,969
     UPC 10.875% Euro Senior Notes due 2009.........      301,878      305,652
     UPC USD Senior Discount Notes due 2009.........      421,747      415,275
     UPC 10.875% USD Senior Notes due 2007..........      191,852      206,525
     UPC 10.875% Euro Senior Notes due 2007.........      100,625      102,639
     UPC 11.25% USD Senior Notes due 2009...........      239,905      262,080
     UPC 11.25% Euro Senior Notes due 2009..........      100,894      103,665
     UPC 13.375% USD Senior Discount Notes due
      2009..........................................      255,786      272,460
     UPC 13.375% Euro Senior Discount Notes due
      2009..........................................      102,847      106,669
     @Entertainment 1999 Senior Discount Notes......      141,807      146,007
     @Entertainment 1998 Senior Discount Notes......      115,984      147,948
     @Entertainment 1999 Series C Senior Discount
      Notes.........................................       11,841       11,841
     PCI Discount Notes.............................       16,457       16,457
     United A/P Notes...............................      407,945      414,008
     UPC Senior Credit Facility.....................      359,720      359,720
     New Telekabel Facility.........................      256,861      256,861
     A2000 Facilities...............................      209,132      209,132
     CNBH Facility..................................      122,317      122,317
     Rhone Vision Cable Credit Facility.............       61,360       61,360
     RCF Facility...................................       31,852       31,852
     UPC DIC Loan...................................       39,366       39,366
     Mediareseaux Facility..........................       45,193       45,193
     Monor Facility.................................       33,488       33,488
     Videopole Facility.............................        7,752        7,752
     Other UPC......................................       50,345       50,345
     VTR Bank Facility..............................      176,000      176,000
     New Austar Bank Facility.......................      202,703      202,703
     Saturn Bank Facility...........................       57,685       57,685
     Other Asia/Pacific and Latin America...........        2,857        2,857
                                                       ----------   ----------
       Total........................................   $6,041,635   $6,029,091
                                                       ==========   ==========
</TABLE>

                                      F-36
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


<TABLE>
<CAPTION>
                                                      Carrying Value Fair Value
                                                      -------------- ----------
                                                           (In thousands)
   <S>                                                <C>            <C>
   As of December 31, 1998:
     United 1998 Notes...............................   $  893,003   $  783,750
     United Old Notes................................          412          412
     UPC Senior Revolving Credit Facility............      512,179      512,179
     UPC Bridge Bank Facility........................       60,063       60,063
     Mediareseaux Facility...........................       21,346       21,346
     UPC DIC Loan....................................       84,214       84,214
     Other UPC.......................................        3,821        3,821
     United A/P Notes................................      356,640      246,400
     Austar Bank Facility............................       67,352       67,352
     Other...........................................        2,923        2,923
                                                        ----------   ----------
       Total.........................................   $2,001,953   $1,782,460
                                                        ==========   ==========
</TABLE>

Debt Maturities

The maturities of the Company's senior discount notes, senior notes and other
long-term debt are as follows (in thousands):

<TABLE>
   <S>                                                               <C>
   Year Ended December 31, 2000..................................... $   52,180
   Year Ended December 31, 2001.....................................      5,492
   Year Ended December 31, 2002.....................................    255,430
   Year Ended December 31, 2003.....................................     78,662
   Year Ended December 31, 2004.....................................     96,839
   Thereafter.......................................................  5,553,032
                                                                     ----------
     Total.......................................................... $6,041,635
                                                                     ==========
</TABLE>

Other Financial Instruments

Interest rate swap agreements are used by the Company from time to time to
manage interest rate risk on its floating rate debt facilities. Interest rate
swaps are entered into depending on the Company's assessment of the market,
and generally are used to convert floating rate debt to fixed rate debt.
Interest differentials paid or received under these swap agreements are
recognized over the life of the contracts as adjustments to the effective
yield of the underlying debt, and related amounts payable to, or receivable
from, the counterparties are included in the consolidated balance sheet.
Currently, the Company has four interest rate swaps to manage interest rate
exposure on the New Austar Bank Facility and one interest rate swap to manage
exposure on the Saturn Bank Facility. Two of the swap agreements on the New
Austar Bank Facility expire in 2002 and effectively convert an aggregate
principal amount of A$50.0 ($32.8) million of variable rate, long-term debt
into fixed rate borrowings. The other two swap agreements expire in 2004 and
convert an aggregate principal amount of A$100.0 ($65.6) million of variable
rate, long-term debt into fixed rate borrowings. The swap agreement on the
Saturn Bank Facility effectively converts an aggregate principal amount of
NZ$60.6 ($31.7) million of variable rate, long-term debt into fixed rate
borrowings. The interest rate swap includes an increasing fixed rate with an
additional margin which is expected to decline as the debt to EBITDA ratio
declines.

                                     F-37
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


11. Convertible Preferred Stock

Series A

In connection with the Company's acquisition of an additional 40.0% economic
interest in Austar in 1995, the Company issued 170,513 shares of par value
$0.01 per share Series A Preferred Stock. The Series A Preferred Stock had an
initial liquidation value of $175.00 per share and accrued dividends at a rate
of 4.0% per annum, compounded quarterly. Each share of Series A Preferred Stock
was convertible into the number of shares of the Company's Class A Common Stock
equal to the liquidation value at the time of conversion divided by $8.75.
During the ten months ended December 31, 1998 a total of 38,369 shares of
Series A Preferred Stock were converted into 850,914 shares of Class A Common
Stock. During the year ended December 31, 1999, the remaining 132,144 shares of
Series A Preferred Stock were converted into 3,006,404 shares of Class A Common
Stock.

Series B

In connection with the Company's acquisition of certain assets of ECT in July
1998, and the acquisition of an additional interest in XYZ Entertainment in
September 1998, the Company issued a total of 139,031 shares of par value $0.01
per share Series B Preferred Stock. The Series B Preferred Stock had an initial
liquidation value of $212.50 per share (approximately $29.5 million) and
accrues dividends at a rate of 6.5% per annum, compounded quarterly. Each share
of Series B Preferred Stock is convertible into the number of shares of the
Company's Class A Common Stock equal to the liquidation value at the time of
conversion divided by $10.63. The Company is required to redeem the Series B
Preferred Stock on June 30, 2008 at a redemption price equal to its then
liquidation value plus accrued dividends. During the year ended December 31,
1999 a total of 22,846 shares of Series B Preferred Stock were converted into
487,410 shares of Class A Common Stock. Assuming none of the remaining 116,185
shares of Series B Preferred Stock is converted prior to redemption, the total
cost to the Company upon redemption would be approximately $46.6 million. The
Company has granted certain rights to holders of the Series B Preferred Stock
to register under the Securities Act of 1933 the sale of shares of Class A
Common Stock into which the Series B Preferred Stock may be converted.

Series C Preferred Stock

In July 1999, the Company issued 425,000 shares of par value $0.01 per share
Series C Preferred Stock, resulting in gross and net proceeds to the Company of
$425.0 million and $381.6 million, respectively. The purchasers of the Series C
Preferred Stock deposited $29.75 million into an account from which the holders
will be entitled to quarterly payments in an amount equal to $17.50 per
preferred share commencing on September 30, 1999 through June 30, 2000, in cash
or Class A Common Stock at United's option. On September 30, 1999 and December
31, 1999 the holders received their quarterly payment in cash. The Series C
Preferred Stock had an initial liquidation value of $1,000 per share, and
accrues dividends perpetually at a rate of 7.0% per annum, payable quarterly on
March 31, June 30, September 30 and December 31 of each year, commencing on
September 30, 2000, payable in cash or Class A Common Stock at the Company's
option. Each share of Series C Preferred Stock is convertible any time at the
option of the holder into the number of shares of the Company's Class A Common
Stock equal to the liquidation value at the time of conversion divided by
$42.15. The conversion price is subject to adjustment upon the occurrence of
certain events. The Company has the right to require conversion on or after
December 31, 2000 if the closing price of United's Class A Common Stock has
equaled or exceeded 150.0% of the conversion price for a certain period of
time, or on or after June 30, 2002 if the closing price of United's Common
Stock has equaled or exceeded 130.0% of the conversion price for a certain
period of time. On or after June 30, 2002, the Company has the option to redeem
the Series C Preferred Stock in certain circumstances in cash or Class A Common
Stock. The Series C Preferred Stock ranks senior to United's Class A Common
Stock and pari passu with the Company's existing preferred stock. The Company
has registered under the Securities Act of 1933 (i) the resale by holders of
the Series C Preferred Stock, (ii) the shares

                                      F-38
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of Class A Common Stock issuable in lieu of cash payment of amounts due on a
change of control, redemption and dividend payment date and (iii) the shares
of Class A Common Stock issuable upon conversion of the Series C Preferred
Stock.

Series D Preferred Stock

In December 1999, the Company issued 287,500 shares of par value $0.01 per
share Series D Preferred Stock, resulting in gross and net proceeds to the
Company of $287.5 million and $259.9 million, respectively. The purchasers of
the Series D Preferred Stock deposited $20.1 million into an account from
which the holders will be entitled to payments in an amount equal to $17.50
per preferred share per quarter commencing on December 31, 1999 through
September 30, 2000 in cash or Class A Common Stock at United's option. On
December 31, 1999 the holders received their payment in cash. The Series D
Preferred Stock had an initial liquidation value of $1,000 per share, and
accrues dividends perpetually at a rate of 7.0% per annum, payable quarterly
on March 31, June 30, September 30 and December 31 of each year, commencing on
December 31, 2000, payable in cash or Class A Common Stock at the Company's
option. Each share of Series D Preferred Stock is convertible any time at the
option of the holder into the number of shares of the Company's Class A Common
Stock equal to the liquidation value at the time of conversion divided by
$63.79. The conversion price is subject to adjustment upon the occurrence of
certain events. The Company has the right to require conversion on or after
June 30, 2001 if the closing price of United's Common Stock has equaled or
exceeded 150.0% of the conversion price for a certain period of time, or on or
after December 31, 2002 if the closing price of United's Common Stock has
equaled or exceeded 130.0% of the conversion price for a certain period of
time. On or after December 31, 2002, the Company has the option to redeem the
Series D Preferred Stock in certain circumstances in cash or Class A Common
Stock. The Series D Preferred Stock ranks senior to United's common stock and
pari passu with the Company's existing preferred stock. The Company has
registered under the Securities Act of 1933 (i) the resale by holders of the
Series D Preferred Stock, (ii) the shares of common stock issuable in lieu of
cash payment of amounts due on a change of control, redemption and dividend
payment date and (iii) the shares of common stock issuable upon conversion of
the Series D Preferred Stock.

12. Stockholders' Equity (Deficit)

Common Stock

In April 1993, the Company adopted a Restated Certificate of Incorporation
pursuant to which the Company authorized the issuance of two classes of common
stock, Class A Common Stock and Class B Common Stock. Each share of Class A
Common Stock is entitled to one vote per share while each share of Class B
Common Stock is entitled to ten votes per share. Each share of Class B Common
Stock is convertible at any time at the option of the holder into one share of
Class A Common Stock. The two classes of common stock are identical in all
other respects.

Common Stock Split

On November 11, 1999, the Board of Directors authorized a two-for-one stock
split effected in the form of a stock dividend distributed on November 30,
1999 to shareholders of record on November 22, 1999. The effect of the stock
split has been recognized retroactively in all share and per share data in the
accompanying consolidated financial statements and notes.

Cumulative Translation Adjustments

During the year ended December 31, 1999, the Company recorded a negative
change in cumulative translation adjustments of $127.2 million, primarily due
to (i) the strengthening of the U.S. dollar compared to the Dutch guilder of
approximately 15.9% and (ii) the strengthening of the U.S. dollar compared to
the Chilean peso of approximately 12.1%.

                                     F-39
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Treasury Stock

As a result of the UPC Transaction, UPC acquired 6,338,302 shares of the
Company's Class A Common Stock, valued at cost on December 11, 1997 at $33.1
million. In November 1998, UPC used 769,062 shares to acquire an additional
5.0% interest in certain Irish programming companies, resulting in 5,569,240
United shares remaining in the treasury at a cost of $29.1 million.

Equity Transactions of Subsidiaries

The issuance of warrants, the issuance of convertible debt with an equity
component, variable plan accounting for stock options and the recognition of
deferred compensation expense by the Company's subsidiaries affects the equity
accounts of the Company. The following represents the effect on additional
paid-in capital and deferred compensation as a result of these equity
transactions:

<TABLE>
<CAPTION>
                                       For the Year Ended December 31, 1999
                                      ----------------------------------------
                                                  Austar    United
                                         UPC      United   Corporate   Total
                                      ---------  --------  --------- ---------
                                                  (In thousands)
   <S>                                <C>        <C>       <C>       <C>
   Variable plan accounting for
    stock options...................  $ 338,261  $ 40,883    $--     $ 379,144
   Deferred compensation expense....   (180,757)  (40,883)    --      (221,640)
   Amortization of deferred
    compensation....................     79,104    22,540     679      102,323
   Issuance of warrants.............     33,025       --      --        33,025
   Issuance of convertible debt (UPC
    DIC Loan).......................     14,875       --      --        14,875
                                      ---------  --------    ----    ---------
     Total..........................  $ 284,508  $ 22,540    $679    $ 307,727
                                      =========  ========    ====    =========
</TABLE>

Other Cumulative Comprehensive Loss

<TABLE>
<CAPTION>
                                                        As of        As of
                                                     December 31, December 31,
                                                         1999         1998
                                                     ------------ ------------
                                                          (In thousands)
   <S>                                               <C>          <C>
   Foreign currency translation adjustments.........  $(217,942)    $(90,788)
   Unrealized gain (loss) on available-for-sale
    securities......................................      6,704         (154)
                                                      ---------     --------
     Total..........................................  $(211,238)    $(90,942)
                                                      =========     ========
</TABLE>

Employee Stock Option Plan

In May 1993, the Company adopted a stock option plan for certain of its
employees (the "Employee Plan"). The Employee Plan is construed, interpreted
and administered by the compensation committee (the "Committee"), consisting
of all members of the Board of Directors who are not employees of the Company.
Members of the Company's Board of Directors who are not employees are not
eligible to receive option grants under the Employee Plan. The Committee has
the discretion to determine the employees and consultants to whom options are
granted, the number of shares subject to the options, the exercise price of
the options, the period over which the options become exercisable, the term of
the options (including the period after termination of employment during which
an option may be exercised) and certain other provisions relating to the
option. The maximum number of shares subject to options that may be granted to
any one participant under the Employee Plan during any calendar year is
500,000 shares. The maximum term of options granted under the Employee Plan is
ten years. Options granted may be either incentive stock options under the
Internal Revenue Code of 1986, as amended, or non-qualified stock options. The
options vest in equal monthly increments over the four-year period following
the date of grant. Vesting would be accelerated upon a change of control in
the Company as defined in the Employee Plan. Under the Employee Plan, options
to purchase a total of 9,200,000 shares of Class A Common Stock have been
authorized, of which 1,727,142 were available for grant as of December 31,
1999.

                                     F-40
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Non-Employee Director Stock Option Plan

The Company adopted a stock option plan for non-employee directors effective
June 1, 1993 (the "1993 Director Plan"). The Director Plan provides for the
grant of an option to acquire 20,000 shares of the Company's Class A Common
Stock to each member of the Board of Directors who was not also an employee of
the Company (a "non-employee director") on June 1, 1993, and to each person
who is newly elected to the Board of Directors as a non-employee director
after June 1, 1993, on the date of their election. To allow for additional
option grants to non-employee directors, the Company adopted a second stock
option plan for non-employee directors effective March 20, 1998 (the "1998
Director Plan", and together with the 1993 Director Plan, the "Director
Plans"). Options under the 1998 Director Plan are granted at the discretion of
the Company's Board.

The maximum term of options granted under the Director Plans is ten years.
Under the 1993 Director Plan, options vest 25% on the first anniversary of the
date of grant and the remaining 75% vests in equal monthly increments over the
following three year period. Under the 1998 Director Plan, options vest in
equal monthly installments over the four year period following the date of
grant. Vesting under both Director Plans would be accelerated upon a change in
control of the Company as defined in the respective Director Plans. Under the
Director Plans, options to purchase a total of 1,960,000 shares of Class A
Common Stock have been authorized, of which 1,029,167 were available for grant
as of December 31, 1999.

Fair Value of Stock Options

For purposes of the pro forma disclosures presented below, the Company has
computed the fair values of all options granted using the Black-Scholes
single-option pricing model and the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
   <S>                                    <C>          <C>          <C>
   Risk-free interest rate...............     6.24%        4.60%        5.91%
   Expected lives........................   5 years      7 years      7 years
   Expected volatility...................    70.44%       55.34%       53.46%
   Expected dividend yield...............        0%           0%           0%
</TABLE>

The total fair value of options granted was $47.7 million, $3.7 million, and
$2.9 million for the year ended December 31, 1999, the ten months ended
December 31, 1998 and the year ended February 28, 1998, respectively. These
amounts are amortized using the straight-line method over the vesting period
of the options. Cumulative compensation expense recognized in pro forma net
income, with respect to options that are forfeited prior to vesting, is
adjusted as a reduction of pro forma compensation expense in the period of
forfeiture. For the year ended December 31, 1999, the ten months ended
December 31, 1998 and the year ended February 28, 1998, stock-based
compensation, net of the effect of the forfeitures, was $11.7 million, $2.7
million and $2.8 million, respectively. This stock-based compensation had the
following pro forma effect on net income (loss) (in thousands):

<TABLE>
<CAPTION>
                                          For the Ten
                  For the Year Ended     Months Ended      For the Year Ended
                   December 31, 1999   December 31, 1998    February 28, 1998
                  ------------------- -------------------- --------------------
                             Basic
                    Net    Net Income    Net     Net Loss     Net     Net Loss
                   Income  Per Share    Loss     Per Share   Loss     Per Share
                  -------- ---------- ---------  --------- ---------  ---------
   <S>            <C>      <C>        <C>        <C>       <C>        <C>
   As reported... $636,318   $7.53    $(545,532)  ($7.43)  $(342,532)  ($4.46)
   Pro forma..... $624,619   $7.39    $(548,226)  ($7.47)  $(345,305)  ($4.50)
</TABLE>

                                     F-41
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The fair value method of accounting for stock-based compensation plans
recognizes the value of options granted as compensation expense over the
option's vesting period and has not been applied to options granted prior to
March 1, 1995.

A summary of stock option activity for the Employee Plan is as follows:

<TABLE>
<CAPTION>
                                For the Year Ended      For the Ten Months Ended     For the Year Ended
                                 December 31, 1999         December 31, 1998         February 28, 1998
                             -------------------------- ------------------------- -------------------------
                                           Weighted-                 Weighted-                 Weighted-
                                            Average                   Average                   Average
                               Number    Exercise Price  Number    Exercise Price  Number    Exercise Price
                             ----------  -------------- ---------  -------------- ---------  --------------
   <S>                       <C>         <C>            <C>        <C>            <C>        <C>
   Outstanding at beginning
    of year................   5,309,526      $ 5.53     5,894,952      $5.92      5,587,702      $5.87
   Granted during the
    year...................   1,467,445      $34.11       739,000      $4.94        871,250      $5.50
   Cancelled during the
    year...................    (624,095)     $ 6.75      (498,138)     $9.34       (260,212)     $7.41
   Exercised during the
    year...................  (1,750,589)     $ 5.67      (826,288)     $5.44       (303,788)     $2.62
                             ----------      ------     ---------      -----      ---------      -----
   Outstanding at end of
    year...................   4,402,287      $14.84     5,309,526      $5.53      5,894,952      $5.92
                             ==========      ======     =========      =====      =========      =====
   Exercisable at end of
    year...................   2,436,077      $ 6.17     3,362,324      $5.55      4,028,140      $5.77
                             ==========      ======     =========      =====      =========      =====

A summary of stock option activity for the Director Plans is as follows:

<CAPTION>
                                For the Year Ended      For the Ten Months Ended     For the Year Ended
                                 December 31, 1999         December 31, 1998         February 28, 1998
                             -------------------------- ------------------------- -------------------------
                                           Weighted-                 Weighted-                 Weighted-
                                            Average                   Average                   Average
                               Number    Exercise Price  Number    Exercise Price  Number    Exercise Price
                             ----------  -------------- ---------  -------------- ---------  --------------
   <S>                       <C>         <C>            <C>        <C>            <C>        <C>
   Outstanding at beginning
    of year................     770,000      $ 5.73       520,000      $6.08        560,000      $6.27
   Granted during the
    year...................     150,000      $54.66       330,000      $4.94         40,000      $5.56
   Cancelled during the
    year...................    (114,167)     $ 4.30           --         --         (80,000)     $7.13
   Exercised during the
    year...................     (87,500)     $ 8.47       (80,000)     $4.75            --         --
                             ----------      ------     ---------      -----      ---------      -----
   Outstanding at end of
    year...................     718,333      $15.84       770,000      $5.73        520,000      $6.08
                             ==========      ======     =========      =====      =========      =====
   Exercisable at end of
    year...................     436,874      $ 5.67       463,956      $6.29        486,666      $6.12
                             ==========      ======     =========      =====      =========      =====
</TABLE>

The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:

<TABLE>
<CAPTION>
                                For the Year Ended     For the Ten Months Ended   For the Year Ended
                                 December 31, 1999        December 31, 1998       February 28, 1998
                             ------------------------- ------------------------ ----------------------
                                        Fair  Exercise           Fair  Exercise         Fair  Exercise
   Exercise Price             Number   Value   Price    Number   Value  Price   Number  Value  Price
   --------------            --------- ------ -------- --------- ----- -------- ------- ----- --------
   <S>                       <C>       <C>    <C>      <C>       <C>   <C>      <C>     <C>   <C>
   Less than market price..        --     --      --     150,000 $6.61  $5.19     6,250 $2.15  $4.75
   Equal to market price...  1,486,279 $27.54  $38.41    919,000 $3.00  $4.90   865,000 $3.32  $5.40
   Greater than market
    price..................    131,166 $51.88  $ 8.92        --    --     --     40,000 $1.17  $7.88
                             --------- ------  ------  --------- -----  -----   ------- -----  -----
     Total.................  1,617,445 $29.52  $36.02  1,069,000 $3.50  $4.94   911,250 $3.21  $5.50
                             ========= ======  ======  ========= =====  =====   ======= =====  =====
</TABLE>


                                     F-42
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes information about employee and director stock
options outstanding and exercisable at December 31, 1999:

<TABLE>
<CAPTION>
                                    Options Outstanding            Options Exercisable
                            ------------------------------------ -----------------------
                                      Weighted-Average Weighted-           Weighted-
                                         Remaining      Average             Average
                                      Contractual Life Exercise            Exercise
   Exercise Price Range      Number       (Years)        Price    Number     Price
   --------------------     --------- ---------------- --------- --------- ---------
   <S>                      <C>       <C>              <C>       <C>       <C>
   $ 2.25-$ 4.75........... 1,606,774       4.92        $ 4.45   1,302,190  $ 4.50
   $ 5.13-$ 6.38........... 1,545,924       7.68        $ 5.63     963,921  $ 5.69
   $ 6.50-$22.06...........   982,422       6.77        $12.13     578,174  $ 9.07
   $31.00-$62.29...........   985,500       9.81        $49.77      28,666  $31.86
                            ---------       ----        ------   ---------  ------
     Total................. 5,120,620       7.05        $15.00   2,872,951  $ 6.09
                            =========       ====        ======   =========  ======
</TABLE>

Subsidiary Stock Option Plans

UPC Plan

In June 1996, UPC adopted a stock option plan (the "UPC Plan") for certain of
its employees and those of its subsidiaries. There are 18,000,000 total shares
available for the granting of options under the UPC Plan, which are held by
the Stichting Administratiekantoor UPC (the "Foundation"), which administers
the UPC Plan. Each option represents the right to acquire from the Foundation
a certificate representing the economic value of one share. Following
consummation of the initial public offering, any certificates issued to
employees who have exercised their options will be converted into UPC common
stock. United appoints the board members of the Foundation and thus controls
the voting of the Foundation's common stock. The options are granted at fair
market value determined by UPC's Supervisory Board at the time of the grant.
The maximum term that the options can be exercised is five years from the date
of the grant. In order to introduce the element of "vesting" of the options,
the UPC Plan provides that even though the options are exercisable
immediately, the shares to be issued or options granted in 1996 vest in equal
monthly increments over a three-year period from the effective date set forth
in the option grant. In March 1998, the UPC Plan was revised to increase the
vesting period for any new grants of options to four years, vesting in equal
monthly increments. Upon termination of an employee (except in the case of
death, disability or the like), all unvested options previously exercised must
be resold to the Foundation at the original purchase price, or all vested
options must be exercised, within 30 days of the termination date. The
Supervisory Board may alter these vesting schedules in its discretion. An
employee has the right at any time to put his certificates or shares from
exercised vested options to the Foundation at a price equal to the fair market
value. UPC can also call such certificates or shares for a cash payment upon
termination in order to avoid dilution, except for certain awards, which can
not be called by UPC until expiration of the underlying options. The UPC Plan
also contains anti-dilution protection and provides that, in the case of
change of control, the acquiring company has the right to require UPC to
acquire all of the options outstanding at the per share value determined in
the transaction giving rise to the change of control.

For purposes of the pro forma disclosures presented below, UPC has computed
the fair values of all options granted during the year ended December 31, 1999
using the Black-Scholes single-option pricing model and the following
weighted-average assumptions:

<TABLE>
   <S>                                                                   <C>
   Risk-free interest rate..............................................   5.76%
   Expected life........................................................ 5 years
   Expected volatility..................................................  56.82%
   Expected dividend yield..............................................      0%
</TABLE>

                                     F-43
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The total fair value of options granted was approximately (Euro) 38.5 ($38.8)
million for the year ended December 31, 1999. This amount is amortized using
the straight-line method over the vesting period of the options. Cumulative
compensation expense recognized in pro forma net income, with respect to
options that are forfeited prior to vesting, is adjusted as a reduction of pro
forma compensation expense in the period of forfeiture. For the year ended
December 31, 1999, stock-based compensation, net of the effect of forfeitures
and net of actual compensation expense recorded in the statement of operations
was (Euro) 5.9 ($5.6) million. This stock-based compensation had the following
pro forma effect on net income (in thousands):

<TABLE>
<CAPTION>
                                                                        Basic
                                                               Net    Net Income
                                                              Income  Per Share
                                                             -------- ----------
   <S>                                                       <C>      <C>
   As reported.............................................. $636,318   $7.53
                                                             ========   =====
   Pro forma................................................ $630,690   $7.46
                                                             ========   =====
</TABLE>

A summary of stock option activity for the UPC Plan is as follows:

<TABLE>
<CAPTION>
                                                   For the Year Ended December 31,
                             -------------------------------------------------------------------------------
                                       1999                       1998                       1997
                             -------------------------- -------------------------- -------------------------
                                           Weighted-                  Weighted-                 Weighted-
                                            Average                    Average                   Average
                               Number    Exercise Price   Number    Exercise Price  Number    Exercise Price
                             ----------  -------------- ----------  -------------- ---------  --------------
                                            (Euros)                    (Euros)                   (Euros)
   <S>                       <C>         <C>            <C>         <C>            <C>        <C>
   Outstanding at beginning
    of period..............  12,586,500       1.72       6,724,656       1.59      6,901,251       1.59
   Granted during the
    period.................   4,338,000      14.91       7,029,000       1.83            --         --
   Cancelled during the
    period.................    (266,565)      3.44         (42,156)      1.59       (176,595)      1.59
   Exercised during the
    period.................  (5,702,256)      1.65      (1,125,000)      1.59            --         --
                             ----------      -----      ----------       ----      ---------       ----
   Outstanding at end of
    period.................  10,955,679       6.94      12,586,500       1.72      6,724,656       1.59
                             ==========      =====      ==========       ====      =========       ====
   Exercisable at end of
    period(1)..............   4,769,595       3.10      12,586,500       1.72      6,724,656       1.59
                             ==========      =====      ==========       ====      =========       ====
</TABLE>
--------
  (1) Includes certificate rights as well as options.

The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:

<TABLE>
<CAPTION>
                                       For the Year Ended December 31,
                              -------------------------------------------------
                                        1999                     1998
                              ------------------------ ------------------------
                                        Fair  Exercise           Fair  Exercise
   Exercise Price              Number   Value  Price    Number   Value  Price
   --------------             --------- ----- -------- --------- ----- --------
                                           (Euros)                  (Euros)
   <S>                        <C>       <C>   <C>      <C>       <C>   <C>
   Less than market price....   375,000 8.94   16.12         --   --      --
   Equal to market price..... 3,963,000 8.95   14.79   7,029,000 1.83    1.83
                              --------- ----   -----   --------- ----    ----
   Total..................... 4,338,000 8.94   14.91   7,029,000 1.83    1.83
                              ========= ====   =====   ========= ====    ====
</TABLE>

                                     F-44
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table summarizes information about stock options outstanding and
exercisable as of December 31, 1999:

<TABLE>
<CAPTION>
                                  Options Outstanding        Options Exercisable
                            -------------------------------- -------------------
                                        Weighted-
                                         Average
                                        Remaining  Weighted-           Weighted-
                                       Contractual  Average             Average
   Exercise Price Range                   Life     Exercise            Exercise
   (Euros)                    Number     (Years)     Price    Number     Price
   --------------------     ---------- ----------- --------- --------- ---------
                                                    (Euros)             (Euros)
   <S>                      <C>        <C>         <C>       <C>       <C>
    1.59-- 2.05............  6,681,039    1.19        1.80   4,211,055    1.78
    9.67-- 9.67............  1,212,000    3.20        9.67     231,000    9.67
   11.26--11.40............    719,640    3.22       11.40     132,483   11.40
   15.67--18.17............  1,171,500    3.56       17.51     130,188   17.46
   20.08--20.08............  1,171,500    3.78       20.08      64,869   20.08
                            ----------    ----       -----   ---------   -----
     Total................. 10,955,679    2.00        6.94   4,769,595    3.10
                            ==========    ====       =====   =========   =====
</TABLE>

The UPC Plan was accounted for as a variable plan prior to UPC's initial
public offering in February 1999. Accordingly, compensation expense was
recognized at each financial statement date based on the difference between
the grant price and the estimated fair value of UPC's common stock.
Thereafter, the UPC Plan has been accounted for as a fixed plan. Compensation
expense of (Euro) 6.5 ($6.8) million, (Euro) 121.7 ($134.7) million and
(Euro) 2.2 ($2.5) million was recognized for the year ended December 31, 1999,
the ten months ended December 31, 1998 and the year ended February 28, 1998,
respectively.

UPC Phantom Stock Option Plan

In March 1998, UPC adopted a phantom stock option plan (the "UPC Phantom
Plan") which permits the grant of phantom stock rights in up to 7,200,000
shares of UPC's common stock. The rights are granted at fair market value
determined by UPC's Supervisory Board at the time of grant, and generally vest
in equal monthly increments over the four-year period following the effective
date of grant and may be exercised for ten years following the effective date
of grant. The UPC Phantom Plan gives the employee the right to receive payment
equal to the difference between the fair market value of a share of UPC common
stock and the option base price for the portion of the rights vested. UPC, at
its sole discretion, may make payment in (i) cash, (ii) freely tradable shares
of United Class A Common Stock or (iii) freely tradable shares of UPC's common
stock. If UPC chooses to make a cash payment, even though its stock is
publicly traded, employees have the option to receive an equivalent number of
freely tradable shares of stock instead. The UPC Phantom Plan contains anti-
dilution protection and provides that, in certain cases of a change of
control, all phantom options outstanding become fully exercisable.

The UPC Phantom Plan is accounted for as a variable plan in accordance with
its terms, resulting in compensation expense for the difference between the
grant price and the fair market value at each financial statement date.
Compensation expense of (Euro) 117.4 ($123.2) million and (Euro) 23.8 ($26.3)
million was recognized for the year ended December 31, 1999 and the ten months
ended December 31, 1998, respectively.

                                     F-45
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


A summary of stock option activity for the UPC Phantom Plan is as follows:

<TABLE>
<CAPTION>
                                For the Year Ended         For the Year Ended
                                 December 31, 1999         December 31, 1998
                             -------------------------- ------------------------
                                           Weighted-                Weighted-
                                            Average                  Average
                               Number    Exercise Price  Number   Exercise Price
                             ----------  -------------- --------- --------------
                                            (Euros)                  (Euros)
   <S>                       <C>         <C>            <C>       <C>
   Outstanding at beginning
    of period..............   6,172,500       1.91            --        --
   Granted during the
    period.................     585,000       9.67      6,172,500      1.91
   Cancelled during the
    period.................  (1,540,128)      2.00            --        --
   Exercised during the
    period.................  (1,072,809)      1.89            --        --
                             ----------       ----      ---------      ----
   Outstanding at end of
    period.................   4,144,563       2.98      6,172,500      1.91
                             ==========       ====      =========      ====
   Exercisable at end of
    period.................   1,554,813       2.47      1,411,407      1.84
                             ==========       ====      =========      ====
</TABLE>

The combined weighted-average fair values and weighted-average exercise prices
of options are as follows:

<TABLE>
<CAPTION>
                                   For the Year Ended      For the Year Ended
                                   December 31, 1999       December 31, 1998
                                 ---------------------- ------------------------
                                         Fair  Exercise           Fair  Exercise
   Exercise Price                Number  Value  Price    Number   Value  Price
   --------------                ------- ----- -------- --------- ----- --------
                                            (Euros)                  (Euros)
   <S>                           <C>     <C>   <C>      <C>       <C>   <C>
   Equal to market price........ 585,000 9.67    9.67   2,057,250 1.91    1.91
</TABLE>

The following table summarizes information about stock options outstanding and
exercisable as of December 31, 1999:

<TABLE>
<CAPTION>
                                                                       Options
                                             Options Outstanding     Exercisable
                                          -------------------------- -----------
                                                    Weighted-Average
                                                       Remaining
                                                    Contractual Life
   Exercise Price (Euros)                  Number       (Years)        Number
   ----------------------                 --------- ---------------- -----------
   <S>                                    <C>       <C>              <C>
   1.82.................................. 2,606,778       7.60        1,186,092
   2.05..................................   952,785       8.74          245,907
   9.67..................................   585,000       9.16          122,814
                                          ---------       ----        ---------
     Total............................... 4,144,563       8.14        1,554,813
                                          =========       ====        =========
</TABLE>

chello Phantom Stock Option Plan

In June 1998 UPC adopted a phantom stock option plan (the "chello Phantom
Plan"), which permits the grant of phantom stock rights of chello, a wholly-
owned subsidiary of UPC. The rights are granted at an option price equal to
the fair market value determined by chello's Supervisory Board at the time of
grant, and generally vest in equal monthly increments over the four-year
period following the effective date of grant and the option must be exercised,
in all cases, not more than ten years from the effective date of grant. The
chello Phantom Plan gives the employee the right to receive payment equal to
the difference between the fair market value of a share (as defined the chello
Phantom Plan) of chello and the option price for the portion of the rights
vested. UPC, at its sole discretion, may make the required payment in cash,
freely tradable shares of United Class A Common Stock, the common stock of
UPC, which shall be valued at the closing price on the day before the date the
Company makes payment to the option holder, or chello's common shares, if they
are publicly traded and freely tradeable ordinary shares. If UPC chooses to
make a cash payment, even though its stock is publicly traded,

                                     F-46
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

employees have the option to receive an equivalent number of freely tradeable
shares of chello's stock instead. As of December 31, 1999 UPC recorded
cumulative compensation expense of (Euro) 70.8 ($71.2) million for options
granted under the chello Phantom Plan.

A summary of stock option activity for the chello Phantom Plan is as follows:

<TABLE>
<CAPTION>
                                                              For the Year
                                      For the Year Ended     Ended December
                                       December 31, 1999        31, 1998
                                      --------------------  -----------------
                                                 Weighted-          Weighted-
                                                  Average            Average
                                                 Exercise           Exercise
                                       Number      Price    Number    Price
                                      ---------  ---------  ------- ---------
                                                  (Euros)            (Euros)
   <S>                                <C>        <C>        <C>     <C>
   Outstanding at beginning of
    period...........................   570,000    4.54         --     --
   Granted during the period.........   235,000    4.54     570,000   4.54
   Granted during the period......... 1,309,838    9.08         --     --
   Granted during the period.........   355,500     -- (1)      --     --
   Cancelled during the period.......  (128,542)   4.71         --     --
   Exercised during the period.......   (11,667)   4.54         --     --
                                      ---------    ----     -------   ----
   Outstanding at end of period...... 2,330,129    7.54(2)  570,000   4.54
                                      =========    ====     =======   ====
   Exercisable at end of period......   414,913    6.13(2)   70,625   4.54
                                      =========    ====     =======   ====
</TABLE>
  --------
  (1) Of the total number of options granted to date, the option price with
      respect to these options is the chello broadband initial public
      offering price.
  (2) Excluding the shares discussed in (1) above.

The following table summarizes information about stock options outstanding and
exercisable as of December 31, 1999:

<TABLE>
<CAPTION>
                                                                       Options
                                             Options Outstanding     Exercisable
                                          -------------------------- -----------
                                                    Weighted-Average
                                                       Remaining
                                                    Contractual Life
   Exercise Price (Euros)                  Number       (Years)        Number
   ----------------------                 --------- ---------------- -----------
   <S>                                    <C>       <C>              <C>
   4.54..................................   669,791       7.05         267,188
   9.08.................................. 1,304,838       9.56         144,074
   --(1).................................   355,500       9.96           3,651
                                          ---------       ----         -------
     Total............................... 2,330,129       8.93         414,913
                                          =========       ====         =======
</TABLE>
  --------
  (1) Of the total number of options granted to date, the option price in
      respect of these options is the IPO price.

The chello Phantom Plan is accounted for as a variable plan in accordance with
its terms, resulting in compensation expense for the difference between the
grant price and the fair market value at each financial statement date.
Compensation expense of (Euro) 69.8 ($70.3) million was recognized for the
year ended December 31, 1999. The Company's estimate of the fair value of its
ordinary stock as of December 31, 1999 utilized in recording compensation
expense and deferred compensation expense under the chello plan was
(Euro) 85.00 per share. Because the Company will account for the chello
Phantom Plan as a variable plan, compensation expense will continue to be
recognized subsequent to December 31, 1999. For each (Euro) 1 per share
increase in the estimate of the fair value per share of its ordinary stock as
of December 31, 1999, over the (Euro) 85.00 used to record stock compensation
expense as of December 31, 1999, additional stock compensation expense
totaling approximately

                                     F-47
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Euro) 0.9 ($0.9) million would have been recognized in the statement of
operations and deferred compensation expense would have increased by
approximately that amount as of that date.

chello Stock option plan

In June 1999, the Company adopted a stock option plan (the "chello Plan").
Under the chello Plan, the Company's Supervisory Board may grant stock options
to the Company's employees at fair market value determined by the Company's
Supervisory Board at the time of grant. All options are exercisable upon grant
and for the period of five years. In order to introduce the element of
"vesting" of the options, the chello Plan provides that even though the
options are exercisable immediately, the shares to be issued or options to be
granted are deemed to vest 1/48th per month for a four-year period from date
to grant. If the employee's employment terminates, other than in case of
death, disability or the like, for so-called "urgent reason" under Dutch law
or for documented and material non-performance, all unvested options
previously exercised must be resold to the Company at the original purchase
price, and all vested options must be exercised, within 30 days of the
termination date. The Supervisory Board may alter these vesting schedules at
its discretion. The chello Plan provides that in case of change of control,
the Company has the right to require a foundation to acquire all of the
options outstanding at per share value determined in the transaction giving
rise to the change in its control.

For purposes of the pro forma disclosures presented below, the Company has
computed the fair value of all options granted during the period from
inception (March 1998) to December 31, 1999 and the twelve months ended
December 31, 1999, using the Black-Scholes single-option pricing model and the
following weighted average assumptions: expected dividend yield of 0%,
expected annual standard volatility of 95%, risk-free interest rate of 3.41%
and expected life of 5 years.

The total value of options granted under the chello Plan was nil for the year
ended December 31, 1998 and (Euro) 3.7 ($3.7) million for the year ended
December 31, 1999. These pro forma amounts are amortized using the straight-
line method over the vesting period of the options. Cumulative compensation
expense recognized in pro forma net income, with respect to options that are
forfeited prior to vesting, is adjusted as a reduction of pro forma
compensation expense in the period of forfeiture. For the year ended December
31, 1998 and December 31, 1999, pro forma stock-based compensation, net of the
effect of forfeitures, was nil and (Euro) 0.7 ($0.7) million respectively.

This stock-based compensation had the following pro forma effect on net income
(in thousands):

<TABLE>
<CAPTION>
                                                                       Net Loss
                                                              Net Loss Per Share
                                                              -------- ---------
   <S>                                                        <C>      <C>
   As reported............................................... $636,318   $7.53
                                                              --------   -----
   Pro forma................................................. $635,587   $7.52
                                                              ========   =====
</TABLE>

UAP Plan

In March 1998, UAP's Board of Directors approved a stock option plan (the "UAP
Plan") which permitted the grant of phantom stock options or the grant of
stock options to purchase up to 1,800,000 shares of UAP's Class A Common
Stock. The options vested in equal monthly increments over a four-year period
following the date of grant, and gave the employee the right with respect to
vested options to receive a cash payment equal to the difference between the
fair market value of a share of UAP stock and the option base price per share.
The UAP Plan was cancelled effective July 22, 1999. Under variable plan
accounting, a total of $17.6 million of compensation expense was recognized
during 1999 by UAP through the cancellation date.

                                     F-48
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


A summary of phantom stock option activity for the UAP Plan is as follows:

<TABLE>
<CAPTION>
                                For the Year Ended      For the Ten Months Ended
                                 December 31, 1999         December 31, 1998
                             -------------------------- ------------------------
                                           Weighted-                Weighted-
                                            Average                  Average
                               Number    Exercise Price  Number   Exercise Price
                             ----------  -------------- --------- --------------
   <S>                       <C>         <C>            <C>       <C>
   Outstanding at beginning
    of period..............   1,779,500      $10.00           --         --
   Granted during the
    period.................      65,000      $10.00     1,779,500     $10.00
   Cancelled during the
    period.................  (1,844,500)     $10.00           --         --
   Exercised during the
    period.................         --          --            --         --
                             ----------      ------     ---------     ------
   Outstanding at end of
    period.................         --          --      1,779,500     $10.00
                             ==========      ======     =========     ======
   Exercisable at end of
    period.................         --          --        584,063     $10.00
                             ==========      ======     =========     ======
</TABLE>

The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:

<TABLE>
<CAPTION>
                               For the Year Ended   For the Ten Months Ended
                               December 31, 1999        December 31, 1998
                             ---------------------- -------------------------
                                     Fair  Exercise            Fair  Exercise
                             Number Value   Price    Number   Value   Price
                             ------ ------ -------- --------- ------ --------
   <S>                       <C>    <C>    <C>      <C>       <C>    <C>
   Exercise price equal to
    market price............ 65,000 $10.00  $10.00  1,779,500 $10.00  $10.00
</TABLE>

Austar United Plan

On June 17, 1999, Austar United established a stock option plan (the "Austar
United Plan"). Effective on Austar United's initial public offering date of
July 27, 1999, certain employees of United and Austar United were granted
options under the Austar United Plan in direct proportion to their previous
holding of UAP options under the UAP Plan along with retroactive vesting
through the initial public offering date to reflect vesting under the UAP
Plan. The maximum term of options granted under the Austar United Plan is ten
years. The options vest in equal monthly increments over a four-year period
following the date of grant. Under the Austar United Plan, options to purchase
a total of 28,760,709 shares have been authorized, of which 3,231,428 were
available for grant. The Austar United Plan was accounted for as a variable
plan prior to Austar United's initial public offering, and as a fixed plan
effective July 27, 1999. For the year ended December 31, 1999, $4.9 million of
compensation expense was recognized by Austar United in the statement of
operations.

For purposes of the pro forma disclosures presented below, Austar United has
computed the fair values of all options granted during the year ended December
31, 1999 using the Black-Scholes single-option pricing model and the following
weighted-average assumptions:

<TABLE>
   <S>                                                                   <C>
   Risk-free interest rate..............................................   5.81%
   Expected life........................................................ 7 years
   Expected volatility..................................................  40.44%
   Expected dividend yield..............................................      0%
</TABLE>

The total fair value of options granted was approximately A$88.0 ($57.7)
million for the year ended December 31, 1999. This amount is amortized using
the straight-line method over the vesting period of the options. Cumulative
compensation expense recognized in pro forma net income, with respect to
options that are forfeited prior to vesting, is adjusted as a reduction of pro
forma compensation expense in the period of forfeiture. Stock-based
compensation, net of the effect of forfeitures and net of actual compensation
expense recorded in the statement of operations was nil for the year ended
December 31, 1999.

                                     F-49
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


A summary of stock option activity for the Austar United Plan is as follows:

<TABLE>
<CAPTION>
                                                      For the Year Ended
                                                       December 31, 1999
                                                --------------------------------
                                                                 Weighted-
                                                                  Average
                                                  Number       Exercise Price
                                                ----------  --------------------
                                                            (Australian dollars)
   <S>                                          <C>         <C>
   Outstanding at beginning of period..........        --            --
   Granted during the period................... 25,631,736          2.26
   Cancelled during the period.................   (102,455)         3.75
   Exercised during the period.................   (684,250)         1.83
                                                ----------          ----
   Outstanding at end of period................ 24,845,031          2.27
                                                ==========          ====
   Exercisable at end of period................ 11,564,416          1.90
                                                ==========          ====
</TABLE>

The combined weighted-average fair values and weighted-average exercise prices
of options are as follows:

<TABLE>
<CAPTION>
                                                          For the Year Ended
                                                           December 31, 1999
                                                       -------------------------
                                                                  Fair  Exercise
                                                         Number   Value  Price
                                                       ---------- ----- --------
   Exercise Price                                                  (Australian
   --------------                                                    dollars)
   <S>                                                 <C>        <C>   <C>
   Less than market price............................. 22,334,236 3.58    1.91
   Equal to market price..............................  3,222,500 2.47    4.70
   Greater than market price..........................     75,000 2.43    4.70
                                                       ---------- ----    ----
     Total............................................ 25,631,736 3.43    2.26
                                                       ========== ====    ====
</TABLE>

The following table summarizes information about the Austar United Plan
options outstanding and exercisable at December 31, 1999:

<TABLE>
<CAPTION>
                                                              Options
                                    Options Outstanding     Exercisable
                                --------------------------- -----------
                                           Weighted-Average
                                              Remaining
   Exercise Price (Australian              Contractual Life
   dollars)                       Number       (Years)        Number
   --------------------------   ---------- ---------------- -----------
   <S>                          <C>        <C>              <C>
   1.80......................   20,813,572       9.55       11,171,494
   4.70......................    4,031,459       9.60          392,922
                                ----------       ----       ----------
     Total...................   24,845,031       9.56       11,564,416
                                ==========       ====       ==========
</TABLE>

ULA Plan

In April 1998, ULA's Board of Directors approved a stock option plan (the "ULA
Plan") which permits the grant of phantom stock options or the grant of stock
options to purchase up to 1,631,000 shares of ULA's Class A Common Stock. The
options vest in equal monthly increments over a four-year period following the
date of grant. Concurrent with approval of the ULA Plan, ULA's Board granted
phantom stock options to certain employees which gives the employee the right
with respect to vested options to receive a cash payment equal to the
difference between the fair market value of a share of ULA stock and the
option base price per share. The ULA Plan is accounted for as a variable plan
in accordance with its terms, resulting in compensation expense for the
difference between the grant price and the fair market value at each financial
statement date. For the year

                                     F-50
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ended December 31, 1999 and the ten months ended December 31, 1998 ULA
recognized $(1.0) and $2.7 million in non-cash compensation (credit) expense
related to these phantom options, respectively. Actual cash paid upon exercise
of these phantom options was $0.6 million and $1.1 million for the year ended
December 31, 1999 and the ten months ended December 31, 1998, respectively.

A summary of phantom stock option activity for the ULA Plan is as follows:

<TABLE>
<CAPTION>
                                For the Year Ended     For the Ten Months Ended
                                December 31, 1999         December 31, 1998
                             ------------------------- -------------------------
                                          Weighted-                 Weighted-
                                           Average                   Average
                              Number    Exercise Price  Number    Exercise Price
                             ---------  -------------- ---------  --------------
   <S>                       <C>        <C>            <C>        <C>
   Outstanding at beginning
    of period..............  1,188,417      $5.77            --         --
   Granted during the
    period.................    340,000      $8.86      1,785,500      $5.63
   Cancelled during the
    period.................   (328,647)     $4.84       (317,296)     $5.47
   Exercised during the
    period.................   (137,083)     $4.81       (279,787)     $5.19
                             ---------      -----      ---------      -----
   Outstanding at end of
    period.................  1,062,687      $7.17      1,188,417      $5.77
                             =========      =====      =========      =====
   Exercisable at end of
    period.................    381,561      $5.87        268,730      $4.86
                             =========      =====      =========      =====
</TABLE>

The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:

<TABLE>
<CAPTION>
                                  For the Year Ended   For the Ten Months Ended
                                  December 31, 1999       December 31, 1998
                                ---------------------- ------------------------
                                        Fair  Exercise           Fair  Exercise
                                Number  Value  Price    Number   Value  Price
                                ------- ----- -------- --------- ----- --------
   <S>                          <C>     <C>   <C>      <C>       <C>   <C>
   Exercise price equal to
    market price..............  340,000 $8.86  $8.86     945,500 $5.81  $5.81
   Exercise price greater than
    market price..............      --    --     --      840,000 $4.26  $5.43
                                ------- -----  -----   --------- -----  -----
     Total....................  340,000 $8.86  $8.86   1,785,500 $5.08  $5.63
                                ======= =====  =====   ========= =====  =====
</TABLE>

The following table summarizes information about the ULA Plan phantom options
outstanding and exercisable at December 31, 1999:

<TABLE>
<CAPTION>
                                                                       Options
                                             Options Outstanding     Exercisable
                                          -------------------------- -----------
                                                    Weighted-Average
                                                       Remaining
                                                    Contractual Life
   Exercise Price                          Number       (Years)        Number
   --------------                         --------- ---------------- -----------
   <S>                                    <C>       <C>              <C>
   $4.26.................................   312,687       7.43         197,187
   $4.96.................................   100,000       7.43          62,500
   $8.81.................................    95,000       9.40          16,249
   $8.86.................................   245,000       9.96           9,375
   $8.98.................................   310,000       8.72          96,250
                                          ---------       ----         -------
     Total............................... 1,062,687       8.57         381,561
                                          =========       ====         =======
</TABLE>

                                      F-51
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


13. Basic and Diluted Net Income (Loss) Attributable to Common Shareholders

<TABLE>
<CAPTION>
                                   For the Year For the Ten     For the Year
                                      Ended     Months Ended       Ended
                                   December 31, December 31,    February 28,
                                       1999         1998            1998
                                   ------------ ------------    ------------
   <S>                             <C>          <C>             <C>
   Basic:
     Net income (loss)............   $636,318    $(545,532)      $(342,532)
     Accretion of Series A
      Convertible Preferred
      Stock.......................       (220)        (968)         (1,271)
     Accretion of Series B
      Convertible Preferred
      Stock.......................     (1,899)        (655)            --
     Accretion of Series C
      Convertible Preferred
      Stock.......................    (14,875)         --              --
     Accretion of Series D
      Convertible Preferred
      Stock.......................     (1,398)         --              --
                                     --------    ---------       ---------
       Basic net income (loss)
        attributable to common
        shareholders..............   $617,926    $(547,155)      $(343,803)
                                     --------    ---------       ---------
   Diluted:
     Accretion of Series A
      Convertible Preferred
      Stock.......................        220          --  (1)         --  (1)
     Accretion of Series B
      Convertible Preferred
      Stock.......................      1,899          --  (1)         --  (1)
     Accretion of Series C
      Convertible Preferred
      Stock.......................     14,875          --  (1)         --  (1)
     Accretion of Series D
      Convertible Preferred
      Stock.......................      1,398          --  (1)         --  (1)
                                     --------    ---------       ---------
       Diluted net income (loss)
        attributable to common
        shareholders..............   $636,318    $(547,155)      $(343,803)
                                     ========    =========       =========
</TABLE>
  --------
  (1) Excluded from the calculation of diluted net income (loss) attributable
      to common shareholders because the effect is anti-dilutive.

14. Commitments

The Company has entered into various operating lease agreements for office
space, office furniture and equipment, and vehicles. Rental expense under
these lease agreements totaled $25.9, $5.8 and $4.1 million for the year ended
December 31, 1999, the ten months ended December 31, 1998 and for the year
ended February 28, 1998, respectively.

The Company has operating lease obligations and other non-cancelable
commitments as follows (in thousands):

<TABLE>
   <S>                                                                 <C>
   Year ended December 31, 2000....................................... $ 88,804
   Year ended December 31, 2001.......................................   88,467
   Year ended December 31, 2002.......................................   69,498
   Year ended December 31, 2003.......................................   51,172
   Year ended December 31, 2004 and thereafter........................  190,626
                                                                       --------
     Total............................................................ $488,567
                                                                       ========
</TABLE>

In September 1999, UPC agreed to form a joint venture with Microsoft
Corporation ("Microsoft") and Liberty Media Corporation ("Liberty"). UPC will
contribute the 5.6 million shares of Class A Common Stock of United that it
owns and the other parties will contribute 9.9 million shares of Class B
Common Stock of United. UPC will have a 50.0% interest in the new joint
venture and Liberty and Microsoft will share the other 50.0% and a $287.0
million redeemable preferred interest in the joint venture to balance out the
parties' ownership interests. UPC, together with Liberty and Microsoft, will
evaluate content and distribution opportunities in Europe. Formation of the
joint venture is still pending.

                                     F-52
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


UPC has entered into an agreement for the long term lease of satellite
transponder capacity providing service from Europe to Europe, North America
and South America. The term of the agreement is 156 months, with a minimum
aggregate total cost of approximately $114.0 million payable in monthly
installments based on capacity used.

@Entertainment has entered into long-term programming agreements and
agreements for the purchase of certain exhibition or broadcast rights with a
number of third party content providers for its digital DTH and cable systems.
@Entertainment had minimum commitments related to these agreements as follows
(in thousands):

<TABLE>
   <S>                                                                 <C>
   Year ended December 31, 2000....................................... $ 55,600
   Year ended December 31, 2001.......................................   51,800
   Year ended December 31, 2002.......................................   48,100
   Year ended December 31, 2003.......................................   29,900
   Year ended December 31, 2004 and thereafter........................   28,600
                                                                       --------
     Total............................................................ $214,000
                                                                       ========
</TABLE>

As of December 31, 1999, @Entertainment had an aggregate minimum commitment
toward the purchase of DTH reception systems from Philips Business Electronics
B.V. of approximately $60.8 million over the next two years.

The Company has minimum fixed MMDS license fees and programming license fees
payable annually at Austar United as follows (in thousands):

<TABLE>
   <S>                                                                  <C>
   Year ended December 31, 2000........................................ $ 4,159
   Year ended December 31, 2001........................................   4,178
   Year ended December 31, 2002........................................   4,178
   Year ended December 31, 2003........................................   4,179
   Year ended December 31, 2004........................................   4,179
   Thereafter..........................................................   7,164
                                                                        -------
     Total............................................................. $28,037
                                                                        =======
</TABLE>

A subsidiary of Austar has a five-year agreement to lease a 54 MHz satellite
transponder. Pursuant to the agreement, which commenced September 1, 1997,
Austar will pay approximately $4,440 in satellite service fees annually as
follows (in thousands):

<TABLE>
   <S>                                                                  <C>
   Year ended December 31, 2000........................................ $ 4,440
   Year ended December 31, 2001........................................   4,440
   Year ended December 31, 2002........................................   2,960
                                                                        -------
     Total............................................................. $11,840
                                                                        =======
</TABLE>

15. Contingencies

From time to time, the Company and/or its subsidiaries may become involved in
litigation relating to claims arising out of its operations in the normal
course of business. The Company is not a party to any material legal
proceedings, nor is it currently aware of any threatened material legal
proceedings.

                                     F-53
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


16. Income Taxes

In general, a United States corporation may claim a foreign tax credit against
its federal income tax expense for foreign income taxes paid or accrued.
Because the Company must calculate its foreign tax credit separately for
dividends received from each foreign corporation in which the Company owns
10.0% to 50.0% of the voting stock, and because of certain other limitations,
the Company's ability to claim a foreign tax credit may be limited,
particularly with respect to dividends paid out of earnings subject to a high
rate of foreign income tax. Generally, the Company's ability to claim a
foreign tax credit is limited to the amount of U.S. taxes the Company pays
with respect to its foreign source income. In calculating its foreign source
income, the Company is required to allocate interest expense and overhead
incurred in the United States between its United States and foreign
activities. Accordingly, to the extent United States borrowings are used to
finance equity contributions to its foreign subsidiaries, the Company's
ability to claim a foreign tax credit may be significantly reduced. These
limitations and the inability of the Company to offset losses in one foreign
jurisdiction against income earned in another foreign jurisdiction could
result in a high effective tax rate on the Company's earnings.

The primary differences between taxable income (loss) and net income (loss)
for financial reporting purposes relate to SAB 51 gains, the non-consolidation
of consolidated foreign subsidiaries for United States tax purposes,
international rate differences and the current non-deductibility of interest
expense on United A/P's senior notes and the United 1999 Notes. For
investments in foreign corporations accounted for under the equity method,
taxable income (loss) generated by these affiliates does not flow through to
the Company for United States federal and state tax purposes, even though the
Company records its allocable share of affiliate income (losses) for financial
reporting purposes. Accordingly, due to the indefinite reversal of such
amounts in future periods, no deferred tax asset has been established for tax
basis in excess of the Company's book basis (approximately $89.2 and $163.0
million at December 31, 1999 and 1998, respectively).

                                     F-54
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The Company's United States tax net operating losses, totaling approximately
$347.8 million at December 31, 1999, expire beginning in 2014 through 2029.
The Company's tax net operating loss carryforwards of its consolidated foreign
subsidiaries as of December 31, 1999 totaled $792.0, $438.0 and $79.0 million
for UEI, UAP and ULA, respectively. The significant components of the net
deferred tax asset are as follows:

<TABLE>
<CAPTION>
                                                                 As of
                                                             December 31,
                                                          --------------------
                                                            1999       1998
                                                          ---------  ---------
                                                            (In thousands)
   <S>                                                    <C>        <C>
   Deferred Tax Assets:
     Tax net operating loss carryforward of consolidated
      foreign subsidiaries..............................  $ 449,030  $ 183,656
     Company's U.S. tax net operating loss
      carryforward......................................    132,156     97,044
     Accrued interest expense...........................     72,345     32,885
     Stock-based compensation...........................     36,735      7,215
     Foreign currency translation adjustment............     23,113        --
     Investment valuation allowance and other...........      2,768      2,605
     Basis difference in marketable equity securities...      3,074      3,070
     Deferred compensation and severence................      3,398      1,175
     Other..............................................     21,082         70
                                                          ---------  ---------
       Total deferred tax assets........................    743,701    327,720
     Valuation allowance................................   (723,914)  (319,292)
                                                          ---------  ---------
       Deferred tax assets, net of valuation allowance..     19,787      8,428
                                                          ---------  ---------
   Deferred Tax Liabilities:
     Intangible assets..................................    (18,745)    (5,852)
     Property, plant and equipment, net.................    (11,282)    (7,156)
     Other..............................................     (1,017)       --
                                                          ---------  ---------
       Total deferred tax liabilities...................     31,044    (13,008)
                                                          ---------  ---------
       Deferred tax liabilities, net....................  $ (11,257) $  (4,580)
                                                          =========  =========
</TABLE>

                                     F-55
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Of the Company's 1999 consolidated income before income taxes and other items,
a loss of $1,027.0 million is derived from the Company's foreign operations.
The difference between income tax expense (benefit) provided in the financial
statements and the expected income tax expense (benefit) at statutory rates is
reconciled as follows:

<TABLE>
<CAPTION>
                                        For the Year For the Ten  For the Year
                                           Ended     Months Ended    Ended
                                        December 31, December 31, February 28,
                                            1999         1998         1998
                                        ------------ ------------ ------------
                                                    (In thousands)
   <S>                                  <C>          <C>          <C>
   Expected income tax expense
    (benefit) at the U.S. statutory
    rate of 35%.......................   $ 115,913    $(172,472)    $(68,727)
   Tax effect of permanent and other
    differences:
     Change in valuation allowance....     370,004      128,420       66,519
     Gain on issuance of common equity
      securities by subsidiaries......    (573,359)         --           --
     Non-deductible expenses..........      77,490       49,497          566
     Capitalized costs................     (49,402)         --           --
     International rate differences...      45,416          619         (515)
     Book/tax basis differences
      associated with foreign
      investments.....................         788        1,176        3,901
     State tax, net of federal
      benefit.........................       9,935      (14,783)      (5,891)
     Non-deductible interest accretion
      ................................       1,693        2,148        2,145
     Gain on sale of equity investment
      in subsidiary...................       5,877          --           --
     Amortization of licenses.........         923        1,516        1,312
     Other............................      (5,080)       4,489          690
                                         ---------    ---------     --------
       Total income tax expense.......   $     198    $     610     $    --
                                         =========    =========     ========
</TABLE>

During 1996, the Austrian tax authorities passed legislation which had the
effect of eliminating approximately NLG256.0 ($116.9) million of tax basis
associated with certain amounts of goodwill recorded at Telekabel Group
effective January 1, 1997. This change in tax law is expected to be challenged
on constitutional grounds. However, there can be no assurance of a successful
repeal of such legislation. Accordingly, this change caused Telekabel Group's
effective tax rate to increase from the historical effective tax rate through
December 31, 1996, due to the non-deductibility of such goodwill amortization
subsequent to January 1, 1997.

The Company through its subsidiaries maintains a presence in 23 countries.
Many of these countries maintain tax regimes that differ significantly from
the system of income taxation used in the United States, such as a value added
tax system. The Company has accounted for the effect of foreign taxes based on
what we believe is reasonably expected to apply to the Company and its
subsidiaries based on tax laws currently in effect and/or reasonable
interpretations of these laws. Because some foreign jurisdictions do not have
systems of taxation that are as well established as the system of income
taxation used in the United States or tax regimes used in other major
industrialized countries, it may be difficult to anticipate how foreign
jurisdictions will tax current and future operations of the Company and its
subsidiaries.

                                     F-56
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


17. Segment Information

<TABLE>
<CAPTION>
                                  For the Year Ended December 31, 1999                       As of December 31, 1999
                     -----------------------------------------------------------------  ----------------------------------
                                                                                          Long-
                     Multichannel                        Internet                         Lived      Capital      Total
                      Television  Telephone  Programming   Data     Other      Total    Assets(2)  Expenditures   Assets
                     ------------ ---------  ----------- --------  --------  ---------  ---------- ------------ ----------
                                             (In thousands)                                       (In thousands)
<S>                  <C>          <C>        <C>         <C>       <C>       <C>        <C>        <C>          <C>
Revenue:
 Europe:
 The Netherlands...    $117,026   $ 32,029    $  1,112   $  8,616  $    330  $ 159,113  $  774,045   $247,050   $3,157,285
 Austria...........      83,737      7,321         --      13,609       --     104,667     179,652     94,240      356,337
 Belgium...........      15,737        --          --       2,497       --      18,234      23,186      8,447       47,826
 Czech Republic....       7,485        181         --         --      1,042      8,708      80,347      2,491      159,806
 France............      27,522      2,710         --         590       --      30,822     319,454     70,666      498,776
 Hungary...........      35,197        --          --         125       --      35,322     112,698     38,708      215,448
 Norway............      49,186        365         --         565       --      50,116     100,315     57,106      244,975
 Poland............      26,845        --       10,917        --        --      37,762     218,784     42,460    1,218,956
 Sweden............      13,335        --          --         504       --      13,839      48,182     12,495      474,899
 Corporate and
  Other............       8,327        --          --         --      6,512     14,839      63,698     38,569       77,219
                       --------   --------    --------   --------  --------  ---------  ----------   --------   ----------
  Total Europe.....     384,397     42,606      12,029     26,506     7,884    473,422   1,920,361    612,232    6,451,527
                       --------   --------    --------   --------  --------  ---------  ----------   --------   ----------
 Asia/Pacific:
 Australia.........     144,632        --          --         --        --     144,632     123,617     94,513      563,627
 New Zealand.......       1,279      4,107         --         734       --       6,120      95,777     23,306       76,139
 Corporate and
  Other............         --         --          --         --        180        180       6,440      3,014       52,441
                       --------   --------    --------   --------  --------  ---------  ----------   --------   ----------
  Total
   Asia/Pacific....     145,911      4,107         --         734       180    150,932     225,834    120,833      692,207
                       --------   --------    --------   --------  --------  ---------  ----------   --------   ----------
 Latin America:
 Chile.............      77,476      9,881         --         --         87     87,444     213,146     53,120      489,638
 Brazil............       4,637        --          --         --        --       4,637       5,679      4,399       17,172
 Corporate and
  Other............       2,428        --          --         --        384      2,812      12,549      3,167       71,379
                       --------   --------    --------   --------  --------  ---------  ----------   --------   ----------
  Total Latin
   America.........      84,541      9,881         --         --        471     94,893     231,374     60,686      578,189
                       --------   --------    --------   --------  --------  ---------  ----------   --------   ----------
 Corporate &
  Other............         --         --          --         --        277        277       2,268        426    1,280,930
                       --------   --------    --------   --------  --------  ---------  ----------   --------   ----------
  Total Company....    $614,849   $ 56,594    $ 12,029   $ 27,240  $  8,812  $ 719,524  $2,379,837   $794,177   $9,002,853
                       ========   ========    ========   ========  ========  =========  ==========   ========   ==========
Adjusted EBITDA:(1)
 Europe:
 The Netherlands...    $ 48,185   $(19,900)   $(16,705)  $(66,569) $(41,350) $ (96,339)
 Austria...........      44,945    (11,470)        --         234       --      33,709
 Belgium...........       3,954        (54)        --      (2,212)      --       1,688
 Czech Republic....      (1,129)        54         --         --        407       (668)
 France............      (1,766)    (5,946)        --      (2,373)      (67)   (10,152)
 Hungary...........      11,739        --          --        (261)      --      11,478
 Norway............      20,740     (7,153)        --      (5,178)      --       8,409
 Poland............      (9,363)       --      (64,791)       --     (3,018)   (77,172)
 Sweden............       4,582       (135)        --      (4,095)      --         352
 Corporate and
  Other............       2,123       (206)        --        (725)    3,494      4,686
                       --------   --------    --------   --------  --------  ---------
  Total Europe.....     124,010    (44,810)    (81,496)   (81,179)  (40,534)  (124,009)
                       --------   --------    --------   --------  --------  ---------
 Asia/Pacific:
 Australia.........      (4,742)       --          --         --        --      (4,742)
 New Zealand.......        (918)    (1,160)        --         (47)      --      (2,125)
 Corporate and
  Other............         --         --          --         --     (4,274)    (4,274)
                       --------   --------    --------   --------  --------  ---------
  Total
   Asia/Pacific....      (5,660)    (1,160)        --         (47)   (4,274)   (11,141)
                       --------   --------    --------   --------  --------  ---------
 Latin America:
 Chile.............      17,744     (2,604)        --         --        --      15,140
 Brazil............      (2,462)       --          --         --        --      (2,462)
 Corporate and
  Other............      (1,210)       --          --         --     (4,609)    (5,819)
                       --------   --------    --------   --------  --------  ---------
  Total Latin
   America.........      14,072     (2,604)        --         --     (4,609)     6,859
                       --------   --------    --------   --------  --------  ---------
 Corporate &
  Other............         --         --          --         --        109        109
                       --------   --------    --------   --------  --------  ---------
  Total Company....    $132,422   $(48,574)   $(81,496)  $(81,226) $(49,308) $(128,182)
                       ========   ========    ========   ========  ========  =========
</TABLE>

                                      F-57
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                 For the Ten Months Ended December 31, 1998                   As of December 31, 1998
                        ---------------------------------------------------------------  ---------------------------------
                                                                                           Long-
                        Multichannel                       Internet                        Lived     Capital      Total
                         Television  Telephone Programming   Data     Other     Total    Assets(2) Expenditures   Assets
                        ------------ --------- ----------- --------  --------  --------  --------- ------------ ----------
                                               (In thousands)                                     (In thousands)
<S>                     <C>          <C>       <C>         <C>       <C>       <C>       <C>       <C>          <C>
Revenue:
 Europe:
 The Netherlands......    $ 13,854    $   162    $   --    $   --    $  7,274  $ 21,290  $  2,440    $ 14,734   $  297,068
 Austria..............      71,396         61        --      3,172        --     74,629   140,550      43,278      341,159
 Belgium..............      13,768        --         --        656      1,071    15,495    27,558      11,253       57,847
 Czech Republic.......       3,754        --         --        --         --      3,754     8,737         523       11,497
 France...............       3,395        --         --        --         --      3,395    40,328      28,802       51,092
 Hungary..............      11,671        --         --        --         --     11,671    26,788       7,239       86,921
 Norway...............      38,879        --         --        161        --     39,040    63,335      25,838      219,068
 Corporate and Other..       2,446        --         567       --         --      3,013     9,310       9,880       22,744
                          --------    -------    -------   -------   --------  --------  --------    --------   ----------
  Total Europe........     159,163        223        567     3,989      8,345   172,287   319,046     141,547    1,087,396
                          --------    -------    -------   -------   --------  --------  --------    --------   ----------
 Asia/Pacific:
 Australia............      74,209        --         --        --         --     74,209   110,351      71,197      181,169
 New Zealand..........         --         --         --        --         --        --        --          --        23,789
 Corporate and Other..       3,060        --         --        --         --      3,060        61         337       48,992
                          --------    -------    -------   -------   --------  --------  --------    --------   ----------
  Total Asia/Pacific..      77,269        --         --        --         --     77,269   110,412      71,534      253,950
                          --------    -------    -------   -------   --------  --------  --------    --------   ----------
 Latin America:
 Chile................         --         --         --        --         --        --        --          --        84,975
 Corporate and Other..       4,135        --         --        --         377     4,512    11,715       3,238       73,048
                          --------    -------    -------   -------   --------  --------  --------    --------   ----------
  Total Latin
   America............       4,135        --         --        --         377     4,512    11,715       3,238      158,023
                          --------    -------    -------   -------   --------  --------  --------    --------   ----------
 Corporate & Other....         --         --         --        --         --        --     10,269         738       42,726
                          --------    -------    -------   -------   --------  --------  --------    --------   ----------
  Total Company.......    $240,567    $   223    $   567   $ 3,989   $  8,722  $254,068  $451,442    $217,057   $1,542,095
                          ========    =======    =======   =======   ========  ========  ========    ========   ==========
Adjusted EBITDA:(1)
 Europe:
 The Netherlands......    $  8,445    $(1,303)   $  (295)  $(6,103)  $ (4,401) $ (3,657)
 Austria..............      34,350     (1,636)       --     (1,739)       --     30,975
 Belgium..............       5,755        --         --       (799)       114     5,070
 Czech Republic.......        (721)       --         --        --         --       (721)
 France...............        (954)      (911)       --        (77)       --     (1,942)
 Hungary..............       3,820        --         --        --         --      3,820
 Norway...............      14,015       (573)       --       (806)       --     12,636
 Corporate and Other..        (167)       --      (3,556)       19        131    (3,573)
                          --------    -------    -------   -------   --------  --------
  Total Europe........      64,543     (4,423)    (3,851)   (9,505)    (4,156)   42,608
                          --------    -------    -------   -------   --------  --------
 Asia/Pacific:
 Australia............     (31,093)       --         --        --         --    (31,093)
 New Zealand..........         --         --         --        --         --        --
 Corporate and Other..         --         --         --        --      (2,287)   (2,287)
                          --------    -------    -------   -------   --------  --------
  Total Asia/Pacific..     (31,093)       --         --        --      (2,287)  (33,380)
                          --------    -------    -------   -------   --------  --------
 Latin America:
 Chile................         --         --         --        --         --        --
 Corporate and Other..      (2,969)       --         --        --      (7,295)  (10,264)
                          --------    -------    -------   -------   --------  --------
  Total Latin
   America............      (2,969)       --         --        --      (7,295)  (10,264)
                          --------    -------    -------   -------   --------  --------
 Corporate & Other....         --         --         --        --      (2,907)   (2,907)
                          --------    -------    -------   -------   --------  --------
  Total Company.......    $ 30,481    $(4,423)   $(3,851)  $(9,505)  $(16,645) $ (3,943)
                          ========    =======    =======   =======   ========  ========
</TABLE>

                                      F-58
<PAGE>

                             UnitedGlobalCom, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


<TABLE>
<CAPTION>
                                    For the Year Ended February 28, 1998                     As of February 28, 1998
                        --------------------------------------------------------------  ---------------------------------
                                                                                          Long-
                        Multichannel                       Internet                       Lived     Capital      Total
                         Television  Telephone Programming   Data    Other     Total    Assets(2) Expenditures   Assets
                        ------------ --------- ----------- -------- --------  --------  --------- ------------ ----------
                                               (In thousands)                                    (In thousands)
<S>                     <C>          <C>       <C>         <C>      <C>       <C>       <C>       <C>          <C>
Revenue:
 Europe:
 The Netherlands......    $    --      $ --       $ --      $ --    $    --   $    --   $ 20,773    $    --    $  308,907
 Austria..............         --        --         --        --         --        --    115,786         --       323,298
 Belgium..............         --        --         --        --         --        --     24,526         --        49,204
 Norway...............         --        --         --        --         --        --     51,369         --       215,517
 Corporate and Other..       9,996       --         --        --         --      9,996    27,636       6,423       54,572
                          --------     -----      -----     -----   --------  --------  --------    --------   ----------
  Total Europe........       9,996       --         --        --         --      9,996   240,090       6,423      951,498
                          --------     -----      -----     -----   --------  --------  --------    --------   ----------
 Asia/Pacific:
 Australia............      64,370       --         --        --         --     64,370   147,871      84,375      202,325
 New Zealand..........         473       --         --        --         --        473    26,484      16,258       43,349
 Corporate and Other..       4,118       --         --        --         --      4,118     8,746         502       48,871
                          --------     -----      -----     -----   --------  --------  --------    --------   ----------
  Total Asia/Pacific..      68,961       --         --        --         --     68,961   183,101     101,135      294,545
                          --------     -----      -----     -----   --------  --------  --------    --------   ----------
 Latin America:
 Argentina............      17,627       --         --        --         --     17,627       --        1,329          --
 Chile................         --        --         --        --         --        --        --          --        78,165
 Corporate and Other..       1,617       --         --        --         --      1,617     6,541       3,112       69,102
                          --------     -----      -----     -----   --------  --------  --------    --------   ----------
  Total Latin
   America............      19,244       --         --        --         --     19,244     6,541       4,441      147,267
                          --------     -----      -----     -----   --------  --------  --------    --------   ----------
 Corporate & Other....         --        --         --        --         421       421    11,003       3,034      286,525
                          --------     -----      -----     -----   --------  --------  --------    --------   ----------
  Total Company.......    $ 98,201     $ --       $ --      $ --    $    421  $ 98,622  $440,735    $115,033   $1,679,835
                          ========     =====      =====     =====   ========  ========  ========    ========   ==========
Adjusted EBITDA:(1)
 Europe:
 The Netherlands......    $    --      $ --       $ --      $ --    $    --   $    --
 Austria..............         --        --         --        --         --        --
 Belgium..............         --        --         --        --         --        --
 Norway...............         --        --         --        --         --        --
 Corporate and Other..      (9,204)      --         --        --         --     (9,204)
                          --------     -----      -----     -----   --------  --------
  Total Europe........      (9,204)      --         --        --         --     (9,204)
                          --------     -----      -----     -----   --------  --------
 Asia/Pacific:
 Australia............     (24,082)      --         --        --         --    (24,082)
 New Zealand..........      (6,688)      --         --        --         --     (6,688)
 Corporate and Other..        (254)      --         --        --      (6,938)   (7,192)
                          --------     -----      -----     -----   --------  --------
  Total Asia/Pacific..     (31,024)      --         --        --      (6,938)  (37,962)
                          --------     -----      -----     -----   --------  --------
 Latin America:
 Argentina............       2,836       --         --        --         --      2,836
 Chile................         --        --         --        --         --        --
 Corporate and Other..        (952)      --         --        --     (10,162)  (11,114)
                          --------     -----      -----     -----   --------  --------
  Total Latin
   America............       1,884       --         --        --     (10,162)   (8,278)
                          --------     -----      -----     -----   --------  --------
 Corporate & Other....         --        --         --        --      (2,921)   (2,921)
                          --------     -----      -----     -----   --------  --------
  Total Company.......    $(38,344)    $ --       $ --      $ --    $(20,021) $(58,365)
                          ========     =====      =====     =====   ========  ========
</TABLE>
--------
(1) Adjusted EBITDA represents earnings before depreciation, amortization and
    stock based compensation charges. Industry analysts generally consider
    Adjusted EBITDA to be a helpful way to measure the performance of cable
    television operations and communications companies. Management believes
    Adjusted EBITDA helps investors to assess the cash flow from operations
    from period to period and thus to value the Company's business. Adjusted
    EBITDA should not, however, be considered a replacement for net income,
    cash flows or for any other measure of performance or liquidity under
    generally accepted accounting principles, or as an indicator of a company's
    operating performance. The presentation of Adjusted EBITDA may not be
    comparable to statistics with a similar name reported by other companies.
    Not all companies and analysts calculate Adjusted EBITDA in the same
    manner.
(2)Represents Property, Plant and Equipment.

                                      F-59
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:

<TABLE>
<CAPTION>
                                        For the Year For the Ten  For the Year
                                           Ended     Months Ended    Ended
                                        December 31, December 31, February 28,
                                            1999         1998         1998
                                        ------------ ------------ ------------
                                                    (In thousands)
<S>                                     <C>          <C>          <C>
Net operating loss.....................  $(770,630)   $(327,781)   $(150,021)
Depreciation and amortization..........    418,714      159,045       91,656
Non-cash stock-based compensation
 expense...............................    223,734      164,793          --
                                         ---------    ---------    ---------
  Consolidated Adjusted EBITDA.........  $(128,182)   $  (3,943)   $ (58,365)
                                         =========    =========    =========
</TABLE>

18. Related Party Transactions

Loans to Employees

In 1996, UPC loaned certain employees of UPC amounts for the exercise of the
employees' stock options, taxes on options exercised, or both. These recourse
loans bear interest at 5.0% per annum. The employees' liability to UPC is
presented in the consolidated financial statements net of UPC's obligation to
the employees under the plan. As of December 31, 1999 and 1998, the receivable
from employees, including accrued interest totaled $12.2 and $10.1 million,
respectively.

In September 1999, the Company loaned to Mr. Mark L. Schneider $0.7 million in
connection with the purchase of his home. The loan bears interest at 15.0% per
annum and is payable monthly. During 1999, Mr. M. Schneider paid $0.04 million
in interest on the loan. The loan is secured by all vested options Mr. M.
Schneider holds in the Company and its affiliates and by a right to a second
mortgage on his home. Payment of the loan is due upon the earlier of the sale
of the home or the date Mr. M. Schneider is no longer employed by United, UPC
or any affiliate. If Mr. M. Schneider defaults on the loan, the Company has a
power of attorney that allows it to exercise the relevant number of stock
options and sell the shares in satisfaction of Mr. M. Schneider's obligation
and the Company can also execute a second mortgage.

Acquisition of Interest in Princes Holdings and Tara

In November 1998, UPC purchased from RCL, an entity owned by a discretionary
trust for the benefit of certain members of the family of John Riordan, a
director of United, a 5.0% interest in Tara and a 5.0% interest in Princes
Holdings. The aggregate purchase price for these interests was approximately
$6.0 million. The parties agreed the purchase price would be paid in cash.
Subsequently, RCL elected to receive shares of Class A Common Stock of United.
The Company paid such purchase price by delivering to RCL 769,062 restricted
shares of Class A Common Stock held by UPC.

19. Subsequent Events

UPC Senior Notes and Senior Discount Notes

In January 2000, UPC completed a $1.6 billion bond offering consisting of
$600.0 million and (Euro) 200.0 million of ten-year 11.25% Senior Notes due
2010, $300.0 million of ten-year 11.5% Senior Notes due 2010 and $1.0 billion
aggregate principal amount of ten-year 13.75% Senior Discount Notes due 2010.
The Senior Discount Notes were sold at 51.2% of the face amount yielding gross
proceeds of $512.0 million and will accrue but not pay interest until 2005.

Acquisition of Intercomm France Holding S.A.

In February 2000, UPC acquired Intercomm France Holding S.A. for (Euro) 36.0
($36.2) million in cash and shares in UPC France. Following the transaction,
UPC controls 92.0% of UPC France.

                                     F-60
<PAGE>

                             UnitedGlobalCom, Inc.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Acquisition of Tebecai Cable System

In February 2000, UPC acquired 100% of Tebecai, a cable system based in the
east of Holland, for (Euro) 71.2 ($71.6) million.

UPC Stock Split

In March 2000, at an extraordinary general meeting of shareholders,
shareholders of UPC approved an amendment to UPC's Articles of Association to
effect a three-for-one stock split. All share and per share amounts in the
accompanying notes to the consolidated financial statements have been adjusted
to reflect this stock split.

Acquisition of ElTele Ostfold and Vestfold

In March 2000, UPC acquired 100% of the equity of ElTele Ostfold and Vestfold
from certain energy companies in Norway for (Euro)39.7 ($39.9) million.

Acquisition of Additional Interest in SBS

In February 2000, UPC acquired an additional 10.2% of SBS for (Euro)162.5
($163.5) million, increasing its ownership to 23.5%.

Acquisition of ENECO Cable System

In March 2000, UPC acquired K&T Group, the cable interests of N.V. ENECO, for
consideration of (Euro)1.2 ($1.2) billion. K&T owns and operates cable
networks in Rotterdam, Dordrecht and the surrounding municipalities in The
Netherlands.

Austar United Public Offering

On March 29, 2000, Austar United announced the sale of 20.0 million shares to
the public at A$8.50 ($5.15) per share for gross proceeds to the Company of
A$170.0 ($103.0) million.

                                     F-61
<PAGE>

             REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

To UnitedGlobalCom, Inc.:

We have audited, in accordance with auditing standards generally accepted in
the United States, the consolidated financial statements of UnitedGlobalCom,
Inc. included in this Form 10-K and have issued our report thereon dated March
29, 2000. Our audit was made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The following
schedules are the responsibility of the Company's management and are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in the audit
of the basic consolidated financial statements as indicated in our report with
respect thereto and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.

                                          Arthur Andersen LLP

Denver, Colorado
March 29, 2000

                                     F-62
<PAGE>

                             UnitedGlobalCom, Inc.

                                  PARENT ONLY
                                   SCHEDULE I
                   Condensed Financial Position of Registrant
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                                            As of
                                                         December 31,
                                                    -----------------------
                                                       1999        1998
                                                    ----------  -----------
<S>                                                 <C>         <C>
                      ASSETS
Current assets
 Cash and cash equivalents........................  $  880,653  $     7,553
 Restricted cash..................................         475          450
 Short-term liquid investments....................     354,710       38,367
 Costs to be reimbursed by affiliated companies,
  net.............................................      14,163       17,430
 Management fee receivables from related parties..       1,800          --
 Other receivables................................         709        1,354
 Other current assets, net........................       7,400        1,267
                                                    ----------  -----------
 Total current assets.............................   1,259,910       66,421
Notes receivable from wholly-owned subsidiaries,
 including accrued interest ......................     447,011      200,005
Marketable equity securities and other
 investments......................................       2,000          --
Investments in affiliates, accounted for under the
 equity method, net...............................     630,797          --
Property, plant and equipment, net of accumulated
 depreciation of $934 and $917, respectively......       2,268        2,325
Deferred financing costs, net of accumulated
 amortization of $4,628 and $1,772, respectively..      29,052       18,133
Other assets, net.................................          76           74
                                                    ----------  -----------
 Total assets.....................................  $2,371,114  $   286,958
                                                    ==========  ===========
  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
 Accounts payable.................................  $    6,444  $       264
 Accrued liabilities..............................       7,450        1,817
 Losses recognized in excess of investment in
  unconsolidated subsidiaries.....................         --       319,253
                                                    ----------  -----------
 Total current liabilities........................      13,894      321,334
Senior discount notes.............................   1,215,994      893,003
                                                    ----------  -----------
 Total liabilities................................   1,229,888    1,214,337
                                                    ----------  -----------
Preferred stock, $0.01 par value, 3,000,000 shares
 authorized, stated at liquidation value:
 Series A Convertible Preferred Stock, 0 and
  132,144 shares issued and outstanding,
  respectively....................................         --        26,086
                                                    ----------  -----------
 Series B Convertible Preferred Stock, 116,185 and
  139,031 shares issued and outstanding,
  respectively....................................      26,920       30,200
                                                    ----------  -----------
Stockholders' equity (deficit):
 Class A Common Stock, $0.01 par value,
  210,000,000 shares authorized, 81,574,815 and
  61,349,990 shares issued and outstanding,
  respectively....................................         816          614
 Class B Common Stock, $0.01 par value, 30,000,000
  shares authorized 19,323,940 and 19,831,760
  shares issued and outstanding, respectively.....         193          198
 Series C Convertible Preferred Stock, 425,000
  shares authorized, 425,000 and 0 shares issued
  and outstanding, respectively...................     410,125          --
 Series D Convertible Preferred Stock, 287,500
  shares authorized, 287,500 and 0 shares issued
  and outstanding, respectively...................     268,773          --
 Additional paid-in capital.......................   1,416,635      378,191
 Deferred compensation............................    (119,996)        (679)
 Treasury stock, at cost, 5,569,240 shares of
  Class A Common Stock............................     (29,061)     (29,061)
 Accumulated deficit..............................    (621,941)  (1,241,986)
 Other cumulative comprehensive loss..............    (211,238)     (90,942)
                                                    ----------  -----------
 Total stockholders' equity (deficit).............   1,114,306     (983,665)
                                                    ----------  -----------
 Total liabilities and stockholders' equity
  (deficit).......................................  $2,371,114  $   286,958
                                                    ==========  ===========
</TABLE>

                                      F-63
<PAGE>

                             UnitedGlobalCom, Inc.

                                  PARENT ONLY
                                   SCHEDULE I
            Condensed Information as to the Operations of Registrant
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
Revenue.................................   $   5,077    $     --     $     452
Corporate general and administrative
 expense................................        (168)      (1,698)        (983)
Depreciation and amortization...........        (379)        (278)        (366)
                                           ---------    ---------    ---------
    Operating loss......................       4,530       (1,976)        (897)
Interest income.........................      17,440        5,051        5,006
Interest income, related parties, net...      32,941       13,727        7,443
Interest expense........................    (116,908)     (76,364)      (6,228)
Provision for losses on investment
 related costs..........................         --           255         (451)
Other expense, net......................      (3,155)        (156)        (202)
                                           ---------    ---------    ---------
    (Loss) income before other items....     (65,152)     (59,463)       4,671
Share in results of affiliates, net.....     701,470     (486,069)    (347,203)
                                           ---------    ---------    ---------
    Net income (loss)...................   $ 636,318    $(545,532)   $(342,532)
                                           =========    =========    =========
Foreign currency translation
 adjustments............................   $(127,154)   $ (24,713)   $ (50,274)
Unrealized gains (losses) on securities:
  Unrealized holding gains (losses)
   arising during period................       6,858         (505)      (1,593)
  Reclassification adjustment for losses
   included in net income...............         --           --         8,013
                                           ---------    ---------    ---------
    Comprehensive income (loss).........   $ 516,022    $(570,750)   $(386,386)
                                           =========    =========    =========
</TABLE>

                                      F-64
<PAGE>

                             UnitedGlobalCom, Inc.

                                  PARENT ONLY
                                   SCHEDULE I
              Condensed Information as to Cash Flows of Registrant
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
Cash flows from operating activities:
Net loss................................   $  636,318   $(545,532)   $(342,532)
Adjustments to reconcile net loss to net
 cash flows from operating activities:
 Share in results of affiliates, net....     (701,470)    486,069      347,203
 Allocation of general, administrative
  and other expenses accounted for as a
  net capital contribution..............      (12,147)    (12,487)     (23,232)
 Depreciation and amortization..........          379         279          366
 Accretion of interest on senior notes
  and amortization of deferred financing
  costs.................................      116,908      76,365        6,212
 Provision for losses on marketable
  equity securities and investment
  related costs.........................          --          --           451
 (Increase) decrease in other assets....      (16,781)     (8,813)        (157)
 (Decrease) increase in accounts
  payable, accrued liabilities and
  other.................................       12,279         963       (2,582)
                                           ----------   ---------    ---------
 Net cash flows from operating
  activities............................       35,486      (3,156)     (14,271)
                                           ----------   ---------    ---------
Cash flows from investing activities:
 Purchase of short-term liquid
  investments...........................     (447,387)   (145,678)     (77,668)
 Proceeds from sale of short-term liquid
  investments...........................      131,044     128,717      107,982
 Restricted cash and short-term
  investments released..................          (25)        385          765
 Payoff of debt recorded at subsidiary
  level by parent--recorded as deemed
  capital contribution to subsidiary....          --          --      (531,800)
 Investments in affiliates and other
  investments...........................      (59,163)    (69,412)    (169,333)
 Increase in notes receivable from
  affiliates............................     (247,006)   (147,333)         --
 Payments on note receivable from
  affiliates............................          --          --        37,500
 Capital expenditures...................         (426)        (56)      (1,841)
 Distribution received from affiliated
  company...............................          --          --       123,230
 Acquisition, transaction and
  development costs and other...........        3,266      (4,207)      (2,676)
                                           ----------   ---------    ---------
 Net cash flows from investing
  activities............................     (619,697)   (237,584)    (513,841)
                                           ----------   ---------    ---------
Cash flows from financing activities:
 Proceeds from offering of senior notes
  and senior discount notes.............      208,939         --       812,200
 Deferred financing costs...............      (13,779)       (409)     (19,495)
 Issuance of common stock in connection
  with public offerings, net of
  financing costs.......................    1,212,977       7,402          --
 Issuance of common stock in connection
  with Company's stock option plan......       27,547       4,789          796
 Issuance of warrants...................       21,627         --           --
 Payments made on payable to affiliate,
  net...................................          --          --       (76,782)
                                           ----------   ---------    ---------
 Net cash flows from financing
  activities............................    1,457,311      11,782      716,719
                                           ----------   ---------    ---------
Increase (decrease) in cash and cash
 equivalents............................      873,100    (228,958)     188,607
Cash and cash equivalents, beginning of
 period.................................        7,553     236,511       47,904
                                           ----------   ---------    ---------
Cash and cash equivalents, end of
 period.................................   $  880,653   $   7,553    $ 236,511
                                           ==========   =========    =========
Non-cash investing and financing
 activities:
 Issuance of preferred stock utilized in
  purchase of Australian investments....   $      --    $  29,544    $     --
                                           ==========   =========    =========
 Non-cash issuance of warrants by
  subsidiary to purchase subsidiary
  stock.................................   $      --    $     --     $   3,678
                                           ==========   =========    =========
Supplemental cash flow disclosure:
 Cash received for interest.............   $   12,205   $   5,003    $   5,318
                                           ==========   =========    =========
</TABLE>

                                      F-65
<PAGE>

                             UnitedGlobalCom, Inc.

                       VALUATION AND QUALIFYING ACCOUNTS
                                  SCHEDULE II
                    (In thousands of United States Dollars)

<TABLE>
<CAPTION>
                           Balance at                                        Balance at
                          Beginning of Charged to                              End of
      Description            Period     Expense   Acquisitions Deductions(1)   Period
------------------------  ------------ ---------- ------------ ------------- ----------
<S>                       <C>          <C>        <C>          <C>           <C>
Allowance for doubtful
 subscriber receivables:
  Year ended December
   31, 1999.............     5,482       11,199      23,041       (11,914)     27,808
  Ten months ended
   December 31, 1998....     3,191        2,470       1,201        (1,380)      5,482
  Year ended February
   28, 1998.............       --           186       3,191          (186)      3,191
Allowance for costs to
 be reimbursed:
  Year ended December
   31, 1999.............       --         3,316         --             (3)      3,313
  Ten months ended
   December 31, 1998....     1,094           55         --         (1,149)        --
  Year ended February
   28, 1998.............     2,369          626         --         (1,901)      1,094
Allowance for
 investments in
 affiliates:
  Year ended December
   31, 1999.............     4,384          --          --         (4,384)        --
  Ten months ended
   December 31, 1998....       --         4,384         --            --        4,384
  Year ended February
   28, 1998.............     2,147          --          --         (2,147)        --
</TABLE>
--------
(1) Represents uncollectible balances written off to the allowance account and
    the effect of currency translation adjustments.

                                      F-66
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To UnitedGlobalCom, Inc.:

We have audited the accompanying consolidated balance sheets of United
International Properties, Inc. (a Colorado corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, parent's deficit and cash flows for the year ended December 31,
1999, the ten months ended December 31, 1998 (see Note 2) and for the year
ended February 28, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform these audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits, and the report of other auditors,
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of United International Properties, Inc. and subsidiaries as of December 31,
1999 and 1998 and the results of their operations and their cash flows for the
year ended December 31, 1999, the ten months ended December 31, 1998 and the
year ended February 28, 1998, in conformity with accounting principles
generally accepted in the United States.

                                          Arthur Andersen LLP

Denver, Colorado
March 29, 2000

                                     F-67
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

                          CONSOLIDATED BALANCE SHEETS
           (Stated in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                             As of
                                                          December 31,
                                                      ---------------------  ---
                                                         1999       1998
                                                      ----------  ---------
<S>                                                   <C>         <C>
                       ASSETS
Current assets
 Cash and cash equivalents..........................  $   13,382  $  12,409
 Restricted cash....................................         500        753
 Short-term liquid investments......................     274,979      3,131
 Subscriber receivables, net of allowance for
  doubtful accounts of $10,949 and $634,
  respectively......................................      23,154      6,970
 Costs to be reimbursed by affiliated companies,
  net...............................................         --         280
 Other receivables, including related party
  receivables of $957 and $2,064, respectively......      45,283      2,997
 Inventory..........................................      16,176     12,617
 Deferred taxes.....................................       2,119        --
 Other current assets, net..........................      18,109      6,231
                                                      ----------  ---------
 Total current assets...............................     393,702     45,388
Investments in affiliates, accounted for under the
 equity method, net.................................      65,142    175,281
Property, plant and equipment, net of accumulated
 depreciation of $286,261 and $153,860,
 respectively.......................................     460,469    130,071
Goodwill and other intangible assets, net of
 accumulated amortization of $35,539 and $18,989,
 respectively.......................................     317,041     65,130
Deferred financing costs, net of accumulated
 amortization of $6,460 and $3,237, respectively....      23,304     11,675
Deferred taxes......................................       3,698        --
Other assets, net...................................      10,301      4,610
                                                      ----------  ---------
 Total assets.......................................  $1,273,657  $ 432,155
                                                      ==========  =========
          LIABILITIES AND PARENT'S DEFICIT
Current liabilities
 Accounts payable, including related party payables
  of $9,959 and $2,291, respectively................  $   60,259  $  11,679
 Accrued liabilities................................      41,538     34,165
 Short-term debt....................................       9,033     59,875
 Current portion of senior discount notes and other
  long-term debt....................................       1,574      2,601
 Other current liabilities..........................      10,567      3,524
                                                      ----------  ---------
 Total current liabilities..........................     122,971    111,844
Notes payable to parent.............................     446,288    107,396
Senior discount notes and senior notes..............     407,945    356,640
Other long-term debt................................     437,671     68,086
Deferred compensation...............................       1,793        --
Deferred taxes......................................       1,013        --
Other long-term liabilities, including due to parent
 of $1,322 and $575, respectively...................       5,470      3,016
                                                      ----------  ---------
 Total liabilities..................................   1,423,151    646,982
                                                      ----------  ---------
Minority interests in subsidiaries..................      78,279      4,983
                                                      ----------  ---------
Parent's deficit:
 Common Stock, $0.01 par value, 1,000 shares
  authorized, 100 and 100 shares issued and
  outstanding, respectively, (pledged as collateral
  under parent's senior discount notes).............         --         --
 Additional paid-in capital.........................     718,517    615,712
 Deferred compensation..............................     (18,343)       --
 Accumulated deficit................................    (843,672)  (770,620)
 Other cumulative comprehensive loss................     (84,275)   (64,902)
                                                      ----------  ---------
 Total parent's deficit.............................    (227,773)  (219,810)
                                                      ----------  ---------
Commitments and contingencies (Notes 13 and 14)
 Total liabilities and parent's deficit.............  $1,273,657  $ 432,155
                                                      ==========  =========
</TABLE>

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

                                      F-68
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                         For the Year For the Ten  For the Year
                                            Ended     Months Ended    Ended
                                         December 31, December 31, February 28,
                                             1999         1998         1998
                                         ------------ ------------ ------------
<S>                                      <C>          <C>          <C>
Revenue................................   $ 245,825    $  81,781    $  88,644
System operating expense...............    (147,973)     (65,688)     (62,886)
System selling, general and
 administrative expense................     (88,460)     (48,825)     (59,385)
Corporate general and administrative
 expense...............................     (36,381)     (14,790)     (20,250)
Depreciation and amortization..........    (137,893)     (82,217)     (85,204)
                                          ---------    ---------    ---------
    Operating loss.....................    (164,882)    (129,739)    (139,081)
Gain on issuance of common equity
 securities by subsidiaries............     248,361          --           --
Interest income, including related
 party income of $561, $497 and $302,
 respectively..........................       7,340        1,973        2,568
Interest expense.......................     (88,579)     (48,339)    (116,015)
Interest expense, related party........     (31,222)      (7,536)      (7,063)
Provision for losses on marketable
 equity securities and investment
 related costs.........................      (7,127)      (6,810)     (14,342)
Gain on sale of investments in
 affiliates............................         --           --        90,020
Foreign currency exchange (loss) gain..     (25,787)      (1,657)      (1,411)
Other expense, net.....................        (406)      (2,239)      (3,550)
                                          ---------    ---------    ---------
    Loss before income taxes and other
     items.............................     (62,302)    (194,347)    (188,874)
Income tax expense.....................      (2,091)         --           --
Minority interests in subsidiaries.....      14,540          617        1,685
Share in results of affiliates, net....     (23,199)     (28,487)     (26,771)
                                          ---------    ---------    ---------
    Net loss before extraordinary
     charge............................     (73,052)    (222,217)    (213,960)
Extraordinary charge for early
 retirement of debt....................         --           --       (79,091)
                                          ---------    ---------    ---------
    Net loss...........................   $ (73,052)   $(222,217)   $(293,051)
                                          =========    =========    =========
Foreign currency translation
 adjustments...........................   $ (20,172)   $ (20,911)   $ (38,401)
Unrealized gains (losses) on
 securities:
  Unrealized holding gains (losses)
   arising during period...............         799         (505)      (1,593)
  Reclassification adjustment for
   losses included in net income.......         --           --         8,013
                                          ---------    ---------    ---------
    Comprehensive loss.................   $ (92,425)   $(243,633)   $(325,032)
                                          =========    =========    =========
</TABLE>

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

                                      F-69
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

                  CONSOLIDATED STATEMENTS OF PARENT'S DEFICIT
                  (Stated in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                Other
                          Common Stock  Additional                           Cumulative
                          -------------  Paid-In     Deferred   Accumulated Comprehensive
                          Shares Amount  Capital   Compensation   Deficit       Loss        Total
                          ------ ------ ---------- ------------ ----------- ------------- ---------
<S>                       <C>    <C>    <C>        <C>          <C>         <C>           <C>
Balances, February 28,
 1997...................   100     --    $ 65,488    $    --     $(221,939)   $(11,505)   $(167,956)
Issuance of warrants to
 purchase common stock
 of subsidiary..........   --      --       3,678         --           --          --         3,678
Gain on sale of stock by
 subsidiary.............   --      --       7,614         --           --          --         7,614
Payoff of debt recorded
 at subsidiary level by
 parent--recorded as
 deemed capital
 contribution...........   --      --     531,800         --           --          --       531,800
Capital distribution to
 parent, net............   --      --     (98,621)        --           --          --       (98,621)
Net loss................   --      --         --          --      (293,051)        --      (293,051)
Change in unrealized
 gain (loss) on
 available-for-sale
 securities, net........   --      --         --          --           --       (1,593)      (1,593)
Provision for loss on
 available-for-sale
 securities.............   --      --         --          --           --        8,013        8,013
Change in cumulative
 translation
 adjustments............   --      --         --          --           --      (38,401)     (38,401)
                           ---    ----   --------    --------    ---------    --------    ---------
Balances, February 28,
 1998...................   100     --     509,959         --      (514,990)    (43,486)     (48,517)
Cash contributions from
 parent.................   --      --      65,982         --           --          --        65,982
Non-cash contributions
 from parent............   --      --      39,767         --           --          --        39,767
Distribution of net
 investment in
 subsidiaries to parent,
 at cost................   --      --           4         --           --          --             4
Elimination of
 historical two month
 reporting difference
 due to change in fiscal
 year end...............   --      --         --          --       (33,413)        --       (33,413)
Net loss................   --      --         --          --      (222,217)        --      (222,217)
Change in unrealized
 gain (loss) on
 available-for-sale
 securities, net........   --      --         --          --           --         (505)        (505)
Change in cumulative
 translation
 adjustments............   --      --         --          --           --      (20,911)     (20,911)
                           ---    ----   --------    --------    ---------    --------    ---------
Balances, December 31,
 1998...................   100     --     615,712         --      (770,620)    (64,902)    (219,810)
Net loss................   --      --         --          --       (73,052)        --       (73,052)
Cash contributions from
 parent.................   --      --      59,163         --           --          --        59,163
Non-cash contributions
 from parent............   --      --       2,759         --           --          --         2,759
Equity transactions of
 subsidiaries...........   --      --      40,883     (40,883)         --          --           --
Amortization of deferred
 compensation...........   --      --         --       22,540          --          --        22,540
Change in cumulative
 translation............   --      --         --          --           --      (20,172)     (20,172)
Change in unrealized
 gain on available-for-
 sale securities........   --      --         --          --           --          799          799
                           ---    ----   --------    --------    ---------    --------    ---------
Balances, December 31,
 1999...................   100    $--    $718,517    $(18,343)   $(843,672)   $(84,275)   $(227,773)
                           ===    ====   ========    ========    =========    ========    =========
</TABLE>

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

                                      F-70
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
Cash flows from operating activities:
Net loss................................   $ (73,052)   $(222,217)   $(293,051)
Elimination of historical two month
 reporting difference due to change in
 fiscal year............................         --       (33,413)         --
Adjustments to reconcile net loss to net
 cash flows from operating activities:
 Gain on issuance of common equity
  securities by subsidiaries............    (248,361)         --           --
 Extraordinary charge for early
  retirement of debt....................         --           --        79,091
 Share in results of affiliates, net....      18,340       34,423       27,860
 Allocation of general, administrative
  and other expenses accounted for as a
  net contribution of capital by
  parent................................       8,752        7,899       15,910
 Minority interests in subsidiaries.....     (14,540)        (617)      (1,685)
 Depreciation and amortization..........     137,893       99,703       85,204
 Accretion of interest on senior notes
  and amortization of deferred financing
  costs.................................      57,681       49,798      104,311
 Stock-based compensation expense.......      21,507        2,669          --
 Gain on sale of investments in
  affiliates............................         --           --       (90,020)
 Provision for losses on marketable
  equity securities and investment
  related costs.........................       7,127        6,342       14,342
 Increase in receivables, net...........     (13,368)      (3,395)      (4,128)
 Decrease (increase) in other assets....       9,898       (8,723)       7,471
 Increase in accounts payable, accrued
  liabilities and other.................      60,776       26,969        9,905
                                           ---------    ---------    ---------
 Net cash flows from operating
  activities............................     (27,347)     (40,562)     (44,790)
                                           ---------    ---------    ---------
Cash flows from investing activities:
 Purchase of short-term liquid
  investments...........................    (273,184)      (3,923)     (16,988)
 Proceeds from sale of short-term liquid
  investments...........................       9,172       13,117       23,303
 Restricted cash released (deposited),
  net...................................         344        7,943       (9,115)
 Investments in affiliates and other
  investments...........................     (19,490)     (38,346)     (64,540)
 Proceeds from sale of investments in
  affiliated companies..................         --           --       211,125
 New acquisitions, net of cash
  acquired..............................    (272,888)      (9,881)         --
 Capital expenditures...................    (181,519)     (75,454)    (106,776)
 Increase in notes receivable and
  other.................................     (30,324)         953      (14,536)
                                           ---------    ---------    ---------
 Net cash flows from investing
  activities............................    (767,889)    (105,591)      22,473
                                           ---------    ---------    ---------
Cash flows from financing activities:
 Issuance of common stock by
  subsidiaries, net.....................     292,784          --           --
 Issuance of common stock in connection
  with subsidiaries stock option plans..         807          --           --
 Proceeds from offering of senior notes
  and senior discount notes.............         --           --        29,925
 Retirement of existing senior notes....        (435)         --           --
 Proceeds from short-term and long-term
  borrowings............................     290,928       39,519      233,210
 Deferred financing costs...............      (8,014)        (486)     (11,373)
 Repayments of short-term and long-term
  borrowings............................    (154,185)     (30,183)    (119,114)
 Capital contribution from (distribution
  to) parent............................      59,193       65,982     (123,230)
 Payments received on receivable from
  parent, net...........................         --           --        76,782
 Proceeds from (payment on) note payable
  to parent.............................     315,035       60,865      (37,500)
 Payment of sellers notes...............         --           --       (46,351)
 Cash contributed from minority interest
  partners..............................       2,971          --        22,042
                                           ---------    ---------    ---------
 Net cash flows from financing
  activities............................     799,084      135,697       24,391
                                           ---------    ---------    ---------
Effect of exchange rates on cash........      (2,875)         101         (190)
                                           ---------    ---------    ---------
Increase (decrease) in cash and cash
 equivalents............................         973      (10,355)       1,884
Cash and cash equivalents, beginning of
 period.................................      12,409       22,764       20,880
                                           ---------    ---------    ---------
Cash and cash equivalents, end of
 period.................................   $  13,382    $  12,409    $  22,764
                                           =========    =========    =========
</TABLE>

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

                                      F-71
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                         For the Year For the Ten  For the Year
                                            Ended     Months Ended    Ended
                                         December 31, December 31, February 28,
                                             1999         1998         1998
                                         ------------ ------------ ------------
<S>                                      <C>          <C>          <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES:
  Cash paid for interest................  $  20,642     $  6,223     $  7,497
                                          =========     ========     ========
  Cash received for interest............  $   3,179     $    558     $  2,376
                                          =========     ========     ========
  Seller notes for purchase of Argentine
   systems..............................  $     --      $    --      $ 52,061
                                          =========     ========     ========
Acquisition of remaining interest in
 VTR:
  Working capital.......................  $ (10,381)    $    --      $    --
  Property, plant and equipment.........   (203,154)         --           --
  Goodwill and other intangible assets..   (244,981)         --           --
  Other long-term assets................    (14,685)         --           --
  Elimination of equity investment in
   Chilean joint venture................     69,381          --           --
  Long-term liabilities.................    145,641          --           --
                                          ---------     --------     --------
    Total cash paid.....................   (258,179)         --           --
  Cash acquired.........................      5,498          --           --
                                          ---------     --------     --------
    Net cash paid.......................  $(252,681)    $    --      $    --
                                          =========     ========     ========
Deconsolidation of New Zealand
 subsidiary:
  Working capital.......................  $  10,162     $  4,159     $    --
  Property, plant and equipment.........    (80,656)     (26,484)         --
  Elimination of investment in Saturn...     21,974          --           --
  Goodwill and other intangible assets..     (5,737)      (2,805)         --
  Notes payable and other debt..........     54,870        3,833          --
  Minority interest.....................        --        11,416          --
                                          ---------     --------     --------
    Total cash relinquished.............  $     613     $ (9,881)    $    --
                                          =========     ========     ========
Sale of Argentine Cable Systems:
  Working capital, net of cash
   relinquished of $2,133...............  $     --      $    --      $ (3,319)
  Investments in affiliated companies...        --           --        83,535
  Property, plant and equipment and
   other long-term assets...............        --           --         4,560
  Goodwill and other intangible assets..        --           --        60,727
  Sellers notes (assumed by the
   buyers)..............................        --           --       (24,398)
  Gain on sale..........................        --           --        90,020
                                          ---------     --------     --------
    Cash received from sale.............  $     --      $    --      $211,125
                                          =========     ========     ========
</TABLE>

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

                                      F-72
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Nature of Operations

United International Properties, Inc. ("UIPI" or the "Company"), a wholly-
owned subsidiary of UnitedGlobalCom, Inc. ("United") was formed on September
21, 1994 in connection with the transaction contemplated by United's offering
of 14% senior discount notes (the "Old Notes").

Under United's offering of the Old Notes, United contributed to UIPI, United's
interests in certain operating properties and early stage projects in Latin
America and Asia/Pacific. UIPI will hold all of United's future investments
and development projects in Latin America and Asia/Pacific. The accompanying
financial statements have been prepared on a basis of reorganization
accounting as though UIPI had performed all foreign development activities and
made all acquisitions of the foreign multi-channel television interests in
Latin America and Asia/Pacific since inception. UIPI reflected all of the
transfers from United as a capital contribution from parent in the
accompanying consolidated financial statements.

The following chart presents a summary of the Company's significant
investments in telecommunications as of December 31, 1999.

                                    United

                                  100%
                                     UIPI


                        -------------------------------
                   100%                                 100%

          United Asia/Pacific             United Latin America, Inc.
          Communications, Inc.                     ("ULA")
                ("UAP")*


                   100%

                                          Brazil:
       United Australia/Pacific,          TV Show Brasil    100.0%
                  Inc.                    Jundiai            46.3%
             ("United A/P")               Chile:

                                          VTR               100.0%

                                          Mexico:
                  75.4%                   Megapo             49.0%(1)
                                          Peru:
             Austar United                Cable Star         62.2%
         Communications Limited           Latin American Programming:
           ("Austar United")              MGM Networks LA    50.0%


           Australia:
            Austar             100.0%
            XYZ Entertainment   50.0%
           New Zealand:
            Saturn             100.0%


           * Other UAP

           China:
            Hunan International
            TV                  49.0%
           Philippines:
            Pilipino Cable
            Corporation         19.6%
--------
(1) In January 2000, ULA purchased an additional 41.3% interest in Megapo for
    $22.8 million.

                                     F-73
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


2. Summary of Significant Accounting Policies

Basis of Presentation

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

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial
interest through the ownership of a majority voting interest. The following
illustrates those subsidiaries for which the Company consolidated the results
of operations for only a portion of the fiscal year ended December 31, 1999:

<TABLE>
<CAPTION>
                        Effective Date
   Entity              of Consolidation                 Reason
   ------              ----------------                 ------
   <S>                 <C>              <C>
   VTR................  May 1, 1999     Acquisition of remaining 66.0% interest
   Saturn(1)..........  August 1, 1999  Acquisition of remaining 35.0% interest
</TABLE>
  --------
  (1) The company consolidated the results of operations of Saturn from July
      1, 1996 to December 31, 1997. Effective January 1, 1998 the Company
      discontinued consolidating the results of operations of Saturn because
      of certain minority shareholders' rights.

All significant intercompany accounts and transactions have been eliminated in
consolidation.

Change in Fiscal Year-End

Prior to the ten months ended December 31, 1998, the Company's fiscal year-end
was February 28, and it accounted for its share of the income or loss of its
operating companies based on the calendar year results of each operating
company. This created a two month delay in reporting the operating company
results in the Company's consolidated results for its fiscal year-end. On
February 24, 1999, the Company changed its fiscal year-end from the last day
in February to the last day in December, effective December 31, 1998. To
effect the transaction to the new fiscal year end, the combined results of
operations of the operating companies for January and February 1998, a loss of
$33.4 million, has been reported as a one-time adjustment to retained deficit
as of March 1, 1998 in the consolidated statement of parent's deficit.
Consequently, the consolidated statement of operations presents the
consolidated results of the Company and its subsidiaries for the ten months
ended December 31, 1998. For comparative purposes, the Company's consolidated
revenue, net operating loss and net loss were $74.4 million, $115.3 million
and $173.2 million, respectively, for the ten months ended December 31, 1997,
and the Company's consolidated revenue, net operating loss and net loss were
$95.5 million, $148.3 million and $255.6 million, respectively for the year
ended December 31, 1998.

Cash and Cash Equivalents and Short-Term Liquid Investments

Cash and cash equivalents include cash and investments with original
maturities of less than three months. Short-term liquid investments include
certificates of deposit, commercial paper, corporate bonds and government
securities which have original maturities greater than three months but less
than twelve months. Short-term liquid investments are classified as available-
for-sale and are reported at fair market value.

                                     F-74
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Restricted Cash

Cash held as collateral for letters of credit and other loans is classified
based on the expected expiration of such facilities. Cash held in escrow and
restricted to a specific use is classified based on the expected timing of
such disbursement.

Costs to be Reimbursed by Affiliated Companies

The Company incurs costs on behalf of affiliated companies, such as salaries
and benefits, travel and professional services. These costs are reimbursed by
the affiliated companies.

Inventory

Inventory is stated at the lower of cost (first-in, first-out basis) or
market.

Investments in Affiliates, Accounted for under the Equity Method

For those investments in unconsolidated subsidiaries and companies in which
the Company's voting interest is 20.0% to 50.0%, its investments are held
through a combination of voting common stock, preferred stock, debentures or
convertible debt and/or the Company exerts significant influence through board
representation and management authority, the equity method of accounting is
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's proportionate share of net earnings or
losses of the affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, including any debt guarantees or other
contractual funding commitments. The Company's proportionate share of net
earnings or losses of affiliates includes the amortization of the excess of
its cost over its proportionate interest in each affiliate's net assets.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for
normal repair and maintenance of property, plant and equipment are charged to
expense as incurred. Assets constructed incorporate overhead expense and
interest charges incurred during the period of construction; investment
subsidies are deducted. Upon disconnection of a subscriber, the remaining book
value of the subscriber equipment, excluding converters which are recovered
upon disconnection, and the capitalized labor are written off and accounted
for as an operating cost. Depreciation is calculated using the straight-line
method over the economic life of the asset.

The economic lives of property, plant and equipment at acquisition are as
follows:

<TABLE>
   <S>                                                                <C>
   Cable distribution networks....................................... 3-20 years
   Subscriber premises equipment and converters...................... 3-10 years
   MMDS/DTH distribution facilities.................................. 5-20 years
   Office equipment, furniture and fixtures.......................... 3-10 years
   Buildings and leasehold improvements.............................. 3-33 years
   Other............................................................. 3-10 years
</TABLE>

Goodwill and Other Intangible Assets

The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15
years. Licenses in newly-acquired companies are recognized at the fair market
value of those licenses at the date of acquisition. Licenses in new franchise
areas include the capitalization of direct costs incurred in obtaining the
license. The license value is amortized on a straight-line basis over the
initial license period, up to a maximum of 20 years.


                                     F-75
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Recoverability of Tangible and Intangible Assets

The Company evaluates the carrying value of all tangible and intangible assets
whenever events or circumstances indicate the carrying value of assets may
exceed their recoverable amounts. An impairment loss is recognized when the
estimated future cash flows (undiscounted and without interest) expected to
result from the use of an asset are less than the carrying amount of the
asset. Measurement of an impairment loss is based on fair value of the asset
computed using discounted cash flows if the asset is expected to be held and
used. Measurement of an impairment loss for an asset held for sale would be
based on fair market value less estimated costs to sell.

Deferred Financing Costs

Costs to obtain debt financing are capitalized and amortized over the life of
the debt facility using the effective interest method.

Subscriber Prepayments and Deposits

Payments received in advance for multi-channel television service are deferred
and recognized as revenue when the associated services are provided. Deposits
are recorded as a liability upon receipt and refunded to the subscriber upon
disconnection.

Revenue Recognition

Revenue is primarily derived from the sale of multi-channel television,
telephony and internet/data services to subscribers and is recognized in the
period the related services are provided. Initial installation fees are
recognized as revenue in the period in which the installation occurs, to the
extent installation fees are equal to or less than direct selling costs, which
are expensed. To the extent installation fees exceed direct selling costs, the
excess are deferred and amortized over the average contract period. All
installation fees and related costs with respect to reconnections and
disconnections are recognized in the period in which the reconnection or
disconnection occurs because reconnection fees are charged at a level equal to
or less than related reconnection costs.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of subscriber receivables. Concentrations
of credit risk with respect to subscriber receivables are limited due to the
Company's large number of customers and their dispersion across many different
countries worldwide.

Staff Accounting Bulletin No. 51 ("SAB 51") Accounting Policy

Gains realized as a result of stock sales by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which
must be credited directly to equity in accordance with the provisions of SAB
51.

Stock-Based Compensation

Stock-based compensation is recognized using the intrinsic value method, which
results in compensation expense for the difference between the grant price and
the fair market value at each new measurement date. Austar United and ULA have
adopted stock-based compensation plans for their employees. With respect to
certain of these plans, the rights conveyed to employees are the substantive
equivalents to stock appreciation rights. Accordingly, compensation expense is
recognized at each financial statement date based on the difference between
the grant price and the estimated fair value of the respective subsidiary's
common stock.

Income Taxes

The Company accounts for income taxes under the asset and liability method
which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have

                                     F-76
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

been included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and income tax basis of assets, liabilities
and loss carryforwards using enacted tax rates in effect for the year in which
the differences are expected to reverse. Net deferred tax assets are then
reduced by a valuation allowance if management believes it more likely than
not they will not be realized. Withholding taxes are taken into consideration
in situations where the income of subsidiaries is to be paid out as dividends
in the near future. Such withholding taxes are generally charged to income in
the year in which the dividend income is generated.

Foreign Operations and Foreign Exchange Rate Risk

The functional currency for the Company's foreign operations is the applicable
local currency for each affiliate company, except for countries which have
experienced hyper-inflationary economies. For countries which have hyper-
inflationary economies, the financial statements are prepared in U.S. dollars.
Assets and liabilities of foreign subsidiaries for which the functional
currency is the local currency are translated at exchange rates in effect at
period-end, and the statements of operations are translated at the average
exchange rates during the period. Exchange rate fluctuations on translating
foreign currency financial statements into U.S. dollars that result in
unrealized gains or losses are referred to as translation adjustments.
Cumulative translation adjustments are recorded as a separate component of
parent's deficit and are included in Other Cumulative Comprehensive Loss.

Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transaction gains and losses
which are reflected in income as unrealized (based on period-end translations)
or realized upon settlement of the transactions. Cash flows from the Company's
operations in foreign countries are translated based on their functional
currencies. As a result, amounts related to assets and liabilities reported on
the consolidated statements of cash flows will not agree to changes in the
corresponding balances in the consolidated balance sheets. The effects of
exchange rate changes on cash balances held in foreign currencies are reported
as a separate line below cash flows from financing activities.

Certain of the Company's foreign operating companies have notes payable and
notes receivable that are denominated in a currency other than their own
functional currency. Accordingly, the Company may experience economic loss and
a negative impact on earnings and equity with respect to its holdings solely
as a result of foreign currency exchange rate fluctuations.

New Accounting Principles

The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that companies recognize
all derivatives as either assets or liabilities in the balance sheet at fair
value. Under SFAS 133, accounting for changes in fair value of a derivative
depends on its intended use and designation. SFAS 133 is effective for fiscal
years beginning after June 15, 2000. The Company is currently assessing the
effect of this new standard.

In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 "Views on Selected Revenue Recognition
Issues" ("SAB 101"), which provides the staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB 101
is effective for the second quarter of 2000. The Company is currently
assessing the effect of SAB 101.

Reclassification

Certain prior year amounts have been reclassified to conform to current year
presentation.

                                     F-77
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


3. Acquisitions and Other

VTR Acquisition

On April 29, 1999, an indirect wholly owned subsidiary of ULA acquired a 66.0%
interest in VTR, a company that provides telephone and multi-channel
television services to the greater Santiago, Chile area (the "VTR
Acquisition"). This acquisition, combined with the interest in VTR that is
owned by another indirect wholly owned subsidiary of the Company, gives the
Company an indirect 100% interest in VTR. The purchase price for the 66.0%
interest in VTR was approximately $258.2 million in cash. In addition, the
Company provided capital for VTR to prepay approximately $125.8 million of
existing bank indebtedness and a promissory note from the Company to one of
the other shareholders of VTR.

Restructuring of United A/P Assets and Austar United Initial Public Offering

In June 1999, the Company's interest in Austar, XYZ Entertainment and Saturn
were contributed to Austar United in exchange for new shares issued by Austar
United. On July 27, 1999, Austar United acquired from SaskTel its 35.0%
interest in Saturn in exchange for approximately 13.7 million of Austar
United's shares, thereby increasing Austar United's ownership interest in
Saturn from 65.0% to 100%. In addition, Austar United successfully completed
an initial public offering selling 103.5 million shares on the Australian
Stock Exchange, raising gross and net proceeds at Australian dollar ("A$")4.70
($3.03) per share of A$486.5 ($313.6) million and A$453.6 ($292.8) million,
respectively. Based on the carrying value of the Company's investment in
Austar United as of July 27, 1999, United recognized a gain of $248.4 million
from the resulting step-up in the carrying amount of United's investment in
Austar United, in accordance with SAB 51. No deferred taxes were recorded
related to this gain due to the Company's intent on holding its investment in
Austar United indefinitely. Austar United's offering reduced the Company's
ownership interest from 100% to approximately 75.5%. As a result of employee
stock option exercises subsequent to the initial public offering date, the
Company's ownership interest in Austar United decreased to 75.4% as of
December 31, 1999. Including all stock options granted to employees that were
vested as of December 31, 1999, the Company's ownership interest in Austar
United on a fully-diluted basis is approximately 73.7%.

MGM Networks LA

In May 1998, ULA entered into a joint venture with a division of Metro-
Goldwyn-Mayer, Inc. ("MGM") to form MGM Networks LA. Under the terms of the
joint venture, ULA contributed its 100% interest in a Latin American
programming venture for a 50.0% interest in MGM Networks LA, and MGM acquired
a 50.0% interest in MGM Networks LA by contributing its Brazil channel (MGM
Gold Brazil) and committing to fund the first $9.9 million ($6.7 million of
which was funded at closing) required by MGM Networks LA. MGM Networks LA has
also entered into a trademark license agreement with MGM for the use of the
MGM brand name and also into a program license agreement to acquire
programming from MGM.

Austar

In July 1998, Austar acquired certain Australian pay television assets of East
Coast Television Pty Limited ("ECT"), an affiliate of Century Communications
Corporation ("Century"), for $6.1 million of the Company's newly-created
Series B Convertible Preferred Stock. ECT's subscription television business
includes subscribers and certain MMDS licenses and transmission equipment
serving the areas in and around Newcastle, Gossford, Wollongong and Tasmania,
Australia.

XYZ Entertainment

In September 1998, UAP acquired the Australian programming assets held by
Century, consisting of Century's 25.0% interest in XYZ Entertainment, a
programming company that owns and/or distributes five channels to the
Australian multi-channel marketplace, increasing its ownership to a total of
50.0% in XYZ Entertainment. The purchase price consisted of $1.2 million in
cash and $23.4 million of the Company's Series B Preferred Stock.

                                     F-78
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


TV Show Brasil

In October 1998, ULA increased its ownership interest in TV Show Brasil from
45.0% to 100% for $11.4 million, half of which was paid in cash, with the
remainder financed by the seller.

Cable Star

In October 1998, ULA and Arequipa Cable Vision ("ACV") each contributed their
Peruvian multi-channel television assets to Cable Star, with ULA receiving
60.0% of the outstanding shares of Cable Star and the former shareholders of
ACV receiving the other 40.0%.

Argentina

In October 1997, the Company completed the sale of all of its cable television
assets in Argentina, including the regions of Bahia Blanca, Comodoro, Trelew
and Santa Fe (the "Argentina Transaction"). The sale price for Bahia Blanca,
Comodoro, Trelew and Santa Fe collectively was $268.2 million, of which $25.3
million consisted of remaining notes payable to sellers from the original
acquisitions. From this net sales price of $242.9 million, $29.6 million was
paid directly by the buyers to other minority interest stockholders, resulting
in net proceeds to the Company of approximately $211.1 million. The payment
was received in full in cash. The Company recognized a gain on the transaction
of $90.0 million.

Tara

In October 1997, Tara issued shares to third parties in exchange for
consideration totaling $2.5 million, thereby diluting the Company's interest
in Tara from 100% to 75.0%. A gain of $1.6 million recognized on the
transaction was credited to additional paid-in capital in accordance with SAB
51.

Saturn

In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a
35.0% equity interest in Saturn by investing New Zealand dollars ("NZ$")29.9
($19.6) million directly into Saturn for its newly-issued shares, thereby
reducing the Company's equity interest in Saturn to 65.0%. A gain of $6.0
million recognized on the transaction was credited to additional paid-in
capital in accordance with SAB 51.

Pro Forma Financial Information for the Year Ended February 28, 1998

The following pro forma condensed consolidated operating results for the year
ended February 28, 1998 gives effect to the Argentina Transaction as if it had
occurred at the beginning of the period presented. This pro forma condensed
consolidated financial information and notes thereto do not purport to
represent what the Company's results of operations would actually have been if
such transaction had in fact occurred on such date. The pro forma adjustments
are based upon currently available information and upon certain assumptions
that management believes are reasonable.

<TABLE>
<CAPTION>
                                                          For the Year Ended
                                                           February 28, 1998
                                                        ------------------------
                                                        Historical  Pro Forma(1)
                                                        ----------  ------------
                                                            (In thousands)
   <S>                                                  <C>         <C>
   Revenue............................................. $  88,644    $  71,017
                                                        =========    =========
   Net loss before extraordinary charge................ $(213,960)   $(295,469)
                                                        =========    =========
   Net loss............................................ $(293,051)   $(374,560)
                                                        =========    =========
</TABLE>
  --------
  (1) Represents elimination of historical statement of operations balances
      for the Argentina systems and elimination of the gain recorded on the
      Argentina Transaction.

                                     F-79
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


4. Cash and Cash Equivalents, Restricted Cash and Short-Term Investments

<TABLE>
<CAPTION>
                                              As of December 31, 1999
                                   ---------------------------------------------
                                                            Short-term
                                   Cash and Cash Restricted   Liquid
                                    Equivalents     Cash    Investments  Total
                                   ------------- ---------- ----------- --------
                                                  (In thousands)
   <S>                             <C>           <C>        <C>         <C>
   Cash...........................    $13,382       $500     $    --    $ 13,882
   Certificates of deposit........        --         --       271,041    271,041
   Commercial paper...............        --         --         1,054      1,054
   Corporate bonds................        --         --         1,005      1,005
   Government securities..........        --         --         1,879      1,879
                                      -------       ----     --------   --------
     Total........................    $13,382       $500     $274,979   $288,861
                                      =======       ====     ========   ========
<CAPTION>
                                              As of December 31, 1998
                                   ---------------------------------------------
                                                            Short-term
                                   Cash and Cash Restricted   Liquid
                                    Equivalents     Cash    Investments  Total
                                   ------------- ---------- ----------- --------
                                                  (In thousands)
   <S>                             <C>           <C>        <C>         <C>
   Cash...........................    $ 1,499       $753     $    --    $  2,252
   Certificates of deposit........        --         --           250        250
   Commercial paper...............     10,648        --         1,187     11,835
   Corporate bonds................        --         --           187        187
   Government securities..........        262        --         1,507      1,769
                                      -------       ----     --------   --------
     Total........................    $12,409       $753     $  3,131   $ 16,293
                                      =======       ====     ========   ========
</TABLE>

                                      F-80
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


5. Investments in Affiliates, Accounted for under the Equity Method

<TABLE>
<CAPTION>
                                                    As of December 31, 1999
                            ------------------------------------------------------------------------
                                                        Cumulative    Cumulative
                            Investments in Dividends Share in Results Translation Valuation
                              Affiliates   Received    of Affiliates  Adjustments Allowance  Total
                            -------------- --------- ---------------- ----------- --------- --------
                                                         (In thousands)
   <S>                      <C>            <C>       <C>              <C>         <C>       <C>
   Asia/Pacific:
     XYZ Entertainment.....    $ 44,306     $   --       $(18,564)     $  2,804    $   --   $ 28,546
     Pilipino Cable
      Corporation..........      14,950         --         (3,004)       (2,588)       --      9,358
     Hunan International
      TV...................       6,061         --         (2,477)           16        --      3,600
     Other.................         350         --            --            --         --        350
   Latin America:
     Megapo................      32,496      (1,408)       (1,618)       (9,382)       --     20,088
     MGM Networks LA(1)....      11,988         --        (11,988)          --         --        --
     Jundiai...............       6,032      (1,572)           72        (1,334)       --      3,198
     Other.................           2         --            --            --         --          2
                               --------     -------      --------      --------    -------  --------
       Total...............    $116,185     $(2,980)     $(37,579)     $(10,484)   $   --   $ 65,142
                               ========     =======      ========      ========    =======  ========

<CAPTION>
                                                    As of December 31, 1998
                            ------------------------------------------------------------------------
                                                        Cumulative    Cumulative
                            Investments in Dividends Share in Results Translation Valuation
                              Affiliates   Received    of Affiliates  Adjustments Allowance  Total
                            -------------- --------- ---------------- ----------- --------- --------
                                                         (In thousands)
   <S>                      <C>            <C>       <C>              <C>         <C>       <C>
   Europe:
     Iberian Programming...    $ 14,082     $   --       $ (7,418)     $    (25)   $   --   $  6,639
   Asia/Pacific:
     Saturn................      49,808         --        (23,138)       (2,881)       --     23,789
     XYZ Entertainment.....      44,306         --        (18,537)          111        --     25,880
     Pilipino Cable
      Corporation..........      11,673         --         (2,812)       (2,824)       --      6,037
     Hunan International
      TV...................       6,073         --         (2,435)           16        --      3,654
     Telefenua.............      18,599         --        (14,215)          --      (4,384)      --
     Other.................         350         --            --            --         --        350
   Latin America:
     VTR...................     112,052         --        (17,203)       (9,874)       --     84,975
     Megapo................      32,496      (1,471)       (1,122)      (11,067)       --     18,836
     MGM Networks LA(1)....       5,687         --        (5,687)           --         --        --
     Jundiai...............       6,797         --           (587)       (1,089)       --      5,121
                               --------     -------      --------      --------    -------  --------
       Total...............    $301,923     $(1,471)     $(93,154)     $(27,633)   $(4,384) $175,281
                               ========     =======      ========      ========    =======  ========
</TABLE>
  --------
  (1) Includes an accrued funding obligation of $3.0 and $2.9 million at
      December 31, 1999 and 1998, respectively. The Company would face
      significant and punitive dilution if it did not make the requested
      fundings.

                                     F-81
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


As of December 31, 1999 and 1998, the Company had the following differences
related to the excess of its cost over its proportionate interest in each
affiliate's net tangible assets included in the above table. Such differences
are being amortized over 15 years.

<TABLE>
<CAPTION>
                                 As of December 31, 1999 As of December 31, 1998
                                 ----------------------- -----------------------
                                   Basis    Accumulated    Basis    Accumulated
                                 Difference Amortization Difference Amortization
                                 ---------- ------------ ---------- ------------
                                                 (In thousands)
   <S>                           <C>        <C>          <C>        <C>
   Europe:
     Iberian Programming........  $   --      $   --      $ 2,216     $   (85)
   Asia/Pacific:
     XYZ Entertainment..........   25,791      (1,609)     23,595         --
     Saturn.....................      --          --       12,733      (1,005)
   Latin America:
     VTR........................                           19,994      (1,941)
     Megapo.....................   20,518      (6,983)     19,583      (5,767)
                                  -------     -------     -------     -------
       Total....................  $46,309     $(8,592)    $78,121     $(8,798)
                                  =======     =======     =======     =======
</TABLE>

VTR

Condensed financial information for VTR stated in U.S. dollars is as follows:

<TABLE>
<CAPTION>
                                                                      As of
                                                                   December 31,
                                                                       1998
                                                                  --------------
                                                                  (In thousands)
   <S>                                                            <C>
   Cash..........................................................    $ 11,254
   Goodwill, net.................................................     109,464
   Property, plant and equipment, net............................     186,660
   Other Assets..................................................      33,486
                                                                     --------
     Total assets................................................    $340,864
                                                                     ========
   Accounts payable and accrued liabilities......................    $ 53,877
   Bank debt.....................................................      88,495
   Related party debt............................................       1,663
   Shareholders' equity..........................................     196,829
                                                                     --------
     Total liabilities and shareholders' equity..................    $340,864
                                                                     ========
</TABLE>

<TABLE>
<CAPTION>
                                                             For the Years
                                                            Ended December
                                                           ------------------
                                                             1998      1997
                                                           --------  --------
                                                            (In thousands)
   <S>                                                     <C>       <C>
   Revenue................................................ $119,005  $114,318
   Operating, selling, general and administrative
    expense...............................................  (90,983)  (92,970)
   Depreciation and amortization..........................  (27,531)  (22,707)
                                                           --------  --------
     Net operating loss...................................      491    (1,359)
   Other..................................................  (19,524)  (19,252)
                                                           --------  --------
     Net loss............................................. $(19,033) $(20,611)
                                                           ========  ========
</TABLE>


                                     F-82
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Condensed financial information for Saturn, stated in U.S. dollars, is as
follows:

<TABLE>
<CAPTION>
                                                                     As of
                                                               December 31, 1998
                                                               -----------------
                                                                (In thousands)
   <S>                                                         <C>
   Current assets.............................................      $ 4,071
   Non-current assets.........................................       59,242
                                                                    -------
     Total assets.............................................      $63,313
                                                                    =======
   Current liabilities........................................      $33,608
   Non-current liabilities....................................           19
   Shareholders' equity.......................................       29,686
                                                                    -------
     Total liabilities and shareholders' equity...............      $63,313
                                                                    =======
</TABLE>

<TABLE>
<CAPTION>
                                                              For the Year Ended
                                                              December 31, 1998
                                                              ------------------
                                                                (In thousands)
   <S>                                                        <C>
   Revenue...................................................      $  1,693
   Expenses..................................................       (16,934)
                                                                   --------
     Net loss................................................      $(15,241)
                                                                   ========
</TABLE>

6. Property, Plant and Equipment
<TABLE>
<CAPTION>
                                                              As of
                                                          December 31,
                                                       --------------------
                                                         1999       1998
                                                       ---------  ---------
                                                         (In thousands)
   <S>                                                 <C>        <C>
   Cable distribution networks........................ $ 293,370  $   9,095
   Subscriber premises equipment and converters.......   297,835    181,072
   MMDS/DTH distribution facilities...................    65,328     55,532
   Office equipment, furniture and fixtures...........    30,499     10,485
   Buildings and leasehold improvements...............    16,103      3,027
   Other..............................................    43,595     24,720
                                                       ---------  ---------
                                                         746,730    283,931
     Accumulated depreciation.........................  (286,261)  (153,860)
                                                       ---------  ---------
     Net property, plant and equipment................ $ 460,469  $ 130,071
                                                       =========  =========
</TABLE>


                                      F-83
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Goodwill and Other Intangible Assets
<TABLE>
<CAPTION>
                                                               As of
                                                           December 31,
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
                                                          (In thousands)
   <S>                                                   <C>       <C>
   Asia/Pacific:
     Austar United...................................... $114,882  $    --
     Austar.............................................      --     60,071
   Latin America:
     VTR................................................  223,484       --
     TV Show Brasil.....................................    8,298    16,161
     Cable Star.........................................    5,916     7,887
                                                         --------  --------
                                                          352,580    84,119
     Accumulated amortization...........................  (35,539)  (18,989)
                                                         --------  --------
     Net goodwill and other intangible assets........... $317,041  $ 65,130
                                                         ========  ========

8. Short-Term Debt
<CAPTION>
                                                               As of
                                                           December 31,
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
                                                          (In thousands)
   <S>                                                   <C>       <C>
   Austar Bank Facility................................. $    --   $ 36,738
   Other Latin America..................................    9,033    23,137
                                                         --------  --------
     Total short-term debt.............................. $  9,033  $ 59,875
                                                         ========  ========

  Carrying value approximates fair value for these short-term facilities.

9. Senior Discount Notes and Senior Notes
<CAPTION>
                                                               As of
                                                           December 31,
                                                         ------------------
                                                           1999      1998
                                                         --------  --------
                                                          (In thousands)
   <S>                                                   <C>       <C>
   United Old Notes..................................... $    --   $    412
   United A/P Notes.....................................  407,945   356,640
                                                         --------  --------
                                                          407,945   357,052
     Less current portion...............................      --       (412)
                                                         --------  --------
     Total senior discount notes........................ $407,945  $356,640
                                                         ========  ========
</TABLE>

United A/P Notes

The 14.0% senior notes were issued by United A/P in May 1996 and September
1997 at a discount from their principal amount of $488.0 million, resulting in
gross proceeds of $255.0 million. On and after May 15, 2001, cash interest
will accrue and will be payable semi-annually on each May 15 and November 15,
commencing November 15, 2001. The United A/P Notes are due May 15, 2006.
Effective May 16, 1997, the interest rate on these notes increased by an
additional 0.75% per annum to 14.75%. On October 14, 1998, United A/P
consummated an equity sale resulting in gross proceeds to United A/P of $70.0
million, reducing the interest rate from 14.75% to 14.0% per annum. Due to the
increase in the interest rate effective May 16, 1997 until consummation of the
equity sale, the United A/P Notes will accrete to a principal amount of $492.9
million on May 15, 2001, the date cash interest begins to accrue.

                                     F-84
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


In November 1997, pursuant to the terms of the indentures governing the United
A/P Notes, United A/P issued warrants to purchase 488,000 shares of its common
stock. The warrants are exercisable through May 15, 2006 at a price of $10.45
per share, which would result in gross proceeds of $5.1 million upon exercise.
The warrants were valued at $3.7 million and have been reflected as an
additional discount to the United A/P Notes on a pro-rata basis and as an
increase in additional paid-in capital. Warrants to acquire 50 shares were
exercised November 24, 1999.

10. Other Long-Term Debt
<TABLE>
<CAPTION>
                                                                   As of
                                                                December 31,
                                                              -----------------
                                                                1999     1998
                                                              --------  -------
                                                               (In thousands)
   <S>                                                        <C>       <C>
   VTR Bank Facility......................................... $176,000  $   --
   New Austar Bank Facility..................................  202,703   67,352
   Saturn Bank Facility......................................   57,685      --
   Other Asia/Pacific........................................    2,263    2,923
   Other Latin America.......................................      594      --
                                                              --------  -------
                                                               439,245   70,275
     Less current portion....................................   (1,574)  (2,189)
                                                              --------  -------
     Total other long-term debt.............................. $437,671  $68,086
                                                              ========  =======
</TABLE>

VTR Bank Facility

On April 29, 1999, VTR entered into a $220.0 million term loan facility in
connection with the VTR Acquisition. The VTR Bank Facility consists of two
tranches--Tranch A, with an aggregate principal amount of $140.0 million, and
Tranche B, with an aggregate principal amount of $80.0 million. The VTR Bank
Facility bears interest at LIBOR plus a margin of 5.0%, increasing by 0.5%
every three months beginning April 29, 2001 until maturity on April 29, 2002.
The VTR Bank Facility indenture restricts certain investments and payments,
including a ceiling on capital expenditures per fiscal year, as well as
generally prohibiting VTR from incurring additional indebtedness with the
exception of a general allowance of $15.0 million. In addition, VTR must
maintain certain financial ratios on a quarterly basis, such as total debt to
EBITDA, debt service coverage, senior debt to EBITDA, interest coverage, as
well as minimum telephony revenue amounts.

New Austar Bank Facility

On April 23, 1999, Austar executed a new A$400.0 million ($262.3 million)
syndicated senior secured debt facility to refinance the existing bank
facility and to fund Austar's subscriber acquisition and working capital
needs. The New Austar Bank Facility consists of two sub-facilities: (i)
A$200.0 million amortizing term facility ("Tranche 1") and (ii) A$200.0
million cash advance facility ("Tranche 2"). Tranche 1 was used to refinance
the existing bank facility, and Tranche 2 is available upon the contribution
of additional equity on a 2:1 debt-to-equity basis. The New Austar Bank
Facility bears interest at the professional market rate in Australia plus a
margin ranging from 1.75% to 2.25% based upon certain debt to cash flow
ratios. The New Austar Bank Facility is fully repayable pursuant to an
amortization schedule beginning December 31, 2002 and ending March 31, 2006.
As of December 31, 1999, Austar had drawn A$200.0 million under Tranche 1 and
A$109.0 million under Tranche 2, for a total outstanding balance of A$309.0
($202.7) million.

Saturn Bank Facility

On July 15, 1999, Saturn closed a syndicated senior debt facility in the
amount of NZ$125.0 ($65.4) million to fund the completion of Saturn's network.
As of December 31, 1999, Saturn had drawn NZ$109.0 ($57.7) million against the
facility and expects to draw down the remaining balance by the end of fourth
quarter 2000.

                                     F-85
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

This debt facility's interest rate has averaged approximately 8.6%, which is
3.0% over the current base rate upon draw-down. The Saturn Bank Facility is
repayable over a five year period beginning fourth quarter 2001.

Fair Value of Senior Discount Notes, Senior Notes and Other Long-term Debt

Fair value is based on market prices for the same or similar issues. Carrying
value is used when a market price is unavailable.
<TABLE>
<CAPTION>
                                                              Carrying   Fair
                                                               Value    Value
                                                              -------- --------
                                                               (In thousands)
   <S>                                                        <C>      <C>
   As of December 31, 1999:
     United A/P Notes........................................ $407,945 $414,008
     VTR Bank Facility.......................................  176,000  176,000
     New Austar Bank Facility................................  202,703  202,703
     Saturn Bank Facility....................................   57,685   57,685
     Other Asia/Pacific and Latin America....................    2,857    2,857
                                                              -------- --------
       Total................................................. $847,190 $853,253
                                                              ======== ========

<CAPTION>
                                                              Carrying   Fair
                                                               Value    Value
                                                              -------- --------
                                                               (In thousands)
   <S>                                                        <C>      <C>
   As of December 31, 1998:
     United Old Notes........................................ $    412 $    412
     United A/P Notes........................................  356,640  246,400
     Austar Bank Facility....................................   67,352   67,352
     Other...................................................    2,923    2,923
                                                              -------- --------
       Total................................................. $427,327 $317,087
                                                              ======== ========
</TABLE>

Debt Maturities

The maturities of the Company's senior discount notes, senior notes and other
long-term debt are as follows (in thousands):

<TABLE>
   <S>                                                                 <C>
   Year Ended December 31, 2000....................................... $  1,574
   Year Ended December 31, 2001.......................................    5,492
   Year Ended December 31, 2002.......................................  194,069
   Year Ended December 31, 2003.......................................   62,205
   Year Ended December 31, 2004.......................................   96,839
   Thereafter.........................................................  487,011
                                                                       --------
     Total............................................................ $847,190
                                                                       ========
</TABLE>

Other Financial Instruments

Interest rate swap agreements are used by the Company from time to time to
manage interest rate risk on its floating rate debt facilities. Interest rate
swaps are entered into depending on the Company's assessment of the market,
and generally are used to convert floating rate debt to fixed rate debt.
Interest differentials paid or received under these swap agreements are
recognized over the life of the contracts as adjustments to the effective
yield of the underlying debt, and related amounts payable to, or receivable
from, the counterparties are included in the consolidated balance sheet.
Currently, the Company has four interest rate swaps to manage interest rate
exposure on the New Austar Bank Facility and one interest rate swap to manage
exposure on the Saturn Bank Facility. Two of the swap agreements on the New
Austar Bank Facility expire in 2002 and effectively convert

                                     F-86
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

one aggregate principal amount of A$50.0 ($32.8 million) of variable rate,
long-term debt into fixed rate borrowings. The other two swap agreements
expire in 2004 and convert an aggregate principal amount of A$100.0 ($65.6)
million of variable rate, long-term debt into fixed rate borrowings. The swap
agreement on the Saturn Bank Facility effectively converts an aggregate
principal amount of NZ$60.0 ($31.7) million of variable rate, long-term debt
into fixed rate borrowings. The interest rate swap includes an increasing
fixed rate with an additional margin which is expected to decline as the debt
to EBITDA ratio declines.

11. Note Payable to Parent

<TABLE>
<CAPTION>
                                                        As of        As of
                                                     December 31, December 31,
                                                         1999         1998
                                                     ------------ ------------
   <S>                                               <C>          <C>
   Note payable to parent, including accrued
    interest of $42,760 and $16,693, respectively..    $446,288     $107,396
                                                       ========     ========
</TABLE>

In December 1995, United loaned the Company $29.8 million in connection with
the purchase of the remaining interest of Austar. The loan accrues interest at
14.0% per annum. Although the terms of the loan state that it is due on
demand, United does not intend to demand payment during the next fiscal year.
Therefore, the loan and related accrued interest are classified as long-term.

In March 1998, United loaned the Company $60.9 million in connection with
funding the general operations of ULA as well as repayment of a portion of the
ULA Revolving Credit Facility. The United loan accrues interest at 10.75% per
annum. Although the terms of the loan state that it is due on demand, United
does not intend to demand payment during the next fiscal year. Therefore, the
loan and related accrued interest are classified as long-term.

In February 1997, United made a bridge loan to ULA of $37.5 million. Interest
on the note accrued at LIBOR plus 6.0%. In November 1997, ULA repaid the note
plus interest with proceeds from the Argentina Transaction.

United provides certain administrative, financial reporting and other services
to the Company, which has no separate employees of its own. In addition,
United Management, Inc. ("United Management"), a wholly-owned subsidiary of
the Company, has executed technical assistance agreements with various
operating systems, pursuant to which United Management provides various
management and technical services to these operating systems for a fee equal
to a percentage of that operating system's gross revenue. United has appointed
certain of its employees to serve in senior management positions at the
operating systems. The operating systems reimburse United for certain direct
costs incurred by United, including salaries and benefits relating to these
senior management positions.

12. Parent's Deficit

Common Stock

Authorized capital consists of 1,000 shares of Common Stock, $.01 par value,
100 shares issued and outstanding, held by United. Such shares have been
pledged as collateral under United's 1998 Notes.

Cumulative Translation Adjustments

During the year ended December 31, 1999, the Company recorded a negative
change in cumulative translation adjustments of $20.2 primarily due to the
strengthening of the U.S. dollar to the Chilean peso of approximately 12.1%.

                                     F-87
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Equity Transactions of Subsidiaries

Variable plan accounting for stock options and the recognition of deferred
compensation expense by the Company's subsidiaries affects the equity accounts
of the Company. The following represents the effect on additional paid-in
capital and deferred compensation as a result of these equity transactions:

<TABLE>
<CAPTION>
                                                                 For the Year
                                                                     Ended
                                                               December 31, 1999
                                                               -----------------
                                                                (In thousands)
   <S>                                                         <C>
   Variable plan accounting for stock options.................     $ 40,883
   Deferred compensation expense..............................      (40,883)
   Amortization of deferred compensation......................       22,540
                                                                   --------
     Total....................................................     $ 22,540
                                                                   ========
</TABLE>

Other Cumulative Comprehensive Loss

<TABLE>
<CAPTION>
                                                                  As of
                                                              December 31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
                                                             (In thousands)
   <S>                                                      <C>       <C>
   Foreign currency translation adjustments................ $(84,920) $(64,748)
   Unrealized gain on available-for-sale securities........      645      (154)
                                                            --------  --------
     Total................................................. $(84,275) $(64,902)
                                                            ========  ========
</TABLE>

Stock Option Plans

UAP Plan

In March 1998, UAP's Board of Directors approved a stock option plan (the "UAP
Plan") which permitted the grant of phantom stock options or the grant of
stock options to purchase up to 1,800,000 shares of UAP's Class A Common
Stock. The options vested in equal monthly increments over a four-year period
following the date of grant, and gave the employee the right with respect to
vested options to receive a cash payment equal to the difference between the
fair market value of a share of UAP stock and the option base price per share.
The UAP Plan was cancelled effective July 22, 1999. Under variable plan
accounting, a total of $17.6 million of compensation expense was recognized
during 1999 by UAP through the cancellation date.

A summary of phantom stock option activity for the UAP Plan is as follows:

<TABLE>
<CAPTION>
                                For the Year Ended      For the Ten Months Ended
                                 December 31, 1999         December 31, 1998
                             -------------------------- ------------------------
                                           Weighted-                Weighted-
                                            Average                  Average
                               Number    Exercise Price  Number   Exercise Price
                             ----------  -------------- --------- --------------
   <S>                       <C>         <C>            <C>       <C>
   Outstanding at beginning
    of period..............   1,779,500      $10.00           --         --
   Granted during the
    period.................      65,000      $10.00     1,779,500     $10.00
   Cancelled during the
    period.................  (1,844,500)     $10.00           --         --
   Exercised during the
    period.................         --          --            --         --
                             ----------      ------     ---------     ------
   Outstanding at end of
    period.................         --          --      1,779,500     $10.00
                             ==========      ======     =========     ======
   Exercisable at end of
    period.................         --          --        584,063     $10.00
                             ==========      ======     =========     ======
</TABLE>

                                     F-88
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The combined weighted-average fair values and weighted-average exercise prices
of options are granted as follows:

<TABLE>
<CAPTION>
                               For the Year Ended   For the Ten Months Ended
                               December 31, 1999        December 31, 1998
                             ---------------------- -------------------------
                                     Fair  Exercise            Fair  Exercise
                             Number Value   Price    Number   Value   Price
                             ------ ------ -------- --------- ------ --------
   <S>                       <C>    <C>    <C>      <C>       <C>    <C>
   Exercise price equal to
    market price............ 65,000 $10.00  $10.00  1,779,500 $10.00  $10.00
</TABLE>

Austar United Plan

On June 17, 1999, Austar United established a stock option plan (the "Austar
United Plan"). Effective on Austar United's initial public offering date of
July 27, 1999, certain employees of United and Austar United were granted
options under the Austar United Plan in direct proportion to their previous
holding of UAP options under the UAP Plan along with retroactive vesting
through the initial public offering date to reflect vesting under the UAP
Plan. The maximum term of options granted under the Austar United Plan is ten
years. The options vest in equal monthly increments over a four-year period
following the date of grant. Under the Austar United Plan, options to purchase
a total of 28,760,709 shares have been authorized, of which 3,231,428 were
available for grant. The Austar United Plan was accounted for as a variable
plan prior to Austar United's initial public offering and as a fixed plan
effective July 27, 1999. For the year ended December 31, 1999, $4.9 million of
compensation expense was recognized by Austar United in the statement of
operations.

For purposes of the proforma disclosures presented below, Austar United has
computed the fair values of all options granted during the year ended December
31, 1999 using the Black-Scholes single-option pricing model and the following
weighted-average assumptions:

<TABLE>
   <S>                                                                   <C>
   Risk-free interest rate..............................................   5.81%
   Expected life........................................................ 7 years
   Expected volatility..................................................  40.44%
   Expected dividend yield..............................................      0%
</TABLE>

The total fair value of options granted was approximately A$88.0 ($57.7)
million for the year ended December 31, 1999. This amount is amortized using
the straight-line method over the vesting period of the options. Cumulative
compensation expense recognized in proforma net income, with respect to
options that are forfeited prior to vesting, is adjusted as a reduction of
proforma compensation expense in the period of forfeiture. Stock-based
compensation, net of the effect of forfeitures and net of actual compensation
expense recorded in the statement of operations was nil for the year ended
December 31, 1999.

A summary of stock option activity for the Austar United Plan is as follows:

<TABLE>
<CAPTION>
                                                         For the Year Ended
                                                          December 31, 1999
                                                      --------------------------
                                                                    Weighted-
                                                                     Average
                                                        Number    Exercise Price
                                                      ----------  --------------
                                                                   (Australian
                                                                     dollars)
   <S>                                                <C>         <C>
   Outstanding at beginning of period................        --         --
   Granted during the period......................... 25,631,736       2.26
   Cancelled during the period.......................   (102,455)      3.75
   Exercised during the period.......................   (684,250)      1.83
                                                      ----------       ----
   Outstanding at end of period...................... 24,845,031       2.27
                                                      ==========       ====
   Exercisable at end of period...................... 11,564,416       1.90
                                                      ==========       ====
</TABLE>

                                     F-89
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:

<TABLE>
<CAPTION>
                                                          For the Year Ended
                                                           December 31, 1999
                                                       -------------------------
                                                                  Fair  Exercise
   Exercise Price                                        Number   Value  Price
   --------------                                      ---------- ----- --------
                                                                   (Australian
                                                                     dollars)
   <S>                                                 <C>        <C>   <C>
   Less than market price............................. 22,334,236 3.58    1.91
   Equal to market price..............................  3,222,500 2.47    4.70
   Greater than market price..........................     75,000 2.43    4.70
                                                       ---------- ----    ----
                                                       25,631,736 3.43    2.26
                                                       ========== ====    ====
</TABLE>

The following table summarizes information about the Austar United Plan
options outstanding and exercisable at December 31, 1999:

<TABLE>
<CAPTION>
                                                                   Options
                                         Options Outstanding     Exerciseable
                                     --------------------------- ------------
                                                Weighted-Average
                                                   Remaining
   Exercise Price (Australian                   Contractual Life
   dollars)                            Number       (Years)         Number
   --------------------------        ---------- ---------------- ------------
   <S>                               <C>        <C>              <C>
   1.80............................. 20,813,572       9.55        11,171,494
   4.70.............................  4,031,459       9.60           392,922
                                     ----------       ----        ----------
                                     24,845,031       9.56        11,564,416
                                     ==========       ====        ==========
</TABLE>

ULA Plan

In April 1998, ULA's Board of Directors approved a stock option plan (the "ULA
Plan") which permits the grant of phantom stock options or the grant of stock
options to purchase up to 1,631,000 shares of ULA's Class A Common Stock. The
options vest in equal monthly increments over a four-year period following the
date of grant. Concurrent with approval of the ULA Plan, ULA's Board granted
phantom stock options to certain employees which gives the employee the right
with respect to vested options to receive a cash payment equal to the
difference between the fair market value of a share of ULA stock and the
option base price per share. The ULA Plan is accounted for as a variable plan
in accordance with its terms, resulting in compensation expense for the
difference between the grant price and the fair market value at each financial
statement date. For the year ended December 31, 1999 and the ten months ended
December 31, 1998, ULA recognized $(1.0) and $2.7 million in non-cash
compensation (credit) expense related to these phantom options, respectively.
Actual cash paid upon exercise of these phantom options was $0.6 million and
$1.1 million for the year ended December 31, 1999 and the ten months ended
December 31, 1998, respectively.

                                     F-90
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


A summary of phantom stock option activity for the ULA Plan is as follows:

<TABLE>
<CAPTION>
                                For the Year Ended     For the Ten Months Ended
                                December 31, 1999         December 31, 1998
                             ------------------------- -------------------------
                                          Weighted-                 Weighted-
                                           Average                   Average
                              Number    Exercise Price  Number    Exercise Price
                             ---------  -------------- ---------  --------------
   <S>                       <C>        <C>            <C>        <C>
   Outstanding at beginning
    of period..............  1,188,417      $5.77            --         --
   Granted during the
    period.................    340,000      $8.86      1,785,500      $5.63
   Cancelled during the
    period.................   (328,647)     $4.84       (317,296)     $5.47
   Exercised during the
    period.................   (137,083)     $4.81       (279,787)     $5.19
                             ---------      -----      ---------      -----
   Outstanding at end of
    period.................  1,062,687      $7.17      1,188,417      $5.77
                             =========      =====      =========      =====
   Exercisable at end of
    period.................    381,561      $5.87        268,730      $4.86
                             =========      =====      =========      =====
</TABLE>

The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:

<TABLE>
<CAPTION>
                                  For the Year Ended   For the Ten Months Ended
                                  December 31, 1999       December 31, 1998
                                ---------------------- ------------------------
                                        Fair  Exercise           Fair  Exercise
                                Number  Value  Price    Number   Value  Price
                                ------- ----- -------- --------- ----- --------
   <S>                          <C>     <C>   <C>      <C>       <C>   <C>
   Exercise price equal to
    market price..............  340,000 $8.86  $8.86     945,500 $5.81  $5.81
   Exercise price greater than
    market price..............      --    --     --      840,000 $4.26  $5.43
                                ------- -----  -----   --------- -----  -----
     Total....................  340,000 $8.86  $8.86   1,785,500 $5.08  $5.63
                                ======= =====  =====   ========= =====  =====
</TABLE>

The following table summarizes information about the ULA Plan phantom options
outstanding and exercisable at December 31, 1999:

<TABLE>
<CAPTION>
                                                                       Options
                                             Options Outstanding     Exercisable
                                          -------------------------- -----------
                                                    Weighted-Average
                                                       Remaining
                                                    Contractual Life
   Exercise Price                          Number       (Years)        Number
   --------------                         --------- ---------------- -----------
   <S>                                    <C>       <C>              <C>
   $4.26.................................   312,687       7.43         197,187
   $4.96.................................   100,000       7.43          62,500
   $8.81.................................    95,000       9.40          16,249
   $8.86.................................   245,000       9.96           9,375
   $8.98.................................   310,000       8.72          96,250
                                          ---------       ----         -------
     Total............................... 1,062,687       8.57         381,561
                                          =========       ====         =======
</TABLE>

13. Commitments

The Company has entered into various operating lease agreements for office
space, office furniture and equipment, and vehicles. Rental expense under
these lease agreements totaled $5.8, $2.0 and $3.5 million for the year ended
December 31, 1999, the ten months ended December 31, 1998 and for the year
ended February 28, 1998, respectively.

                                     F-91
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The Company has operating lease obligations and other non-cancelable
commitments as follows (in thousands):

<TABLE>
   <S>                                                                   <C>
   Year ended December 31, 2000......................................... $3,263
   Year ended December 31, 2001.........................................  2,939
   Year ended December 31, 2002.........................................  1,282
   Year ended December 31, 2003.........................................    501
   Year ended December 31, 2004 and thereafter..........................    558
                                                                         ------
     Total.............................................................. $8,543
                                                                         ======
</TABLE>

The Company has minimum fixed MMDS license fees and programming license fees
payable annually at Austar United as follows (in thousands):

<TABLE>
   <S>                                                                  <C>
   Year ended December 31, 2000........................................ $ 4,159
   Year ended December 31, 2001........................................   4,178
   Year ended December 31, 2002........................................   4,178
   Year ended December 31, 2003........................................   4,178
   Year ended December 31, 2004........................................   4,178
   Thereafter..........................................................   7,164
                                                                        -------
     Total............................................................. $28,035
                                                                        =======
</TABLE>

A subsidiary of Austar has a five-year agreement to lease a 54 MHz satellite
transponder. Pursuant to the agreement, which commenced September 1, 1997,
Austar will pay approximately $4,440 in satellite service fees annually as
follows (in thousands):

<TABLE>
   <S>                                                                  <C>
   Year ended December 31, 2000........................................ $ 4,440
   Year ended December 31, 2001........................................   4,440
   Year ended December 31, 2002........................................   2,960
                                                                        -------
     Total............................................................. $11,840
                                                                        =======
</TABLE>

14. Contingencies

From time to time, the Company and/or its subsidiaries may become involved in
litigation relating to claims arising out of its operations in the normal
course of business. The Company is not a party to any material legal
proceedings, nor is it currently aware of any threatened material legal
proceedings.

15. Income Taxes

In general, a United States corporation may claim a foreign tax credit against
its federal income tax expense for foreign income taxes paid or accrued.
Because the Company must calculate its foreign tax credit separately for
dividends received from each foreign corporation in which the Company owns
10.0% to 50.0% of the voting stock, and because of certain other limitations,
the Company's ability to claim a foreign tax credit may be limited,
particularly with respect to dividends paid out of earnings subject to a high
rate of foreign income tax. Generally, the Company's ability to claim a
foreign tax credit is limited to the amount of U.S. taxes the Company pays
with respect to its foreign source income. In calculating its foreign source
income, the Company is required to allocate interest expense and overhead
incurred in the United States between its United States and foreign
activities. Accordingly, to the extent United States borrowings are used to
finance equity contributions to its foreign subsidiaries, the Company's
ability to claim a foreign tax credit may be significantly reduced. These
limitations and the inability of the Company to offset losses in one foreign
jurisdiction against income earned in another foreign jurisdiction could
result in a high effective tax rate on the Company's earnings.

                                     F-92
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The primary differences between taxable income (loss) and net income (loss)
for financial reporting purposes relate to SAB 51 gains, the non-consolidation
of consolidated foreign subsidiaries for United States tax purposes,
international rate differences and the current non-deductibility of interest
expense on United A/P's senior notes. For investments in foreign corporations
accounted for under the equity method, taxable income (loss) generated by
these affiliates does not flow through to the Company for United States
federal and state tax purposes, even though the Company records its allocable
share of affiliate income (losses) for financial reporting purposes.
Accordingly, due to the indefinite reversal of such amounts in future periods,
no deferred tax asset has been established for tax basis in excess of the
Company's book basis (approximately $69.9 and $133.0 million at December 31,
1999 and 1998, respectively).

The Company's United States tax net operating losses, totaling approximately
$175.0 million at December 31, 1999, expire beginning in 2014 through 2029.
The Company's tax net operating loss carryforwards of its consolidated foreign
subsidiaries as of December 31, 1999 totaled $438.0 million and $79.0 million
for UAP and ULA, respectively. The significant components of the net deferred
tax asset are as follows:

<TABLE>
<CAPTION>
                                                          As of December 31,
                                                          --------------------
                                                            1999       1998
                                                          ---------  ---------
                                                            (In thousands)
<S>                                                       <C>        <C>
Deferred Tax Assets:
  Tax net operating loss carryforward of consolidated
   foreign subsidiaries.................................. $ 171,835  $ 111,152
  Company's U.S. tax net operating loss carryforward.....    66,674     66,099
  Accrued interest expense on the United A/P Notes.......    52,040     32,885
  Investment valuation allowance and other...............     3,465      2,605
  Basis difference in marketable equity securities.......     3,074      3,070
  Deferred compensation and severence....................     2,103        144
  Stock-based compensation...............................       622        --
  Other..................................................     5,918       (319)
                                                          ---------  ---------
    Total deferred tax assets............................   305,731    215,636
  Valuation allowance....................................  (294,602)  (215,636)
                                                          ---------  ---------
    Deferred tax assets, net of valuation allowance......    11,129        --
                                                          ---------  ---------
Deferred Tax Liabilities:
  Intangible assets......................................       (64)       --
  Property, plant and equipment, net.....................    (5,245)       --
  Other..................................................    (1,016)       --
                                                          ---------  ---------
    Total deferred tax liabilities.......................    (6,325)       --
                                                          ---------  ---------
    Deferred tax assets, net............................. $   4,804  $     --
                                                          =========  =========
</TABLE>

                                     F-93
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Of the Company's 1999 consolidated loss before income taxes and other items,
$232.1 million is derived from the Company's foreign operations. The
difference between income tax expense (benefit) provided in the financial
statements and the expected income tax expense (benefit) at statutory rates is
reconciled as follows:

<TABLE>
<CAPTION>
                                        For the Year For the Ten  For the Year
                                           Ended     Months Ended    Ended
                                        December 31, December 31, February 28,
                                            1999         1998         1998
                                        ------------ ------------ ------------
                                                    (In thousands)
   <S>                                  <C>          <C>          <C>
   Expected income tax benefit at the
    U.S. statutory rate of 35%.........   $(21,806)    $(68,022)    $(74,886)
   Tax effect of permanent and other
    differences:
     Change in valuation allowance.....     73,334       65,588       65,257
     Gain on issuance of common equity
      securities by subsidiaries.......    (94,377)         --           --
     International rate differences....     18,985         (855)        (515)
     Non-deductible expenses...........      9,067        4,279          987
     Book/tax basis differences
      associated with foreign
      investments......................        788        1,176       12,119
     State tax, net of federal
      benefit..........................     (1,869)      (5,830)      (6,419)
     Non-deductible interest accretion
      on the United A/P Notes..........      1,693        2,148        2,145
     Amortization of licenses..........        923        1,516        1,312
     Gain on sale of equity investment
      in subsidiary....................      5,877          --           --
     Other.............................      9,476          --           --
                                          --------     --------     --------
       Total income tax expense........   $  2,091     $    --      $    --
                                          ========     ========     ========
</TABLE>

The Company through its subsidiaries maintains a presence in 23 countries.
Many of these countries maintain tax regimes that differ significantly from
the system of income taxation used in the United States, such as a value added
tax system. The Company has accounted for the effect of foreign taxes based on
what it believes is reasonably expected to apply to the Company and its
subsidiaries based on tax laws currently in effect and/or reasonable
interpretations of these laws. Because some foreign jurisdictions do not have
systems of taxation that are as well established as the system of income
taxation used in the United States or tax regimes used in other major
industrialized countries, it may be difficult to anticipate how foreign
jurisdictions will tax current and future operations of the Company and its
subsidiaries.

                                     F-94
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


16. Segment and Geographic Information

<TABLE>
<CAPTION>
                                  For the Year Ended December 31, 1999                       As of December 31, 1999
                    -----------------------------------------------------------------  -----------------------------------
                                                                                         Long-
                    Multichannel                          Internet                       Lived      Capital       Total
                     Television  Telephone  Programming     Data    Other     Total    Assets(2)  Expenditures    Assets
                    ------------ --------- -------------- -------- --------  --------  --------- -------------- ----------
                                           (In thousands)                                        (In thousands)
<S>                 <C>          <C>       <C>            <C>      <C>       <C>       <C>       <C>            <C>
Revenue:
 Asia/Pacific:
 Australia........    $144,632    $   --        $--         $--    $    --   $144,632  $123,617     $ 94,513    $  563,627
 New Zealand......       1,279      4,107        --          734        --      6,120    95,777       23,306        76,139
 Corporate and
  Other...........         --         --         --          --         180       180     8,051        3,014        54,218
                      --------    -------       ----        ----   --------  --------  --------     --------    ----------
  Total
   Asia/Pacific...     145,911      4,107        --          734        180   150,932   227,445      120,833       693,984
                      --------    -------       ----        ----   --------  --------  --------     --------    ----------
 Latin America:
 Chile............      77,476      9,881        --          --          87    87,444   213,146       53,120       489,638
 Brazil...........       4,637        --         --          --         --      4,637     5,679        4,399        17,172
 Corporate and
  Other...........       2,428        --         --          --         384     2,812    14,199        3,167        72,863
                      --------    -------       ----        ----   --------  --------  --------     --------    ----------
  Total Latin
   America........      84,541      9,881        --          --         471    94,893   233,024       60,686       579,673
                      --------    -------       ----        ----   --------  --------  --------     --------    ----------
 Corporate &
  Other...........         --         --         --          --         --        --        --           --            --
                      --------    -------       ----        ----   --------  --------  --------     --------    ----------
  Total Company...    $230,452    $13,988       $--         $734   $    651  $245,825  $460,469     $181,519    $1,273,657
                      ========    =======       ====        ====   ========  ========  ========     ========    ==========
Adjusted
 EBITDA:(1)
 Asia/Pacific:
 Australia........    $ (4,742)   $   --        $--         $--    $    --   $ (4,742)
 New Zealand......        (918)    (1,160)       --          (47)       --     (2,125)
 Corporate and
  Other...........         --         --         --          --      (5,474)   (5,474)
                      --------    -------       ----        ----   --------  --------
  Total
   Asia/Pacific...      (5,660)    (1,160)       --          (47)    (5,474)  (12,341)
                      --------    -------       ----        ----   --------  --------
 Latin America:
 Chile............      17,744    $(2,604)       --          --         --     15,140
 Brazil...........      (2,462)       --         --          --         --     (2,462)
 Corporate and
  Other...........      (1,210)       --         --          --      (4,609)   (5,819)
                      --------    -------       ----        ----   --------  --------
  Total Latin
   America........      14,072     (2,604)       --          --      (4,609)    6,859
                      --------    -------       ----        ----   --------  --------
 Corporate &
  Other...........         --         --         --          --         --        --
                      --------    -------       ----        ----   --------  --------
  Total Company...    $  8,412    $(3,764)      $--         $(47)  $(10,083) $ (5,482)
                      ========    =======       ====        ====   ========  ========
</TABLE>

                                      F-95
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


<TABLE>
<CAPTION>
                                  For the Ten Months Ended December 31, 1998                 As of December 31, 1998
                         --------------------------------------------------------------  -------------------------------
                                                                                           Long-
                         Multichannel                       Internet                       Lived     Capital     Total
                          Television  Telephone Programming   Data    Other     Total    Assets(2) Expenditures  Assets
                         ------------ --------- ----------- -------- --------  --------  --------- ------------ --------
                                                (In thousands)                                   (In thousands)
<S>                      <C>          <C>       <C>         <C>      <C>       <C>       <C>       <C>          <C>
Revenue:
 Europe:
 Corporate and other...    $    --      $--        $--        $--    $    --   $    --   $    --     $   --     $  6,639
                           --------     ----       ----       ----   --------  --------  --------    -------    --------
 Asia/Pacific:
 Australia.............      74,209      --         --         --         --     74,209   110,351     71,197     181,169
 New Zealand...........         --       --         --         --         --        --        --         --       23,789
 Corporate and Other...       3,060      --         --         --         --      3,060        61        337      48,992
                           --------     ----       ----       ----   --------  --------  --------    -------    --------
  Total Asia/Pacific...      77,269      --         --         --         --     77,269   110,412     71,534     253,950
                           --------     ----       ----       ----   --------  --------  --------    -------    --------
 Latin America:
 Chile.................         --       --         --         --         --        --        --         --       84,975
 Corporate and Other...       4,135      --         --         --         377     4,512    11,715      3,238      73,048
                           --------     ----       ----       ----   --------  --------  --------    -------    --------
  Total Latin America..       4,135      --         --         --         377     4,512    11,715      3,238     158,023
                           --------     ----       ----       ----   --------  --------  --------    -------    --------
 Corporate & Other.....         --       --         --         --         --        --      7,944        682      13,543
                           --------     ----       ----       ----   --------  --------  --------    -------    --------
  Total Company........    $ 81,404     $--        $--        $--    $    377  $ 81,781  $130,071    $75,454    $432,155
                           ========     ====       ====       ====   ========  ========  ========    =======    ========
Adjusted EBITDA:(1)
 Europe:
 Corporate and Other...    $    --      $--        $--        $--    $    --   $    --
                           --------     ----       ----       ----   --------  --------
 Asia/Pacific:
 Australia.............     (31,093)     --         --         --         --    (31,093)
 New Zealand...........         --       --         --         --         --        --
 Corporate and Other...         --       --         --         --      (2,287)   (2,287)
                           --------     ----       ----       ----   --------  --------
  Total Asia/Pacific...     (31,093)     --         --         --      (2,287)  (33,380)
                           --------     ----       ----       ----   --------  --------
 Latin America:
 Chile.................         --       --         --         --         --        --
 Corporate and Other...      (2,969)     --         --         --      (7,295)  (10,264)
                           --------     ----       ----       ----   --------  --------
  Total Latin America..      (2,969)     --         --         --      (7,295)  (10,264)
                           --------     ----       ----       ----   --------  --------
 Corporate & Other.....         --       --         --         --      (1,209)   (1,209)
                           --------     ----       ----       ----   --------  --------
  Total Company........    $(34,062)    $--        $--        $--    $(10,791) $(44,853)
                           ========     ====       ====       ====   ========  ========
</TABLE>


                                      F-96
<PAGE>

                     UNITED INTERNATIONAL PROPERTIES, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                   For the Year Ended February 28, 1998                      As of February 28, 1998
                     -----------------------------------------------------------------  ---------------------------------
                                                                                          Long-
                     Multichannel                          Internet                       Lived      Capital      Total
                      Television  Telephone  Programming     Data    Other     Total    Assets(2)  Expenditures   Assets
                     ------------ --------- -------------- -------- --------  --------  --------- -------------- --------
                                            (In thousands)                                        (In thousands)
<S>                  <C>          <C>       <C>            <C>      <C>       <C>       <C>       <C>            <C>
Revenue:
 Europe :
 Corporate and
  other............    $    --      $ --        $ --        $ --    $    --   $    --   $    --      $    --     $ 14,329
                       --------     -----       -----       -----   --------  --------  --------     --------    --------
 Asia/Pacific:
 Australia.........      64,370       --          --          --         --     64,370   147,871       84,375     202,325
 New Zealand.......         473       --          --          --         --        473    26,484       16,258      43,349
 Corporate and
  Other............       4,118       --          --          --         --      4,118     8,746          502      48,871
                       --------     -----       -----       -----   --------  --------  --------     --------    --------
  Total
   Asia/Pacific....      68,961       --          --          --         --     68,961   183,101      101,135     294,545
                       --------     -----       -----       -----   --------  --------  --------     --------    --------
 Latin America:
 Argentina.........      17,627       --          --          --         --     17,627       --         1,329         --
 Chile.............         --        --          --          --         --        --        --           --       78,165
 Corporate and
  Other............       1,617       --          --          --         --      1,617     6,541        3,112      69,102
                       --------     -----       -----       -----   --------  --------  --------     --------    --------
  Total Latin
   America.........      19,244       --          --          --         --     19,244     6,541        4,441     147,267
                       --------     -----       -----       -----   --------  --------  --------     --------    --------
 Corporate &
  Other............         --        --          --          --         439       439     9,042        1,200      18,288
                       --------     -----       -----       -----   --------  --------  --------     --------    --------
  Total Company....    $ 88,205     $ --        $ --        $ --    $    439  $ 88,644  $198,684     $106,776    $474,429
                       ========     =====       =====       =====   ========  ========  ========     ========    ========
Adjusted EBITDA:(1)
 Europe:
 Corporate and
  Other............    $    --      $ --        $ --        $ --    $    --   $    --
                       --------     -----       -----       -----   --------  --------
 Asia/Pacific:
 Australia.........     (24,082)      --          --          --         --    (24,082)
 New Zealand.......      (6,688)      --          --          --         --     (6,688)
 Corporate and
  Other............        (254)      --          --          --      (6,938)   (7,192)
                       --------     -----       -----       -----   --------  --------
  Total
   Asia/Pacific....     (31,024)      --          --          --      (6,938)  (37,962)
                       --------     -----       -----       -----   --------  --------
 Latin America:
 Argentina.........       2,836       --          --          --         --      2,836
 Chile.............         --        --          --          --         --        --
 Corporate and
  Other............        (952)      --          --          --     (10,162)  (11,114)
                       --------     -----       -----       -----   --------  --------
  Total Latin
   America.........       1,884       --          --          --     (10,162)   (8,278)
                       --------     -----       -----       -----   --------  --------
 Corporate &
  Other............                   --          --          --      (7,637)   (7,637)
                       --------     -----       -----       -----   --------  --------
  Total Company....    $(29,140)    $ --        $ --        $ --    $(24,737) $(53,877)
                       ========     =====       =====       =====   ========  ========
</TABLE>
-------
(1) Adjusted EBITDA represents earnings before depreciation, amortization and
    stock based compensation charges. Industry analysts generally consider
    Adjusted EBITDA to be a helpful way to measure the performance of cable
    television operations and communications companies. Management believes
    Adjusted EBITDA helps investors to assess the cash flow from operations
    from period to period and thus to value the Company's business. Adjusted
    EBITDA should not, however, be considered a replacement for net income,
    cash flows or for any other measure of performance or liquidity under
    generally accepted accounting principles, or as an indicator of a
    company's operating performance. The presentation of Adjusted EBITDA may
    not be comparable to statistics with a similar name reported by other
    companies. Not all companies and analysts calculate Adjusted EBITDA in the
    same manner.
(2) Represents Property, Plant and Equipment.

Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:

<TABLE>
<CAPTION>
                               For the Year       For the Ten      For the Year
                                   Ended         Months Ended          Ended
                             December 31, 1999 December 31, 1998 February 28, 1998
                             ----------------- ----------------- -----------------
                                                (In thousands)
   <S>                       <C>               <C>               <C>
   Net operating loss......      $(164,882)        $(129,739)        $(139,081)
   Depreciation and
    amortization...........        137,893            82,217            85,204
   Stock-based compensation
    expense................         21,507             2,669               --
                                 ---------         ---------         ---------
     Consolidated Adjusted
      EBITDA...............      $  (5,482)        $ (44,853)        $ (53,877)
                                 =========         =========         =========
</TABLE>

17. Subsequent Events

On March 29, 2000, Austar United announced the sale of 20.0 million shares to
the public at A$8.50 ($5.15) per share for gross proceeds to the Company of
A$170.0($103.0) million.

                                     F-97
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To UnitedGlobalCom, Inc.:

We have audited the accompanying consolidated balance sheets of United Europe,
Inc. (a Delaware corporation) (formerly UIH Europe, Inc.) and subsidiaries as
of December 31, 1999 and 1998 and the related consolidated statements of
operations, parent's equity (deficit) and cash flows for the year ended
December 31, 1999, the ten months ended December 31, 1998 (see Note 2) and the
year ended February 28, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform these audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of United Europe, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for the year ended
December 31, 1999, the ten months ended December 31, 1998 and the year ended
February 28, 1998 in conformity with accounting principles generally accepted
in the United States.

                                          Arthur Andersen LLP

Denver, Colorado
March 29, 2000

                                     F-98
<PAGE>

                              UNITED EUROPE, INC.

                          CONSOLIDATED BALANCE SHEETS
           (Stated in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                          As of December 31,
                                                         ----------------------
                                                            1999        1998
                                                         ----------  ----------
<S>                                                      <C>         <C>
                        ASSETS
Current assets
 Cash and cash equivalents.............................  $1,031,880  $   15,646
 Restricted cash.......................................      17,242      16,012
 Subscriber receivables, net of allowance for doubtful
  accounts of $16,859 and $4,899, respectively.........      60,234       6,818
 Costs to be reimbursed by affiliated companies........      10,566      14,432
 Other receivables.....................................      84,907      13,675
 Inventory.............................................      66,819      12,762
 Other current assets, net.............................      73,382       8,283
                                                         ----------  ----------
 Total current assets..................................   1,345,030      87,628
Investments in affiliates, accounted for under the
 equity method, net....................................     244,367     254,209
Marketable equity securities and other investments.....     627,244      53,499
Property, plant and equipment, net of accumulated
 depreciation of $195,329 and $46,406, respectively....   1,920,361     319,046
Goodwill and other intangible assets, net of
 accumulated amortization of $134,594 and $20,693,
 respectively..........................................   2,627,761     359,804
Deferred financing costs, net of accumulated
 amortization of $5,974 and $4,914, respectively.......      78,348      11,462
Other assets, net......................................       1,743       1,748
                                                         ----------  ----------
 Total assets..........................................  $6,844,854  $1,087,396
                                                         ==========  ==========
       LIABILITIES AND PARENT'S EQUITY (DEFICIT)
Current liabilities
 Accounts payable, including related party payables of
  $2,802 and $8,281, respectively......................  $  252,428  $   75,078
 Accrued liabilities...................................     274,857      30,097
 Subscriber prepayments and deposits...................      41,466      24,210
 Short-term debt.......................................     164,263      33,504
 Note payable to parent................................         --       92,609
 Current portion of senior discount notes and other
  long-term debt.......................................      50,606      60,063
                                                         ----------  ----------
 Total current liabilities.............................     783,620     315,561
Senior discount notes and senior notes.................   2,761,065         --
Other long-term debt...................................   1,166,780     621,560
Deferred compensation..................................      53,032     173,251
Deferred taxes.........................................      16,061       4,580
Other long-term liabilities............................      19,446       4,655
                                                         ----------  ----------
 Total liabilities.....................................   4,800,004   1,119,607
Minority interests in subsidiaries.....................     789,691      13,722
                                                         ----------  ----------
Parent's equity (deficit):
 Common stock, $0.01 par value, 1,000 shares
  authorized, 100 and 100 shares issued and
  outstanding, respectively, (pledged as collateral
  under parent's senior discount notes)................         --          --
 Additional paid-in capital............................     724,797     339,074
 Deferred compensation.................................    (101,653)        --
 Accumulated deficit...................................     394,472    (383,651)
 Other cumulative comprehensive income (loss)..........     237,543      (1,356)
                                                         ----------  ----------
 Total parent's equity (deficit).......................   1,255,159     (45,933)
                                                         ----------  ----------
Commitments and contingencies (Note 13 and 14)
 Total liabilities and parent's equity (deficit).......  $6,844,854  $1,087,396
                                                         ==========  ==========
</TABLE>

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

                                      F-99
<PAGE>

                              UNITED EUROPE, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
           (Stated in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                         For the Year For the Ten  For the Year
                                            Ended     Months Ended    Ended
                                         December 31, December 31, February 28,
                                             1999         1998         1998
                                         ------------ ------------ ------------
<S>                                      <C>          <C>          <C>
Revenue................................   $  473,422   $ 172,287     $  9,945
System operating expense...............     (309,277)    (57,123)      (2,754)
System selling, general and
 administrative expense................     (212,214)    (56,401)      (3,418)
Corporate general and administrative
 expense...............................     (281,702)   (178,279)      (7,320)
Depreciation and amortization..........     (280,442)    (76,550)      (6,086)
                                          ----------   ---------     --------
  Operating loss.......................     (610,213)   (196,066)      (9,633)
Gain on issuance of common equity
 securities by subsidiaries............    1,260,478         --           --
Interest income........................       29,458       3,440          --
Interest expense.......................     (194,512)    (38,524)      (2,045)
Interest expense, related party........       (1,719)     (6,022)         --
Provision for losses on marketable
 equity securities and investment
 related costs.........................          --       (3,131)         --
Foreign currency exchange (loss) gain..      (13,714)        233          --
Other (expense) income, net............       (7,544)      1,715           74
                                          ----------   ---------     --------
  Income (loss) before income taxes and
   other items.........................      462,234    (238,355)     (11,604)
Income tax benefit (expense)...........        1,893        (610)         --
Minority interests in subsidiaries.....      345,904         793         (117)
Share in results of affiliates, net....      (31,908)    (25,679)     (42,431)
                                          ----------   ---------     --------
  Net income (loss)....................   $  778,123   $(263,851)    $(54,152)
                                          ==========   =========     ========
Foreign currency translation
 adjustments...........................   $ (111,252)  $  (1,787)    $(11,872)
Unrealized holding gains arising during
 period................................      350,151      23,350          --
                                          ----------   ---------     --------
  Comprehensive income (loss)..........   $1,017,022   $(242,288)    $(66,024)
                                          ==========   =========     ========
</TABLE>


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

                                     F-100
<PAGE>

                              UNITED EUROPE, INC.

              CONSOLIDATED STATEMENTS OF PARENT'S EQUITY (DEFICIT)
                  (Stated in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                Other
                          Common Stock  Additional                           Cumulative
                          -------------  Paid-In     Deferred   Accumulated Comprehensive
                          Shares Amount  Capital   Compensation   Deficit   Income (Loss)   Total
                          ------ ------ ---------- ------------ ----------- ------------- ----------
<S>                       <C>    <C>    <C>        <C>          <C>         <C>           <C>
Balances, February 28,
 1997...................   100    $--    $159,241   $     --     $ (48,692)   $ (11,047)  $   99,502
Capital contributions
 from parent............   --      --     170,222         --           --           --       170,222
Net loss................   --      --         --          --       (54,152)         --       (54,152)
Change in cumulative
 translation
 adjustments............   --      --         --          --           --       (11,872)     (11,872)
                           ---    ----   --------   ---------    ---------    ---------   ----------
Balances, February 28,
 1998...................   100     --     329,463         --      (102,844)     (22,919)     203,700
Non-cash contributions
 from parent............   --      --       3,825         --           --           --         3,825
Gain on deemed issuance
 of stock by
 subsidiary.............   --      --       5,786         --           --           --         5,786
Elimination of
 historical two-month
 reporting difference
 due to change in fiscal
 year end...............   --      --         --          --       (16,956)         --       (16,956)
Net loss................   --      --         --          --      (263,851)         --      (263,851)
Change in unrealized
 gain on available-for-
 sale securities........   --      --         --          --           --        23,350       23,350
Change in cumulative
 translation
 adjustments............   --      --         --          --           --        (1,787)      (1,787)
                           ---    ----   --------   ---------    ---------    ---------   ----------
Balances, December 31,
 1998...................   100     --     339,074         --      (383,651)      (1,356)     (45,933)
Net income..............   --      --         --          --       778,123          --       778,123
Cash contributions from
 parent.................   --      --     (17,345)        --           --           --       (17,345)
Non-cash contributions
 from parent............   --      --      16,907         --           --           --        16,907
Equity transactions of
 subsidiaries...........   --      --     386,161    (180,757)         --           --       205,404
Amortization of deferred
 compensation...........   --      --         --       79,104          --           --        79,104
Change in cumulative
 translation............   --      --         --          --           --      (111,252)    (111,252)
Change in unrealized
 gain on available-for-
 sale securities........   --      --         --          --           --       350,151      350,151
                           ---    ----   --------   ---------    ---------    ---------   ----------
Balances, December 31,
 1999...................   100    $--    $724,797   $(101,653)   $ 394,472    $ 237,543   $1,255,159
                           ===    ====   ========   =========    =========    =========   ==========
</TABLE>


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

                                     F-101
<PAGE>

                              UNITED EUROPE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Stated in thousands)
<TABLE>
<CAPTION>
                                          For the Year  For the Ten  For the Year
                                             Ended      Months Ended    Ended
                                          December 31,  December 31, February 28,
                                              1999          1998         1998
                                          ------------  ------------ ------------
<S>                                       <C>           <C>          <C>
Cash flows from operating activities:
Net income (loss).......................  $   778,123    $(263,851)   $ (54,152)
Elimination of historical two month
 reporting difference due to change in
 fiscal year............................          --       (16,956)         --
Adjustments to reconcile net loss to net
 cash flows from operating activities:
  Gain on issuance of common equity
   securities by subsidiaries...........   (1,260,478)         --           --
  Share in results of affiliates, net...       31,298       31,903       42,431
  Allocation of general, administrative
   and other expenses accounted for as a
   net contribution of capital by
   parent...............................        3,395        3,825        7,322
  Minority interests in subsidiaries....     (345,904)        (569)         117
  Depreciation and amortization.........      280,442       92,986        6,086
  Accretion of interest on senior notes
   and amortization of deferred
   financing costs......................       49,980        4,640          109
  Stock-based compensation expense......      202,227      162,124          --
  Provision for losses on marketable
   equity securities and investment
   related costs........................          --         3,131          --
  Increase in receivables, net..........      (78,921)      (9,919)        (709)
  (Increase) decrease in other assets...      (46,997)      (5,364)         422
  Increase in accounts payable, accrued
   liabilities and other................      270,760       47,705        5,574
                                          -----------    ---------    ---------
    Net cash flows from operating
     activities.........................     (116,075)      49,655        7,200
                                          -----------    ---------    ---------
Cash flows from investing activities:
  Purchase of short-term liquid
   investments..........................     (267,809)         --           --
  Restricted cash (deposited) released..       (3,578)      19,576          --
  Investments in affiliates and other
   investments..........................     (354,036)    (100,665)    (111,628)
  Proceeds from sale of investments in
   affiliated companies.................       18,000       19,968          --
  New acquisitions, net of cash
   acquired.............................   (2,048,911)    (109,881)         --
  Capital expenditures..................     (612,232)    (141,547)      (7,461)
                                          -----------    ---------    ---------
    Net cash flows from investing
     activities.........................   (3,268,566)    (312,549)    (119,089)
                                          -----------    ---------    ---------
Cash flows from financing activities:
  Issuance of common stock by
   subsidiaries, net....................    2,331,522          --           --
  Issuance of common stock in connection
   with subsidiary stock option plan....       17,346          --           --
  Proceeds from offering of senior notes
   and senior discount notes............    2,540,813          --           --
  Proceeds from short-term and long term
   borrowings...........................      773,651      281,648          505
  Deferred financing costs..............      (78,886)      (5,037)         --
  Repayments of short-term and long-term
   borrowings...........................   (1,122,853)    (138,175)      (1,456)
  (Payment on) proceeds from note
   payable to parent....................      (80,587)      86,468          --
  Payment of sellers notes..............      (18,000)         --           --
  Capital contribution from parent......      (17,346)         --       162,500
  Cash paid to minority interest
   partners.............................          --          (253)         --
                                          -----------    ---------    ---------
    Net cash flows from financing
     activities.........................    4,345,660      224,651      161,549
                                          -----------    ---------    ---------
  Effect of exchange rates on cash......       55,215        4,723         (494)
                                          -----------    ---------    ---------
  Increase (decrease) in cash and cash
   equivalents..........................    1,016,234      (33,520)      49,166
  Cash and cash equivalents, beginning
   of period............................       15,646       49,166          --
                                          -----------    ---------    ---------
  Cash and cash equivalents, end of
   period...............................  $ 1,031,880    $  15,646    $  49,166
                                          ===========    =========    =========
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                     F-102
<PAGE>

                              UNITED EUROPE, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES:
  Cash paid for interest................   $  80,480     $34,706      $   --
                                           =========     =======      =======
  Cash received for interest............   $  26,248     $ 3,513      $   --
                                           =========     =======      =======
  Seller note for purchase of system in
   Hungary..............................   $     --      $18,000      $   --
                                           =========     =======      =======
Acquisition of 100% of @Entertainment:
  Net current assets....................   $ (51,239)    $   --       $   --
  Property, plant and equipment.........    (196,178)        --           --
  Goodwill..............................    (986,814)        --           --
  Long-term liabilities.................     448,566         --           --
  Other.................................     (21,335)        --           --
                                           ---------     -------      -------
    Total cash paid.....................    (807,000)        --           --
  Cash acquired.........................      62,507         --           --
                                           ---------     -------      -------
    Net cash paid.......................   $(744,493)    $   --       $   --
                                           =========     =======      =======
Acquisition of 100% of Stjarn:
  Property, plant and equipment.........   $ (43,171)    $   --       $   --
  Goodwill..............................    (442,094)        --           --
  Net current liabilities...............      55,997         --           --
  Long-term liabilities.................      32,268         --           --
                                           ---------     -------      -------
    Total purchase price................    (397,000)        --           --
  Seller's Note.........................     100,000         --           --
                                           ---------     -------      -------
    Total cash paid.....................    (297,000)        --           --
  Cash acquired.........................       3,792         --           --
                                           ---------     -------      -------
    Net cash paid.......................   $(293,208)    $   --       $   --
                                           =========     =======      =======
Acquisition of remaining 49.0% of UTH:
  Property, plant and equipment.........   $(210,013)    $   --       $   --
  Investments in affiliated companies...     (46,830)        --           --
  Goodwill..............................    (256,749)        --           --
  Net current liabilities...............       5,384         --           --
  Long-term liabilities.................     242,536         --           --
                                           ---------     -------      -------
    Total cash paid.....................    (265,672)        --           --
  Cash acquired.........................      13,629         --           --
                                           ---------     -------      -------
    Net cash paid.......................   $(252,043)    $   --       $   --
                                           =========     =======      =======
Acquisition of remaining 50.0% of A2000:
  Receivables assumed...................   $ (13,062)    $   --       $   --
  Property, plant and equipment.........     (96,539)        --           --
  Goodwill..............................    (274,361)        --           --
  Net current liabilities...............      25,044         --           --
  Long-term liabilities.................     129,918         --           --
                                           ---------     -------      -------
    Total cash paid.....................    (229,000)        --           --
  Cash acquired.........................         521         --           --
                                           ---------     -------      -------
    Net cash paid.......................   $(228,479)    $   --       $   --
                                           =========     =======      =======
</TABLE>

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

                                     F-103
<PAGE>

                              UNITED EUROPE, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                             (Stated in thousands)

<TABLE>
<CAPTION>
                                          For the Year For the Ten  For the Year
                                             Ended     Months Ended    Ended
                                          December 31, December 31, February 28,
                                              1999         1998         1998
                                          ------------ ------------ ------------
<S>                                       <C>          <C>          <C>
Acquisition of 100% of GelreVision:
  Property, plant and equipment.........   $ (49,407)    $    --     $     --
  Goodwill..............................     (67,335)         --           --
  Net current liabilities...............       2,682          --           --
  Long-term liabilities.................       4,236          --           --
                                           ---------     --------    ---------
    Total cash paid.....................    (109,824)         --           --
  Cash acquired.........................         136          --           --
                                           ---------     --------    ---------
    Net cash paid.......................   $(109,688)    $    --     $     --
                                           =========     ========    =========
Contributions of Dutch cable systems to
 new joint venture:
  Working capital.......................   $     --      $ (1,871)   $     --
  Investments in affiliated companies...         --        96,866          --
  Property, plant and equipment.........         --        85,037          --
  Goodwill and other intangible assets..         --        78,515          --
  Senior secured notes and other debt...         --      (111,553)         --
  Other liabilities.....................         --       (17,417)         --
                                           ---------     --------    ---------
    Total net assets contributed........   $     --      $129,577    $     --
                                           =========     ========    =========
Acquisition of Dutch cable assets:
  Property, plant and equipment and
   other long-term assets...............   $     --      $(51,632)   $     --
  Goodwill and other intangible assets..         --       (36,416)         --
                                           ---------     --------    ---------
    Total cash paid.....................   $     --      $(88,048)   $     --
                                           =========     ========    =========
Acquisition of additional 50.0% interest
 in UPC:
  Working capital, including cash
   acquired of $50,872..................   $     --      $    --     $  (7,158)
  Investment in UnitedGlobalCom, Inc.
   Class A Common Stock.................         --           --       (33,074)
  Investments in affiliated companies...         --           --      (167,945)
  Property, plant and equipment and
   other long-term assets...............         --           --      (273,988)
  Goodwill and other intangible assets..         --           --      (383,503)
  Elimination of United's equity
   investment in UPC....................         --           --        46,319
  Long-term debt........................         --           --       624,633
  Other liabilities.....................         --           --        32,216
                                           ---------     --------    ---------
    Total cash paid.....................   $     --      $    --     $(162,500)
                                           =========     ========    =========
</TABLE>

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

                                     F-104
<PAGE>

                              UNITED EUROPE, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Nature of Operations

United Europe, Inc. (the "Company" or "UEI") was formed as a Delaware
corporation in September 1989, for the purpose of developing, acquiring and
managing European multi-channel television, programming and telephony
operations. The Company is a wholly-owned subsidiary of UnitedGlobalCom, Inc.
("United").

The following chart presents a summary of the Company's significant
investments in telecommunications as of December 31, 1999.

                                    United


                                   100%

                                      UEI


                                  53.2%

                     United Pan-Europe Communications N.V.
                                    ("UPC")



<TABLE>
               <S>                    <C>
               Austria:
                Telekabel Group              95.0%
               Belgium:
                UPC Belgium                 100.0%
               Czech Republic:
                Kabel Net                   100.0%
                Kabel Plus                   94.6%
               France:
                UPC France                   99.6%(1)
               Germany:
                PrimaCom                     18.2%(2)
               Hungary:
                UPC Magyarorszag             79.3%
                Monor                        97.1%
               Ireland:
                Tara                         80.0%
               Israel:
                Tevel                        46.6%
               Malta:
                Melita                       50.0%
               The Netherlands:
                UPC Nederland               100.0%
               Norway:
                UPC Norge                   100.0%
               Poland:
                @Entertainment              100.0%
               Romania:
                UPC Romania           51.0%-100.0%
               Slovak Republic:
                UPC Slovak            95.0%-100.0%
               Spain/Portugal:
                Iberian Programming          50.0%
               Sweden:
                Stjarn                      100.0%
               United Kingdom:
                Xtra Music                   41.0%
               Other Business Lines:
                SBS                          13.3%(3)
                Priority Telecom            100.0%
                chello broadband            100.0%
                UPC tv                      100.0%
</TABLE>

(1) In February 2000, UPC's interest decreased to 92.0% (see Note 18).
(2) Subsequent to December 31, 1999, UPC increased its interest to 24.9%.
(3) In February 2000, UPC acquired an additional 10.2% interest in SBS for
    (Euro)162.5 ($163.5) million.

                                     F-105
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies

Basis of Presentation

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

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial
interest through the ownership of a majority voting interest. The following
illustrates those subsidiaries for which the Company consolidated the results
of operations for only a portion of the fiscal year ended December 31, 1999:

<TABLE>
<CAPTION>
                           Effective Date
Entity                    of Consolidation                    Reason
------                    ----------------                    ------
<S>                       <C>               <C>
UPC Nederland (1)         February 1, 1999  Acquisition of remaining 49.0% interest in
                                             United Telekabel Holding N.V. ("UTH")
UPC Slovensko (Slovak
 Republic)                June 1, 1999      Acquisition
GelreVision (The
 Netherlands)             June 1, 1999      Acquisition
Reseaux Cables de France
 ("RCF")                  June 1, 1999      Acquisition
Stjarn                    August 1, 1999    Acquisition
Videopole (France)        August 1, 1999    Acquisition
@Entertainment            August 1, 1999    Acquisition
Time Warner Cable France  September 1, 1999 Acquisition
A2000 (The Netherlands)   September 1, 1999 Acquisition of remaining 50.0% interest
Kabel Plus                October 1, 1999   Acquisition
Monor                     December 1, 1999  Acquisition
</TABLE>
--------
(1) Prior to the acquisition date, the equity method of accounting was used
    because of certain minority shareholder's rights.

The Company began consolidating UPC upon acquisition of the remaining 50.0%
interest on December 11, 1997. Prior to December 11, 1997, the Company
accounted for its investment in UPC under the equity method. All significant
intercompany accounts and transactions have been eliminated in consolidation.

Change in Fiscal Year-End

Prior to the ten months ended December 31, 1998, the Company's fiscal year-end
was February 28, and it accounted for its share of the income or loss of its
operating companies based on the calendar year results of each operating
company. This created a two month delay in reporting the operating company
results in the Company's consolidated results for its fiscal year-end. On
February 24, 1999, the Company changed its fiscal year-end from the last day
in February to the last day in December, effective December 31, 1998. To
effect the transaction to the new fiscal year, the combined results of
operations of the operating companies for January and February 1998, a loss of
$17.0 million, has been reported as a one-time adjustment to the retained
deficit as of March 1, 1998, in the consolidated statement of parent's equity
(deficit). Consequently, the consolidated statement of operations presents the
consolidated results of the Company and its subsidiaries for the ten months
ended December 31, 1998. For comparative purposes, the Company's consolidated
revenue, net operating loss and net loss were $9.9 million, $2.3 million and
$36.8 million, respectively, for the ten months ended December 31, 1997, and
the Company's consolidated revenue, net operating loss and net loss were
$203.1 million, $200.4 million and $280.8 million, respectively for the year
ended December 31, 1998.

                                     F-106
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Cash and Cash Equivalents and Short-Term Liquid Investments

Cash and cash equivalents include cash and investments with original
maturities of less than three months. Short-term liquid investments include
certificates of deposit, commercial paper, corporate bonds and government
securities which have original maturities greater than three months but less
than twelve months. Short-term liquid investments are classified as available-
for-sale and are reported at fair market value.

Restricted Cash

Cash held as collateral for letters of credit and other loans is classified
based on the expected expiration of such facilities. Cash held in escrow and
restricted to a specific use is classified based on the expected timing of
such disbursement.

Costs to be Reimbursed by Affiliated Companies

The Company incurs costs on behalf of affiliated companies, such as salaries
and benefits, travel and professional services. These costs are reimbursed by
the affiliated companies.

Inventory

Inventory is stated at the lower of cost (first-in, first-out basis) or
market.

Investments in Affiliates, Accounted for under the Equity Method

For those investments in unconsolidated subsidiaries and companies in which
the Company's voting interest is 20.0% to 50.0%, its investments are held
through a combination of voting common stock, preferred stock, debentures or
convertible debt and/or the Company exerts significant influence through board
representation and management authority, the equity method of accounting is
used. Under this method, the investment, originally recorded at cost, is
adjusted to recognize the Company's proportionate share of net earnings or
losses of the affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, including any debt guarantees or other
contractual funding commitments. The Company's proportionate share of net
earnings or losses of affiliates includes the amortization of the excess of
its cost over its proportionate interest in each affiliate's net assets.

Marketable Equity Securities and Other Investments

The cost method of accounting is used for the Company's other investments in
affiliates in which the Company's ownership interest is less than 20.0% and
where the Company does not exert significant influence, except for those
investments in marketable equity securities. The Company classifies its
investments in marketable equity securities in which its interest is less than
20.0% and where the Company does not exert significant influence as available-
for-sale and reports such investments at fair market value. Unrealized gains
and losses are charged or credited to equity, and realized gains and losses
and other-than-temporary declines in market value are included in operations.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for
normal repair and maintenance of property, plant and equipment are charged to
expense as incurred. Assets constructed incorporate overhead expense and
interest charges incurred during the period of construction; investment
subsidies are deducted. Upon disconnection of a subscriber, the remaining book
value of the subscriber equipment, excluding converters which are recovered
upon disconnection, and the capitalized labor are written off and accounted
for as an operating cost. Depreciation is calculated using the straight-line
method over the economic life of the asset.

                                     F-107
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The economic lives of property, plant and equipment at acquisition are as
follows:

<TABLE>
   <S>                                                                <C>
   Cable distribution networks....................................... 3-20 years
   Subscriber premises equipment and converters...................... 3-10 years
   MMDS/DTH distribution facilities.................................. 5-20 years
   Office equipment, furniture and fixtures.......................... 3-10 years
   Buildings and leasehold improvements.............................. 3-33 years
   Other............................................................. 3-10 years
</TABLE>

Goodwill and Other Intangible Assets

The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15
years. Licenses in newly-acquired companies are recognized at the fair market
value of those licenses at the date of acquisition. Licenses in new franchise
areas include the capitalization of direct costs incurred in obtaining the
license. The license value is amortized on a straight-line basis over the
initial license period, up to a maximum of 20 years.

Recoverability of Tangible and Intangible Assets

The Company evaluates the carrying value of all tangible and intangible assets
whenever events or circumstances indicate the carrying value of assets may
exceed their recoverable amounts. An impairment loss is recognized when the
estimated future cash flows (undiscounted and without interest) expected to
result from the use of an asset are less than the carrying amount of the
asset. Measurement of an impairment loss is based on fair value of the asset
computed using discounted cash flows if the asset is expected to be held and
used. Measurement of an impairment loss for an asset held for sale would be
based on fair market value less estimated costs to sell.

Deferred Financing Costs

Costs to obtain debt financing are capitalized and amortized over the life of
the debt facility using the effective interest method.

Subscriber Prepayments and Deposits

Payments received in advance for multi-channel television service are deferred
and recognized as revenue when the associated services are provided. Deposits
are recorded as a liability upon receipt and refunded to the subscriber upon
disconnection.

Revenue Recognition

Revenue is primarily derived from the sale of multi-channel television,
telephony and Internet/data services to subscribers and is recognized in the
period the related services are provided. Initial installation fees are
recognized as revenue in the period in which the installation occurs, to the
extent installation fees are equal to or less than direct selling costs, which
are expensed. To the extent installation fees exceed direct selling costs, the
excess fees are deferred and amortized over the average contract period. All
installation fees and related costs with respect to reconnections and
disconnections are recognized in the period in which the reconnection or
disconnection occurs because reconnection fees are charged at a level equal to
or less than related reconnection costs.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of subscriber receivables. Concentrations
of credit risk with respect to subscriber receivables are limited due to the
Company's large number of customers and their dispersion across many different
countries worldwide.

                                     F-108
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Staff Accounting Bulletin No. 51 ("SAB 51") Accounting Policy

Gains realized as a result of stock sales by the Company's subsidiaries are
recorded in the statement of operations, except for any transactions which
must be credited directly to equity in accordance with the provisions of SAB
51.

Stock-Based Compensation

Stock-based compensation is recognized using the intrinsic value method, which
results in compensation expense for the difference between the grant price and
the fair market value at each new measurement date. UPC adopted stock-based
compensation plans for their employees. With respect to certain of these
plans, the rights conveyed to employees are the substantive equivalents to
stock appreciation rights. Accordingly, compensation expense is recognized at
each financial statement date based on the difference between the grant price
and the estimated fair value of the respective subsidiary's common stock.

Income Taxes

The Company accounts for income taxes under the asset and liability method
which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have been
included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and income tax basis of assets, liabilities
and loss carryforwards using enacted tax rates in effect for the year in which
the differences are expected to reverse. Net deferred tax assets are then
reduced by a valuation allowance if management believes it more likely than
not they will not be realized. Withholding taxes are taken into consideration
in situations where the income of subsidiaries is to be paid out as dividends
in the near future. Such withholding taxes are generally charged to income in
the year in which the dividend income is generated.

Foreign Operations and Foreign Exchange Rate Risk

The functional currency for the Company's foreign operations is the applicable
local currency for each affiliate company, except for countries which have
experienced hyper-inflationary economies. For countries which have hyper-
inflationary economies, the financial statements are prepared in U.S. dollars.
Assets and liabilities of foreign subsidiaries for which the functional
currency is the local currency are translated at exchange rates in effect at
period-end, and the statements of operations are translated at the average
exchange rates during the period. Exchange rate fluctuations on translating
foreign currency financial statements into U.S. dollars that result in
unrealized gains or losses are referred to as translation adjustments.
Cumulative translation adjustments are recorded as a separate component of
parent's equity (deficit), included in Other Cumulative Comprehensive Loss.

Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transaction gains and losses
which are reflected in income as unrealized (based on period-end translations)
or realized upon settlement of the transactions. Cash flows from the Company's
operations in foreign countries are translated based on their functional
currencies. As a result, amounts related to assets and liabilities reported on
the consolidated statements of cash flows will not agree to changes in the
corresponding balances on the consolidated balance sheets. The effects of
exchange rate changes on cash balances held in foreign currencies are reported
as a separate line below cash flows from financing activities.

Certain of the Company's foreign operating companies have notes payable and
notes receivable that are denominated in a currency other than their own
functional currency. Accordingly, the Company may experience economic loss and
a negative impact on earnings and equity with respect to its holdings solely
as a result of foreign currency exchange rate fluctuations.

                                     F-109
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


New Accounting Principles

The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that companies recognize
all derivatives as either assets or liabilities in the balance sheet at fair
value. Under SFAS 133, accounting for changes in fair value of a derivative
depends on its intended use and designation. SFAS 133 is effective for fiscal
years beginning after June 15, 2000. The Company is currently assessing the
effect of this new standard.

In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 "Views on Selected Revenue Recognition
Issues" ("SAB 101"), which provides the staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. SAB 101
is effective for the second quarter of 2000. The Company is currently
assessing the effect of SAB 101.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year
presentation.

3. Acquisitions and Other

UPC Stock Offerings

In February 1999, UPC successfully completed an initial public offering
selling 133.8 million shares on the Amsterdam Stock Exchange and The Nasdaq
Stock Market, Inc. ("Nasdaq"), raising gross and net proceeds at Dutch guilder
("NLG")21.30 ($10.93) per share of NLG2,852.9 ($1,463.0) million and
NLG2,660.1 ($1,364.1) million, respectively. The proceeds were used to reduce
debt facilities and finance acquisitions. Based on the carrying value of the
Company's investment in UPC as of February 11, 1999, United recognized a gain
of $822.1 million from the resulting step-up in the carrying amount of
United's investment in UPC, in accordance with SAB 51. No deferred taxes were
recorded related to this gain due to the Company's intent on holding its
investment in UPC indefinitely. UPC's offering reduced the Company's ownership
interest from 100% to 59.6%.

In October 1999, UPC completed a second public offering of 45.0 million
ordinary shares, raising gross and net proceeds at Euro ("(Euro)") 19.92
($21.58) per share of (Euro) 896.3 ($970.9) million and (Euro) 851.5 ($922.4)
million, respectively. The proceeds were used to finance acquisitions. Based
on the carrying value of the Company's investment in UPC as of October 19,
1999, United recognized a gain of $403.4 million from the resulting step-up in
the carrying amount of United's investment in UPC, in accordance with SAB 51.
No deferred taxes were recorded related to this gain due to the Company's
intent on holding its investment in UPC indefinitely. This second offering
further reduced the Company's ownership to 53.2% as of December 31, 1999.

If all of the UPC stock options and warrants outstanding as of December 31,
1999 were exercised, the Company's ownership interest would be 51.7% on a
fully-diluted basis.

UTH

In August 1998, UPC merged its Dutch cable television and telecommunications
assets, consisting of its 50.0% interest in A2000 and its wholly-owned
subsidiary Cable Network Brabant Holding B.V. ("CNBH"), with those of the
Dutch energy company N.V. NUON Energie-Onderneming voor Gelderland, Friesland
en Flevoland ("NUON"), forming a new company, UTH (the "UTH Transaction"). The
transaction was accounted for as a formation of a joint venture with NUON's
and UPC's net assets recorded at their historical carrying values. Although
UPC retained a 51.0% economic and voting interest in UTH, because of joint
governance on most significant operating decisions, UPC accounted for its
investment in UTH using the equity method of accounting. On February 17, 1999,
UPC acquired the remaining 49.0% of UTH from NUON (the "NUON Transaction") for

                                     F-110
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Euro) 235.1 ($265.7) million. In addition, UPC repaid NUON a (Euro) 15.1
($17.1) million subordinated loan, including accrued interest, dated December
23, 1998, owed by UTH to NUON. The purchase of NUON's interest and payment of
the loan were funded with proceeds from UPC's initial public offering.
Effective February 1, 1999, UPC began consolidating the results of operations
of UTH. Details of the net assets acquired, based on the preliminary purchase
price allocation, were as follows (in thousands):

<TABLE>
   <S>                                                                 <C>
   Property, plant and equipment...................................... $210,013
   Investments in affiliated companies................................   46,830
   Goodwill...........................................................  256,749
   Long-term debt liabilities......................................... (242,536)
   Net current liabilities............................................   (5,384)
                                                                       --------
     Total cash paid.................................................. $265,672
                                                                       ========
</TABLE>

The following pro forma condensed consolidated operating results for the year
ended December 31, 1999 and the ten months ended December 31, 1998 gives
effect to the UTH Transaction and the NUON Transaction as if they had occurred
at the beginning of the periods presented. This pro forma condensed
consolidated financial information does not purport to represent what the
Company's results of operations would actually have been if such transactions
had in fact occurred on such dates. The pro forma adjustments are based upon
currently available information and upon certain assumptions that management
believes are reasonable.

<TABLE>
<CAPTION>
                                 For the Year Ended  For the Ten Months Ended
                                 December 31, 1999      December 31, 1998
                                -------------------- ---------------------------
                                Historical Pro Forma  Historical     Pro Forma
                                ---------- --------- ------------   ------------
                                   (In thousands)         (In thousands)
   <S>                          <C>        <C>       <C>            <C>
   Revenue.....................  $473,422  $483,539  $    172,287   $    253,295
                                 ========  ========  ============   ============
   Net income (loss)...........  $778,123  $773,428  $   (263,852)  $   (299,708)
                                 ========  ========  ============   ============
</TABLE>

Acquisition of UPC Slovensko

In June 1999, UPC acquired SKT spol s.r.o. (now known as UPC Slovensko), a
company that owns and operates a cable television system in Bratislava, the
capital of the Slovak Republic, for $43.3 million.

Acquisition of GelreVision

In June 1999, UPC acquired through UPC Netherland 100% of the GelreVision
multi-channel television systems in The Netherlands for NLG233.9 ($109.8)
million.

Acquisition of Reseaux Cables de France

In June 1999, UPC acquired through UPC France 95.7% of RCF, which operates
cable television systems throughout France, for French francs ("FFR")172.0
($27.1) million.

Acquisition of Interest in SBS

In July 1999, UPC purchased 4.8% of SBS for $24.3 million in cash. In August
1999, UPC acquired an additional 8.5% of SBS for $75.9 million.

Stjarn Acquisition

In July 1999, UPC acquired Stjarn for a purchase price of $397.0 million, of
which $100.0 million was paid in the form of a one-year note with interest at
8.0% per year and the balance of the purchase price was paid in cash. UPC will
have the option, at maturity of the note, to pay the note in either cash or
UPC stock. Stjarn operates cable television systems serving the greater
Stockholm area.

                                     F-111
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Acquisition of Videopole

In August 1999, UPC acquired through UPC France 100% of Videopole for a total
purchase price of $135.1 million. The purchase price was paid in cash ($69.9
million) and 2.9 million ordinary shares of UPC ($65.2 million). Based on the
carrying value of the Company's investment in UPC as of July 31, 1999, United
recognized a gain of $34.9 million from the resulting step-up in the carrying
amount of United's investment in UPC, in accordance with SAB 51. No deferred
taxes were recorded related to this gain due to the Company's intent on
holding its investment in UPC indefinitely.

@Entertainment Acquisition

In August 1999, UPC acquired 100% of @Entertainment for $807.0 million in
cash. Details of the net assets acquired, based on a preliminary purchase
price allocation using information currently available, were as follows (in
thousands):

<TABLE>
   <S>                                                                <C>
   Net current assets................................................ $  51,239
   Property, plant and equipment.....................................   196,178
   Goodwill..........................................................   986,814
   Long-term liabilities.............................................  (448,566)
   Other.............................................................    21,335
                                                                      ---------
     Total cash paid................................................. $ 807,000
                                                                      =========
</TABLE>

The following pro forma condensed consolidated operating results for the year
ended December 31, 1999 and the ten months ended December 31, 1998 give effect
to the acquisition of @Entertainment as if it had occurred at the beginning of
each period presented. This pro forma condensed consolidated financial
information does not purport to represent what the Company's results of
operations would actually have been if such transaction had in fact occurred
on such dates. The pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are
reasonable.

<TABLE>
<CAPTION>
                                                            For the Ten Months
                                       For the Year Ended         Ended
                                       December 31, 1999    December 31, 1998
                                      -------------------- ---------------------
                                      Historical Pro Forma Historical  Pro Forma
                                      ---------- --------- ----------  ---------
                                         (In thousands)       (In thousands)
   <S>                                <C>        <C>       <C>         <C>
   Revenue...........................  $473,422  $520,401  $ 172,287   $ 222,665
                                       ========  ========  =========   =========
   Net income (loss).................  $778,123  $585,956  $(263,852)  $(443,718)
                                       ========  ========  =========   =========
</TABLE>

Acquisition of Time Warner Cable France

In August 1999, UPC acquired through UPC France 100% of Time Warner Cable
France, a company that operates three cable television systems in the suburbs
of Paris and Lyon and in the city of Limoges. The purchase price was $71.1
million in cash. Simultaneous with the acquisition of Time Warner Cable
France, UPC acquired an additional 47.6% interest in one of its operating
systems, Rhone Vision Cable, in which Time Warner France had a 49.9% interest,
for FFR89.3 ($14.6) million, increasing UPC's ownership in that system to
97.5%.

Acquisition of 50.0% of A2000

In September 1999, UPC acquired, through UPC Nederland, the remaining 50.0% of
A2000 that it did not already own for $229.0 million and $13.1 million in cash
and assumed receivables, respectively.

Kabel Plus Acquisition

In October 1999, UPC acquired a 94.6% interest in Kabel Plus for a purchase
price of $150.0 million, and took control of the Kabel Plus cable television
systems in the Czech and Slovak Republics.

                                     F-112
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Acquisition of Additional Interest in Monor

In December 1999, UPC acquired an additional 48.0% economic interest in Monor
from its partner and several small minority shareholders for $45.0 million,
increasing UPC's ownership to 97.1%. Monor's telephony system is located in
the Monor region, an area which borders Budapest in Hungary.

Purchase of Minority Interest in PrimaCom

In December 1999, UPC purchased a total interest of 18.2% in PrimaCom, which
owns and operates cable television networks in Germany, for (Euro) 226.5
($227.9) million. The fair value of this investment was $231.9 million as of
December 31, 1999 and is reflected in "Marketable equity securities and other
investments" on the Consolidated Balance Sheet.

Combivisie and CNBH

Effective January 1, 1998, UPC acquired certain assets, including the Dutch
cable systems of Combivisie for $88.0 million. The purchase was funded with
draws on UPC's existing credit facilities. Subsequent to the transaction, the
assets and liabilities of UPC's other Dutch systems and Combivisie were
merged, forming CNBH, a wholly-owned subsidiary of UPC Netherland.

Hungary

In June 1998, UPC acquired certain Hungarian multi-channel television system
assets for $9.5 million in cash and a non-interest bearing promissory note in
the amount of $18.0 million. These assets are now part of UPC Magyarorszag.

Tevel and Melita

In November 1998, UPC (i) acquired from Tele-Communications International,
Inc. ("TINTA") its indirect 23.3% and 25.0% interests in the Tevel and Melita
systems, respectively, for $91.5 million, doubling UPC's respective ownership
in these systems to 46.6% and 50.0%, respectively, (ii) purchased an
additional 5.0% interest in Princes Holdings and 5.0% of Tara in consideration
for 769,062 shares of United Class A Common Stock held by UPC, and (iii) sold
the 5.0% interest in Princes Holdings, together with its existing 20.0%
interest, to TINTA for $20.5 million. The net payment of $71.0 million to
TINTA ($68.0 million after closing adjustments) was funded with the proceeds
of a $90.0 million promissory note made by a subsidiary of UPC to its primary
partners in the Tevel system (the "UPC DIC Loan").

UPC

In July 1995, the Company and Philips Electronics N.V. ("Philips") contributed
their respective ownership interests in European and Israeli multi-channel
television systems to UPC. Philips contributed to UPC its 95.0% interest in
cable television systems in Austria, its 100% interest in cable television
systems in Belgium, its minority interests in multi-channel television systems
in Germany, The Netherlands (Eindhoven) and France. The Company contributed
its interests in multi-channel television systems in Israel, Ireland, the
Czech Republic, Malta, Norway, Hungary, Sweden and Spain. The Company also
contributed $78.2 million in cash to UPC and issued to Philips 6,338,302
shares of its Class A Common Stock having a value of $50.0 million (at date of
closing). In addition, UPC issued to Philips $133.6 million of convertible
subordinated pay-in-kind notes (the "PIK Notes"). As a result of this
transaction, the Company and Philips each owned a 50.0% economic and voting
interest in UPC.

On December 11, 1997, the Company acquired Philips' entire interest in UPC
(the "UPC Transaction"). As part of the UPC Transaction, (i) UPC purchased the
6,338,302 shares of Class A Common Stock of the Company held by Philips, (ii)
United purchased NLG169.9 ($84.3) million of the accreted amount of UPC's PIK
Notes and redeemed them for 45,540,783 shares of UPC, (iii) UPC repaid to
Philips the remaining NLG170.4 ($84.6)

                                     F-113
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

million accreted amount of the PIK Notes, (iv) United purchased 39,364,812
shares of UPC directly from Philips, and (v) UPC repurchased Philips'
remaining equity interest in UPC (73,135,188 shares). The Company effectively
owned 100% of UPC as a result of the UPC Transaction, including shares held by
a foundation controlled by United which administers the UPC stock plan for the
benefit of UPC employees and management, pursuant to UPC's equity incentive
plans. The final purchase price (excluding transaction-related costs) was
$425.2 million, comprised of $168.7 million for the purchase by the Company
and repayment by UPC of UPC's PIK Notes, $33.2 million allocated to the
purchase by UPC of 6,338,302 shares of the Company's Class A Common Stock and
$223.3 million allocated to the purchase of Philips' interest in UPC. The UPC
Transaction was funded by a long-term revolving credit facility through UPC
with a syndicate of banks ($151.5 million), a bridge bank facility through a
subsidiary of UPC ($111.2 million) and a cash investment by the Company of
$162.5 million.

Details of the net assets acquired, based on a preliminary allocation of the
purchase price, which were denominated in Dutch guilders and translated to
U.S. dollars using the exchange rate on the date of acquisition, were as
follows (in thousands):

<TABLE>
   <S>                                                               <C>
   Working capital, including cash acquired of $50,872.............. $  (7,158)
   Investment in United Class A Common Stock........................   (33,074)
   Investment in affiliated companies...............................  (167,945)
   Property, plant and equipment and other long-term assets.........  (273,988)
   Goodwill and other intangible assets.............................  (383,503)
   Elimination of United equity investment..........................    46,319
   Long-term debt...................................................   624,633
   Other liabilities................................................    32,216
                                                                     ---------
     Total cash paid................................................ $(162,500)
                                                                     =========
</TABLE>

Tara

In October 1997, Tara issued shares to third parties in exchange for
consideration totaling $2.5 million, thereby diluting the Company's interest
in Tara from 100% to 75.0%. A gain of $1.6 million recognized on the
transaction was credited to additional paid-in capital in accordance with SAB
51.

Pro Forma Financial Information for the Year Ended February 28, 1998

The following pro forma condensed consolidated operating results for the years
ended February 28, 1998 give effect to the UPC Transaction as if it had
occurred at the beginning of the period presented. This pro forma condensed
consolidated financial information and notes thereto do not purport to
represent what the Company's results of operations would actually have been if
such transaction had in fact occurred on such dates. The pro forma adjustments
are based upon currently available information and upon certain assumptions
that management believes are reasonable.

<TABLE>
<CAPTION>
                                                           For the Year Ended
                                                            February 28, 1998
                                                         -----------------------
                                                         Historical Pro Forma(1)
                                                         ---------- ------------
                                                             (In thousands)
   <S>                                                   <C>        <C>
   Revenue..............................................  $  9,945   $ 173,344
                                                          ========   =========
   Net loss.............................................  $(54,152)  $(104,925)
                                                          ========   =========
</TABLE>
--------
(1) Represents the historical amounts included in UPC's consolidated statement
    of operations for the period from January 1, 1997 to December 10, 1997,
    additional depreciation and amortization related to the step-up in basis
    in tangible assets and additional goodwill, the net decrease in equity in
    losses of affiliated companies, and the net increase in interest expense
    as a result of the UPC Transaction.

                                     F-114
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


4. Investments in Affiliates, Accounted for under the Equity Method

<TABLE>
<CAPTION>
                                                 As of December 31, 1999
                            -----------------------------------------------------------------
                                                         Cumulative      Cumulative
                            Investments in Dividends Share in Results of Translation
                              Affiliates   Received      Affiliates      Adjustments  Total
                            -------------- --------- ------------------- ----------- --------
                                                     (In thousands)
   <S>                      <C>            <C>       <C>                 <C>         <C>
   SBS.....................    $ 99,621     $   --        $ (5,421)        $ 2,858   $ 97,058
   Tevel...................     100,679      (6,180)       (12,108)          3,761     86,152
   Melita..................      14,062         --           2,066          (2,417)    13,711
   Iberian Programming.....      11,947         --            (460)          2,828     14,315
   Xtra Music..............       9,913         --          (2,476)           (640)     6,797
   Other...................      27,447         --             (65)         (1,048)    26,334
                               --------     -------       --------         -------   --------
     Total.................    $263,669     $(6,180)      $(18,464)        $ 5,342   $244,367
                               ========     =======       ========         =======   ========
<CAPTION>
                                                 As of December 31, 1998
                            -----------------------------------------------------------------
                                                         Cumulative      Cumulative
                            Investments in Dividends Share in Results of Translation
                              Affiliates   Received      Affiliates      Adjustments  Total
                            -------------- --------- ------------------- ----------- --------
                                                     (In thousands)
   <S>                      <C>            <C>       <C>                 <C>         <C>
   UTH.....................    $135,290     $   --        $(11,447)        $ 8,288   $132,131
   Tevel...................      96,340      (6,090)          (390)           (306)    89,554
   Melita..................      14,078         --             997             724     15,799
   Monor...................      11,301         --          (2,601)         (7,849)       851
   Xtra Music..............       5,326         --            (536)            252      5,042
   Other...................      14,532         --          (3,876)            176     10,832
                               --------     -------       --------         -------   --------
     Total.................    $276,867     $(6,090)      $(17,853)        $ 1,285   $254,209
                               ========     =======       ========         =======   ========
</TABLE>

As of December 31, 1999 and 1998, the Company had the following differences
related to the excess of its cost over its proportionate interest in each
affiliate's net tangible assets included in the above table. Such differences
are being amortized over 15 years.

<TABLE>
<CAPTION>
                                 As of December 31, 1999 As of December 31, 1998
                                 ----------------------- -----------------------
                                   Basis    Accumulated    Basis    Accumulated
                                 Difference Amortization Difference Amortization
                                 ---------- ------------ ---------- ------------
                                                 (In thousands)
   <S>                           <C>        <C>          <C>        <C>
   SBS..........................  $109,080    $ (2,828)   $    --     $   --
   Tevel........................    82,010      (7,947)     80,644     (3,351)
   Melita.......................    11,673      (1,242)     12,898       (451)
   Iberian Programming..........    11,941        (521)        --         --
   Xtra Music...................     5,511        (246)      3,585        (73)
   Other........................       --          --        9,985       (404)
                                  --------    --------    --------    -------
     Total......................  $220,215    $(12,784)   $107,112    $(4,279)
                                  ========    ========    ========    =======
</TABLE>

                                     F-115
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Condensed financial information for UPC, stated in U.S. dollars, is presented
below:

<TABLE>
<CAPTION>
                                                           For the Year Ended
                                                          December 31, 1997(1)
                                                          --------------------
                                                             (In thousands)
   <S>                                                    <C>
   Revenue...............................................      $ 172,951
   Operating, selling, general and administrative ex-
    pense................................................       (121,833)
   Depreciation and amortization.........................        (68,148)
                                                               ---------
     Net operating loss..................................        (17,030)
   Interest, net.........................................        (32,936)
   Share in results of affiliated companies, net.........        (10,395)
   Other.................................................        (29,820)
                                                               ---------
     Net loss............................................      $ (90,181)
                                                               =========
</TABLE>
--------
(1) The Company consolidated the results of UPC effective December 11, 1997.

5. Marketable Equity Securities of Parent

As a result of the UPC Transaction, UPC acquired 6,338,302 shares of United's
Class A Common Stock, valued at cost on December 11, 1997 at $33.1 million. In
November 1998, UPC used 769,062 shares to acquire an additional 5.0% interest
in Tara and Princes Holdings, resulting in 5,569,240 remaining United shares
held by UPC.

6. Property, Plant and Equipment

<TABLE>
<CAPTION>
                                                           As of December 31,
                                                           --------------------
                                                              1999       1998
                                                           ----------  --------
                                                             (In thousands)
   <S>                                                     <C>         <C>
   Cable distribution networks............................ $1,533,411  $246,607
   Subscriber premises equipment and converters...........    153,670    71,178
   MMDS/DTH distribution facilities.......................     79,265     7,340
   Office equipment, furniture and fixtures...............     72,161    18,674
   Buildings and leasehold improvements...................    144,769     6,748
   Other..................................................    132,414    14,905
                                                           ----------  --------
                                                            2,115,690   365,452
     Accumulated depreciation.............................   (195,329)  (46,406)
                                                           ----------  --------
     Net property, plant and equipment.................... $1,920,361  $319,046
                                                           ==========  ========
</TABLE>

                                     F-116
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


7. Goodwill and Other Intangible Assets

<TABLE>
<CAPTION>
                                                           As of December 31,
                                                           --------------------
                                                              1999       1998
                                                           ----------  --------
                                                             (In thousands)
   <S>                                                     <C>         <C>
   @Entertainment......................................... $  935,867  $    --
   UPC Netherland.........................................    763,714       --
   Stjarn.................................................    430,606       --
   Telekabel Group........................................    177,800   206,092
   UPC France.............................................    117,787       --
   UPC Norge..............................................     85,405    87,563
   Kabel Plus.............................................     85,330       --
   UPC Magyarorszag.......................................     55,068    51,550
   UPC....................................................     29,406       --
   Monor..................................................     24,420       --
   UPC Slovak.............................................     23,026       --
   UPC Belgium............................................     20,994    22,322
   Other..................................................     12,932    12,970
                                                           ----------  --------
                                                            2,762,355   380,497
     Accumulated amortization.............................   (134,594)  (20,693)
                                                           ----------  --------
     Net goodwill and other intangible assets............. $2,627,761  $359,804
                                                           ==========  ========
</TABLE>

8. Short-Term Debt

<TABLE>
<CAPTION>
                                                                As of December
                                                                     31,
                                                               ----------------
                                                                 1999    1998
                                                               -------- -------
                                                                (In thousands)
   <S>                                                         <C>      <C>
   Stjarn Seller's Note (Note 3).............................. $100,000 $   --
   Stjarn Credit Facility.....................................   39,333     --
   A2000 Bank Facility (Note 10)..............................   20,575     --
   Other UPC..................................................    4,355  33,504
                                                               -------- -------
     Total short-term debt.................................... $164,263 $33,504
                                                               ======== =======
</TABLE>

  Carrying value approximates fair value for these short-term facilities.

Stjarn Credit Facility

In December 1998, Stjarn's parent company entered into a Swedish Kronor
("SEK")521.0 ($61.3) million loan agreement with a bank to refinance certain
debt. The loan currently consists of an A facility, a medium term loan in the
amount of SEK371.0 ($43.6) million and a revolving credit facility in the
amount of SEK150.0 ($17.6) million. These facilities bear interest at the rate
of Stockholm Interbank Offered Rate ("STIBOR") plus a margin of 0.75% to
1.25%. As a result of UPC's acquisition of Stjarn, both the A facility and the
revolving facility are now due on March 31, 2000.

                                     F-117
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


9. Senior Discount Notes and Senior Notes

<TABLE>
<CAPTION>
                                                            As of December 31,
                                                           --------------------
                                                              1999      1998
                                                           ---------- ---------
                                                              (In thousands)
   <S>                                                     <C>        <C>
   UPC USD Senior Notes due 2009.......................... $  759,442 $     --
   UPC 10.875% Euro Senior Notes due 2009.................    301,878       --
   UPC USD Senior Discount Notes due 2009.................    421,747       --
   UPC 10.875% USD Senior Notes due 2007..................    191,852       --
   UPC 10.875% Euro Senior Notes due 2007.................    100,625       --
   UPC 11.25% USD Senior Notes due 2009...................    239,905       --
   UPC 11.25% Euro Senior Notes due 2009..................    100,894       --
   UPC 13.375% USD Senior Discount Notes due 2009.........    255,786       --
   UPC 13.375% Euro Senior Discount Notes due 2009........    102,847       --
   @Entertainment 1999 Senior Discount Notes..............    141,807       --
   @Entertainment 1998 Senior Discount Notes..............    115,984       --
   @Entertainment 1999 Series C Senior Discount Notes.....     11,841       --
   PCI Discount Notes.....................................     16,457       --
                                                           ---------- ---------
                                                            2,761,065       --
     Less current portion.................................        --        --
                                                           ---------- ---------
     Total senior discount notes.......................... $2,761,065 $     --
                                                           ========== =========
</TABLE>

UPC USD Senior Notes due 2009, UPC 10.875% Euro Senior Notes due 2009 and UPC
USD Senior Discount Notes due 2009 (collectively the "UPC July 1999 Notes")

In July 1999, UPC completed a private placement bond offering consisting of
$800.0 million ten-year 10.875% Senior Notes due 2009, (Euro) 300.0 million of
ten-year 10.875% Senior Notes due 2009 and $735.0 million aggregate principal
amount of ten-year 12.5% Senior Discount Notes due 2009. The UPC Senior
Discount Notes due 2009 were sold at 54.5% of face value amount yielding gross
proceeds of approximately $400.7 million, and will accrue but not pay interest
until 2005. Interest payments on the Senior Notes due 2009 will be due semi-
annually, commencing February 1, 2000. The indentures governing the UPC July
1999 Notes place certain limitations on UPC's ability, and the ability of its
subsidiaries, to borrow money, issue capital stock, pay dividends in stock or
repurchase stock, make investments, create certain liens, engage in certain
transactions with affiliates, and sell certain assets or merge with or into
other companies. Concurrent with the closing of the UPC July 1999 Notes
offering, UPC entered into a cross-currency swap, swapping the $800.0 million
UPC Senior Notes due 2009 into fixed and variable rate Euro notes with a
notional amount totaling (Euro) 754.7 million. One half of the Euro notes have
a fixed interest rate of 8.54% through August 1, 2004, thereafter switching to
a variable interest rate of Euro Interbank Offered Rate ("EURIBOR") plus
4.15%, for an initial rate of 7.1%.

UPC 10.875% USD and Euro Senior Notes due 2007, UPC 11.25% USD and Euro Senior
Notes due 2009 and UPC 13.375% USD and Euro Senior Discount Notes due 2009
(collectively the "UPC October 1999 Notes")

In October 1999, UPC completed a private placement bond offering consisting of
six tranches: $200.0 million and (Euro) 100.0 million of eight-year 10.875%
Senior Notes due 2007; $252.0 million and (Euro) 101.0 million of ten-year
11.25% Senior Notes due 2009; and $478.0 million and (Euro) 191.0 million
aggregate principal amount of ten-year 13.375% Senior Discount Notes due 2009.
The Senior Discount Notes were sold at 52.3% of the face amount yielding gross
proceeds of $250.0 million and (Euro) 100.0 million and will accrue but not
pay interest until November 2004. UPC then entered into cross-currency swaps,
swapping the $252.0 million 11.25% coupon into fixed and variable rate Euro
notes with a notional amount totaling (Euro) 240.2 million, and swapping the
$200.0

                                     F-118
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

million 10.875% coupon into fixed and variable rate Euro notes with a notional
amount totaling (Euro) 190.7 million. Of the former swap, (Euro) 120.1 million
have a fixed interest rate of 9.9% through November 1, 2004, thereafter
switching to a variable rate of EURIBOR + 4.8%. The remaining (Euro) 120.1
million have a variable interest rate of EURIBOR + 4.80%. Of the latter swap,
(Euro) 95.4 million have a fixed interest rate of 9.9% through November 1,
2004, thereafter switching to a variable rate of EURIBOR + 4.8%. The remaining
(Euro) 95.4 million have a variable interest rate of EURIBOR + 4.8%.

@Entertainment 1999 Senior Discount Notes, @Entertainment 1998 Senior Discount
 Notes and
@Entertainment 1999 Series C Senior Discount Notes (collectively the
 "@Entertainment Notes")

In January 1999, @Entertainment sold 256,800 units consisting of Senior
Discount Notes due 2009 and warrants to purchase 1,813,665 shares of
@Entertainment's common stock. The @Entertainment 1999 Senior Discount Notes
were issued at a discount to their aggregate principal amount at maturity
yielding gross proceeds of approximately $100.0 million. Cash interest on the
@Entertainment 1999 Senior Discount Notes will not accrue prior to February 1,
2004. Thereafter, cash interest will accrue at a rate of 14.5% per annum,
payable semi-annually in arrears on August 1 and February 1 of each year,
commencing August 1, 2004. In connection with the acquisition of
@Entertainment, UPC acquired all of the existing warrants held in connection
with the @Entertainment 1999 Senior Discount Notes.

In July 1998, @Entertainment sold 252,000 units, consisting of 14.5% Senior
Discount Notes due 2008 and warrants entitling the warrant holders to purchase
1,824,514 shares of @Entertainment common stock. This offering generated
approximately $125.1 million in gross proceeds to @Entertainment. The
@Entertainment 1998 Senior Discount Notes are unsubordinated and unsecured
obligations of @Entertainment. Cash interest will not accrue prior to July 15,
2003. After that, cash interest will accrue at a rate of 14.5% per year and
will be payable semi-annually in arrears on January 15 and July 15 of each
year, beginning January 15, 2004. The @Entertainment 1998 Senior Discount
Notes will mature on July 15, 2008. In connection with the acquisition of
@Entertainment, UPC acquired all of the existing warrants held in connection
with the @Entertainment 1998 Senior Discount Notes.

Pursuant to the terms of the @Entertainment indenture, @Entertainment
repurchased $49.1 million aggregate principal amount at maturity of these
notes for $26.5 million as a result of UPC's acquisition of @Entertainment.

In January 1999, @Entertainment sold $36.0 million aggregate principal amount
at maturity of Series C Senior Discount Notes generating approximately $9.8
million of gross proceeds. The @Entertainment 1999 Series C Senior Discount
Notes are senior unsecured obligations of @Entertainment. Original issue
discount will accrete from January 20, 1999, until maturity on July 15, 2008.
Cash interest will accrue beginning July 15, 2004 at a rate of 7.0% per year
on the principal amount at maturity, and will be payable semi-annually in
arrears, on July 15 and January 15 of each year beginning January 15, 2005.

PCI Discount Notes

Poland Communications, Inc. ("PCI"), @Entertainment's major operating
subsidiary, sold $130.0 million of discount notes in October 1996. The PCI
Discount Notes bear interest at 9.875%, payable on May 1 and November 1 of
each year. The PCI Discount Notes mature on November 1, 2003. Pursuant to the
terms of the PCI indenture, @Entertainment repurchased a majority of the PCI
Discount Notes in November 1999 as a result of UPC's acquisition of
@Entertainment.

                                     F-119
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


10. Other Long-Term Debt

<TABLE>
<CAPTION>
                                                           As of December 31,
                                                           --------------------
                                                              1999       1998
                                                           ----------  --------
                                                             (In thousands)
   <S>                                                     <C>         <C>
   UPC Senior Credit Facility............................. $  359,720  $    --
   New Telekabel Facility.................................    256,861       --
   A2000 Facilities.......................................    209,132       --
   CNBH Facility..........................................    122,317       --
   Rhone Vision Cable Credit Facility.....................     61,360       --
   RCF Facility...........................................     31,852       --
   UPC DIC Loan...........................................     39,366    84,214
   Mediareseaux Facility..................................     45,193    21,346
   Monor Facility.........................................     33,488       --
   Videopole Facility.....................................      7,752       --
   Other UPC..............................................     50,345     3,821
   UPC Senior Revolving Credit Facility...................        --    512,179
   UPC Bridge Bank Facility...............................        --     60,063
                                                           ----------  --------
                                                            1,217,386   681,623
     Less current portion.................................    (50,606)  (60,063)
                                                           ----------  --------
     Total other long-term debt........................... $1,166,780  $621,560
                                                           ==========  ========
</TABLE>

UPC Senior Credit Facility

On July 27, 1999, several UPC subsidiaries and a syndicate of banks executed a
Loan and Note Issuance Agreement for a (Euro)1.0 ($1.1) billion multi-currency
senior secured credit facility. The UPC Senior Credit Facility matures on July
27, 2006 and is comprised of two tranches. The (Euro) 750.0 ($755.1) million
Tranche A is a senior secured reducing revolving credit facility. Tranche B is
a (Euro) 250.0 ($251.7) million term loan credit facility. The UPC Senior
Credit Facility bears interest at EURIBOR (for borrowings in euro) and at the
London Interbank Offered Rate ("LIBOR") (for all other borrowings) plus a
margin of between 0.75% and 2.0% (which shall be at least 1.5% for the first
six months following closing) plus an additional cost of funding calculation.
In addition to repayment of UPC's existing revolving credit facility, proceeds
from the UPC Senior Credit Facility were used to fund acquisitions, repay
certain intercompany debts, pay interest on funds downstreamed from the
proceeds of high yield issues, general corporate purposes, capital
expenditures and other permitted distributions. Borrowings under the UPC
Senior Credit Facility are limited by financial ratio tests. The UPC Senior
Credit Facility contains change in control provisions related to UPC's
ownership in certain subsidiaries and United's ownership of UPC. In addition,
the UPC Senior Credit Facility limits acquisitions funded by loan proceeds to
(Euro) 400.0 ($402.7) million over the life of the UPC Senior Credit Facility.
The UPC Senior Credit Facility contains certain financial covenants and
restrictions on UPC and its subsidiaries' ability to make dividends or other
payments to UPC, incur indebtedness, dispose of assets and merge and enter
into affiliate transactions. Net proceeds of certain disposals are required to
be used to prepay the facility.

New Telekabel Facility

In March 1999, UPC Nederland replaced their existing facility with a senior
facility. The New Telekabel Facility consists of a (Euro) 340.0 ($342.3)
million revolving facility to N.V. Telekabel, a subsidiary of UPC Nederland,
that will convert to a term facility on December 31, 2001. The New Telekabel
Facility includes (Euro) 5.0 ($5.0) million in the form of an overdraft
facility that will be available until December 31, 2007. The New Telekabel
Facility bears interest at EURIBOR plus a margin between 0.75% and 2.00% based
on leverage multiples tied to certain measures of net operating cash flow.

                                     F-120
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


A2000 Facilities

In January 1996, A2000 and one of its subsidiaries entered into bank
facilities of NLG90.0 ($41.1) million and NLG375.0 ($171.2) million,
respectively. In October 1996, a subsidiary of A2000 entered into a bank
facility of NLG45.0 ($20.5) million. These facilities have between nine- and
ten-year terms and interest rates of Amsterdam Interbank Offered Rate
("AIBOR") plus 0.75% or AIBOR plus 0.7% or fixed rates (fixed prior to each
advance) increased by 0.7% or 0.75% per annum. The facilities also restrict
the borrowers from incurring additional indebtedness and from paying dividends
and distributions, subject to certain exceptions.

CNBH Facility

In February 1998, CNBH entered into a secured NLG250.0 ($114.2) million ten-
year term facility with a syndicate of banks. In January 1999, this facility
was increased to NLG274.0 ($125.1) million. The CNBH Facility bears interest
at AIBOR plus a margin between 0.7% and 0.75%. Beginning in 2001, CNBH will be
required to apply 50.0% of its excess cash flow to prepayment of its facility.
In connection with this facility, CNBH also entered into a NLG5.0 ($2.3)
million ten-year term working capital facility with a bank.

Rhone Vision Cable Credit Facility

In July 1996, Rhone Vision Cable, a subsidiary of Time Warner Cable France,
entered into a FFR680.0 ($104.4) million credit facility with a bank to
finance construction and installation of Rhone Vision Cable networks. The
facility bears interest at LIBOR plus 1.0%, payable quarterly. The facility
must be repaid by the earlier of June 30, 2002 or six months after network
completion.

RCF Facility

In 1990, RCF and six of its subsidiaries entered into a FFR160.0 ($24.6)
million credit facility with a consortium of banks to finance working capital
and operations. In 1995 this facility was amended and extended to FFR252.4
($38.7) million to refinance three further credit facilities entered into by
other subsidiaries of RCF. The loan bears interest at PIBOR (the French
interbank offer rate) plus 1.5%, payable in arrears quarterly. The loan is to
be repaid in yearly installments of FFR34.6 ($5.3) million beginning at the
end of 1999 until December 31, 2005.

UPC DIC Loan

In November 1998, a subsidiary of Discount Investment Corporation ("DIC")
loaned UPC a total of $90.0 million to acquire the additional interests in
Tevel and Melita. The UPC DIC Loan matures in November 2000 and bears interest
at 8.0% and is payable, together with 106.0% of the principal amount, on
maturity. In connection with the UPC DIC Loan, UPC granted to an affiliate of
DIC an option to acquire a total of $90.0 million, plus accrued interest, of
ordinary shares of UPC at a price equal to 90.0% of the initial public
offering price. UPC allocated the $90.0 million in loan proceeds between the
debt instrument and the equity option element on the basis of relative fair
values. In February 1999, the option agreement was amended, resulting in a
grant of two options of $45.0 million each to acquire ordinary shares of UPC.
DIC then exercised the first option for $45.0 million, paying in cash and
acquiring 4.7 million ordinary shares of UPC. UPC repaid $45.0 million of the
UPC DIC Loan and accrued interest with proceeds received from the option
exercise. The remaining option is exercisable until September 30, 2000.

Mediareseaux Facility

In July 1998, Mediareseaux entered into a 9.5 year term facility with a bank
for an amount of FFR680.0 ($104.4) million. The Mediareseaux Facility bears
interest at LIBOR plus a margin ranging from 0.75% to 2.0%. The availability
of the facility depends on revenue generated and debt to equity ratios. The
availability period ends at December 31, 2002. The repayment period starts
from January 1, 2003 to final maturity in 2007. During the repayment period,
Mediareseaux must apply 50.0% of its excess cash flow in prepaying the
facility. In July

                                     F-121
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1998, Mediareseaux secured a 9.5 year FFR20.0 ($3.1) million overdraft
facility, subject to the same terms and conditions as the Mediareseaux
Facility except that the availability tests are not applicable.

Monor Facility

In September 1997, Monor entered into a $42.0 million term loan facility with
a syndicate of banks. The proceeds of the Monor facility were used to repay
indebtedness and for capital expenditures in the build-out of Monor's network.
Monor's facility matures on December 31, 2006 and bears interest at LIBOR plus
1.5%. Monor entered into an interest rate swap agreement with a bank, swapping
the floating rate to a fixed rate of 6.7% for German marks and 7.8% for U.S.
dollars. Monor's facility is secured by a pledge over the shares of Monor and
its assets. This facility limits Monor's ability to encumber its assets, incur
indebtedness and pay dividends.

Fair Value of Senior Discount Notes, Senior Notes and Other Long-Term Debt

Fair value is based on market prices for the same or similar issues. Carrying
value is used when a market price is unavailable.

<TABLE>
<CAPTION>
                                                      Carrying Value Fair Value
                                                      -------------- ----------
                                                           (In thousands)
   <S>                                                <C>            <C>
   As of December 31, 1999:
   UPC USD Senior Notes due 2009....................    $  759,442   $  775,969
   UPC 10.875% Euro Senior Discount Notes due 2009..       301,878      305,652
   UPC USD Senior Discount Notes due 2009...........       421,747      415,275
   UPC 10.875% USD Senior Notes due 2007............       191,852      206,525
   UPC 10.875% Euro Senior Notes due 2007...........       100,625      102,639
   UPC 11.25% USD Senior Notes due 2009.............       239,905      262,080
   UPC 11.25% Euro Senior Notes due 2009............       100,894      103,665
   UPC 13.375% USD Senior Discount Notes due 2009...       255,786      272,460
   UPC 13.375% Euro Senior Discount Notes due 2009..       102,847      106,669
   @Entertainment 1999 Senior Discount Notes........       141,807      146,007
   @Entertainment 1998 Senior Discount Notes........       115,984      147,948
   @Entertainment 1999 Series C Senior Discount
    Notes...........................................        11,841       11,841
   PCI Discount Notes...............................        16,457       16,457
   UPC Senior Credit Facility.......................       359,720      359,720
   New Telekabel Facility...........................       256,861      256,861
   A2000 Facilities.................................       209,132      209,132
   CNBH Facility....................................       122,317      122,317
   Rhone Vision Cable Credit Facility...............        61,360       61,360
   RCF Facility.....................................        31,852       31,852
   UPC DIC Loan.....................................        39,366       39,366
   Mediareseaux Facility............................        45,193       45,193
   Monor Facility...................................        33,488       33,488
   Videopole Facility...............................         7,752        7,752
   Other UPC........................................        50,345       50,345
                                                        ----------   ----------
       Total........................................    $3,978,451   $4,090,573
                                                        ==========   ==========
   As of December 31, 1998:
   UPC Senior Revolving Credit Facility.............    $  512,179   $  512,179
   UPC Bridge Bank Facility.........................        60,063       60,063
   Mediareseaux Facility............................        21,346       21,346
   UPC DIC Loan.....................................        84,214       84,214
   Other UPC........................................         3,821        3,821
                                                        ----------   ----------
       Total........................................    $  681,623   $  681,623
                                                        ==========   ==========
</TABLE>

                                     F-122
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Debt Maturities

The maturities of the Company's senior discount notes, senior notes and other
long-term debt are as follows (in thousands):

<TABLE>
   <S>                                                               <C>
   Year Ended December 31, 2000..................................... $   50,606
   Year Ended December 31, 2001.....................................        --
   Year Ended December 31, 2002.....................................     61,361
   Year Ended December 31, 2003.....................................     16,457
   Year Ended December 31, 2004.....................................        --
   Thereafter.......................................................  3,850,027
                                                                     ----------
     Total.......................................................... $3,978,451
                                                                     ==========
</TABLE>

11. Note Payable to Parent

<TABLE>
<CAPTION>
                               As of
                            December 31,
                                1998
                            ------------
   <S>                      <C>
   Note payable to parent,
    including accrued in-
    terest of $6,141......    $92,609
                              =======
</TABLE>

United loaned the Company a total of $86.5 million in connection with funding
the general operations of UPC as well as the repayment of the UPC Bridge Bank
Facility. The United loan accrued interest at 10.75% per annum. The Company
repaid $87.5 million of principal and interest in February 1999 with proceeds
from UPC's initial public offering.

12. Parent's Equity (Deficit)

Common Stock

Authorized capital consists of 1,000 shares of common stock, $0.01 par value,
100 shares issued and outstanding, held by United. Such shares have been
pledged as collateral under United's 1998 Notes.

Cumulative Translation Adjustments

During the year ended December 31, 1999, the Company recorded a negative
change in cumulative translation adjustments of $111.3 million, primarily due
to the strengthening of the U.S. dollar compared to the Dutch guilder of
approximately 15.9%.

Equity Transactions of Subsidiaries

The issuance of warrants, the issuance of convertible debt with an equity
component, variable plan accounting for stock options and the recognition of
deferred compensation expense by the Company's subsidiaries affects the equity
accounts of the Company. The following represents the effect on additional
paid-in capital and deferred compensation as a result of these equity
transactions:

<TABLE>
<CAPTION>
                                                              For the Year Ended
                                                              December 31, 1999
                                                              ------------------
                                                                (In thousands)
   <S>                                                        <C>
   Variable plan accounting for stock options................     $ 338,261
   Deferred compensation expense.............................      (180,757)
   Amortization of deferred compensation.....................        79,104
   Issuance of warrants......................................        33,025
   Issuance of convertible debt (UPC DIC Loan)...............        14,875
                                                                  ---------
     Total...................................................     $ 284,508
                                                                  =========
</TABLE>

                                     F-123
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Other Cumulative Comprehensive Income (Loss)

<TABLE>
<CAPTION>
                                 As of        As of
                              December 31, December 31,
                                  1999         1998
                              ------------ ------------
                                   (In thousands)
   <S>                        <C>          <C>
   Foreign currency transla-
    tion adjustments.........  $(135,958)    $(24,706)
   Unrealized gain on avail-
    able-for-sale securi-
    ties.....................    373,501       23,350
                               ---------     --------
     Total...................  $ 237,543     $ (1,356)
                               =========     ========
</TABLE>

Subsidiary Stock Option Plans

UPC Plan

In June 1996, UPC adopted a stock option plan (the "UPC Plan") for certain of
its employees and those of its subsidiaries. There are 18,000,000 total shares
available for the granting of options under the UPC Plan, which are held by
the Stichting Administratiekantoor UPC (the "Foundation"), which administers
the UPC Plan. Each option represents the right to acquire from the Foundation
a certificate representing the economic value of one share. Following
consummation of the initial public offering, any certificates issued to
employees who have exercised their options will be converted into UPC common
stock. United appoints the board members of the Foundation and thus controls
the voting of the Foundation's common stock. The options are granted at fair
market value determined by UPC's Supervisory Board at the time of the grant.
The maximum term that the options can be exercised is five years from the date
of the grant. In order to introduce the element of "vesting" of the options,
the UPC Plan provides that even though the options are exercisable
immediately, the shares to be issued or options granted in 1996 vest in equal
monthly increments over a three-year period from the effective date set forth
in the option grant. In March 1998, the UPC Plan was revised to increase the
vesting period for any new grants of options to four years, vesting in equal
monthly increments. Upon termination of an employee (except in the case of
death, disability or the like), all unvested options previously exercised must
be resold to the Foundation at the original purchase price, or all vested
options must be exercised, within 30 days of the termination date. The
Supervisory Board may alter these vesting schedules in its discretion. An
employee has the right at any time to put his certificates or shares from
exercised vested options to the Foundation at a price equal to the fair market
value. UPC can also call such certificates or shares for a cash payment upon
termination in order to avoid dilution, except for certain awards, which can
not be called by UPC until expiration of the underlying options. The UPC Plan
also contains anti-dilution protection and provides that, in the case of
change of control, the acquiring company has the right to require UPC to
acquire all of the options outstanding at the per share value determined in
the transaction giving rise to the change of control.

For purposes of the pro forma disclosures presented below, UPC has computed
the fair values of all options granted during the year ended December 31, 1999
using the Black-Scholes single-option pricing model and the following
weighted-average assumptions:

<TABLE>
   <S>                                                                   <C>
   Risk-free interest rate..............................................   5.76%
   Expected life........................................................ 5 years
   Expected volatility..................................................  56.82%
   Expected dividend yield..............................................      0%
</TABLE>

The total fair value of options granted was approximately (Euro) 38.5 ($38.8)
million for the year ended December 31, 1999. This amount is amortized using
the straight-line method over the vesting period of the options. Cumulative
compensation expense recognized in proforma net income, with respect to
options that are forfeited prior to vesting, is adjusted as a reduction of
proforma compensation expense in the period of forfeiture. For the year ended
December 31, 1999, stock-based compensation, net of the effect of forfeitures
and net of

                                     F-124
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

actual compensation expense recorded in the statement of operations was
(Euro) 5.9 ($5.6) million. This stock-based compensation had the following pro
forma effect on net income (in thousands):

<TABLE>
<CAPTION>
                                                                          Net
                                                                         Income
                                                                        --------
   <S>                                                                  <C>
   As reported......................................................... $778,123
   Pro forma........................................................... $772,495
</TABLE>

A summary of stock option activity for the UPC Plan is as follows:

<TABLE>
<CAPTION>
                                            For the Year Ended December 31,
                             ----------------------------------------------------------------
                                     1999                  1998                 1997
                             --------------------- --------------------- --------------------
                                         Weighted-             Weighted-            Weighted-
                                          Average               Average              Average
                                         Exercise              Exercise             Exercise
                               Number      Price     Number      Price    Number      Price
                             ----------  --------- ----------  --------- ---------  ---------
                                          (Euros)               (Euros)              (Euros)
   <S>                       <C>         <C>       <C>         <C>       <C>        <C>
   Outstanding at beginning
    of period..............  12,586,500     1.72    6,724,656    1.59    6,901,251    1.59
   Granted during the
    period.................   4,338,000    14.91    7,029,000    1.83          --      --
   Cancelled during the
    period.................    (266,565)    3.44      (42,156)   1.59     (176,595)   1.59
   Exercised during the
    period.................  (5,702,256)    1.65   (1,125,000)   1.59          --      --
                             ----------    -----   ----------    ----    ---------    ----
   Outstanding at end of
    period.................  10,955,679     6.94   12,586,500    1.72    6,724,656    1.59
                             ==========    =====   ==========    ====    =========    ====
   Exercisable at end of
    period(1)..............   4,769,595     3.10   12,586,500    1.72    6,724,656    1.59
                             ==========    =====   ==========    ====    =========    ====
</TABLE>
--------
(1) Includes certificate rights as well as options.

The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:

<TABLE>
<CAPTION>
                                        For the Year Ended December 31,
                               -------------------------------------------------
                                         1999                     1998
                               ------------------------ ------------------------
                                         Fair  Exercise           Fair  Exercise
                                Number   Value  Price    Number   Value  Price
                               --------- ----- -------- --------- ----- --------
                                            (Euros)                  (Euros)
   Exercise Price
   --------------
   <S>                         <C>       <C>   <C>      <C>       <C>   <C>
   Less than market price.....   375,000 8.94   16.12         --   --      --
   Equal to market price...... 3,963,000 8.95   14.79   7,029,000 1.83    1.83
                               --------- ----   -----   --------- ----    ----
     Total.................... 4,338,000 8.94   14.91   7,029,000 1.83    1.83
                               ========= ====   =====   ========= ====    ====
</TABLE>

                                     F-125
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table summarizes information about stock options outstanding and
exercisable as of December 31, 1999:

<TABLE>
<CAPTION>
                                     Options Outstanding          Options Exercisable
                            ------------------------------------- -------------------
                                       Weighted-Average Weighted-           Weighted-
                                          Remaining      Average             Average
                                       Contractual Life Exercise            Exercise
                              Number       (Years)        Price    Number     Price
                            ---------- ---------------- --------- --------- ---------
                                                         (Euros)             (Euros)
   Exercise Price Range
   (Euros)
   --------------------
   <S>                      <C>        <C>              <C>       <C>       <C>
    1.59- 2.05.............  6,681,039       1.19          1.80   4,211,055    1.78
    9.67- 9.67.............  1,212,000       3.20          9.67     231,000    9.67
   11.26-11.40.............    719,640       3.22         11.40     132,483   11.40
   15.67-18.17.............  1,171,500       3.56         17.51     130,188   17.46
   20.08-20.08.............  1,171,500       3.78         20.08      64,869   20.08
                            ----------       ----         -----   ---------   -----
     Total................. 10,955,679       2.00          6.94   4,769,595    3.10
                            ==========       ====         =====   =========   =====
</TABLE>

The UPC Plan was accounted for as a variable plan prior to UPC's initial
public offering in February 1999. Accordingly, compensation expense was
recognized at each financial statement date based on the difference between
the grant price and the estimated fair value of UPC's common stock. Therafter,
the UPC Plan has been accounted for as a fixed plan. Compensation expense of
(Euro) 6.5 ($6.8) million, (Euro) 121.7 ($134.7) million and (Euro) 2.2 ($2.5)
million was recognized for the year ended December 31, 1999, the ten months
ended December 31, 1998 and the year ended February 28, 1998, respectively.

UPC Phantom Stock Option Plan

In March 1998, UPC adopted a phantom stock option plan (the "UPC Phantom
Plan") which permits the grant of phantom stock rights in up to 7,200,000
shares of UPC's common stock. The rights are granted at fair market value
determined by UPC's Supervisory Board at the time of grant, and generally vest
in equal monthly increments over the four-year period following the effective
date of grant and may be exercised for ten years following the effective date
of grant. The UPC Phantom Plan gives the employee the right to receive payment
equal to the difference between the fair market value of a share of UPC common
stock and the option base price for the portion of the rights vested. UPC, at
its sole discretion, may make payment in (i) cash, (ii) freely tradable shares
of United Class A Common Stock or (iii) freely tradable shares of UPC's common
stock. If UPC chooses to make a cash payment, even though its stock is
publicly traded, employees have the option to receive an equivalent number of
freely tradable shares of stock instead. The UPC Phantom Plan contains anti-
dilution protection and provides that, in certain cases of a change of
control, all phantom options outstanding become fully exercisable.

The UPC Phantom Plan is accounted for as a variable plan in accordance with
its terms, resulting in compensation expense for the difference between the
grant price and the fair market value at each financial statement date.
Compensation expense of (Euro) 117.4 ($123.2) million and (Euro) 23.8 ($26.3)
million was recognized for the year ended December 31, 1999 and the ten months
ended December 31, 1998, respectively.

                                     F-126
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


A summary of stock option activity for the UPC Phantom Plan is as follows:

<TABLE>
<CAPTION>
                                       For the Year Ended   For the Year Ended
                                       December 31, 1999     December 31, 1998
                                      --------------------- -------------------
                                                  Weighted-           Weighted-
                                                   Average             Average
                                                  Exercise            Exercise
                                        Number      Price    Number     Price
                                      ----------  --------- --------- ---------
                                                   (Euros)             (Euros)
   <S>                                <C>         <C>       <C>       <C>
   Outstanding at beginning of peri-
    od..............................   6,172,500    1.91          --     --
   Granted during the period........     585,000    9.67    6,172,500   1.91
   Cancelled during the period......  (1,540,128)   2.00          --     --
   Exercised during the period......  (1,072,809)   1.89          --     --
                                      ----------    ----    ---------   ----
   Outstanding at end of period.....   4,144,563    2.98    6,172,500   1.91
                                      ==========    ====    =========   ====
   Vested and exercisable at end of
    period..........................   1,554,813    2.47    1,411,407   1.84
                                      ==========    ====    =========   ====
</TABLE>

The combined weighted-average fair values and weighted-average exercise prices
of options granted are as follows:

<TABLE>
<CAPTION>
                                   For the Year Ended      For the Year Ended
                                   December 31, 1999       December 31, 1998
                                 ---------------------- ------------------------
                                         Fair  Exercise           Fair  Exercise
                                 Number  Value  Price    Number   Value  Price
                                 ------- ----- -------- --------- ----- --------
                                            (Euros)                  (Euros)
   Exercise Price
   --------------
   <S>                           <C>     <C>   <C>      <C>       <C>   <C>
   Equal to market price........ 585,000 9.67    9.67   2,057,250 1.91    1.91
</TABLE>

The following table summarizes information about stock options outstanding and
exercisable as of December 31, 1999:

<TABLE>
<CAPTION>
                                     Options Outstanding     Options Exercisable
                                  -------------------------- -------------------
                                            Weighted-Average
                                               Remaining
                                            Contractual Life
   Exercise Price (Euros)          Number       (Years)            Number
   ----------------------         --------- ---------------- -------------------
   <S>                            <C>       <C>              <C>
   1.82.......................... 2,606,778       7.60            1,186,092
   2.05..........................   952,785       8.74              245,907
   9.67..........................   585,000       9.16              122,814
                                  ---------       ----            ---------
     Total....................... 4,144,563       8.14            1,554,813
                                  =========       ====            =========
</TABLE>

chello Phantom Stock Option Plan

In June 1998, UPC adopted a phantom stock option plan (the "chello Phantom
Plan"), which permits the grant of phantom stock rights of chello, a wholly-
owned subsidiary of UPC. The rights are granted at an option price equal to
the fair market value determined by chello's Supervisory Board at the time of
grant, and generally vest in equal monthly increments over the four-year
period following the effective date of grant and the option must be exercised,
in all cases, not more than ten years from the effective date of grant. The
chello Phantom Plan gives the employee the right to receive payment equal to
the difference between the fair market value of a share (as defined the chello
Phantom Plan) of chello and the option price for the portion of the rights
vested. UPC, at its sole discretion, may make the required payment in cash,
freely tradable shares of United Class A Common Stock, the common stock of
UPC, which shall be valued at the closing price on the day before the date the
Company makes payment to the option holder, or the chello's common shares, if
they are publicly traded and freely tradeable ordinary shares. If UPC chooses
to make a cash payment, even though its stock is publicly

                                     F-127
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

traded, employees have the option to receive an equivalent number of freely
tradable shares of chello's stock instead. As of December 31, 1999, UPC
recorded cumulative compensation expense of (Euro) 70.8 ($71.2) million for
options granted under the chello Phantom Plan.

A summary of stock option activity for the chello Phantom Plan is as follows:

<TABLE>
<CAPTION>
                                  For the Year Ended       For the Year Ended
                                  December 31, 1999        December 31, 1998
                               ------------------------- ----------------------
                                            Weighted-              Weighted-
                                             Average                Average
                                Number    Exercise Price Number  Exercise Price
                               ---------  -------------- ------- --------------
                                             (Euros)                (Euros)
   <S>                         <C>        <C>            <C>     <C>
   Outstanding at beginning
    of period................    570,000       4.54          --        --
   Granted during the peri-
    od.......................    235,000       4.54      570,000      4.54
   Granted during the peri-
    od.......................  1,309,838       9.08          --        --
   Granted during the peri-
    od.......................    355,500        -- (1)       --        --
   Cancelled during the peri-
    od.......................   (128,542)      4.71          --        --
   Exercised during the peri-
    od.......................    (11,667)      4.54          --        --
                               ---------       ----      -------      ----
   Outstanding at end of pe-
    riod.....................  2,330,129       7.54(2)   570,000      4.54
                               =========       ====      =======      ====
   Vested and exercisable at
    end of period............    414,913       6.13(2)    70,625      4.54
                               =========       ====      =======      ====
</TABLE>
  --------
  (1) Of the total number of options granted to date, the option price with
      respect to these options is the chello broadband initial public
      offering ("IPO") price.
  (2) Excluding the shares discussed in (1) above.

The following table summarizes information about stock options outstanding and
exercisable as of December 31, 1999:

<TABLE>
<CAPTION>
                                     Options Outstanding     Options Exercisable
                                  -------------------------- -------------------
                                            Weighted-Average
                                               Remaining
                                            Contractual Life
   Exercise Price (Euros)          Number       (Years)            Number
   ----------------------         --------- ---------------- -------------------
   <S>                            <C>       <C>              <C>
    4.54.........................   669,791       7.05             267,188
    9.08......................... 1,304,838       9.56             144,074
    --(1)........................   355,500       9.96               3,651
                                  ---------       ----             -------
     Total....................... 2,330,129       8.93             414,913
                                  =========       ====             =======
</TABLE>
  --------
  (1)Of the total number of options granted to date, the option price in
    respect of these options is the IPO price.

The chello Phantom Plan is accounted for as a variable plan in accordance with
its terms, resulting in compensation expense for the difference between the
grant price and the fair market value at each financial statement date.
Compensation expense of (Euro) 69.8 ($70.3) million was recognized for the
year ended December 31, 1999. The Company's estimate of the fair value of its
ordinary stock as of December 31, 1999 utilized in recording compensation
expense and deferred compensation expense under the chello plan was
(Euro) 85.00 per share. Because the Company will account for the chello
Phantom Plan as a variable plan, compensation expense will continue to be
recognized subsequent to December 31, 1999. For each (Euro) 1 per share
increase in the estimate of the fair value per share of its ordinary stock as
of December 31, 1999, over the (Euro) 85.00 used to record stock compensation
expense as of December 31, 1999, additional stock compensation expense
totalling approximately (Euro)0.9 ($0.9) million would have been recognized in
the statement of operations and deferred compensation expense would have
increased by approximately that amount as of that date.

                                     F-128
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


chello Stock option plan

In June 1999, the Company adopted a stock option plan (the "chello Plan").
Under the chello Plan, the Company's Supervisory Board may grant stock options
to the Company's employees at fair market value determined by the Company's
Supervisory Board at the time of grant. All options are exercisable upon grant
and for the period of five years. In order to introduce the element of
"vesting" of the options, the chello Plan provides that even though the
options are exercisable immediately, the shares to be issued or options to be
granted are deemed to vest 1/48th per month for a four-year period from date
to grant. If the employee's employment terminates, other than in case of
death, disability or the like, for so-called "urgent reason" under Dutch law
or for documented and material non-performance, all unvested options
previously exercised must be resold to the Company at the original purchase
price, and all vested options must be exercised, within 30 days of the
termination date. The Supervisory Board may alter these vesting schedules at
its discretion. The chello Plan provides that in case of change of control,
the Company has the right to require a foundation to acquire all of the
options outstanding at per share value determined in the transaction giving
rise to the change in its control.

For purposes of the pro forma disclosures presented below, the Company has
computed the fair value of all options granted during the year ended December
31, 1998 and the year ended December 31, 1999, using the Black-Scholes single-
option pricing model and the following weighted average assumptions: expected
dividend yield of 0%, expected annual standard volatility of 95%, risk-free
interest rate of 3.41% and expected life term of 5 years.

The total value of options granted under the chello Plan was nil for the year
ended December 31, 1998 and (Euro)3.7 ($3.7) million for the year ended
December 31, 1999. These pro forma amounts are amortized using the straight-
line method over the vesting period of the options. Cumulative compensation
expense recognized in pro forma net income, with respect to options that are
forfeited prior to vesting, is adjusted as a reduction of pro forma
compensation expense in the period of forfeiture. For the year ended December
31, 1998 and December 31, 1999, pro forma stock-based compensation, net of the
effect of forfeitures, was nil and (Euro)0.7 ($0.7) million, respectively.

This stock-based compensation had the following pro forma effect on net income
(in thousands):

<TABLE>
<CAPTION>
                                                                           Net
                                                                          Loss
                                                                         -------
   <S>                                                                   <C>
   As reported.......................................................... 778,123
                                                                         -------
   Pro forma............................................................ 777,392
                                                                         =======
</TABLE>

13. Commitments

The Company has entered into various operating lease agreements for office
space, office furniture and equipment, and vehicles. Rental expense under
these lease agreements totaled $19.5, $3.4 and $0 million for the year ended
December 31, 1999, the ten months ended December 31, 1998 and for the year
ended February 28, 1998, respectively.

The Company has operating lease obligations and other non-cancelable
commitments as follows (in thousands):

<TABLE>
   <S>                                                                 <C>
   Year ended December 31, 2000.......................................   84,920
   Year ended December 31, 2001.......................................   84,843
   Year ended December 31, 2002.......................................   67,532
   Year ended December 31, 2003.......................................   50,195
   Year ended December 31, 2004 and thereafter........................  190,008
                                                                       --------
     Total............................................................ $477,498
                                                                       ========
</TABLE>


                                     F-129
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In September 1999, UPC agreed to form a joint venture with Microsoft
Corporation ("Microsoft") and Liberty Media Corporation ("Liberty"). UPC will
contribute the 5.6 million shares of Class A Common Stock of United that it
owns and the other parties will contribute 9.9 million shares of Class B
Common Stock of United. UPC will have a 50.0% interest in the new joint
venture and Liberty and Microsoft will share the other 50.0% and a $287.0
million redeemable preferred interest in the joint venture to balance out the
parties' ownership interests. UPC, together with Liberty and Microsoft, will
evaluate content and distribution opportunities in Europe. Formation of the
joint venture is still pending.

UPC has entered into an agreement for the long-term lease of satellite
transponder capacity providing service from Europe to Europe, North America
and South America. The term of the agreement is 156 months, with a minimum
aggregate total cost of approximately $114.0 million payable in monthly
installments based on capacity used.

@Entertainment has entered into long-term programming agreements and
agreements for the purchase of certain exhibition or broadcast rights with a
number of third-party content providers for its digital DTH and cable systems.
@Entertainment had minimum commitments related to these agreements as follows
(in thousands):

<TABLE>
<S>                                                                    <C>
Year ended December 31, 2000.......................................... $ 55,600
Year ended December 31, 2001..........................................   51,800
Year ended December 31, 2002..........................................   48,100
Year ended December 31, 2003..........................................   29,900
Year ended December 31, 2004 and thereafter...........................   28,600
                                                                       --------
  Total............................................................... $214,000
                                                                       ========
</TABLE>

As of December 31, 1999, @Entertainment had an aggregate minimum commitment
toward the purchase of DTH reception systems from Philips Business Electronics
B.V. of approximately $60.8 million over the next two years.

14. Contingencies

From time to time, the Company and/or its subsidiaries may become involved in
litigation relating to claims arising out of its operations in the normal
course of business. The Company is not a party to any material legal
proceedings, nor is it currently aware of any threatened material legal
proceedings.

15. Income Taxes

In general, a United States corporation may claim a foreign tax credit against
its federal income tax expense for foreign income taxes paid or accrued.
Because the Company must calculate its foreign tax credit separately for
dividends received from each foreign corporation in which the Company owns
10.0% to 50.0% of the voting stock, and because of certain other limitations,
the Company's ability to claim a foreign tax credit may be limited,
particularly with respect to dividends paid out of earnings subject to a high
rate of foreign income tax. Generally, the Company's ability to claim a
foreign tax credit is limited to the amount of U.S. taxes the Company pays
with respect to its foreign source income. In calculating its foreign source
income, the Company is required to allocate interest expense and overhead
incurred in the United States between its United States and foreign
activities. Accordingly, to the extent United States borrowings are used to
finance equity contributions to its foreign subsidiaries, the Company's
ability to claim a foreign tax credit may be significantly reduced. These
limitations and the inability of the Company to offset losses in one foreign
jurisdiction against income earned in another foreign jurisdiction could
result in a high effective tax rate on the Company's earnings.

                                     F-130
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The primary differences between taxable income (loss) and net income (loss)
for financial reporting purposes relate to SAB 51 gains, international rate
differences and the non-consolidation of consolidated foreign subsidiaries for
United States tax purposes. For investments in foreign corporations accounted
for under the equity method, taxable income (loss) generated by these
affiliates does not flow through to the Company for United States federal and
state tax purposes, even though the Company records its allocable share of
affiliate income (losses) for financial reporting purposes. Accordingly, due
to the indefinite reversal of such amounts in future periods, no deferred tax
asset has been established for tax basis in excess of the Company's book basis
(approximately $19.3 and $30.0 million at December 31, 1999 and 1998,
respectively).

The Company's United States tax net operating losses, totaling approximately
$9.8 million at December 31, 1999, expire beginning in 2014 through 2029. The
Company's tax net operating loss carryforwards of its consolidated foreign
subsidiaries as of December 31, 1999 totaled $801.8 million. The significant
components of the net deferred tax asset are as follows:

<TABLE>
<CAPTION>
                                                        As of        As of
                                                     December 31, December 31,
                                                         1999         1998
                                                     ------------ ------------
                                                          (In thousands)
   <S>                                               <C>          <C>
   Deferred Tax Assets:
     Tax net operating loss carryforward of
      consolidated foreign subsidiaries.............  $ 277,195     $ 72,504
     Company's U.S. tax net operating loss
      carryforward..................................      3,732        3,266
     Stock-based compensation.......................     36,113        7,215
     Foreign currency translation adjustment........     23,113          --
     Accrued interest expense.......................     14,420          --
     Other..........................................     14,271          426
                                                      ---------     --------
       Total deferred tax assets....................    368,844       83,411
     Valuation allowance............................   (360,186)     (74,983)
                                                      ---------     --------
       Deferred tax assets, net of valuation
        allowance...................................      8,658        8,428
                                                      ---------     --------
   Deferred Tax Liabilities:
     Intangible assets..............................    (18,681)      (5,852)
     Property, plant and equipment, net.............     (6,038)      (7,156)
     Other..........................................        --           --
                                                      ---------     --------
       Total deferred tax liabilities...............    (24,719)     (13,008)
                                                      ---------     --------
       Deferred tax liabilities, net................  $ (16,061)    $ (4,580)
                                                      =========     ========
</TABLE>

                                     F-131
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Of the Company's 1999 consolidated income (loss) before income taxes and other
items, $794.8 million is derived from the Company's foreign operations. The
difference between income tax expense (benefit) provided in the financial
statements and the expected income tax expense (benefit) at statutory rates is
reconciled as follows:

<TABLE>
<CAPTION>
                                        For the Year For the Ten  For the Year
                                           Ended     Months Ended    Ended
                                        December 31, December 31, February 28,
                                            1999         1998         1998
                                        ------------ ------------ ------------
   <S>                                  <C>          <C>          <C>
   Expected income tax expense
    (benefit) at the U.S. statutory
    rate of 35%.......................   $ 161,782     $(83,638)    $(4,061)
   Tax effect of permanent and other
    differences:
     Change in valuation allowance....     256,282       40,561       4,409
     Gain on issuance of common equity
      securities by subsidiary........    (478,981)         --          --
     Non-deductible expenses..........      68,400       49,382         --
     Capitalized costs................     (49,402)         --          --
     International rate differences...      26,431        1,474         --
     State tax, net of federal
      benefit.........................      13,867       (7,169)       (348)
     Other............................        (272)         --          --
                                         ---------     --------     -------
       Total income tax (benefit)
        expense.......................   $  (1,893)    $    610     $   --
                                         =========     ========     =======
</TABLE>

During 1996, the Austrian tax authorities passed legislation which had the
effect of eliminating approximately NLG256.0 ($116.9) million of tax basis
associated with certain amounts of goodwill recorded at Telekabel Group
effective January 1, 1997. This change in tax law is expected to be challenged
on constitutional grounds. However, there can be no assurance of a successful
repeal of such legislation. Accordingly, this change caused Telekabel Group's
effective tax rate to increase from the historical effective tax rate through
December 31, 1996, due to the non-deductibility of such goodwill amortization
subsequent to January 1, 1997.

The Company through its subsidiaries maintains a presence in 23 countries.
Many of these countries maintain tax regimes that differ significantly from
the system of income taxation used in the United States, such as a value added
tax system. The Company has accounted for the effect of foreign taxes based on
what it believes is reasonably expected to apply to the Company and its
subsidiaries based on tax laws currently in effect and/or reasonable
interpretations of these laws. Because some foreign jurisdictions do not have
systems of taxation that are as well established as the system of income
taxation used in the United States or tax regimes used in other major
industrialized countries, it may be difficult to anticipate how foreign
jurisdictions will tax current and future operations of the Company and its
subsidiaries.

                                     F-132
<PAGE>

                              UNITED EUROPE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Segment Information

<TABLE>
<CAPTION>
                                  For the Year Ended December 31, 1999                       As of December 31, 1999
                     -----------------------------------------------------------------  ----------------------------------
                                                                                          Long-
                     Multichannel                        Internet                         Lived      Capital      Total
                      Television  Telephone  Programming   Data     Other      Total    Assets(2)  Expenditures   Assets
                     ------------ ---------  ----------- --------  --------  ---------  ---------- ------------ ----------
                                             (In thousands)                                       (In thousands)
<S>                  <C>          <C>        <C>         <C>       <C>       <C>        <C>        <C>          <C>
Revenue:
 Europe:
 The Netherlands...    $117,026   $ 32,029    $  1,112   $  8,616  $    330  $ 159,113  $  774,045   $247,050   $3,550,612
 Austria...........      83,737      7,321         --      13,609       --     104,667     179,652     94,240      356,337
 Belgium...........      15,737        --          --       2,497       --      18,234      23,186      8,447       47,826
 Czech Republic....       7,485        181         --         --      1,042      8,708      80,347      2,491      159,806
 France............      27,522      2,710         --         590       --      30,822     319,454     70,666      498,776
 Hungary...........      35,197        --          --         125       --      35,322     112,698     38,708      215,448
 Norway............      49,186        365         --         565       --      50,116     100,315     57,106      244,975
 Poland............      26,845        --       10,917        --        --      37,762     218,784     42,460    1,218,956
 Sweden............      13,335        --          --         504       --      13,839      48,182     12,495      474,899
 Corporate and
  other............       8,327        --          --         --      6,512     14,839      63,698     38,569       77,219
                       --------   --------    --------   --------  --------  ---------  ----------   --------   ----------
  Total Europe.....    $384,397   $ 42,606    $ 12,029   $ 26,506  $  7,884  $ 473,422  $1,920,361   $612,232   $6,844,854
                       ========   ========    ========   ========  ========  =========  ==========   ========   ==========
Adjusted EBITDA:(1)
 Europe:
 The Netherlands...    $ 48,185   $(19,900)   $(16,705)  $(66,569) $(41,350) $ (96,339)
 Austria...........      44,945    (11,470)        --         234       --      33,709
 Belgium...........       3,954        (54)        --      (2,212)      --       1,688
 Czech Republic....      (1,129)        54         --         --        407       (668)
 France............      (1,766)    (5,946)        --      (2,373)      (67)   (10,152)
 Hungary...........      11,739        --          --        (261)      --      11,478
 Norway............      20,740     (7,153)        --      (5,178)      --       8,409
 Poland............      (9,363)       --      (64,791)       --     (3,018)   (77,172)
 Sweden............       4,582       (135)        --      (4,095)      --         352
 Corporate and
  other............       2,123       (206)        --        (725)      (41)     1,151
                       --------   --------    --------   --------  --------  ---------
  Total Europe.....    $124,010   $(44,810)   $(81,496)  $(81,179) $(44,069) $(127,544)
                       ========   ========    ========   ========  ========  =========
</TABLE>

<TABLE>
<CAPTION>
                                  For the Ten Months Ended December 31, 1998                  As of December 31, 1998
                         --------------------------------------------------------------  ---------------------------------
                                                                                           Long-
                         Multichannel                       Internet                       Lived     Capital      Total
                          Television  Telephone Programming   Data     Other    Total    Assets(2) Expenditures   Assets
                         ------------ --------- ----------- --------  -------  --------  --------- ------------ ----------
                                                (In thousands)                                    (In thousands)
<S>                      <C>          <C>       <C>         <C>       <C>      <C>       <C>       <C>          <C>
Revenue:
 Europe:
 The Netherlands.......    $ 13,854    $   162    $   --    $   --    $ 7,274  $ 21,290  $  2,440    $ 14,734   $  297,068
 Austria...............      71,396         61        --      3,172       --     74,629   140,550      43,278      341,159
 Belgium...............      13,768        --         --        656     1,071    15,495    27,558      11,253       57,847
 Czech Republic........       3,754        --         --        --        --      3,754     8,737         523       11,497
 France................       3,395        --         --        --        --      3,395    40,328      28,802       51,092
 Hungary...............      11,671        --         --        --        --     11,671    26,788       7,239       86,921
 Norway................      38,879        --         --        161       --     39,040    63,335      25,838      219,068
 Corporate and Other...       2,446        --         567       --        --      3,013     9,310       9,880       22,744
                           --------    -------    -------   -------   -------  --------  --------    --------   ----------
  Total Europe.........    $159,163    $   223    $   567   $ 3,989   $ 8,345  $172,287  $319,046    $141,547   $1,087,396
                           ========    =======    =======   =======   =======  ========  ========    ========   ==========
Adjusted EBITDA:(1)
 Europe:
 The Netherlands.......    $  8,445    $(1,303)   $  (295)  $(6,103)  $(4,401) $ (3,657)
 Austria...............      34,350     (1,636)       --     (1,739)      --     30,975
 Belgium...............       5,755        --         --       (799)      114     5,070
 Czech Republic........        (721)       --         --        --        --       (721)
 France................        (954)      (911)       --        (77)      --     (1,942)
 Hungary...............       3,820        --         --        --        --      3,820
 Norway................      14,015       (573)       --       (806)      --     12,636
 Corporate and Other...        (167)       --      (3,556)       19       131    (3,573)
                           --------    -------    -------   -------   -------  --------
  Total Europe.........    $ 64,543    $(4,423)   $(3,851)  $(9,505)  $(4,156) $ 42,608
                           ========    =======    =======   =======   =======  ========
</TABLE>


                                     F-133
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                    For the Year Ended February 28, 1998                 As of February 28, 1998
                          ---------------------------------------------------------  -------------------------------
                                                                                       Long-
                          Multichannel                       Internet                  Lived     Capital     Total
                           Television  Telephone Programming   Data   Other  Total   Assets(2) Expenditures  Assets
                          ------------ --------- ----------- -------- ----- -------  --------- ------------ --------
                                               (In thousands)                                (In thousands)
<S>                       <C>          <C>       <C>         <C>      <C>   <C>      <C>       <C>          <C>
Revenue:
 Europe:
 The Netherlands........    $   --       $--        $--        $--    $--   $   --   $ 20,773     $  --     $308,907
 Austria................        --        --         --         --     --       --    115,786        --      323,298
 Belgium................        --        --         --         --     --       --     24,526        --       49,204
 Norway.................        --        --         --         --     --       --     51,369        --      215,517
 Corporate and other....      9,945       --         --         --     --     9,945    26,998      7,461      53,007
                            -------      ----       ----       ----   ----  -------  --------     ------    --------
  Total Europe..........    $ 9,945      $--        $--        $--    $--   $ 9,945  $239,452     $7,461    $949,933
                            =======      ====       ====       ====   ====  =======  ========     ======    ========
Adjusted EBITDA:(1)
 Europe:
 The Netherlands........    $   --       $--        $--        $--    $--   $   --
 Austria................        --        --         --         --     --       --
 Belgium................        --        --         --         --     --       --
 Norway.................        --        --         --         --     --       --
 Corporate and other....     (3,547)      --         --         --     --    (3,547)
                            -------      ----       ----       ----   ----  -------
  Total Europe..........    $(3,547)     $--        $--        $--    $--   $(3,547)
                            =======      ====       ====       ====   ====  =======
</TABLE>
--------
(1) Adjusted EBITDA represents earnings before depreciation, amortization and
    stock based compensation charges. Industry analysts generally consider
    Adjusted EBITDA to be a helpful way to measure the performance of cable
    television operations and communications companies. Management believes
    Adjusted EBITDA helps investors to assess the cash flow from operations
    from period to period and thus to value the Company's business. Adjusted
    EBITDA should not, however, be considered a replacement for net income,
    cash flows or for any other measure of performance or liquidity under
    generally accepted accounting principles, or as an indicator of a
    company's operating performance. The presentation of Adjusted EBITDA may
    not be comparable to statistics with a similar name reported by other
    companies. Not all companies and analysts calculate Adjusted EBITDA in the
    same manner.
(2) Represents Property, Plant and Equipment.

Adjusted EBITDA reconciles to the consolidated statement of operations as
follows:

<TABLE>
<CAPTION>
                                         For the Year For the Ten  For the Year
                                            Ended     Months Ended    Ended
                                         December 31, December 31, February 28,
                                             1999         1998         1998
                                         ------------ ------------ ------------
                                                     (In thousands)
   <S>                                   <C>          <C>          <C>
   Net operating loss...................  $(610,213)   $(196,066)    $(9,633)
   Depreciation and amortization........    280,442       76,550       6,086
   Stock-based compensation expense.....    202,227      162,124         --
                                          ---------    ---------     -------
     Consolidated Adjusted EBITDA.......  $(127,544)   $  42,608     $(3,547)
                                          =========    =========     =======
</TABLE>

17. Related Party Transactions

Loans to Employees

In 1996, UPC loaned certain employees of UPC amounts for the exercise of the
employees' stock options, taxes on options exercised, or both. These recourse
loans bear interest at 5.0% per annum. The employees' liability to UPC is
presented in the consolidated financial statements net of UPC's obligation to
the employees under the

                                     F-134
<PAGE>

                              UNITED EUROPE, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

plan. As of December 31, 1999 and 1998, the receivable from employees,
including accrued interest totaled $12.2 and $10.1 million, respectively.

Acquisitions of Interest in Princes Holdings and Tara

In November 1998, UPC purchased from RCL, an entity owned by a discretionary
trust for the benefit of certain members of the family of John Riordan, a
director of United, a 5.0% interest in Tara and a 5.0% interest in Princes
Holdings. The aggregate purchase price for these interests was approximately
$6.0 million. The parties agreed the purchase price would be paid in cash.
Subsequently, RCL elected to receive shares of Class A Common Stock of United.
The Company paid such purchase price by delivery to RCL 769,062 restricted
shares of Class A Common Stock held by UPC.

18. Subsequent Events

UPC Senior Notes and Senior Discount Notes

In January 2000, UPC completed a $1.6 billion bond offering consisting of
$600.0 million and (Euro) 200.0 million of ten-year 11.25% Senior Notes due
2010, $300.0 million of ten-year 11.5% Senior Notes due 2010 and $1.0 billion
aggregate principal amount of ten-year 13.75% Senior Discount Notes due 2010.
The Senior Discount Notes were sold at 51.2% of the face amount yielding gross
proceeds of $512.0 million and will accrue but not pay interest until 2005.

Acquisition of Intercomm France Holding S.A.

In February 2000, UPC acquired Intercomm France Holding S.A. for (Euro) 36.0
($36.2) million in cash and shares in UPC France. Following the transaction,
UPC controls 92.0% of UPC France.

Acquisition of Tebecai Cable System

In February 2000, UPC acquired 100% of Tebecai, a cable system based in the
east of Holland, for (Euro) 71.2 ($71.6) million.

UPC Stock Split

In March 2000, at an extraordinary general meeting of shareholders,
shareholders of UPC approved an amendment to UPC's Articles of Association to
effect a three-for-one stock split. All share and per share amounts in the
accompanying notes to the consolidated financial statements have been adjusted
to reflect this stock split.

Acquisition of ElTele Ostfold and Vestfold

In March 2000, UPC acquired 100% of the equity of ElTele Ostfold and Vestfold
from certain energy companies in Norway for (Euro) 39.7 ($39.9) million.

Acquisition of Additional Interest in SBS

In February 2000, UPC acquired and additional 10.2% of SBS for (Euro) 162.5
($163.5) million, increasing its ownership to 23.5%.

Acquisition of ENECO Cable System

In March 2000, UPC acquired K&T Group, the cable interests of N.V. ENECO, for
consideration of (Euro) 1.2 ($1.2) billion. K&T owns and operates cable
networks in Rotterdam, Dordrecht and the surrounding municipalities in The
Netherlands.

                                     F-135
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

Introduction

  We have audited the consolidated financial statements of UNITED TELEKABEL
HOLDING N.V., Amsterdam, The Netherlands, for the year 1998 for purpose of
inclusion in the Form 10-K of one of its shareholders. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

Scope

  We conducted our audit in accordance with auditing standards generally
accepted in The Netherlands, which are substantially the same as those
generally accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.

Opinion

  In our opinion, the consolidated financial statements give a true and fair
view of the financial position of the company as at December 31, 1998 and of
the result for the period from commencement of operations at August 6, 1998
then ended in accordance with accounting principles generally accepted in The
Netherlands.

  Generally accepted accounting principles in The Netherlands vary in certain
significant respects from generally accepted accounting principles in the
United States of America. Application of generally accepted accounting
principles in the United States of America would have affected total assets,
statement of operations and shareholders' equity as at and for the period from
commencement of operations at August 6, 1998 ended December 31, 1998, to the
extent summarized in Note 18. to the consolidated financial statements.

                                          Arthur Andersen

Amstelveen, The Netherlands,
March 19, 1999


                                     F-136
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

                           CONSOLIDATED BALANCE SHEET
                            AS OF DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

<TABLE>
<S>                                                                    <C>
                                ASSETS
Fixed assets:
  Intangible fixed assets.............................................   564,438
  Tangible fixed assets...............................................   847,056
  Affiliated companies................................................   206,332
                                                                       ---------
    Total fixed assets................................................ 1,617,826
                                                                       ---------
Current assets:
  Inventories.........................................................     3,091
  Receivables.........................................................    40,638
  Cash and cash equivalents...........................................    10,475
                                                                       ---------
    Total current assets..............................................    54,204
                                                                       ---------
    Total assets...................................................... 1,672,030
                                                                       =========
                 SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' Equity..................................................   635,521
Minority interest.....................................................     1,104
                                                                       ---------
                                                                         636,625

Provisions............................................................    42,054
Long-term liabilities.................................................   232,727
Current liabilities...................................................   760,624
                                                                       ---------
    Total shareholders' equity and liabilities........................ 1,672,030
                                                                       =========
</TABLE>

                                     F-137
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

                      CONSOLIDATED STATEMENT OF OPERATIONS
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

<TABLE>
<S>                                                                    <C>
Total revenues........................................................   99,122
                                                                       --------
Operating expenses:
  Direct operating expenses...........................................  (33,172)
  Selling, general and administrative expenses........................  (36,096)
  Depreciation and amortization.......................................  (39,490)
                                                                       --------
    Total operating expenses.......................................... (108,758)
                                                                       --------
  Operating loss......................................................   (9,636)
  Financial income and expense........................................  (16,699)
                                                                       --------
    Loss before income taxes..........................................  (26,335)
  Income taxes........................................................    1,212
                                                                       --------
    Loss after taxes..................................................  (25,123)
  Share in results of affiliated companies............................  (24,486)
                                                                       --------
    Group loss........................................................  (49,609)
  Minority interest...................................................      235
                                                                       --------
    Net loss..........................................................  (49,374)
                                                                       ========
</TABLE>

                                     F-138
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

<TABLE>
<S>                                                                  <C>
Cash flows from operating activities:
Net loss............................................................  (49,374)
Adjustments to reconcile net loss to net cash flows from operating
 activities:
  Depreciation and amortization.....................................   39,490
  Share in results of affiliated companies, net.....................   24,486
  Minority interest in subsidiaries.................................     (235)
Changes in assets and liabilities:
  Decrease in current assets........................................   40,098
  (Decrease) in current liabilities.................................  (55,186)
  (Decrease) in deferred taxes and other provisions.................   (1,132)
                                                                     --------
    Net cash flows from operating activities........................   (1,853)
                                                                     --------
Cash flows from investing activities:
  Capital expenditures.............................................. (121,384)
  Loan to affiliated companies......................................   (7,120)
  Acquisitions, net of cash acquired................................  (12,588)
                                                                     --------
    Net cash flows from investing activities........................ (141,092)
                                                                     --------
Cash flows from financing activities:
  Proceeds from short-term borrowings...............................  120,705
  Proceeds from long-term borrowings................................    9,621
                                                                     --------
    Net cash flows from financing activities........................  130,326
                                                                     --------
Net decrease in cash and cash equivalents...........................  (12,619)
Cash and cash equivalents at beginning of period....................      100
Cash and cash equivalents contributed...............................   22,994
                                                                     --------
    Cash and cash equivalents at end of period......................   10,475
                                                                     ========
Supplemental cash-flow disclosures:
  Cash paid for interest............................................  (19,470)
                                                                     ========
Non-cash investing activities:
Contribution of Dutch cable systems
  Working capital...................................................  (73,850)
  Affiliated companies..............................................  223,698
  Tangible fixed assets.............................................  764,762
  Intangible fixed assets...........................................  550,911
  Short-term debt................................................... (544,918)
  Long-term liabilities............................................. (223,106)
  Provisions........................................................  (35,696)
  Cash and cash equivalents.........................................   22,994
                                                                     --------
    Equity contributed..............................................  684,795
                                                                     ========
</TABLE>

                                     F-139
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

1. Organization and Nature of Operations

  United Telekabel Holding N.V. ("UTH" or the "Company"), legally seated in
Almere, The Netherlands, was legally formed in May 1998 and commenced
operations on August 6, 1998. UTH was formed as a joint venture between United
Pan-Europe Communications N.V. ("UPC") and N.V. NUON Energie-Onderneming voor
Gelderland, Friesland en Flevoland ("NUON"). UPC became a 51% shareholder and
NUON a 49% shareholder. UTH was formed for the purpose of offering cable-based
communications through its networks in the Netherlands. UTH currently offers
cable television services and is further developing and upgrading its network
to provide digital video, voice and internet/data services in its Dutch
markets.

  UTH commenced operations on August 6, 1998 when both shareholders
contributed their interests in Dutch cable television operating companies to
UTH. NUON contributed its interest in N.V. Telekabel Beheer ("Telekabel") and
UPC contributed its interest in Cable Network Brabant Holding B.V. ("CNBH")
and 50% of the shares in A2000 Holding N.V. ("A2000"). UTH recorded the assets
contributed at their fair market value. The table below summarizes the opening
balance sheet of UTH, based on the net assets contributed at their fair market
values by NUON and UPC as of August 6, 1998.

<TABLE>
   <S>                                                                 <C>
   Cash and cash equivalents contributed..............................    23,094
   Other current assets...............................................    83,827
   Affiliated companies...............................................   223,698
   Tangible fixed assets..............................................   764,762
   Intangible fixed assets............................................   550,911
                                                                       ---------
     Total assets..................................................... 1,646,292
                                                                       =========
   Short-term debt....................................................   544,918
   Other current liabilities..........................................   157,677
   Provisions.........................................................    35,696
   Long-term liabilities..............................................   223,106
   Shareholders' equity...............................................   684,895
                                                                       ---------
     Total shareholders' equity and liabilities....................... 1,646,292
                                                                       =========
</TABLE>

  Due to the fact that operations commenced at August 6, 1998, no comparative
financial statements have been presented. Proforma information (unaudited) is
presented in note 19.

2. Summary of Significant Accounting Policies

 Basis of Presentation

  The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the Netherlands
for financial statements. The accounting policies followed in the preparation
for the consolidated financial statements, differ in some respects to those
generally accepted in the United States of America (US GAAP). See note 18.

  The preparation of financial statements in conformity with Dutch generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported

                                     F-140
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. In the opinion of management, all
adjustments (consisting of normal recurring accruals) have been made which are
necessary to present fairly the financial position of the Company as of
December 31, 1998 and the results of its operations for the period from
commencement of operations (August 6, 1998) to December 31, 1998.

 Principles of Consolidation

  The accompanying consolidated financial statements include the accounts of
UTH and its group companies (the "UTH Group"). Group companies are companies
or other legal entities in which UTH has an ownership interest of more than
50% of the issued share capital or that UTH otherwise controls. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

  The following chart presents a summary of UTH's significant investments in
multi-channel television, programming and telephony operations as of December
31, 1998:

<TABLE>
<CAPTION>
                                                                      Percentage
   Name                                                       City    Ownership
   ----                                                       ----    ----------
   <S>                                                      <C>       <C>
   Cable Network Brabant Holding B.V. ..................... Eindhoven    100
   N.V. Telekabel Beheer................................... Arnhem       100
   A2000 Holding N.V. ..................................... Amsterdam     50(1)
   Uniport Communications B.V..............................               80
</TABLE>
  --------
  (1) Not consolidated

 Foreign Currencies

  Assets and liabilities denominated in foreign currencies are translated into
Dutch guilders at the year-end exchange rate. Transactions in foreign
currencies are translated at the exchange rate in effect at the time of the
transaction. The exchange results are recorded under financial income and
expense in the statement of income.

Balance Sheet

 (a) General

  Assets and liabilities are stated at face value unless indicated otherwise.

 (b) Fixed assets

  Intangible fixed assets

 The excess of investments in consolidated subsidiaries over the net tangible
asset value at acquisition is amortized on a straight-line basis over 15
years. Licenses in newly acquired companies are recognized at the fair market
value of those licenses at the date of acquisition and include the development
costs incurred prior to the date a new license was acquired. The license value
is amortized on a straight-line basis over the initial license period, up to a
maximum of 20 years. Deferred financing costs are amounts spent in connection
with financing the UTH Group. The amortization period is the period relating
to the term of the financing. When assets are fully amortized, the costs and
accumulated amortization are removed from the accounts.


                                     F-141
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

  Tangible fixed assets

  Tangible fixed assets are stated at cost. Additions, replacements,
installation costs and major improvements are capitalized, and costs for
normal repair and maintenance of tangible fixed assets are charged to expense
as incurred. Assets constructed by subsidiaries of UTH incorporate overhead
expense and interest charges incurred during the period of construction;
investment subsidies are deducted. Depreciation is calculated using the
straight-line method over the economic life of the asset, taking into account
the residual value. The economic lives of tangible fixed assets at acquisition
are as follows:

<TABLE>
   <S>                                                               <C>
   Networks.........................................................  7-20 years
   Buildings and leasehold improvements............................. 20-33 years
   Machinery & Other................................................  3-10 years
</TABLE>

  Affiliated Companies

  For those investments in companies in which UTH's ownership interest is 20%
to 50%, its investments are held through a combination of voting common stock,
preferred stock, debentures or convertible debt and/or UTH exerts significant
influence through board representation and management authority, or in which
majority control is deemed to be temporary, the equity method of accounting is
used. Under this method, the investment, originally recorded at fair market
value, is adjusted to recognize UTH's proportionate share of net earnings or
losses of the affiliates, limited to the extent of UTH's investment in and
advances to the affiliates, including any debt guarantees or other contractual
funding commitments. UTH's proportionate share of net earnings or losses of
affiliates includes the amortization of the excess of its cost over its
proportionate interest in each affiliate's net tangible assets or the excess
of its proportionate interest in each affiliate's net tangible assets in
excess of its cost.

 (c) Receivables

  Receivables are stated at face value, less an allowance for doubtfull
accounts. The allowance for doubtful accounts is based upon specific
identification of overdue accounts receivable. An allowance for a percentage
of the account is established once the receivable is overdue. Upon
disconnection of the subscriber, the account is fully reserved. The allowance
is maintained on the books until receipt of payment or for a maximum of three
years.

 (d) Cash and Cash Equivalents

  Cash and cash equivalents include cash and investments with original
maturities of less than three months.

 (e) Provisions

  Deferred tax liabilities arising from temporary differences between the
financial and tax bases of assets and liabilities are included in the
provisions. The principal differences arise in connection with valuation
differences of intangible fixed assets. In calculating the provision, current
tax rates are applied.

  UTH accounts for income taxes under the asset and liability method, which
requires recognition of, deferred tax assets and liabilities for the expected
future income tax consequences of transactions, which have been included in
the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are

                                     F-142
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

determined based on the difference between the financial statement and income
tax basis of assets, liabilities and loss carry forwards using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Net deferred tax assets are then reduced by a valuation allowance if
management believes it is more likely than not they will not be realized.

 (f) Fair value of financial instruments

  SFAS Statement No. 107, "Disclosures about Fair Values of Financial
Instruments" requires the disclosure of estimated fair values for all
financial instruments, both on and off balance sheet, for which it is
practicable to estimate fair value. For certain instruments, including cash
and cash equivalents, receivables, current liabilities and certain provisions,
it was assumed that the carrying amount approximated fair value due to the
short maturity of those instruments. For short and long term debt, the
carrying value approximates the fair value since all debt instruments carry a
variable interest rate component except for the convertible loans which
carried a fixed interest rate. For investments in affiliated companies carried
at cost, quoted market prices for the same or similar financial instruments
were used to estimate the fair values. UTH has adopted the principles of this
statement in its financial statements. UTH did not have any material off
balance sheet financial instruments as of December 31, 1998.

 (g) Recoverability of Tangible and Intangible fixed assets

  UTH evaluates the carrying value of all tangible and intangible assets
whenever events or circumstances indicate the carrying value of assets may
exceed their recoverable amounts. An impairment loss is recognized when the
estimated future cash flows (undiscounted and without interest) expected to
result from the use of an asset are less than the carrying amount of the
asset. Measurement of an impairment loss is based on the fair value of the
asset computed using discounted cash flows if the asset is expected to be held
and used. Measurement of an impairment loss for an asset held for sale would
be based on fair market value less estimated costs to sell.

 (h) Concentration of Credit Risk

  Financial instruments which potentially subject UTH to concentrations of
credit risk consist principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to UTH's large number
of customers.

 (i) Other Comprehensive Income

  UTH has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an
enterprise (i) classify items of other comprehensive income by their nature in
a financial statement and (ii) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. As of
December 31, 1998, UTH had no other comprehensive income items.

 Income Statement

  Revenue is primarily derived from the sale of cable television services to
subscribers and is recognized in the period the related services are provided.
Initial installation fees are recognized as revenue in the period in which the
installation occurs, to the extent installation fees are equal to or less than
direct selling costs, which are expensed. To the extent installation fees
exceed direct selling costs, the excess fees are deferred and amortized over
the average contract period. All installation fees and related costs with
respect to reconnections and disconnections are recognized in the period in
which the reconnection or disconnection occurs.

                                     F-143
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)


 New Accounting Principles

  In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting For the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"), which provides guidance
on accounting for the costs of computer software developed or obtained for
internal use. SOP 98-1 identifies the characteristics of internal-use software
and provides examples to assist in determining when computer software is for
internal use. SOP 98-1 is effective for financial statements for fiscal years
beginning after December 15, 1998, for projects in progress and prospectively,
with earlier application encouraged. Management believes that the adoption of
SOP 98-1 will not have a material effect on the financial statements.

  The American Institute of Certified Public Accountants recently issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"), which is required to be adopted by affected companies for fiscal
years beginning after December 15, 1998. SOP 98-5 defines start-up and
organization costs, which must be expensed as incurred. In addition, all
deferred start-up and organization costs existing as of January 1, 1999 must
be written-off and accounted for as a cumulative effect of an accounting
change. Management believes that the adoption of SOP 98-1 will not have a
material effect on the financial statements.

  The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that companies recognize
all derivatives as either assets or liabilities in the balance sheet at fair
value. Under SFAS 133, accounting for changes in fair value of a derivative
depends on its intended use and designation. SFAS 133 is effective for fiscal
years beginning after June 15, 1999. Management is currently assessing the
effect of this new standard.

3. Intangible fixed assets

<TABLE>
<CAPTION>
                                    Balance as of December 31, 1998
                                    ---------------------------------------
                                                  Licenses      Deferred
                                                    and         Financing
                                      Total       Goodwill        Costs
                                    -----------  -----------   ------------
<S>                                 <C>          <C>           <C>
Value upon contribution............     550,911      547,869         3,042
Investment.........................      30,996       29,745         1,251
Amortization.......................     (17,469)     (17,149)         (320)
                                    -----------  -----------     ---------
Book value as of December 31,
 1998..............................     564,438      560,465         3,973
                                    ===========  ===========     =========
<CAPTION>
                                      Balance as of December 31, 1998
                                    -------------------------------------------
                                                  Licenses      Deferred
                                                    and         Financing
                                      Total       Goodwill        Costs
                                    -----------  -----------   ------------
<S>                                 <C>          <C>           <C>
Gross Value........................     581,907      577,614         4,293
Amortization.......................     (17,469)     (17,149)         (320)
                                    -----------  -----------     ---------
Book value as of December 31,
 1998..............................     564,438      560,465         3,973
                                    ===========  ===========     =========
</TABLE>


                                     F-144
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

4. Tangible fixed assets

<TABLE>
<CAPTION>
                                            Balance as of December 31, 1998
                                          -------------------------------------
                                                   Land and           Machinery
                                           Total   Buildings Network   & Other
                                          -------  --------- -------  ---------
   <S>                                    <C>      <C>       <C>      <C>
   Value upon contribution............... 764,762    6,025   745,503   13,234
   Additions............................. 104,315      130   102,023    2,162
   Depreciation.......................... (22,021)    (182)  (20,005)  (1,834)
                                          -------    -----   -------   ------
   Book value as of December 31, 1998.... 847,056    5,973   827,521   13,562
                                          =======    =====   =======   ======
</TABLE>

<TABLE>
<CAPTION>
                                            Balance as of December 31, 1998
                                          -------------------------------------
                                                   Land and           Machinery
                                           Total   Buildings Network   & Other
                                          -------  --------- -------  ---------
   <S>                                    <C>      <C>       <C>      <C>
   Cost.................................. 869,077    6,155   847,526   15,396
   Depreciation.......................... (22,021)    (182)  (20,005)  (1,834)
                                          -------    -----   -------   ------
   Book value as of December 31, 1998.... 847,056    5,973   827,521   13,562
                                          =======    =====   =======   ======
</TABLE>

5. Affiliated companies

<TABLE>
<CAPTION>
                                         Balance as of December 31, 1998
                                         --------------------------------------
                                          Total       Investments    Advances
                                         -----------  -------------  ----------
   <S>                                   <C>          <C>            <C>
   Balance upon contribution............     223,698        223,698         --
   Additions............................       7,120            --        7,120
   Share in results.....................     (24,486)       (24,486)        --
                                         -----------    -----------   ---------
   Balance as of December 31, 1998......     206,332        199,212       7,120
                                         ===========    ===========   =========
</TABLE>

  The investments in affiliated companies as of December 31, 1998 are:

<TABLE>
<CAPTION>
                                 Investments in      Cumulative Share
                        %       and Advances to       In Results of
                    Ownership Affiliated Companies Affiliated Companies  Total
                    --------- -------------------- -------------------- -------
   <S>              <C>       <C>                  <C>                  <C>
   A2000...........   50.0%         229,481              (24,449)       205,032
   Interway........   33.0%           1,337                  (37)         1,300
                                    -------              -------        -------
   Total...........                 230,818              (24,486)       206,332
                                    =======              =======        =======
</TABLE>

  UTH had the following differences related to the excess of cost over the net
tangible assets acquired for its equity investments. Such differences are being
amortized over 12 to 15 years:

<TABLE>
<CAPTION>
                                                           Basis    Accumulated
                                                         Difference Amortization
                                                         ---------- ------------
   <S>                                                   <C>        <C>
   A2000................................................  249,236      (8,200)
                                                          =======      ======
</TABLE>

  These differences have been presented as affiliated companies and share in
result of affiliated companies respectively.

  Subsequent to year end, UPC provided a letter of support to A2000 stating
that it would continue to provide to A2000 the funding necessary to continue
operations through at least 1999.

                                     F-145
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)


  Summary financial information for A2000 based on Dutch generally accepted
accounting principles is as follows:

Balance Sheet

<TABLE>
<CAPTION>
                                                              As of December 31,
                                                                     1998
                                                              ------------------
   <S>                                                        <C>
   Intangible fixed assets...................................      113,361
   Tangible fixed assets.....................................      356,623
   Financial fixed assets....................................          770
   Liquid assets.............................................          369
   Other current assets......................................       37,482
                                                                   -------
     Total assets............................................      508,605
                                                                   =======
   Provisions................................................        1,610
   Long-term debt............................................      467,430
   Current liabilities.......................................      125,813
                                                                   -------
     Total liabilities.......................................      594,853
                                                                   -------
     Total shareholders' value...............................      (86,248)
                                                                   =======
</TABLE>

Statement of income

<TABLE>
<CAPTION>
                                                             For the Five Months
                                                             Ended December 31,
                                                                    1998
                                                             -------------------
   <S>                                                       <C>
   Revenue..................................................        53,954
   Costs....................................................       (39,271)
   Depreciation and amortization............................       (35,888)
   Financial income/charges.................................       (11,293)
                                                                   -------
     Net loss...............................................       (32,498)
                                                                   =======
</TABLE>

6. Receivables

  Receivables as presented under current assets mature within one year and are
specified as follows:

<TABLE>
   <S>                                                                    <C>
   Trade accounts receivable............................................. 22,519
   Receivables from affiliated companies.................................  1,654
   Prepaid expenses and accrued income...................................  1,447
   Other receivables..................................................... 15,018
                                                                          ------
   Total................................................................. 40,638
                                                                          ======
</TABLE>

  A major item under "other receivables" is current reclaimable VAT 3,676. As
of December 31, 1998 the valuation allowance on trade receivables amounted to
538.


7. Cash and cash equivalents

  Cash and cash equivalents include demand accounts held in a bank with a
maturity of less than three months.

                                     F-146
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)


8. Shareholders' Equity

  UTH's issued share capital consists of 100,000 shares with a par value of
NLG 1 each. All issued shares are fully paid-in.

<TABLE>
<CAPTION>
                                                                      Bank Loans
                                                                      ----------
   <S>                                                                <C>
   1999..............................................................    3,220
   2000..............................................................    2,353
   2001..............................................................    8,404
   2002..............................................................   16,948
   2003..............................................................   30,104
   Thereafter........................................................  174,918
                                                                       -------
     Total...........................................................  235,947
                                                                       =======
</TABLE>

9. Provisions

  Provisions relate mainly to deferred taxation.

10. Long-term liabilities

<TABLE>
<CAPTION>
                                                                        Amount
                                                            Average  Outstanding
                                                  Range of  Rate of  December 31,
                                                  Interest  Interest     1998
                                                  --------  -------- ------------
   <S>                                            <C>       <C>      <C>
   Bank loans.................................... 5-7.625%    5.2      235,947
</TABLE>

  Long-term liabilities at December 31, 1998 will be payable as follows:

<TABLE>
<CAPTION>
                                                                      Bank Loans
                                                                      ----------
   <S>                                                                <C>
   1999..............................................................    3,220
   2000..............................................................    2,353
   2001..............................................................    8,404
   2002..............................................................   16,948
   2003..............................................................   30,104
   Thereafter........................................................  174,918
                                                                       -------
     Total...........................................................  235,947
                                                                       =======
</TABLE>

  On February 20, 1998 CNBH secured a 250,000 nine-year term facility, which
was amended in August 1998 to 266,000. The CNBH facility bears interest at the
applicable Amsterdam Interbank Offered Rate ("AIBOR") plus a margin ranging
from 0.60% to 1.60% per annum, and is secured by, among other things, an
encumbrance over CNBH's assets and a pledge of the shares of CNBH. The
facility is used to refinance several acquisitions and will furthermore be
used for the development and exploitation of enhanced cable TV services, data
services and telephony services. As of December 31, 1998, 219,000 was
outstanding on the facility.

  The shares of UTH held by UPC are pledged for a certain loan of UPC.


                                     F-147
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)


11. Current Liabilities

  The current liabilities relate to short-term debt and other liabilities
which are specified below:

(a)Short-term debt

<TABLE>
   <S>                                                                   <C>
   Long-term debt repayable within one year.............................   3,220
   Short-term debt to shareholders...................................... 662,403
                                                                         -------
   Total................................................................ 665,623
                                                                         =======
</TABLE>

 Short term debt to shareholders as of December 31, 1998

  NUON's contribution to UTH included an existing 690,000-debt facility with
an outstanding balance of approximately 543,000 (as of August 6, 1998). This
facility bears an interest rate of 6.65% over the reporting period up to
November 30, 1998. As of November 30, 1998 this rate was increased with 1.5%.
As of December 31, 1998, approximately 614,000 was outstanding on the
facility. The debt facility is due March 15, 1999, with an extension period of
15 days. As security for repayment of the debt facility, NUON received a
pledge over the shares of N.V. Telekabel Beheer (the assets contributed by
NUON). UTH has negotiated with the lenders to refinance the debt facility (see
Note 20.).

 Subordinated loans

  UTH entered into a subordinated loan agreement with NUON in December 1998
for an amount of NLG 33.0 million. The interest payable is 5.5% on an annually
basis. This subordinated loan was entered into for purposes of continuing
funding of incurred losses and capital expenditures. UTH entered into a
subordinated loan agreement with UPC in December 1998 for an amount of NLG
15.2 million. The interest payable is 5.5% on an annually basis. This
subordinated loan was entered into for purposes of continuing funding of
incurred losses and capital expenditures.

(b)Other Liabilities

<TABLE>
   <S>                                                                   <C>
   Accounts payable to trade creditors..................................  47,459
   Deposits by customers................................................     197
   Other short-term liabilities.........................................  39,855
   Deferred income and accrued expenses.................................   7,490
                                                                         -------
   Total................................................................  95,001
                                                                         -------
   Total current liabilities............................................ 760,624
                                                                         =======
</TABLE>

12. Information per geographical area

  All operations of UTH are in The Netherlands. In addition, substantially all
operations relate to cable television services.

13. Personnel

  Labor cost is specified as follows:

<TABLE>
   <S>                                                                    <C>
   Salaries and wages....................................................  9,173
   Pension costs.........................................................    538
   Social securities.....................................................  1,911
                                                                          ------
     Total............................................................... 11,622
                                                                          ======
</TABLE>


                                     F-148
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

  The information about employees by category is as follows:

<TABLE>
   <S>                                                                       <C>
   Operating................................................................ 160
   Other.................................................................... 184
                                                                             ---
     Total.................................................................. 344
                                                                             ===
</TABLE>


14. Financial income and expenses

<TABLE>
   <S>                                                                  <C>
   Interest income.....................................................      14
   Interest expense.................................................... (16,713)
                                                                        -------
     Total............................................................. (16,699)
                                                                        =======
</TABLE>

  Under interest expense an amount of 11,348 was accounted for as interest
related parties.

15. Income taxes

  In general, a Dutch holding company may benefit from the so-called
participation exemption. The participation exemption is a facility in Dutch
corporate tax law which under certain conditions allows a Dutch company to
exempt any dividend income and capital gains in relation with its
participation in subsidiaries. Capital losses are also exempt, apart from
liquidation losses (under stringent conditions).

  For UTH the primary difference between taxable loss and net loss for
financial reporting purposes relates to the amortization of goodwill. The
consolidated financial statements have been prepared assuming partial tax
basis for license fees capitalized relating to certain acquisitions. Deferred
taxes have been provided for that portion of the licenses which management
believes no tax basis will be allowed.

  The difference between income tax expense provided in the financial
statements and the expected income tax benefit at statutory rates is
reconciled as follows:

<TABLE>
   <S>                                                                   <C>
   Expected income tax benefit at the Dutch statutory rate of 35%....... (9,217)
   Tax effect of permanent and other differences:
     Change in valuation allowance......................................  6,541
     Non-deductible expenses............................................  1,464
                                                                         ------
       Total income tax benefit......................................... (1,212)
                                                                         ======
</TABLE>

  The significant components of the net deferred tax liability are as follows:

<TABLE>
<S>                                                                     <C>
Deferred Tax Assets:
Tax net operating loss carried forward.................................  20,112
Valuation allowance.................................................... (20,112)
                                                                        -------
  Deferred tax assets, net of valuation allowance......................       0
                                                                        -------
Deferred Tax Liabilities:
Intangible assets......................................................  33,438
Tangible fixed assets, net.............................................     962
                                                                        -------
Total deferred tax liabilities.........................................  34,400
                                                                        -------
  Deferred tax liabilities, net........................................  34,400
                                                                        =======
</TABLE>

  The tax loss carry forwards have no expiration date.

                                     F-149
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)


16. Related parties transactions

  UTH signed management services agreements with both of its shareholders. In
the reporting period an amount of NLG4,255 has been taken into account as
expenses. In addition UTH delivers service to NUON. These services are
rendered at arms length prices and made up 8% of the revenues over the
reporting period. As mentioned under Note 11 UTH has a short-term debt payable
to NUON as well as subordinated loans to both NUON and UPC. UPC charged an
amount of 988 for salaries and related costs for employees seconded to UTH
Group.

17. Commitments and Guarantees

  The UTH Group has entered into various rent and lease agreements for office
space, cars, etc. The terms of the agreements call for future minimum payments
as follows:

<TABLE>
   <S>                                                                     <C>
   1999................................................................... 4,000
   2000................................................................... 3,200
   2001................................................................... 2,100
   2002................................................................... 1,600
   2003................................................................... 1,400
</TABLE>

  Subsequent to December 31, 1998, UTH provided additional funding to A2000.
In total UTH's share of the funding commitment is $15,000. As of December 31,
1998, UTH had funded $3,750 of its commitment.

18. US GAAP Reconciliation

 General

  The accounting policies followed in the preparation for the consolidated
financial statements differ in some respects to those generally accepted in
the United States of America (US GAAP).

  The differences which have a material effect on net loss and/or
shareholders' equity and/or total assets are as follows:

  --The fair market value of licences, goodwill, land and buildings and
   networks for US GAAP purposes should be set at historical cost of the
   contributor. Consequently, no step-up in asset value is allowed for the
   difference between historical cost and the fair market value of the assets
   contributed by both UPC and NUON.

  --Deferred taxes have been established for the difference between book and
   tax basis of contributed assets, if applicable.

 Income Taxes

  The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" which
requires recognition of deferred tax assets and liabilities for the expected
future income tax consequences of transactions which have been included in the
financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based upon the difference between the financial
and tax bases of assets and liabilities and carryforwards using enacted tax
rates in effect for the year in which the differences are expected to reverse.
UTH has adopted the principles of this statement in its financial statements.

                                     F-150
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)


 US GAAP information

  The calculation of net loss, shareholders' equity and total assets,
substantially in accordance with US GAAP, is as follows:

<TABLE>
   <S>                                                                <C>
   Net loss as per Consolidated Statements of income.................   (49,374)
   Adjustments to reported income (loss):
   Amortization of goodwill..........................................     4,082
   Share in results of affiliated companies..........................       747
                                                                      ---------
   Approximate net loss in accordance with US GAAP...................   (44,545)
                                                                      =========
   Shareholders' equity as per Consolidated balance sheets...........   635,521
   Adjustments to reported equity:
   Goodwill..........................................................  (152,105)
   Affiliated Companies..............................................   (27,893)
                                                                      ---------
   Approximate shareholders' equity in accordance with US GAAP.......   455,523
                                                                      =========
   Total assets as per Consolidated Balance sheets................... 1,672,030
   Adjustments to reported assets:
   Goodwill..........................................................  (152,105)
   Affiliated Companies..............................................   (27,893)
                                                                      ---------
   Approximate total assets in accordance with US GAAP............... 1,492,032
                                                                      =========
</TABLE>

19. Proforma information (unaudited)

  On August 6, 1998 both shareholders contributed their interests in the Dutch
cable market into UTH. The following pro forma condensed consolidated
information for the year ended December 31, 1997 and 1998 give effect to the
UTH Transaction as if it had occurred at the beginning of the periods
presented. This pro forma condensed consolidated information does not purport
to represent what UTH's result of operations would actually have been if such
transaction had in fact occurred on such date. The pro forma adjustments are
based upon currently available information and upon certain assumptions that
management believes are reasonable.

<TABLE>
<CAPTION>
                                           For the Year Ended For the Year Ended
                                           December 31, 1997  December 31, 1998
                                           ------------------ ------------------
   <S>                                     <C>                <C>
   Total revenues.........................      157,836            219,314
   Net loss...............................      (47,194)           (90,600)
</TABLE>

20. Subsequent events

 Subordinated loan

  UTH entered into a subordinated loan agreement with UPC in March, 1999 for
an amount of 119,000. The interest is payable on an annual basis. This
subordinated loan was entered into for purposes of continuing funding of
incurred losses and capital expenditures.


                                     F-151
<PAGE>

                         UNITED TELEKABEL HOLDING N.V.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                     (AUGUST 6, 1998) TO DECEMBER 31, 1998
                    (stated in thousands of Dutch guilders)

 NUON Share Purchase Agreement

  On February 17, 1999, UPC acquired the remaining 49% of UTH. This
transaction completed the purchase by UPC of 100% of UTH. UPC purchased the
interest from NUON for 518,100. In addition, UPC repaid NUON and assumed from
NUON a 33,300 subordinated loan, including accrued interest dated December 31,
1998, owed by UTH to NUON.

 Refinancing

  Subsequent to December 31, 1998, UTH replaced their existing 690,000
facility with a senior facility and additional shareholder loans. The senior
facility consists of a euro340 million (750,000) revolving facility to N.V.
Telekabel Beheer that will convert to a term facility on December 31, 2001.
Euro 5 million of this facility will be in the form of an overdraft facility
that will be available until December 31, 2007. This existing facility will be
used to repay a portion of the UTH facility and for capital expenditures. The
new facility will bear interest at the Euro Interbank Offered Rate plus a
margin between 0.75% and 2.00% based on the leverage multiples tied to N.V.
Telekabel Beheer's net operating income. The new facility will be secured by,
among other things, a pledge over shares held by the borrower and will
restrict N.V. Telekabel Beheer's ability to incur additional debt.

                                     F-152
<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, in the City of
Denver, State of Colorado, on this 29th day of March, 2000.

                                          UnitedGlobalCom, Inc.
                                          a Delaware corporation

                                                    /s/ Valerie L. Cover
                                          By: _________________________________
                                                      Valerie L. Cover
                                               Controller and Vice President

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Report to be signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                                             Title of Position
              Signature                  Held With the Registrant           Date
              ---------                  ------------------------           ----

<S>                                    <C>                           <C>
                  *                    Chairman of the Board and       March 29, 2000
______________________________________  Chief Executive Officer
          Gene W. Schneider

                  *                    Director                        March 29, 2000
______________________________________
          Albert M. Carollo

                  *                    Director                        March 29, 2000
______________________________________
          John P. Cole, Jr.

         /s/ Valerie L. Cover          Controller (Principal           March 29, 2000
______________________________________  Accounting Officer) and
           Valerie L. Cover             Vice President

                  *                    Director                        March 29, 2000
______________________________________
         Lawrence J. DeGeorge

                  *                    Director, President and         March 29, 2000
______________________________________  Chief Operating Officer
           Michael T. Fries

                  *                    Director                        March 29, 2000
______________________________________
            John C. Malone

                  *                    Director                        March 29, 2000
______________________________________
           John F. Riordan

                  *                    Director                        March 29, 2000
______________________________________
          Curtis W. Rochelle

                  *                    Director                        March 29, 2000
______________________________________
          Mark L. Schneider

                  *                    Director                        March 29, 2000
______________________________________
            Henry P. Vigil

                  *                    Director and Senior Vice        March 29, 2000
______________________________________  President
            Tina M. Wildes

         /s/ Valerie L. Cover
*By: _________________________________
           Valerie L. Cover
           Attorney-in-fact
</TABLE>