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 [FEE REQUIRED]

                   For the fiscal year ended December 31, 1996

                                       or

       [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

              For the transition period from __________to _________

                Commission file Number     333-05017
                                       __________________

                           UIH Australia/Pacific, Inc.
             (Exact name of registrant as specified in its charter)

Colorado                                                     84-1341958
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

                            4643 South Ulster Street
                                   Suite 1300
                             Denver, Colorado 80237
                                 (303) 770-4001
               (Address, including zip code and telephone number,
        including area code, of registrant's principal executive offices)


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


   Indicate  by check mark  whether  the  registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceding  12 months and (2) has been  subject to such  filing
requirements for the past 90 days. Yes [X]  No [  ]

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

   The Company has no publicly-trading  shares of capital stock. As of March 28,
1997, the Company had outstanding 500 shares of Common Stock.


<PAGE>

                           UIH AUSTRALIA/PACIFIC, INC.
                         1996 ANNUAL REPORT ON FORM 10-K

                                Table of Contents

                                     PART I

Item 1.    Business........................................................   2

Item 2.    Properties......................................................  20

Item 3.    Legal Proceedings...............................................  21

Item 4.    Submission of Matters to a Vote of Security Holders.............  21

                                     PART II

Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters.............................................  22

Item 6.    Selected Financial Data.........................................  22

Item 7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations.............................  23

Item 8.    Financial Statements and Supplementary Data.....................  33

Item 9.    Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure.............................  33

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant..............  59

Item 11.   Executive Compensation..........................................  62

Item 12.   Security Ownership of Certain Beneficial Owners
           and Management..................................................  66

Item 13.   Certain Relationships and Related Transactions..................  66

                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports............  68
           on Form 8-K


<PAGE>


                                     PART I

ITEM 1.  BUSINESS
-----------------

(a)  GENERAL DEVELOPMENT OF BUSINESS
------------------------------------

     UIH  Australia/Pacific,  Inc.  (the  "Company")  is a leading  provider  of
multi-channel  television services in Australia, New Zealand and Tahiti. Through
its Australian  operating  company Austar,  which is comprised of two companies,
CTV Pty Limited, ("CTV") and STV Pty Limited ("STV"), the Company is the largest
provider of multi-channel  television services in regional  Australia,  where it
operates  wireless cable systems ("MMDS") and markets a  direct-to-home  ("DTH")
service in franchise areas  encompassing  approximately  1.6 million  television
homes, or 25% of the total Australian market. In addition, the Company,  through
its New Zealand operating company Saturn  Communications  Limited  ("Saturn") is
constructing a wireline cable and telephony system in Wellington, New Zealand, a
market representing  approximately 135,000 television homes. The Company's other
assets  include  a  25%  interest  in  XYZ   Entertainment   Pty  Limited  ("XYZ
Entertainment"  or "XYZ"), a programming  company that provides four channels to
the Australian  multi-channel television market as part of the "Galaxy Package,"
the most  widely  distributed  programming  package  in  Australia  and the core
component of Austar's  programming  offering,  up to a 90% economic  interest in
Telefenua  S.A.  ("Telefenua"),  the only provider of  multi-channel  television
services  in Tahiti,  with an MMDS  system in a market  with  31,000  television
homes, and a 100% interest in United Wireless Pty Limited ("United Wireless"), a
provider of wireless mobile data services in Australia.

     The   Company,   a   majority-owned    subsidiary   of   UIH   Asia/Pacific
Communications,  Inc.  ("UAP"),  which is in turn a  wholly-owned  subsidiary of
United International Holdings, Inc. (together with all of its subsidiaries other
than the Company and the Company's  subsidiaries,  "UIH"), was formed on October
14, 1994.  Immediately  prior to the May 1996 offering (the "May 1996 Offering")
of the  Company's  14% Senior  Discount  Notes due 2006 (the  "Notes"),  certain
subsidiaries of UIH that held its interests in Australia, New Zealand and Tahiti
were merged with and into the Company.  The information in this annual report on
Form 10-K has been  prepared  as though the Company  had  performed  all foreign
development activities and made all acquisitions of UIH's ownership interests in
multi-channel  television,  programming  and mobile data companies in Australia,
New Zealand and Tahiti  since  inception.  The  Company,  as  presented  in this
manner,  commenced  operations  in January  1994 when UIH began its  development
related activities in the Asia/Pacific region. UIH transferred the net assets of
the above mentioned  subsidiaries,  including capitalized  development costs and
investments  in  affiliated  companies,  to the Company.  The Company,  in turn,
reflected these transfers as capital contributions from the parent company.

HISTORY OF ACQUISITIONS

     In 1994,  the  Company  acquired,  through  directly  and  indirectly  held
interests, an effective 50% economic interest in two newly-formed companies that
constitute   Austar.   In  December  1995,  the  Company   acquired  from  other
shareholders of Austar an additional interest in Austar,  thereby increasing its
total economic interest in Austar to 90%. In May 1996, as a result of additional
equity contributions, the Company's economic interest in Austar was increased to
94%,  which was  subsequently  increased  to 96%. In October  1996,  the Company
acquired the remaining 4% economic interest in Austar.

     In July 1994, the Company  acquired a 50% interest in Saturn,  which at the
time owned only a small cable television system outside of Wellington. Since the
Company's initial  investment,  Saturn has begun  construction on a hybrid fiber
coaxial  ("HFC") cable network  planned to pass 135,000 homes in the  Wellington
area. In July 1996, the Company acquired the remaining 50% interest in Saturn in
exchange for a 2.6% interest in the Company.


                                       2

<PAGE>



     In October 1994, the Company and Century  Communications Corp.  ("Century")
formed XYZ Entertainment,  each retaining a 50% interest. In September 1995, the
joint venture between Century and UIH, Century United  Programming  Ventures Pty
Limited  ("CUPV")  sold a 50%  interest in XYZ  Entertainment  to a third party,
thereby diluting the Company's indirect interest in XYZ Entertainment to 25%.

     In January 1995,  the Company  acquired an indirect  effective 90% economic
interest in Telefenua.  The Company's economic interest decreases to 75% and 64%
once the  Company has  received a 20% and 40%,  respectively,  internal  rate of
return on its investment in Telefenua.  The Company has funded the  construction
and development of Telefenua's multi-channel television system.

     In August 1995, the Company  purchased a 100% interest in United  Wireless.
The Company has since continued the development and funding of United  Wireless'
business.

RELATIONSHIP WITH UIH

     The Company is an  indirect,  majority-owned  subsidiary  of UIH, a leading
provider of multi-channel  television  services outside the United States.  UIH,
together with its strategic and financial  partners,  has ownership interests in
multi-channel  television  systems  in  operation  or under  construction  in 25
countries   in  Europe,   Latin   America   and,   through  the   Company,   the
Australia/Pacific   region.  As  of  December  31,  1996,  UIH's   multi-channel
television  systems had  approximately  10.4 million  television  homes in their
respective  service  areas,  passed  approximately  7.2  million  homes  and had
approximately  3.1  million  subscribers.  In  addition  to the  Company,  UIH's
operations include its 50% interest in United and Philips Communications B.V., a
joint venture with Philips  Electronics N.V. that is the largest privately-owned
multi-channel television operator in Europe.

     UIH and the Company are parties to a management agreement pursuant to which
UIH  will  continue  to  perform  and be  compensated  for  certain  management,
technical, administrative, accounting, tax, legal, financial reporting and other
services for the Company.

ORGANIZATION OF COMPANY

     The following chart summarizes the organizational structure of the Company.
The  interests  indicated  below are  summaries  of the  approximate  direct and
indirect economic interests of the Company in its principal businesses.  Some of
the Company's  interests in such  operating  companies are held through  various
partnerships and holding  companies and the Company's voting rights with respect
to  certain  of such  operating  companies  differ  from the  economic  interest
indicated in the chart. See "Corporate Organizational Structure."


                                       3

<PAGE>



                                       UIH Australia/Pacific, Inc.


         Operating                                                    Ownership
         System          Principal Business                           Percentage
         ---------       ------------------------------------------   ----------
         Austar          Regional Australia, MMDS and DTH
                         multi-channel systems                             100%

         Saturn          Greater Wellington, New Zealand area,
                         wireline cable system                             100%

         United
         Wireless        Australia, wireless mobile data services          100%

         Telefenua       Tahiti and Moorea, MMDS
                         multi-channel system                               90%

         XYZ
         Entertainment   Australian Programming                             25%


(b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
--------------------------------------------------

     The Company operates in the cable television industry through investing in,
acquiring  and managing  multi-channel  television,  telephony  and  programming
operations.

 (c)  NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------------

OVERVIEW

     The Company is a leading provider of multi-channel  television  services in
Australia,  New Zealand and Tahiti.  Through its  Australian  operating  company
Austar, the Company is the largest provider of multi-channel television services
in regional Australia,  where it operates MMDS systems and markets a DTH service
in franchise areas  encompassing  approximately 1.6 million television homes, or
25% of the total Australian  market. In addition,  the Company,  through its New
Zealand operating company Saturn, is constructing a wireline cable and telephony
system in Wellington,  New Zealand, a market representing  approximately 135,000
television  homes.  The Company's  other assets include a 25% interest in XYZ, a
programming company that provides four channels to the Australian  multi-channel
television  market as part of the Galaxy  Package,  the most widely  distributed
programming package in Australia and the core component of Austar's  programming
offering,   a  90%  economic  interest  in  Telefenua,   the  only  provider  of
multi-channel  television  services  in Tahiti,  with an MMDS system in a market
with  31,000  television  homes,  and a 100%  interest  in United  Wireless,  an
Australian  company  providing  mobile  data  services  primarily  in Sydney and
Melbourne.

     The  Company  believes  that it is  well-positioned  to  capitalize  on the
rapidly increasing demand for multi-channel television and telephony services in
Australia,  New Zealand and Tahiti.  As of February  28,  1997,  the Company had
invested over $275 million in its networks and operating  infrastructure and had
launched  service in each of its markets.  As of February 28, 1997 the Company's
multi-channel television operating systems had an aggregate of approximately 1.8
million  television homes  serviceable and  approximately  131,000  subscribers,
compared to approximately 296,200 television homes serviceable and approximately
29,300 subscribers as of December 31, 1995 (with a substantial  majority of such
growth resulting from Austar's expansion).  During this same period, programming
subscribers of XYZ increased from approximately 65,000 to approximately 380,000.
While the Company  expects  that a  substantial  portion of its growth will come
from the  continued  development  of Austar,  the  Company is also  anticipating
significant growth by its other operating  companies,  each of which the Company
believes has attractive growth prospects.


                                       4

<PAGE>


     The following table sets forth certain  unaudited  operating  statistics of
the operating companies as of February 28, 1997:

                                       Television
                                         Homes in         Homes
Operating System       Technology      Service Area    Serviceable  Subscribers
----------------       ----------      ------------    -----------  -----------

Austar                  MMDS/DTH        1,622,000       1,528,730      123,689
Saturn              Cable/Telephony       141,000          15,975        1,903
Telefenua                 MMDS             31,000          19,584        5,472
XYZ                   Programming            N/A             N/A       380,000
                                        ---------       ---------      -------
        Total                           1,794,000       1,564,289      511,064
                                        =========       =========      =======


AUSTAR (AUSTRALIA)

     Austar is the largest  provider  of  multi-channel  television  services in
regional  Australia  (areas outside  Australia's six largest  cities).  In early
1996, Austar initiated widespread deployment of its services and, as of February
28,  1997,  had  launched  MMDS service in 38  metropolitan  markets  containing
approximately  782,000  homes and had initiated the marketing of DTH services in
non-metropolitan  markets containing  approximately 747,000 homes. These markets
represent  over 97% of Austar's  1.6 million  franchise  television  homes,  the
remaining 40,000 of which will be serviceable by mid-1997.

     Austar has entered into franchise  agreements  with Australis Media Limited
("Australis") that grant it the right to provide the Galaxy programming  package
within its franchise  areas through 2009  (extendible at Austar's option through
2019).

     OPERATING AND GROWTH  STRATEGY.  Due to the  relatively  small size and low
housing densities which characterize the markets in its franchise areas,  Austar
is  primarily  utilizing  MMDS and DTH  wireless  technologies  to  deliver  its
service.   In  its  metropolitan   markets,   Austar  constructs  and  owns  the
transmission  facilities  and  installs  and  retains  ownership  of the in-home
subscriber equipment. In its non-metropolitan markets, Austar is marketing a DTH
service  (consisting  primarily of the Galaxy programming  package) and installs
and retains ownership of the in-home subscriber  equipment.  As a result, Austar
did not incur the costs necessary to own the facilities  required to offer a DTH
service  and only  incurs  capital  costs when a DTH  subscriber  is  installed.
Approximately  800,000 of the television  homes in Austar's  service area are in
metropolitan   markets  with  sufficient  size  and  densities  to  justify  the
construction of MMDS networks.  Austar owns virtually all of the licenses in the
MMDS  spectrum  currently  available in these  markets for the provision of MMDS
services.  Because  MMDS service is less  expensive to install than DTH,  Austar
services customers in these metropolitan  markets with its MMDS service whenever
possible.  A small  number  (approximately  20%) of homes in these  metropolitan
markets, however, are out of the line of sight of Austar's MMDS networks. Austar
services  these  homes with its DTH  service.  Austar  markets  its  programming
services via DTH in its  non-metropolitan  franchise areas representing  747,000
television   homes.   These  are  less  densely   populated  areas  outside  its
metropolitan  markets that are more effectively  serviced by DTH technology.  In
addition,  Austar  recently  began  construction  of a wireline cable network in
Darwin, a market containing  approximately  26,200 serviceable homes where dense
vegetation makes an MMDS system impractical.

     The deployment of MMDS networks in combination  with DTH has allowed Austar
to roll out its  service  quickly  and achieve  rapid  subscriber  growth in its
franchise  areas.  Austar  believes that the ability to be the first provider of
multi-channel  television  services in each of its markets has allowed Austar to
establish a  significant  market  presence and strong brand  awareness,  factors
which  management  believes provide it with a competitive  advantage.  Austar is
currently   the  only   provider  of   multi-channel   television   services  in
substantially all of its franchise areas.


                                       5

<PAGE>


     As of  February  28,  1997,  Austar  had  launched  service  in  38 of  its
metropolitan markets  representing 782,000 out of 800,000 potential  serviceable
homes.  Austar  currently   anticipates   launching  service  in  its  remaining
metropolitan markets by mid 1997. In mid-January and February 1997, sales orders
declined in relation to the previous months due to a planned  reduction in sales
and marketing  efforts  designed to conserve  cash in light of existing  funding
needs.  The  following  table sets forth the  summary  operating  statistics  in
Austar's launched metropolitan  markets,  which are served primarily by MMDS, as
well as its non-metropolitan markets served by DTH:
<TABLE>
<CAPTION>
                                                              1996                                                 1997
                             ---------------------------------------------------------------------------    -------------------

                             June 30    July 31   Aug. 31    Sept. 30     Oct. 31    Nov. 30     Dec. 31    Jan. 31     Feb. 28
                             --------  --------  --------   ---------    --------    -------     -------    -------     -------
<S>                        <C>        <C>       <C>         <C>         <C>         <C>        <C>          <C>        <C>
Cumulative metropolitan
   markets launched.......        13         19        20          23          27          35         38          38          38
Metropolitan homes
   serviceable............   476,000    604,000   626,000     655,000     700,000     754,000    782,000      782,000    782,000
Non-metropolitan homes
   servicable.............   747,000    747,000   747,000     747,000     747,000     747,000    747,000      747,000    747,000
                           ---------  --------- ---------   ----------  ---------   ---------  ---------    ---------  ---------
Total homes
   serviceable............ 1,223,000  1,351,000  1,373,000   1,402,000  1,447,000   1,501,000  1,529,000    1,529,000  1,529,000
                           =========  =========  =========   =========  =========   =========  =========    =========  =========

Sales orders..............     9,461     15,665     12,535      13,063     23,799      19,485     18,769       18,771     11,410
Net gain in subscribers...     5,656      9,521     10,452      11,021     15,024      13,212     14,898       12,620      7,659
Total subscribers.........    29,282     38,803     49,255      60,276     75,300      88,512    103,410      116,030    123,689
World Movies
   subscribers............     5,237      6,959      8,655      10,111     11,698      12,729     13,907       15,420     17,025
Installation backlog(1)...     6,500     10,000      9,200       8,200     13,860      10,945     10,879       11,709      8,611

 (1)Estimated for periods prior to October.
</TABLE>

     To facilitate  the rapid  roll-out of its service,  Austar has  established
local offices in the majority of its metropolitan  markets.  These local offices
coordinate marketing, installation and customer service in Austar's metropolitan
markets and surrounding  non-metropolitan areas. The local offices are supported
by five regional offices.  Each regional office typically serves three to twelve
metropolitan  markets.  Austar estimates that approximately 70% of its potential
non-metropolitan  customers  are within  fifty  kilometers  of its  metropolitan
service areas. This proximity enables Austar to reduce  installation and service
costs associated with DTH service to  non-metropolitan  subscribers and to focus
subscription sales through the use of marketing, promotional and sales tactics.

     Austar has entered  into  contracts  with a number of service  companies to
install MMDS receivers,  DTH satellite dishes and set-top  decoders.  Installers
collect the installation  fee, install  subscriber  equipment and test reception
quality.  Austar has trained and established  certain guidelines for third party
service company employees who install Austar reception equipment.  Austar has an
extensive quality  assurance program and expends a significant  amount of effort
to follow-up on installations to ensure customer  satisfaction  and, in the case
of DTH equipment  installed  within its metropolitan  markets,  verify that more
economical  MMDS  technology  could not be used.  Austar believes its efforts to
resolve service problems quickly has helped establish customer loyalty.

     As of January 31, 1997,  Austar had spent $39.5 million for construction of
MMDS head-end and  transmission  facilities  for all of its  operating  systems.
Variable  installation  and equipment costs for each MMDS and DTH subscriber are
currently  approximately  $460  and  $780 per  subscriber,  respectively.  These
subscriber  costs  are  partially  offset  by  the  Company's  metropolitan  and
non-metropolitan  installation  charges  of $31 to $75 and  $150,  respectively.
Austar retains ownership of all MMDS and DTH customer premises equipment.

     PRICING.  Austar is currently  providing the eight channel Galaxy  Package,
the most widely distributed programming package in Australia, plus three to five
additional  channels of  programming  as its basic  package at a monthly rate of
approximately   $31,   with  a  one-time   installation   charge   ranging  from
approximately   $31  to  $75  for   metropolitan   subscribers   and   $150  for
non-metropolitan  DTH subscribers.  Austar also integrates all available off-air
channels into its basic channel line up at no additional  charge. In March 1996,
Austar  began  offering its  first premium channel, World Movies, which consists


                                       6

<PAGE>

primarily  of  foreign  movies,  art  films  and  features.  Austar is  charging
approximately  $5.30 per month for World Movies. As of February 28, 1997, Austar
had 17,025 subscribers for its World Movies premium channel.

     MARKETING;  CUSTOMER  SUPPORT.  Austar has focused its  marketing and sales
efforts to support  its  strategy  of rapid  system  roll-out  which  management
believes  will provide it with a  competitive  advantage in each of its markets.
Austar has developed a comprehensive marketing and sales organization consisting
of a 180 person  direct sales force and over 200 national  customer  service and
telemarketing  personnel.  The direct sales force,  which  operates out of local
offices in each of Austar's  metropolitan markets, is currently generating sales
of  approximately  2,500  subscriptions  per week.  The sales  force at Austar's
National Customer  Operations  Center ("NCOC") is currently  generating sales of
approximately 2,750 additional  subscriptions per week from inbound and outbound
calls. This sales  organization is supported by an integrated  marketing program
of television, radio and print advertising.

     The  NCOC is  a  state-of-the-art  fully-integrated  subscriber  management
system  featuring  a  sophisticated  digital  wide-area  network,  Cable  Data's
Intelecable   platform,   an  automated  response  unit  and  predictive  dialer
technology. The NCOC currently services all of Austar's MMDS and DTH subscribers
and has the capacity to service all future  customers  in its existing  markets.
NCOC employees process installation orders, handle customer inquiries, including
programming  and  technical  questions,  and  implement  the customer  retention
program,   which  includes   telephone   contact  with  customers   following  a
cancellation  request,  as well as  making  unprompted  contact  with  customers
immediately following installation in an effort to ensure customer satisfaction.
Incoming  calls from all of  Austar's  markets  are  directed  to the NCOC where
customer  service  representatives  are  available to provide  sales and service
information.  The NCOC currently handles  approximately  3,000 calls per day but
has scaleable capacity to handle at least 5,000 calls per day. The NCOC facility
currently  employs 200 customer service  professionals,  which Austar intends to
increase as its  subscriber  base grows in its  franchise  areas.  In  addition,
Austar is exploring  the  possibility  of using the NCOC to  outsource  customer
service to third parties in similar lines of business where appropriate.

     Austar's monthly "churn"  (calculated as total  disconnects as a percentage
of average  subscribers)  has  averaged  5.4% during  1996 and  declined to 4.1%
during the fourth quarter of 1996.  Austar believes that this ratio is likely to
continue to decline in the future due to several factors,  although there can be
no such  assurances.  First,  over 31% of the  total  disconnects  in 1996  have
resulted  from  subscribers  in the Gold  Coast  (which  represents  only 12% of
Austar's total  subscribers  as of February 28, 1997),  the only market in which
Austar currently faces competition. As a result of this competitive environment,
Austar's  installation  fee in the Gold Coast is only $15 as  compared to $31 to
$75 in other metropolitan markets and $150 in non-metropolitan markets. A higher
installation  charge results in a larger financial  commitment to the service by
the subscriber  and therefore  reduces the  probability of churn.  In connection
with the  Company's  acquisition  of  Australis'  interest in Austar and related
agreements  and  transactions  (the  "Australis  Arrangement"),  Austar  will be
compensated  by  Australis  for any Foxtel  Management  Pty  Limited  ("Foxtel")
subscribers  in  the  Gold  Coast.  Second,  due  to  the  significantly  higher
installation  charges in its  non-metropolitan  markets summarized above, Austar
believes  that this ratio will  decline as its  percentage  of  non-metropolitan
subscribers to total  subscribers  increases  (because  Austar only launched its
rural DTH service in May 1996, its percentage of non-metropolitan subscribers to
total  subscribers has increased from 0% on May 1, 1996 to approximately  28% at
February 28, 1997). Approximately 49% of Austar's total serviceable homes are in
its  non-metropolitan  franchise  area.  Austar's  average  monthly churn in its
non-metropolitan  markets has been approximately 2% during 1996. Finally, Austar
expects its churn to decline as it continues to implement its customer assurance
and  retention  program and the breadth and quality of its  programming  package
improves  and  is  actively  negotiating  to add  additional  sports  and  other
programming  to its  offering.  In  addition,  the  Company is in the process of
implementing  specific plans to decrease churn, such as introducing direct debit
banking for customers,  and reducing telephone abandonment rates which would aid
in customer retention and satisfaction.  In the first two months of 1997, Austar
experienced  slightly  higher churn  than in the later part of 1996. The Company

                                       7

<PAGE>

believes  that churn  during  these two months  was  higher  than  normal due to
seasonality  from the December  holiday season and less compelling  programming,
particularly movies, during these months.

     PROGRAMMING.   The  Company  believes  that  programming  is  an  important
component in building successful multi-channel television systems.  Accordingly,
Austar has secured the right to distribute  the Galaxy Package of programming in
its service areas pursuant to franchise  agreements  with Australis with initial
terms through 2009  (extendible at the option of Austar  through  2019).  Austar
believes that the terms of its franchise agreements with Australis are favorable
to Austar and that these terms provide Austar with a programming  cost advantage
over potential competitors. See "Austar-- Franchise Agreements."

     The Galaxy Package is the most widely  distributed  programming  package in
Australia and is the core  programming  offering of Austar,  ECT,  Australis and
Foxtel.  Management believes that approximately 75% of Australia's multi-channel
television  subscribers  subscribe  to the Galaxy  Package.  The channels in the
Galaxy Package were developed  exclusively for the Australian  market by several
of  the  world's  leading  programming  companies,  including  Paramount,  Sony,
Universal,  Fox and Viacom.  The Galaxy Package  consists of the following eight
channels:

    Galaxy Channel                 Programming Genre
    --------------                 -----------------

    Showtime.....................  premium feature movies
    Encore.......................  library movies
    Fox Sports...................  sports
    TV-1.........................  general entertainment
    Discovery....................  documentary, adventure, history and lifestyle
    Nickelodeon/Nick at Nite.....  children's and family entertainment
    Arena........................  general entertainment
    Channel [V]..................  music video

     In addition to the right to distribute the Galaxy  Package,  Austar has the
right to  distribute  any  additional  channels  offered  by Galaxy and will pay
Australis  for such  channels  a fee no greater  than that  charged to any other
person and in no case greater than  Australis' cost (as charged by third parties
with respect to  programming  delivered by such party to Australis or the lowest
price at which  Australis  agrees to distribute  Australis  produced or compiled
programming), plus 10%. See "Austar--Franchise Agreements."

     Austar has also secured  additional  programming on a non-exclusive  basis,
which it is  distributing  to its  customers  as part of its  basic  programming
package, and Austar integrates all available free-to-air channels into its basic
channel line up at no additional charge. Austar's other "cable" channels include
the following:

    Other Channels                 Programming Genre
    --------------                 -----------------

    CMT........................... country music videos
    BBC World..................... world news
    CNBC(1)....................... business news
    Asia Business News (2)........ regional business news
    TNT(2)(3)..................... library movies
    Cartoon Network(2)(3)......... cartoons
    CNN International(2).......... world news
    The Value Channel(4).......... shopping
    Preview(4).................... programming guide

    (1) All markets except the Gold Coast.
    (2) The Gold Coast (MMDS) only.
    (3) TNT and Cartoon Network share one channel.
    (4) DTH only.

     In March 1996,  Austar began offering its first optional  premium  channel,
World  Movies,  which  consists  primarily  of  foreign  movies,  art  films and


                                       8

<PAGE>

features.  Austar is charging  approximately  $5.30 per month for World  Movies.
Initial  demand for this  service  has been  strong  with  approximately  17,025
customers  as  of  February  28,  1997,  approximately  14%  of  Austar's  basic
subscribers.

     In March 1997,  Austar  acquired the  programming  rights to and  initiated
transmission  of the  Super  League  Channel  to all of its  customers  for  the
season's initial four games.  The parties are currently  negotiating a long-term
agreement, although there can be no assurances that Austar will be successful in
obtaining an agreement on  satisfactory  terms, if at all. The Super League is a
rugby league  competition  supported by News Corp.  and produced in  partnership
with News  Corp.'s Fox Sports  joint  venture.  Rugby  league is one of the most
popular  television  sports in the  Queensland  and New South Wales  portions of
Austar's  franchise  areas.  The Super League  Channel  currently  provides live
telecasts  (and replay  rights) of certain  Super League  weekly games on Friday
nights,  Saturday,  Sunday and Monday evenings, but the suppliers of the channel
have  indicated  their intention to add, at some point in the future, additional
"football" programming, including U.S. NFL games and international soccer.

     Austar  intends  to  expand  further  the  number of  programming  services
available on its MMDS systems and expects  that,  upon  deregulation  of the DTH
business in July 1997, it will be marketing  additional  channels of programming
via DTH.  Austar's  MMDS  systems  have the capacity to transmit up to 19 analog
channels (of which Austar currently uses 11 to 12 in its markets) in addition to
free-to-air  channels,  which are integrated into the programming line-up at the
rooftop.  Austar is  currently  testing  digital  technology  in one  market and
intends to offer  digital  service in certain  metropolitan  markets if and when
competitive factors dictate. The DTH service marketed by Austar utilizes MPEG II
digital  technology which has over 100 channels of capacity.  In addition to any
additions to the Galaxy Package, Austar has also secured, beginning in July 1997
for a five-year period, a 54 MHz transponder capable of broadcasting  between 10
and 15 digital channels on the Optus Networks satellite that currently transmits
the Galaxy Package,  and pursuant to the Australis  Arrangement has the right to
deliver such programming to its customers through the Galaxy system. The Company
is currently evaluating the revenue generation potential for program carriage on
this  transponder and may sublease all or a portion of its transponder  capacity
during the initial term of the  agreement.  Such  transponder  payments  will be
approximately  $480,000 per month,  beginning in July 1997,  under the agreement
with Optus Networks.

     FRANCHISE  AGREEMENTS.  Austar has entered into franchise  agreements  with
Australis.  Each  franchise  agreement is for a term of 15 years  commencing  in
October  1994,  and Austar has the option to renew the  franchise  agreements on
identical terms for another ten years. Under the franchise agreements, Australis
granted  Austar the  license  and right to  distribute  the  Galaxy  programming
package in its franchise areas. These franchise  agreements provide  exclusivity
over wireless  technologies  and provide that Australis will not grant rights to
any  other  person  to use  Australis'  satellite  infrastructure  or  system to
transmit Galaxy in Austar's franchise areas.

     Pursuant to the terms of its franchise agreements, Austar pays a percentage
of net revenues to Australis for the right to distribute the Galaxy Package. For
purposes of the franchise agreements, net revenues equal gross revenues received
from the eight Galaxy  channels  currently  provided less certain  agreed costs,
including  depreciation  of  subscriber  equipment,  which the Company  believes
results in a favorable programming pricing structure.

     In March 1995,  Australis granted Foxtel a license to distribute the Galaxy
Package over cable television systems throughout  Australia,  including Austar's
franchise areas. The Company believes that because of such action, Australis was
in breach of its franchise agreements.  Foxtel is currently  distributing Galaxy
programming,  in only one of Austar's  markets,  the Gold Coast,  which contains
approximately  116,000  serviceable  homes.  On June 19,  1996,  pursuant to the
Australis  Arrangement,  Austar and the Company  agreed to settle their  dispute
with  Australis  with  respect  to  this  matter.   As  part  of  the  Australis
Arrangement,  the parties  agreed that Australis is entitled to grant Foxtel the
non-exclusive  right to distribute Galaxy  programming by cable, but that Foxtel
may not  sublicense or assign this right  without  Austar's  consent.  Australis
agreed to pay to Austar an amount equal to the amount  Australis  received  from
Foxtel for  programming  service for the period from March 1995 through June 30,


                                       9

<PAGE>

1996, less the amount  Australis paid to third party  programming  suppliers for
such  programming  with  respect  to  Foxtel  subscribers  located  in  Austar's
franchise areas during such period. In addition,  from June 30, 1996 through the
term of the franchise  agreements,  Austar has the right in its sole discretion,
either to (i)  sublicense to Foxtel the right to transmit the services  provided
to it by  Australis  (and  any  other  services)  by cable  transmission  in its
franchise  areas or (ii)  require  Australis  to pay Austar an amount each month
equal to the sum of (a) the greater of A$4.50 per  subscriber  and all  revenues
(less  programming  costs) per  subscriber  during such month received under the
agreement  between  Foxtel and  Australis,  with  respect to Foxtel  subscribers
located in Austar's franchise areas and (b) an additional amount (if any) to put
Austar  in the  position  that it  would  have  been in had it  sublicensed  the
services  provided to it by Australis  directly to Foxtel (which currently would
be approximately $8 per Foxtel subscriber per month). The Company believes that,
because  its  programming  costs are less than the  revenue to be  generated  by
sublicensing  such  programming  to Foxtel,  the benefits to be gained from this
aspect of the Australis  Arrangement will be substantial over the years. As part
of the  Australis  Arrangement,  Australis  agreed  to  extend  the  term of the
franchise  agreements  by five  years to an  initial  15-year  term and  amended
certain  financial and strategic  terms of the franchise  agreements.  Australis
also granted to Austar the right to use Australis'  satellite  infrastructure to
provide  additional DTH services within Austar's  franchise  areas. In addition,
Australis  agreed to provide all future Galaxy  channels to Austar at a price no
less  favorable than that charged other persons and in any event at no more than
Australis'  cost (as  charged  by third  parties  with  respect  to  programming
delivered  by such party to  Australis  or the lowest  price of which  Australis
agrees to distribute Australis produced or compiled  programming),  plus 10%. In
return,  the Company agreed (i) to waive and release any claim arising out of or
in connection with Australis' execution and performance of its license agreement
with Foxtel and (ii) not to make any  objection  or claim  against  Australis or
Foxtel in  connection  with such  license  agreement.  Management  believes  the
Australis Arrangement is favorable to Austar.

     COMPETITION.  The substantial majority of Austar's metropolitan markets are
either small (i.e.,  approximately  20,000  homes),  and/or have  relatively low
household  densities  (generally 25 to 75 homes per square kilometer as compared
to 100 to 130 homes per square kilometer in Australia's largest capital cities).
As a result, Austar believes that its metropolitan markets generally do not have
sufficient  density to justify the  construction  of competitive  wireline cable
systems.  While the  Company  believes  household  densities  could  potentially
support wireline cable construction in areas  representing  approximately 20% of
Austar's  total  franchise  homes,  the  relatively  small size of these markets
reduces the  attractiveness  of  constructing a competitive  cable  network.  In
addition,  Austar, as a licensed subscription television provider, is authorized
to build  wireline  cable  systems in its  markets and where  appropriate  could
construct  wireline  cable  systems.  With the  exception  of the  Foxtel  cable
television  system  currently  extending into Austar's  116,000-home  Gold Coast
metropolitan market, Austar does not currently have any operational subscription
television  competitors  in its franchise  areas.  In the Gold Coast,  Austar is
currently  providing  13  channels of  programming  as its basic  package  which
includes the eight channel Galaxy programming package as well as five additional
channels,  at a monthly rate of approximately  $23 with a one-time  installation
charge of approximately  $15. Foxtel offers the Galaxy Package of eight channels
as well as its ten other satellite or locally originated  channels for a monthly
fee of $31 and an installation  charge of $16. At February 28, 1997,  Austar had
14,956  subscribers  in the Gold  Coast  and  estimates  that  Foxtel  has 7,500
subscribers in this market.  In addition,  Austar is currently  testing  digital
MMDS  technology in the Gold Coast and expects to implement  digital  service in
those metropolitan markets where competitive conditions dictate.

     Approximately  747,000  of  Austar's  1.6  million  franchise  homes are in
non-metropolitan  markets  which  generally  have  densities  of  fewer  than 25
households per square  kilometer.  As a result,  the Company believes that these
markets  can  only  be  served   economically  with  DTH  technology.   Existing
regulations  prohibit any DTH service other than the Galaxy programming  package
from being  offered in Australia  prior to July 1997.  Austar has the  exclusive
right  to  market  the  Galaxy  DTH  service  in its  franchise  area.  Although
regulations  will no longer  prohibit  additional  DTH services after June 1997,
Austar  will  retain its  exclusive  right to market  the Galaxy  Package in its
franchise  areas  through  2009  (extendible  to 2019 at  Austar's  option).  In
addition, Austar believes it has an additional competitive advantage in offering
DTH  service in these  markets  because  over 70% of its  serviceable  homes are
within a fifty kilometer  radius of its  metropolitan  markets, in most of which


                                       10

<PAGE>

it  has  sales  personnel  and  installation  technicians.  Accordingly,  Austar
believes  its cost to market and install  subscribers  in these areas  should be
below that of any potential competitor without similar infrastructure in place.

     Management  believes that Austar has  established a significant  subscriber
base,   strong  brand  awareness  and  substantial   operational  and  marketing
infrastructure,  factors that  provide it with a  competitive  advantage.  Optus
Vision has publicly  announced  that it plans to offer  subscription  television
services by DTH throughout Australia.  In addition, the Company understands that
Australis and Optus Vision plan to form a joint venture  whereby  Australis will
contribute  to  the  venture  its  satellite  infrastructure  allowing  for  DTH
transmission of Optus Vision's programming  services.  The Company believes that
using the  infrastructure  by any entity other than Austar for the  provision of
DTH  services  within  Austar's  franchise  area  would be in  violation  of its
franchise  agreements  with  Australis  and has recently  commenced  proceedings
seeking  injunctive  relief  preventing the use of Australis'  infrastructure by
Optus Vision in Austar's  franchise area.  There can be no assurance that Austar
will prevail in its lawsuit or that,  even if it is  successful  in obtaining an
injunction to prevent the  consummation  of the joint  venture,  Optus Vision or
others will not compete in Austar's franchise area.

     MANAGEMENT  AND  EMPLOYEES.  Austar's  senior  management  includes  10 UAP
employees appointed to Austar that collectively have 130 years experience in the
construction,  marketing  and  operation of  multi-channel  television  systems.
Austar  and  UIH  are  parties  to a  10-year  Technical  Assistance  Agreement,
renewable for up to an additional  15 one-year  terms,  pursuant to which Austar
pays UIH a monthly fee equal to 4% of its gross revenues  through  October 2002,
3% through October 2004 and 2% through the remaining term of the agreement,  for
the provision of various management and technical  services,  and reimburses UIH
for certain  direct costs  incurred by UIH,  including the salaries and benefits
relating to the senior management team.

     As of January 31, 1997, Austar had a total of 699 employees.  Substantially
all of  Austar's  employees  are  parties to an "award"  governing  the  minimum
conditions of their  employment  including  probationary  periods of employment,
rights upon termination, vacation, overtime and dispute resolution.

SATURN (NEW ZEALAND)

     The Company owns 100% of Saturn,  which  recently  launched  service on the
initial portions of its HFC network that will allow it to provide  multi-channel
television  services  as well as  business  and  residential  telecommunications
services in the Wellington area,  encompassing 135,000 homes.  Wellington is New
Zealand's  capital and second  largest  city.  The Company  launched  service in
portions  of this  system  in  September  1996 and  expects  construction  to be
completed by mid-1998.  Saturn also  operates an existing  cable  system,  which
passes approximately 6,000 homes, on the Kapiti Coast north of Wellington. As of
February 28, 1997, Saturn's activated networks passed approximately 16,000 homes
and serviced  approximately 1,900 subscribers.  In addition,  Saturn has secured
additional  rights to use existing  poles to attach its network cable in markets
representing 200,000 homes, subject to local planning approval, and is exploring
the possibility of expanding its networks and services to these markets.

     MARKET  OVERVIEW.  The Company  believes that New Zealand,  a market of 1.2
million television homes, is attractive for multi-channel  television providers.
New Zealand has a demographic  profile similar to Australia,  including high per
capita  income and strong  television,  VCR and cellular  telephone  penetration
rates. In addition, New Zealand imposes virtually no pricing regulation and only
limited  program  content  regulation  and permits  operators to offer  combined
multi-channel  television  and  telephony  services  over one network.  There is
currently only one significant  multi-channel television provider that currently
offers a five-channel UHF-delivered subscription service.

     OPERATING AND GROWTH STRATEGY. Saturn is constructing a 750 MHz HFC network
designed to service 500 homes per node with each home drop  overlaid with copper
telephony plant. This architecture will allow the integrated delivery of pay TV,
telephony, Internet access, high speed data and future interactive services. The


                                       11

<PAGE>

majority of Saturn's approximately 1,600 kilometers of plant will be constructed
on aerial  utility  poles which will allow for  quicker and more  cost-effective
network construction than underground wireline. In addition,  because Wellington
zoning generally  permits only a single additional  communications  cable on its
aerial utility poles,  Saturn's status as first operator on such poles may limit
use  of  these  poles  by  other  communications  providers.  Because  the  only
significant  multi-channel television competitor in the Wellington market offers
a  UHF-delivered  service  that is  limited  to only five  channels,  management
believes  it will be able to build a  significant  customer  base by offering an
attractive basic programming  line-up of over 30 channels at competitive prices,
as well as  pay-per-view,  data and  telephony  services.  Saturn  is  currently
negotiating  for an  interconnect  agreement that will allow it to provide local
residential  and business  telephone  services.  By bundling  both  subscription
television  and  telephony  services,  Saturn  will  be able  to  offer  pricing
discounts  across both  services,  which  management  believes  will  provide an
advantage over competitors  that offer only one service.  Saturn is currently in
the preliminary stages of discussions with several telecommunications  providers
in  the  New  Zealand  market   concerning   potential   strategic   partnership
arrangements.  There can be no assurances,  however, that Saturn will be able to
conclude successfully any such arrangements.

     PROGRAMMING.  Saturn's  programming  strategy is to offer a wide variety of
high-quality  channels at  competitive  prices.  Saturn is currently  offering a
single tier of service  consisting  of 21 channels and is currently  negotiating
with a number of  programming  services  to expand  its  channel  offering.  The
following is a list of the programming  currently offered by Saturn in its basic
package:

          Channel                   Programming Genre
          -------                   -----------------

          TV 1....................  general entertainment
          TV 2....................  general entertainment
          TV 3....................  general entertainment
          Capital TV..............  general entertainment
          Community Channel.......  local news, events
          CNN International ......  world news
          Asia Business News......  Asian business news
          Discovery...............  science and nature
          NBC Superchannel........  general entertainment
          TNT.....................  classic movies
          Cartoon Network.........  children's cartoon programming
          Trackside...............  TAB racing
          Kidzone.................  children's programming
          Weather Channel.........  live weather from NZ MetService
          Program Guide...........  programming line-up
          TVSN....................  shopping
          CMTV....................  country music video
          RFO.....................  French general entertainment
          NHK.....................  Japanese general entertainment
          Elijah Television.......  non-denominational religious programming
          Worldnet................  U.S. information service news and science

     In  addition,  in 1996 Saturn has  negotiated  two  pay-per-view  licensing
agreements  with  Columbia  TriStar and  Universal  Pictures and expects to have
agreements with several other studios and to launch its pay-per-view services in
the second quarter of 1997.

     PRICING.  Saturn  currently  offers a single basic service  package with 21
channels in  Wellington  at a monthly  subscription  rate of $23 with a one time
installation  fee of  $30  per  subscriber.  Sky TV  ("Sky"),  Saturn's  primary
competitor,  charges  subscribers a monthly rate of  approximately  $36 for five
channels of programming with a one time  installation fee of $35 per subscriber.
Saturn is currently offering new subscribers a promotional monthly basic rate of
$17 for the months from November 1996 to March 1997.


                                       12

<PAGE>


     MARKETING;  CUSTOMER SUPPORT.  Saturn's  marketing  strategy uses promotion
techniques proven in existing subscription television markets such as the United
States and Europe,  including  direct sales  campaigns  (door-to-door  selling),
direct mail and telemarketing supported by a mass media brand awareness program.
Direct  sales  has  proven to be the most  effective  technique  in other  cable
television markets,  particularly in areas where multi-channel  television is in
its introductory stage. Each of these techniques aims to communicate the selling
points  of cable  television:  expanded  choice,  high  entertainment  value and
breadth of programming  genre to potential  subscribers.  Homes are released for
marketing on a node by node basis as construction  is completed,  which allows a
very targeted  marketing program tailored to the unique  demographic  profile of
the  territory,  and  enables  Saturn to  capitalize  on the  product  awareness
resulting from its construction efforts.  Saturn's sales strategy is designed to
include an emphasis on  telephony  services  (once these can be offered)  and to
capitalize on the value, quality and customer service advantages associated with
bundled services.  Saturn has established a national customer services center at
its  corporate  headquarters  in  Wellington.  All  call  management  technology
employed  by Saturn is  scaleable  and can be  configured  to support a national
network expansion.  In addition,  Saturn is currently developing a sophisticated
marketing  database  to assist the sales force in a targeted  sales  approach in
future marketing campaigns.

     COMPETITION.  There are currently three broadcast  networks in New Zealand,
with plans for a fourth network announced.  The largest provider of subscription
television  services  in New  Zealand  is Sky,  which  operates  a five  channel
scrambled UHF  subscription  television  service.  Although Sky offers a popular
sports  channel  on an  exclusive  basis,  Sky  does  not  currently  offer  the
programming  diversity  or  television/telephony  bundling  that Saturn plans to
offer,  services  Saturn believes will drive its  penetration.  Sky has recently
announced,  however,  that for an installation fee of $420 it intends to offer a
satellite  service  primarily  targeted  to  rural  areas  of New  Zealand  that
currently  are  unable to  receive  Sky's UHF  signal and which may enable it to
provide up to an additional five channels.  Independent  News Limited,  which is
49% owned by News  Corp.,  has  recently  announced  that it is  negotiating  to
acquire a  significant  shareholding  in Sky. In  addition,  Telecom New Zealand
("Telecom"),  New Zealand's  largest  telecommunications  service  provider with
nearly a 100% share of local loop  revenues,  75% of national and  international
toll  revenues and 90% of cellular  revenues,  has  announced  its  intention to
rebuild certain of its existing networks using HFC technology,  which will allow
it to offer video and data services to a total of approximately  70,000 homes in
various  parts of New Zealand,  and that  further  expansion of its network will
depend on  results of the  initial  roll-out.  Telecom  recently  activated  the
initial   portion  of  its  network  in  the  Wellington   area,   which  passes
approximately  2,000  homes.   Telecom  is  also  expected  to  be  the  primary
competition to Saturn's planned local loop telephony service.

     MANAGEMENT AND EMPLOYEES.  The Company has appointed three of its employees
to senior  management  positions at Saturn,  including  Saturn's chief executive
officer, Jack Matthews,  and Saturn's technical director and customer operations
director. UAP also provides technical, administrative and operational assistance
to Saturn.  Saturn  reimburses UAP for all direct and indirect costs  associated
with these services, including employee costs, and pays UAP 5% of Saturn's gross
revenue through 1999.

     As of January 31,  1997,  Saturn had 125  employees.  Substantially  all of
Saturn's  employees are parties to a collective  employment  contract  governing
certain  conditions  of  their  employment  including  probationary  periods  of
employment,  termination,  redundancy,  overtime,  holidays,  leave and  dispute
resolution.


                                       13
<PAGE>


XYZ (AUSTRALIAN PROGRAMMING)

     Through its 25% interest in XYZ, the Company  provides  four  channels (the
"XYZ  Channels")  of the eight  channels  which are  distributed  as the  Galaxy
Package, the most widely distributed  programming package in Australia.  The XYZ
Channels consist of the following:

<TABLE>
<CAPTION>
          Channel                        Programming Genre
          -------                        -----------------
          <S>                            <C>
          Discovery Channel............  documentary, adventure, history and lifestyle programming
          Nickelodeon/Nick at Nite.....  children's educational, entertainment and cartoons/family oriented
                                         drama and entertainment
          Channel [V]..................  music video with local presenters
          Arena........................  drama, comedy, general entertainment, programming, library movies
</TABLE>


     XYZ provides the XYZ Channels to  Continental  Century Pay  Television  Pty
Limited (the "A  Licenseholder"),  which in turn, pursuant to long-term carriage
agreements,  supplies  them as part of the Galaxy  Package to Australis  and its
franchisees  and to Foxtel.  The Galaxy  Package is available to the majority of
Australia's  approximately  six million  television  households,  including  all
households marketed via MMDS and DTH by Australis and its franchisees,  pursuant
to a carriage  agreement between Australis and the A Licenseholder that has been
warranted  to XYZ as having a term  through at least 2010.  The XYZ Channels are
also distributed to Foxtel pursuant to a carriage  agreement  between Foxtel and
the A  Licenseholder  that has been  warranted  to XYZ as having a term  through
2020. XYZ's agreement with the A Licenseholder provides for fixed per subscriber
prices.   The  Company   understands  the  carriage   agreement  between  the  A
Licenseholder and Foxtel provides for substantial minimum subscriber guarantees.
XYZ currently  receives monthly revenues of approximately  $3.15 per MMDS or DTH
subscriber  and  $4.15  per  Foxtel  subscriber.  ECT,  an  affiliate  of  the A
Licenseholder,  has guaranteed the  performance of all of the A  Licenseholder's
obligations  to XYZ under this  agreement.  As of  February  28,  1997,  the XYZ
channels were  distributed to  approximately  380,000  multi-channel  television
subscribers.

     OPERATING AND GROWTH  STRATEGY.  XYZ is an  independently  managed  venture
which purchases,  edits, packages and transmits programming for the XYZ Channels
in exchange for a monthly fee per  subscriber.  The Company and Century  jointly
manage  Arena;  the  Company,  Century and Foxtel  manage  Channel  [V]; and the
Company and Century,  together with Nickelodeon Australia,  Inc. ("Nickelodeon")
manage  the  Nickelodeon/Nick  at Nite  channel.  Each of these  three  channels
reports to a board comprised of the Company, Century and Foxtel executives.  The
Discovery Channel is managed by Discovery Asia and distributed by XYZ.

     XYZ is focusing its marketing efforts on creating,  building and supporting
channel  identification  and brand  awareness.  XYZ's goal is to acquire quality
programming that will engender viewer loyalty. In addition, when restrictions on
multi-channel  television  advertising  expire in  mid-1997,  XYZ plans to offer
advertising on each of the XYZ Channels. XYZ also plans to create and distribute
two additional channels in 1997.

     ACQUISITION OF PROGRAMMING. In July 1995, XYZ and Discovery Asia executed a
twelve-year  exclusive  carriage  agreement  whereby a localized  version of the
Discovery  Channel replaced the existing  documentary  channel developed by XYZ.
The Company believes that, as a result of this arrangement,  XYZ will be able to
offer subscribers higher quality programming at a lower cost to XYZ.

     XYZ and  Nickelodeon,  a division  of Viacom,  are  jointly  producing  and
distributing an Australian version of  Nickelodeon/Nick at Nite, which XYZ began
distributing  in  October  1995.  XYZ  pays a  monthly  per  subscriber  license
distribution fee that is shared equally by Nickelodeon and XYZ.

     XYZ acquires  programming and locally produces  interstitials for, packages
and  distributes  Arena and Channel  [V].  XYZ has  acquired a two to three year
supply of  programming  for  Arena at  prices  its  management  considers  to be


                                       14

<PAGE>

favorable.  XYZ is  pursuing  supply  agreements  and  potential  joint  venture
arrangements with a number of other international programming suppliers.

     In March 1997, XYZ and Channel [V] Music Networks ("CVMN"), a joint venture
between Star TV and several record  companies  including  B.M.G.,  EMI, Sony and
Warner  Music,  entered into an agreement to re-brand  XYZ's music video channel
under a license arrangement with the international music video channel,  Channel
[V].  The  arrangement,  which has a ten year  term,  will  allow XYZ to use the
Channel [V]  trademarks,  interstitial  materials  and  management  and gives it
access to Channel  [V]'s  favorable  record  programming  arrangements.  XYZ has
agreed to pay a  management  fee of A$1 million over the first two years as well
as a licensing fee based on gross subscriber revenues, ranging from 2.5% for the
first two years to 5% for the third  through  the tenth  years.  After the third
year, CVMN shall have a one-year option to acquire a 20% interest in Channel [V]
at a price  equal to XYZ's cost plus cost of  capital  at 11.5% per annum.  Upon
such acquisition,  CVMN will offset its licensing fee against current and future
profit shares.

     EMPLOYEES. As of January 31, 1997, XYZ had 51 employees and the Nickelodeon
joint  venture had 20  employees.  The  programming  joint  venture  between the
Company and Century had 11 employees that provide management services to XYZ.

TELEFENUA (TAHITI)

     The Company has an up to 90% economic  interest in Telefenua which operates
a 15 channel  MMDS  service in a service  area that,  as of February  28,  1997,
included approximately 19,600 television homes. Telefenua is currently expanding
its network by selectively adding beam benders and repeaters that will allow its
signal to reach substantially all of the approximately  31,000 serviceable homes
in its franchise areas. Telefenua had 5,472 subscribers as of February 28, 1997,
representing  a 28%  penetration  rate.  The  Company is in the early  stages of
negotiating  the sale of all or a  portion  of  Telefenua  to a local  strategic
investor, although there can be no assurance that the Company will conclude such
a transaction.

     MARKET  OVERVIEW.  Tahiti and Moorea are the two largest and most  populous
islands of French  Polynesia,  a  self-governing  territory  of the  Republic of
France. The French government  contributes heavily to French Polynesia's economy
and approximately  one-third of Tahiti's  population is employed by the national
government.   Television  viewing  alternatives  are  limited,  but  demand  for
television is strong as  demonstrated  by the country's high  television and VCR
penetration rates, 99% and 66%, respectively,  and average per capita television
viewing of nearly four hours per day. Prior to late 1994,  television choice was
limited to two government broadcast channels.

     OPERATING  AND GROWTH  STRATEGY.  Telefenua is focusing on  increasing  its
penetration  rates  through  continued  direct  marketing  campaigns,  including
door-to-door   sales,  and  expanding  its  serviceable   homes  through  select
deployment  of beam benders and  repeaters.  Management  is actively  seeking to
expand its programming  offering  including the planned  introduction of premium
movie  services.  Telefenua is also  expanding its network by adding  additional
beam benders and  repeaters.  The Company  anticipates  this  expansion  will be
completed over the next 12 to 24 months.

     PRICING.  The subscription fee for Telefenua's  basic tier is approximately
$49 per month and the expanded tier monthly rate is approximately  $60. To date,
nearly 99% of  Telefenua's  customers  are  subscribing  to the expanded tier of
service.  Telefenua also charges a one-time  installation  rate of approximately
$100.

     PROGRAMMING.  Telefenua offers a combination of French and English language
services. Telefenua's current channel line-up consists of 15 channels segregated
into two tiers of service--a basic service with 12 channels and an expanded tier
with an additional three channels.  Telefenua's  basic tier offers the two local
broadcast  channels  as well as  French  language  childrens',  sports,  general
entertainment  and music  channels and the English  language  CNN  International
channel.  Telefenua  also offers a  French/Tahitian  language  program guide and


                                       15

<PAGE>

plans to offer a local public access channel.  The expanded tier includes French
language movies, a documentary channel and ESPN International.

     With the exception of CNN  International,  ESPN  International  and the two
local broadcast  channels,  all programming  consists of taped French  satellite
services. Current French regulations require approval of the national regulatory
authority for all programming.  The following is a list of programming currently
offered by Telefenua:

          Channel                  Programming Genre
          -------                  -----------------

          RFO 1................... government broadcast, general entertainment
          RFO 2................... government broadcast, general entertainment
          CNN International....... world news
          RTL..................... general entertainment
          Eurosport............... sports
          Canal J/Canal Jimmy..... adult and childrens'
          Serie Club.............. general entertainment
          Paris Premiere.......... arts, life
          MCM..................... music video
          M6...................... general entertainment
          CMT..................... country music video
          Program Guide........... program guide service
          Planete................. documentary (expanded basic tier)
          Cine Cinemas............ movies (expanded basic tier)
          ESPN International...... sports (expanded basic tier)

     MARKETING;   CUSTOMER   SUPPORT.   Telefenua   utilizes  several  marketing
techniques,  proven in the U.S.  multi-channel  television  industry,  including
door-to-door, direct mail and local media. The Company's customer service center
also conducts  telemarketing  campaigns  and has opened sales  boutiques in high
traffic  areas  throughout  Tahiti and Moorea.  Marketing  campaigns  consist of
selected  promotions  targeting specific  demographic groups throughout the year
and new markets as they are activated.  Telefenua's  customer  service center is
located  at  its  corporate  headquarters.   The  center  handles  all  customer
inquiries, coordinates installations and manages all maintenance activities.

     COMPETITION.  Telefenua's only subscription  television competitor is Canal
Plus,  which  offers a single  channel UHF  service  offering a  combination  of
sports, movies and general entertainment programming. The Company estimates that
Canal Plus had approximately 3,800 subscribers,  of which an estimated 1,000 are
also  customers  of  Telefenua.  The  monthly  subscription  fee for Canal Plus'
service  is  approximately   equal  to  the  subscription  fee  for  Telefenua's
15-channel  expanded tier service.  There is no existing  competition  in Tahiti
from DTH  services due to limited  satellite  coverage in the region and lack of
available satellite delivered French language programming.

     MANAGEMENT AND EMPLOYEES.  UIH and the Societe Francaise des Communications
et du Cable  S.A.  ("SFCC"),  Telefenua's  immediate  parent,  are  parties to a
Technical  Assistance  Agreement,  whereby UIH has agreed to provide  technical,
administrative and operational  assistance to SFCC. SFCC has a similar technical
assistance  agreement with Telefenua under which it makes available to Telefenua
UIH's  services  encompassing  the following  areas:  (i)  engineering,  design,
construction, and equipment purchasing; (ii) marketing, selling and advertising;
(iii) accounting,  billing and subscriber  management systems and (iv) personnel
management and training,  for  reimbursement of expenses and a fee equal to 5.5%
of Telefenua's  gross revenue through the end of 1996, 3.5% of gross revenue for
the following 12 months, and 2.5% thereafter.  The fees payable to UIH under its
Technical  Assistance Agreement with SFCC are 5%, 3% and 2% of Telefenua's gross
revenues  over the same  periods.  UIH is also  reimbursed  for all  direct  and
indirect costs  associated with the services it provides.  UIH has appointed two
of its  employees  to serve as  managing  director  and  technical  director  of
Telefenua. UIH pays these employees' salaries and benefits and charges Telefenua
for these amounts.


                                       16

<PAGE>


     As of January 31, 1997, Telefenua had 40 employees.

UNITED WIRELESS (AUSTRALIAN MOBILE DATA)

     The Company owns a 100% economic interest in United Wireless, a provider of
two-way  wireless  mobile data  services in  Australia.  Wireless  data networks
provide  for  the  two-way  transmission  of  packet  switched  data  between  a
customer's  terminal and a host  computer.  The  transmission  of wireless  data
occurs over a network, similar in configuration to a cellular telephone network,
which is constructed and maintained by a local network  carrier,  such as United
Wireless.

     BACKGROUND.  In September  1995,  the Company  acquired a 100%  interest in
BellSouth  Mobile Data Australia Pty Limited which was renamed United  Wireless.
United  Wireless is in the second phase of its network  deployment  in the major
metropolitan  markets of  Australia.  United  Wireless'  network is based on the
"Mobitex" technology,  developed by Ericsson and Swedish Telekom and launched in
1984.  Today,  there are 14 operational  Mobitex wireless data networks deployed
throughout Europe, North America and the Asia/Pacific region.

     MARKET OVERVIEW.  The Australian wireless mobile and fixed data industry is
in an early stage of development.  Wireless data services were first  introduced
in  Australia  in 1992 by United  Wireless'  predecessor.  Today,  there are two
public wireless data carriers in Australia with a total estimated installed base
of 5,500 customer terminals.

     OPERATING AND GROWTH  STRATEGY.  United Wireless is aggressively  expanding
its network  coverage areas to encompass the  metropolitan  markets of Adelaide,
Brisbane,  Canberra,  the Gold Coast,  Melbourne,  Perth and Sydney. The Company
plans on  spending  approximately  $3.7  million for  network  construction  and
working capital needs through 1998.

     MARKETING AND  CUSTOMERS.  United  Wireless'  target market  includes large
companies  with  significant  potential  installed  bases,  such  as  utilities,
security alarm firms,  commercial banks,  transport  companies,  and courier and
delivery companies. Management believes that the most expeditious and economical
approach  to  building  an  installed  customer  terminal  base is to target its
efforts on securing these large corporate accounts.  Specific  applications that
United Wireless plans to  target include remote order entry (i.e., sales persons
and  couriers),  credit and debit card  validation,  remote  meter  reading  for
utilities, security monitoring and vending machine inventory monitoring.

     REVENUE AND PRICING.  The majority of United Wireless' revenues are derived
from monthly access fees charged on a per terminal basis.  The average  customer
pays a monthly rate of $25 per terminal.

     SALES.  United Wireless utilizes a network of systems  integrators that act
as the primary  interface with potential  customers.  These systems  integrators
develop  specific  customer  applications  which  utilize the  Mobitex  wireless
network for  transmission  of data.  United  Wireless  works  closely with these
systems  integrators  providing  technical,  marketing  and other  general sales
support.

     COMPETITION. United Wireless competes primarily with Telstra Wireless Data,
a subsidiary of Telstra,  whose wireless data network was developed by Motorola.
The  Company   estimates   Telstra  Wireless  Data  has  an  installed  base  of
approximately 5,250 customer terminals.

     In  addition  to  an  existing  competitor,   United  Wireless  could  face
competition  in the  future  from  certain  companies  that  are  attempting  to
implement  satellite-generated data transmission and paging services on a global
scale. The launch of low earth orbit satellite systems offering wide area public
data  communications in Australia is expected between 1999 and 2002. The Company
believes,   however,  that  the  costs  of  both  terminal  equipment  and  data
transmission  are expected to be  significantly  greater than those  incurred by
United Wireless.


                                       17

<PAGE>


     The Company believes that the Mobitex network provides certain  competitive
advantages over other operating platforms including:  (i) superior  transmission
quality;  (ii)  broader  redundancy  capabilities;  (iii)  larger  base  station
coverage  areas;  (iv) lower  maintenance  and support  requirements;  and (v) a
greater array of proven application solutions.

     EMPLOYEES.   As of January 31, 1997, United Wireless had 23 employees.

TECHNOLOGIES EMPLOYED BY THE COMPANY

     The Company currently uses three principal transmission technologies in the
deployment of its multi-channel  television  services in Australia,  New Zealand
and Tahiti.  These  technologies  are:  (i)  microwave  multipoint  distribution
systems (MMDS or wireless cable);  (ii) DTH satellite  broadcast  services;  and
(iii)  wireline  cable,  or  CATV,  the  technology  with  which   multi-channel
television  services are most  frequently  delivered in the United  States.  The
Company has carefully  evaluated the  characteristics of the markets in which it
is currently operating or planning to operate  multi-channel  television systems
and  has  chosen  what  it  believes  to be the  most  appropriate  transmission
technology  for each.  While these  transmission  technologies  are, in general,
similar with respect to picture quality,  all such  technologies  offer improved
picture quality compared to what has  historically  been offered by over-the-air
broadcasters.

     MMDS is a  microwave  distribution  system  for which  frequency  bands are
utilized for transmission of the programming  services.  MMDS signals  originate
from  a  head-end  facility,  which  receives  satellite-delivered   programming
services and delivers  such  programming  via an encoded  microwave  signal from
transmitters  located  on a tower or on top of a building  to a small  receiving
antenna  located at a  subscriber's  premises,  where the microwave  signals are
decoded.  MMDS  transmission  requires a clear  line-of-sight  because microwave
frequencies will not pass through  obstructions;  however, many signal blockages
can be overcome  through the use of low power signal  repeaters which retransmit
an otherwise blocked signal over a limited area. The initial  construction costs
of a MMDS system generally are significantly  lower than a wireline cable or DTH
system.  The Company is using MMDS  transmission  technology  in  Australia  and
Tahiti,  where housing  density and topography make MMDS the most cost effective
technology.

     DTH transmits  encoded signals  directly from a satellite to a subscriber's
premises,  where it is decoded.  Currently in  Australia,  all DTH  subscription
television   services  are  transmitted  via  the  Optus  Satellite  using  High
Performance  Beams ("HP Beams")  covering  certain  geographic  areas  (commonly
referred to as a satellite  "footprint").  All of Austar's  franchise  areas are
within the Optus Satellite footprint. Since this signal will be transmitted at a
high  power  level and  frequency  utilizing  MPEG II  digital  technology,  its
reception can be accomplished  with a relatively small (26-35 inch) dish mounted
on a rooftop or in the yard for the  households  located  within  the  innermost
satellite  transmission  footprint and with a slightly  larger (35-47 inch) dish
for the households located outside the innermost footprint.  Austar is using DTH
transmission  technology for homes in its MMDS markets that are not reachable by
its MMDS  signals as well as for homes in its  franchise  areas where  household
densities  do not support the  construction  of MMDS  systems.  Due to satellite
coverage  limitations,  DTH service is currently not available in New Zealand or
Tahiti although Sky has recently announced plans to start delivering services to
New Zealand by satellite.

     A wireline cable  television  system is a network of coaxial or fiber-optic
transmission  cables through which  programming is transmitted to a subscriber's
premises  from the system's  head-end  facility,  which  receives  satellite and
tape-delivered  programming.  Wireline cable television  offers a wide bandwidth
that generally allows the transmission of a larger number of channels than MMDS.
When constructed with a HFC network,  as the Company plans to do in New Zealand,
the system's  infrastructure can be used to deliver telephony and data services.
The primary  disadvantages  of a wireline  cable network are the higher costs of
construction, especially in areas of low housing density, and the length of time
required to construct the network.  The Company is  constructing  wireline cable
systems  in New  Zealand  and,  due to  topography  and  housing  densities,  is
constructing a wireline cable system in one market in Australia.


                                       18

<PAGE>

EMPLOYEES

     The Company has no  employees.  Administrative  and other  services for the
Company are  currently  provided by UIH.  UIH and the Company are parties to the
UIH  Management  Agreement  pursuant to which UIH  provides all  management  and
administrative   services  necessary  for  the  Company.  UIH  supplies  certain
employees  to Austar,  Saturn and  Telefenua  pursuant to  Technical  Assistance
Agreements  with  such  operating  companies.  See Item 13 of Part III  "Certain
Relationships and Related Transactions."

CORPORATE ORGANIZATIONAL STRUCTURE

     The Company is a holding company with no operations of its own. The Company
holds majority economic  interests in all of its operating  companies other than
XYZ.  Below is a summary of the Company's  ownership  interests in its operating
companies.

AUSTAR

     The Company holds a combined 100% economic  interest in CTV and STV,  which
operate together under the name Austar,  through direct and indirect holdings of
convertible  debentures and ordinary shares. The Company holds approximately 15%
of the ordinary shares of CTV and STV, which accounts for an approximately  0.3%
economic  interest  in  Austar.  The  Company  holds  all  of  CTV's  and  STV's
convertible  debentures,  which  accounts for an  approximately  97.8%  economic
interest  in Austar.  In  addition,  through the  Company's  holdings of certain
debentures  of Salstel  Media  Holdings  Pty Limited  ("SMH") and Salstel  Media
Investments Pty Limited  ("SMI"),  which in turn hold ordinary shares of CTV and
STV, UAP has an additional effective 1.9% economic interest in Austar.  Although
the Company holds  debentures  and one share in each of SMH and SMI, it does not
control  such  entities  or have  controlling  rights as a  shareholder  of such
entities.  Through  contractual  arrangements and pursuant to the terms of CTV's
and STV's respective charter documents, the Company has the right to appoint all
of the six voting directors of each company.

XYZ

     The Company has an indirect 25% interest in XYZ through its 50% interest in
CUPV, an Australian  corporation owned equally by the Company and Century.  CUPV
holds a 50%  interest  in XYZ.  The  remaining  50%  interest  in XYZ is held by
Foxtel.

SATURN

     In 1994,  the  Company  acquired a 50%  interest  in Saturn,  a New Zealand
corporation.  In July 1996,  the Company  acquired the remaining 50% interest in
Saturn in exchange for a 2.6% common equity interest in the Company.

TELEFENUA

     UIH-SFCC Holdings, L.P. ("UIH-SFCC"), a limited partnership wholly-owned by
the Company, is the general partner of a limited partnership (the "Partnership")
that owns 100% of the preferred stock of SFCC, representing approximately 40% of
the share capital of SFCC.  SFCC is the parent company of Telefenua,  which owns
and operates the multi-channel television system in Tahiti. As holder of 100% of
the preferred stock of SFCC, the Partnership is entitled to certain preferential
distributions  by  SFCC.   Through  its  general   partner's   interest  in  the
Partnership,  UIH-SFCC will receive 90% of the distributions  made by SFCC until
UIH-SFCC  has  received  the  return  of its  investment  plus a 20%  cumulative
compounded annual return, 75% of distributions  until it has received the return
of its  investment  plus a 40%  cumulative  compound  annual  return  and 64% of
distributions  thereafter.  Once UIH-SFCC's total equity investment  exceeds $10
million,  further  equity  investments  would not be entitled to the 90% and 75%
distributions.  Instead, equity investments above $10 million, to the extent not


                                       19

<PAGE>

matched pro rata by the  Company's  partners,  would  increase  the 64% that UIH
receives after the preferential distributions are made on the first $10 million.
As of September 30, 1996, UIH-SFCC has also advanced $7 million as a bridge loan
to SFCC,  approximately  $5  million  of which was  converted  into  convertible
debentures of SFCC, which are convertible into preferred stock of SFCC. UIH-SFCC
intends to convert  approximately $3.1 million of such debentures into preferred
stock  with the same terms as the  existing  preferred  stock of SFCC,  to bring
UIH-SFCC's  total equity  investment to $10 million.  UIH-SFCC has also invested
$2.3 million in equipment, which has been leased to Telefenua.

UNITED WIRELESS

     United Wireless is a wholly-owned subsidiary of the Company.

     For a discussion  of risks  associated  with foreign  operations,  refer to
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" in Item 7 of Part II of this Form 10-K.

(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
--------------------------------------------------------------------------------

     For  information  applicable  to  this  item,  refer  to the  notes  to the
financial statements contained in Item 8 of Part II of this Form 10-K.

ITEM 2.  PROPERTIES
-------------------

     The Company's executive offices are located in Denver,  Colorado,  in space
leased by UIH. In  management's  opinion,  facilities are sufficient to meet the
current and foreseeable future needs of its operating companies.

     Austar leases office space in Sydney for its administrative offices and has
established  five regional offices in leased space in certain areas where it has
launched service. Austar also leases locations for smaller local offices in most
of its markets to handle local customer maintenance, marketing and installation.
In  addition,  Austar  leases  facilities  to house the  head-end  facility  and
transmitter  tower  in each  of its  markets.  The  NCOC is  located  in  leased
facilities in the Gold Coast. Generally, these Austar facilities are leased with
terms of three to six years,  with  renewal  options in many  instances.  Austar
believes that its leased facilities are sufficient for its foreseeable needs and
that it has  access to a  sufficient  supply  of  additional  facilities  in its
various markets, should it require more space.

     Saturn  has   constructed  a  head-end   facility  on  leased  property  in
Paraparaumu.  Saturn leases office and warehouse facilities for its headquarters
in Petone,  located north of  Wellington,  and  additional  office and warehouse
space  on the  Kapiti  Coast.  These  leases  have  six- and  three-year  terms,
respectively,  with six- and three-year  renewal options,  respectively.  Saturn
also has a two-year lease for additional  warehouse space in Petone.  Saturn has
an option to acquire the Kapiti office premises.

     XYZ currently uses a portion of Foxtel's broadcasting facilities located in
Sydney. XYZ is currently  negotiating with Foxtel terms of a four-year lease for
this facility. The Company believes this arrangement results in operational cost
savings. XYZ believes its facilities are sufficient for the foreseeable future.

     Telefenua  owns  office  space in  Punaania,  Tahiti.  This  facility  also
contains the customer service center and the head-end  equipment for the system,
including equipment for the receipt of satellite delivered programming and local
broadcasts  as well as play-back of taped  programming.  Telefenua  compiles its
15-channel  service at this facility and then  transmits from its MMDS broadcast
tower located on the island of Moorea.

     United  Wireless leases  corporate  office space in Sydney and has a leased
regional sales office in Melbourne.


                                       20

<PAGE>


ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     Other  than as  described  below,  the  Company is not a party to any other
material legal  proceedings,  nor is it currently aware of any other  threatened
material legal  proceedings.  From time to time, the Company may become involved
in  litigation  relating to claims  arising out of its  operations in the normal
course of its business.

     The territorial  government of Tahiti has legally challenged the Decree and
authority of the CSA to award  Telefenua the  authorizations  to operate an MMDS
system in French  Polynesia.  The  French  Polynesian's  challenge  to  France's
authority to award Telefenua an MMDS license in Tahiti was upheld by the CONSEIL
D'ETAT, the supreme  administrative court of France. The territorial  government
of Tahiti has brought an action in French court seeking cancellation of the MMDS
licenses awarded by the CSA to Telefenua,  although no such cancellation has yet
taken place. A law recently enacted by the French  Parliament may give Telefenua
a  statutory  basis for  seeking  a new  authorization  from the  communications
agency,  should the existing  authorization  be nullified.  The Company believes
that if the  existing  authorization  is  nullified  and  Telefenua is unable to
obtain a new  authorization,  Telefenua  may  petition for  restitution  for the
taking of such authorization.  There can be no assurance,  however,  that if the
existing  authorization is nullified a new  authorization  will be obtained.  If
Telefenua does not obtain a new  authorization,  however,  there is no assurance
that  Telefenua  will  receive  any  restitution.  In  addition,  any  available
restitution could be limited and could take years to obtain.

     Carl M.  Johnson,  an  individual  who  claimed to have  worked with UIH in
connection  with the  acquisition  by Austar of  certain  of its  licenses,  has
claimed that UIH owes him a 12.5% equity interest in unspecified subsidiaries of
UIH.  This  complaint,  which was filed on April 24,  1996 and  served on UIH in
October 1996, is pending in a civil court in Melbourne,  Australia, and seeks an
unspecified amount of damages. UIH intends to vigorously defend these claims.

     On November 6, 1996,  Austar filed a complaint in the Supreme  Court of New
South  Wales,  Commercial  Division,  seeking  injunctive  relief to prevent (i)
Australis  from  transferring  its  satellite  delivery  systems and  associated
infrastructure to its joint venture with Optus Vision and (ii) Optus Vision from
using such  infrastructure  to deliver DTH services in Austar's  franchise area.
Austar  believes  that the use of the  infrastructure  by any entity  other than
Austar  for the  provision  of DTH  services  within  Austar's  franchise  areas
violates the terms of Austar's franchise  agreement with Australis which granted
Austar an exclusive license and franchise to use the  infrastructure  within its
franchise  areas.  Austar is seeking  injunctive  relief or, in the alternative,
damages associated with this violation of its franchise agreements.  On December
6, 1996,  Australis filed counterclaims  against Austar and the Company alleging
generally  that Austar and the Company  breached  implied terms of the Australis
Arrangement by seeking such injunctive relief. In addition,  Optus Vision claims
that the exclusive nature of Austar's franchise  agreements violates Australia's
Trade Practices Act. The Company intends vigorously to defend its position.

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

     No matters  have been  submitted to a vote of security  holders  during the
quarter ended December 31, 1996.


                                       21

<PAGE>


PART II


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

     UAP owns 487  (97.4%) of the 500 shares of issued  and  outstanding  common
stock of the Company.  The  remaining 13 shares are owned by Kiwi Cable  Company
BVI, Inc.("Kiwi"),  the entity from which the Company acquired the remaining 50%
interest  in Saturn  for  approximately  $7.8  million.  The holder of this 2.6%
interest was granted a one-time  conversion  right to exchange such interest for
an equivalent interest in the common stock of UAP, upon certain circumstances.

     The Company has paid no dividends  to either UAP or Kiwi.  The Company is a
holding  company with no  independent  operations  of its own and, as such,  its
ability to pay  dividends is dependent  upon  distributions  from its  operating
companies. Such distributions may be limited by contractual or other obligations
of such operating companies. In addition, the ability of the operating companies
to distribute  funds may be limited by the current or future  regulations of the
countries in which they are located.

ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

     The  following  summary  consolidated  financial  data for the years  ended
December 31, 1994,  1995 and 1996 and balance sheet data as of December 31, 1995
and 1996 have been derived from the Company's  consolidated financial statements
which have been audited by Arthur Andersen LLP,  independent public accountants,
whose report indicated a reliance on other auditors  relative to certain amounts
relating to the Company's  interest in  Telefenua and XYZ as of and for the year
ended  December 31, 1995.  The data set forth below is qualified by reference to
and  should  be read in  conjunction  with the  audited  Consolidated  Financial
Statements of the Company and Notes thereto,  and  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations" included in Item 7 of
Part II of this Form 10-K.
<TABLE>
<CAPTION>

                                                                                             For the Years Ended
                                                                                                 December 31,
                                                                             ----------------------------------------------------
                                                                             1994                    1995                    1996
                                                                             -----                   ----                    ----
                                                                               (In thousands, except share and per share data)
<S>                                                                       <C>                     <C>                     <C>

STATEMENT OF OPERATIONS DATA:
Service and other revenue ..................................              $     --                $   1,883               $  24,977
System operating expense ...................................                    --                   (3,230)                (30,730)
System selling, general and
   administrative expense ..................................                    --                   (2,482)                (24,800)
Corporate general and
   administrative expense ..................................                   (659)                   (920)                 (1,376)
Depreciation and amortization
   expense .................................................                    --                   (1,003)                (36,269)
Equity in losses of affiliated
   companies ...............................................                 (1,015)                (16,379)                 (5,414)
Net loss ...................................................                 (1,674)                (17,233)                (87,986)
Net loss per common share ..................................              $  (3,437)              $ (35,386)              $(178,471)
Weighted average number of
   shares outstanding ......................................                    487                     487                     493
OTHER DATA:
Capital expenditures .......................................              $       1               $   7,648               $ 187,100
</TABLE>



                                       22

<PAGE>



                                                            As of December 31,
                                                            ------------------
                                                            1995          1996
                                                            -----         ----
                                                               (In thousands)
BALANCE SHEET DATA:
Cash, cash equivalents, and short-term investments.......  $  8,730    $  37,860
Property, plant and equipment, net.......................    27,630      193,170
Total assets.............................................    99,295      319,323
Senior discount notes and other liabilities..............       867      251,397
Total liabilities........................................    21,714      314,946
Total stockholders' equity...............................    75,066        4,377

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

INTRODUCTION

     The Company  currently  holds (i) an effective  100%  economic  interest in
Austar, (ii) a 100% interest in Saturn,  (iii) a 25% interest in XYZ, (iv) an up
to 90%  economic  interest  in  Telefenua  and  (v) a 100%  interest  in  United
Wireless.  Because  the  Company  accounts  for its  less  than  majority  owned
operating  companies on the equity  method,  prior to September  1995,  only the
Company's Tahitian subsidiary,  Telefenua, was consolidated.  In September 1995,
the Company  acquired a 100% interest in United  Wireless at which time it began
consolidating  its results of  operations.  In late December  1995,  the Company
increased  its  economic  interest  in  Austar  from  50%  to 90%  (the  "Austar
Transaction").  During 1996, the Company further increased its economic interest
in Austar to 100%. Prior to the Austar  Transaction,  the Company  accounted for
its  investment  in Austar using the equity  method of  accounting.  The Company
began  consolidating  the  results of  operations  of Austar on January 1, 1996.
Following its July 1996 acquisition of the remaining 50% interest in Saturn, the
Company  began  consolidating  the results of  operations  of Saturn,  which had
previously been accounted for using the equity method of accounting. The Company
accounts for its interest in XYZ using the equity method of accounting.

     In connection  with the offering of the Notes,  UIH merged into the Company
UIH's subsidiaries that hold interests in certain operating properties and early
stage projects in Australia,  New Zealand and Tahiti. The accompanying financial
statements have been prepared on a basis of reorganization  accounting as though
the  Company  had  performed  all foreign  development  activities  and made all
acquisitions of UIH's foreign multi-channel  television,  programming and mobile
data interests in Australia, New Zealand and Tahiti since inception. The Company
commenced  operations  in January  1994 when UIH began its  development  related
activities in the  Australia/Pacific  region.  The Company  reflected all of the
transfers  from UIH as a capital  contribution  from parent in the  accompanying
consolidated financial statements. The Company reports on the basis of U.S. GAAP
and recognizes its  proportionate  share of affiliated  company income (loss) on
the basis of U.S. GAAP results.

     The operating  companies have, since inception,  been engaged  primarily in
the construction of their networks and organizational  and start-up  activities.
As a result,  the  Company  has  generated  negative  cash  flow from  operating
activities for all periods presented. Accordingly, the Company believes that its
historical  results of  operations  discussed  herein are not  indicative of the
results of  operations  which will follow the  completion  of  construction  and
initial marketing of service by the operating companies.  As demonstrated by the
table  below,  the Company has  invested  significant  capital in the  operating
companies each of which are experiencing a rapid growth in subscribers.


                                       23


<PAGE>
<TABLE>
<CAPTION>

                                                            December 31, 1996
                                --------------------------------------------------------------------------
                                                                 Invested                      Subscriber
                                  Company         Service        Capital                        Net Gain
Consolidated Subsidiaries:      Ownership(1)    Launch Date    (In millions)    Subscribers    During 1996
--------------------------      ------------    -------------  -------------    -----------    -----------
<S>                                   <C>        <C>              <C>             <C>            <C>
Austar..................              100%        Aug. 1995       $185.4          103,410        98,206
Saturn..................              100%       Sept. 1996         23.9            1,697           738
Telefenua...............               90%        Mar. 1995         16.7            5,187         1,061
United Wireless.........              100%       Sept. 1995          5.0              N/A           N/A

Unconsolidated Affiliate:
-------------------------

XYZ.....................               25%        Apr. 1995       $ 10.8          340,000       275,000
</TABLE>

(1)  For an  explanation  of the  Company's  interests in each of the  operating
     companies,   see  Item  1  "Narrative  Description  of   Business-Corporate
     Organizational Structure."

     UIH,  the  Company's  parent,   provides  various  management,   technical,
administrative,  accounting,  financial reporting, tax, legal and other services
for the Company pursuant to the terms of a UIH Management  Agreement between UIH
and the Company. See Item 13 "Certain Relationships and Related Transactions."

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1995 AND 1996

      SERVICE AND OTHER  REVENUE.  The  Company's  service  revenues  (including
installation  revenues) increased to $25 million for the year ended December 31,
1996 from $1.9 million in the  comparable  prior year period.  This increase was
primarily  attributable  to  increases in service and  installation  revenues at
Austar.  Service and other  revenues  for the years ended  December 31, 1995 and
1996 were as follows:

                                                      For the Years Ended
                                                          December 31,
                                              --------------------------------
                                                 1994        1995       1996
                                               -------     -------     ------
                                                       (In thousands)

     Austar.............................      $    --      $   --      $21,244
     Telefenua..........................           --       1,882        3,513
     Saturn.............................           --          --          110
     United Wireless....................           --           1          110
                                              --------      ------     -------
          Total service and
             other revenue..............      $    --       $1,883     $24,977
                                              ========      ======     =======

          AUSTAR

               Service  revenues at Austar were $21.2 million in 1996.  Revenues
          consisted  primarily  of  service  and  installation  fees from  basic
          subscribers  of $14 million and $7 million,  respectively,  with other
          revenue  totaling $.2 million.  The Company  began  consolidating  the
          results  of Austar on  January  1,  1996.  As a  result,  the  Company
          reported  no service  revenues  from Austar in 1995.  Austar's  actual
          service  revenues in 1995 were $0.4  million.  The increase in service
          revenues  in  1996  was  primarily  attributable  to  an  increase  in
          subscribers  (5,204 at  December  31,  1995  compared  to  103,410  at
          December 31, 1996). Such increase was the result of the rapid roll-out
          of Austar's services initially launched in August 1995.


                                       24

<PAGE>


         TELEFENUA

                Telefenua's service revenues increased to $3.5 million from $1.9
         million in 1995,  primarily  attributable to an increase in subscribers
         (4,126 at December 31, 1995 compared to 5,187 at December 31, 1996).

         SATURN

                The Company began  consolidating the results of Saturn effective
         July 1, 1996.  Saturn's  actual  service  revenues  for the years ended
         December  31,  1996 and  1995  were  $0.2  million  and  $0.1  million,
         respectively.   The  increase  is   attributable   to  an  increase  in
         subscribers from 959 in 1995 to 1,697 in 1996.

     SYSTEM OPERATING  EXPENSES.  The Company's  operating expenses increased to
$30.7  million  for 1996 from $3.2  million  in 1995,  primarily  as a result of
increases in operating  expenses at Austar.  System  operating  expenses for the
years ended December 31, 1995 and 1996 were as follows:

                                                         For the Years Ended
                                                            December 31,
                                                   ----------------------------
                                                    1994        1995       1996
                                                    ----        ----       ----
                                                          (In thousands)
      Austar...................................   $  --      $   --     $26,310
      Telefenua................................      --        2,836      2,118
      Saturn...................................      --          --         889
      United Wireless..........................      --          394      1,413
                                                  ------     -------    -------
           Total system operating expenses.....   $  --      $ 3,230    $30,730
                                                  ======     =======    =======

          AUSTAR

               The  Company  reported  operating  expenses  from Austar of $26.3
          million in 1996,  consisting  primarily  of salary and  benefits  ($11
          million),  satellite  programming  fees ($5.5 million) and annual MMDS
          spectrum  license fees ($2  million),  with the  remainder  consisting
          primarily of office-related  expenses,  system  travel/recruitment and
          the  NCOC  and  field  office  start-up   costs.   The  Company  began
          consolidating  the results of Austar on January 1, 1996.  As a result,
          the  Company  reported  no  operating  expenses  from  Austar  in  the
          Company's  consolidated  statements  of  operations  for 1994 or 1995.
          Austar's  operating expenses for 1995 were approximately $4.3 million.
          The increase in operating expenses in 1996 was primarily  attributable
          to the rapid  roll-out  of  Austar's  services  initially  launched in
          August 1995 and the corresponding  increase in subscribers.  Austar is
          experiencing high operating  expenses relative to service revenues due
          to certain fixed  operating  expenses  (such as  management  overhead,
          license  fees and certain  marketing  costs) as well as  non-recurring
          start up costs (such as initial market  research,  NCOC  establishment
          costs  and  additional  one-time  expenses  due to the name  change to
          "Austar")  associated  with the launch of its service.  Austar expects
          operating  expenses  as a percent  of service  revenues  to decline as
          start-up costs are reduced and as certain fixed operating expenses are
          spread over expected increases in service revenues.

          TELEFENUA

               Operating  expenses  consolidated  by the Company from  Telefenua
          decreased to $2.1 million in 1996 from $2.8 million in 1995, primarily
          due to a decrease in  technical-related  repairs and  maintenance  and
          tape  production  costs,  partially  offset  by  an  increase  in  the
          subscribers in 1996.  Telefenua's operating expenses in 1996 consisted
          primarily of  programming  related  expenses  ($1.2  million) with the
          remainder  consisting of payroll-related  costs and  technical-related
          costs.


                                       25

<PAGE>


         SATURN

                The  Company  began  consolidating   Saturn  on  July  1,  1996.
         Accordingly,  while the  Company  reported  operating  expenses of $0.9
         million for Saturn in its  consolidated  statement  of  operations  for
         1996,  Saturn's  actual  operating  expenses  were  approximately  $2.3
         million for 1996  consisting  primarily of payroll and office  expenses
         related  to  the  start-up  activities,  including  system  design  and
         engineering work, for expansion of Saturn's  Wellington system in 1996.
         Saturn's system operating expenses in 1995 were $1.1 million.

    SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  The  Company's  system
selling, general and administrative expenses increased to $24.8 million for 1996
from  $2.5  million  in 1995,  primarily  attributable  to  increases  in system
selling,  general and administrative expenses at Austar. System selling, general
and administrative expenses for 1995 and 1996 were as follows:

                                                        For the Years Ended
                                                            December 31,
                                                    ---------------------------
                                                    1994       1995       1996
                                                    ----       ----       ----
                                                          (In thousands)
    Austar......................................... $ --      $   --    $18,628
    Telefenua......................................   --       2,286      2,586
    Saturn.........................................   --          --      2,463
    United Wireless................................   --         196      1,123
                                                    -----     ------    -------
        Total system selling, general and
            administrative expenses...............  $ --      $2,482    $24,800
                                                    =====     ======    =======

         AUSTAR

              System  selling,  general and administrative expenses consolidated
         by the  Company  from  Austar  were  $18.6  million  for the year ended
         December 31, 1996 and consisted  primarily of $5.5 million in marketing
         costs related to print, radio  and television  advertisements  utilized
         in the launch of Austar's services  throughout its service areas during
         1996,  direct  sales  commissions  ($4.1  million) and  for general and
         administrative  expenses at Austar's  Sydney corporate headquarters ($9
         million).  The  Company  began  consolidating  the results of Austar on
         January 1, 1996.  Accordingly,  the Company reported no system selling,
         general  and  administrative  expenses  for  Austar  in  1995 or  1994.
         Austar's actual  system selling,  general and  administrative  expenses
         were  approximately  $3.1 million in  1995  compared to $0.4 million in
         1994.  The  increase  relates  to  marketing  efforts  associated  with
         Austar's 1995 service launch. The increase in  system selling,  general
         and administrative  expenses was primarily  attributable to an increase
         in  marketing  related to  the  increased  roll-out  of MMDS  operating
         systems and the initiation of DTH service in 1996.

         TELEFENUA

                System selling, general and administrative expenses consolidated
         by the  Company  from  Telefenua  increased  to  $2.6  million  in 1996
         compared  to $2.3  million in 1995 and $0 in 1994.  This  increase  was
         primarily  attributable to increased  marketing efforts associated with
         Telefenua's March 1995 service launch.

         SATURN

                The Company reported system selling,  general and administrative
         expenses  from  Saturn of $2.5  million  for 1996.  The  Company  began
         consolidating   the   results  of  Saturn   effective   July  1,  1996.
         Accordingly, no system selling, general and administrative expenses for
         1995 and 1994 were  reported.  Saturn's  actual  selling,  general  and
         administrative  costs  increased  to $2.8  million  in 1996  from  $1.2
         million in 1995 and $0.4 million in 1994. The increase is  attributable


                                       26

<PAGE>

         to  increased  marketing  efforts  to  expand  the  subscriber  base as
         Saturn's system expanded.

     CORPORATE  GENERAL AND  ADMINISTRATIVE  EXPENSE.  The  Company's  corporate
general and  administrative  expenses for the year ended  December 31, 1996 were
$1.4 million as compared to $0.9 million in 1995 and $0.7 million in 1994. These
expenses relate to corporate staff dedicated to the region.

     DEPRECIATION  AND  AMORTIZATION.   Depreciation  and  amortization  expense
increased to $36.3  million in 1996 compared to $1 million in 1995 due primarily
to the  depreciation and amortization of $30.3 million from Austar in 1996. This
increase in depreciation  and  amortization  was  attributable  primarily to the
significant deployment of operating assets at Austar beginning in early 1996 and
continuing  throughout  the year as Austar  launched  service and began  serving
subscribers  in a number of new  markets.  Depreciation  expense is  expected to
increase  substantially  in  future  periods  as  capital  expenditures  for the
build-out of Austar's MMDS sites and the launch of Saturn's wireline cable plant
and related increases in capital necessary for subscriber equipment continue for
the next several months.  The Company began  consolidating the results of Austar
on January 1, 1996.  As a result,  the  Company  reported  no  depreciation  and
amortization  from Austar in its  consolidated  statements of operations for the
years ended  December  31, 1994 and 1995.  The Company had no  depreciation  and
amortization expense in 1994.

     EQUITY IN LOSSES OF AFFILIATED COMPANIES.  The Company recognized equity in
losses of  affiliated  companies of $16.4 million and $5.4 million for the years
ended December 31, 1995 and 1996, respectively, primarily due to the decrease in
its ownership of XYZ and the  consolidation of Austar beginning in January 1996.
Equity losses in affiliated companies for 1995 and 1996 are as follows:

                                                       For the Years Ended
                                                           December 31,
                                                   ----------------------------
                                                   1994        1995       1996
                                                   -----       ----       ----
                                                          (In thousands)
          Austar(1)............................  $   551     $ 3,212    $    -
          Saturn(2)............................      365       1,438        930
          XYZ(3)...............................       99      11,729      4,484
                                                 -------     -------    -------
             Total equity in losses of
                   affiliated companies........  $ 1,015     $16,379    $ 5,414
                                                 =======     =======    =======

         (1)  The companies that comprise Austar were  incorporated in mid-1994.
              The Company acquired an initial interest in these companies in the
              fall  of  1994  and  increased  its  economic  interest  in  these
              companies to 90% in late December 1995.  Austar launched its first
              MMDS system in August 1995. The Company began consolidating Austar
              effective  January 1, 1996.  Accordingly,  the Company reported no
              equity in losses related to Austar in 1996.
         (2)  The Company  acquired  an initial  50%  interest in Saturn in July
              1994.  Accordingly,  the Company  recognized  equity in losses for
              Saturn  for  only the six  months  ended  December  31,  1994,  as
              compared to the full twelve months for the year ended December 31,
              1995. The Company increased its ownership  interest in Saturn from
              50% to 100% in July 1996.  Accordingly,  subsequent  to that time,
              the Company consolidated the operating results of Saturn. Prior to
              such time, the Company recognized equity in losses from Saturn.
         (3)  XYZ  was formed in October of 1994 and began distributing its four
              Channels in April 1995.

         SATURN

                In addition,  in 1995,  Saturn initiated  engineering and design
         work and started  system  construction  and  accordingly  incurred more
         losses in 1995 as compared to 1994.


                                       27

<PAGE>


         XYZ

                Equity in losses of XYZ  decreased  to $4.5 million in 1996 from
         $11.7 million in 1995. This decrease was primarily  attributable to the
         decrease in the Company's  interest in XYZ from 50% to 25% in September
         1995. In addition,  XYZ reported a lower net loss in 1996 due to higher
         revenues in 1996 resulting from an increase in programming  subscribers
         combined  with a  favorable  comparison  to 1995  which  included  high
         start-up costs associated with the launch of the channels. XYZ's actual
         operating  revenues for 1996 were $7.6 million compared to $1.3 million
         for 1995. XYZ's operating, selling, general and administrative expenses
         for  1996  were  $17.3  million  (consisting   primarily  of  satellite
         transponder  costs of $5.9  million,  staffing  costs of $3.3  million,
         production/programming  costs of $4.9 million and advertising/marketing
         costs of $1.6 million) compared to $27.5 million for 1995.

     GAIN ON SALE OF INVESTMENT.  In September 1995 the Company sold one half of
its interest in XYZ at cost. As the  recognition  of equity losses  through that
date had reduced the Company's investment to zero, the Company recognized a gain
on the entire amount received of $4.1 million.

     INTEREST EXPENSE.  The Company issued  approximately  $225.1 million (gross
proceeds) of the Notes in May 1996 (the "May 1996 Offering"). As a result of the
May 1996 Offering,  the Company  incurred  interest expense of $20.3 million for
the year ended December 31, 1996.  Prior to the May 1996  Offering,  the Company
had no significant amount of interest-bearing debt.

     INTEREST  INCOME.  Interest  income  increased  to $4.1  million  from $0.2
million  in  1995  and $0 in  1994.  The  increase  is  attributable  to  higher
short-term investment balances resulting from the issuance of the Notes.

YEARS ENDED DECEMBER 31, 1994 AND 1995

     Although the Company was formed in 1994,  most of the  operating  companies
did not launch service until mid- to late-1995.

     SERVICE  AND OTHER  REVENUE.  The  Company's  service  revenues  (including
installation revenues) increased to $1.9 million for the year ended December 31,
1995 from $0 in the prior year.

           AUSTAR

                The Company began consolidating the results of Austar on January
           1, 1996. As a result,  the Company  reported no service revenues from
           Austar in 1995.  Austar's actual service  revenues for 1995 were $0.4
           million  compared to $0 in 1994. The increase in service  revenues in
           1995 was primarily  attributable to an increase in  subscribers (none
           at December  31, 1994  compared to 5,204 at December 31, 1995).  Such
           increase  was the result of the rapid  roll-out of Austar's  services
           initially launched August 1995.

           TELEFENUA

                Telefenua's  service  revenues increased from $0 in 1994 to $1.9
           million for 1995.  The  increase  is  primarily  attributable  to  an
           increase in subscribers  (none at December 31, 1994 compared to 4,126
           at December 31, 1995). Telefenua launched service in March 1995.

           SATURN

                The Company began consolidating  the results of Saturn effective
           July 1, 1996.  Accordingly, the Company  reported no service  revenue
           from Saturn in 1995.  Saturn's actual  service  revenues for the year
           ended  December 31, 1994 were $0.05  million compared to $0.1 million
           for the year ended  December  31, 1995.  The increase  was  primarily
           attributable  to an increase in  subscribers from 443 at December 31,
           1994 to 959 at December 31, 1995.


                                       28

<PAGE>


     SYSTEM OPERATING  EXPENSES.  The Company's  operating expenses increased to
$3.2  million  for the year ended  December  31, 1995 from $0 in the prior year,
primarily as a result of increases in operating expenses at Telefenua.

          AUSTAR

               The Company began  consolidating the results of Austar on January
          1, 1996. As a result,  the Company reported no operating expenses from
          Austar in the Company's consolidated statements of operations for 1994
          and  1995.   Austar's   actual   operating   expenses   increased   to
          approximately  $4.3  million  in  1995  relative  to  1994.  Operating
          expenses  consisted  primarily of payroll  ($1.7  million),  satellite
          programming   fees  ($0.4  million)  with  the  remainder   consisting
          primarily of office related expenses,  system  travel/recruitment  and
          NCOC and field  office  start-up  costs.  The  increase  in  operating
          expenses in 1995 was primarily  attributable  to the rapid roll-out of
          Austar's  services,   initially  launched  in  August  1995,  and  the
          corresponding  increase  in  subscribers  (none at  December  31, 1994
          compared to 5,204 at December 31, 1995).

          TELEFENUA

               Operating  expenses  consolidated  by  the Company from Telefenua
          increased  to $2.8  million  in  1995  from  $0 in  1994.  Telefenua's
          operating expenses for  1995 consisted  primarily of programming fees,
          production  costs  and  payroll  related  costs.   Telefenua  launched
          service  in  March  1995  resulting   in  the  increase  in  operating
          expenses.

          SATURN

               The  Company  began  consolidating   Saturn  on   July  1,  1996.
          Accordingly,  the Company reported no operating expenses for Saturn in
          its  consolidated  statements  of  operations  for   the  years  ended
          December 31, 1994  and 1995.  Saturn's actual operating  expenses were
          $0.4 million for 1994 compared to  $1.1 million for 1995. The increase
          is attributable to system expansion  and increased subscribers (443 at
          December 31, 1994 compared to 959 at  December 31, 1995).

     SYSTEM SELLING,  GENERAL AND ADMINISTRATIVE  EXPENSES. The Company's system
selling,  general and administrative  expenses increased to $2.5 million for the
year ended December 31, 1995 from $0 in 1994.

           AUSTAR

                The Company began consolidating the results of Austar on January
           1, 1996. Accordingly, the Company reported no system selling, general
           and  administrative  expenses  for  Austar in 1994 or 1995.  Austar's
           actual system selling,  general and administrative expenses were $0.4
           million in 1994 compared to  approximately  $3.1 million in 1995. The
           increase relates to  marketing  efforts associated with Austar's 1995
           service launch.

           TELEFENUA

                System selling, general and administrative expenses consolidated
           by the Company from  Telefenua  increased  to $0 in 1994  compared to
           $2.3 in 1995.  This increase was primarily  attributable to increased
           marketing  efforts  associated  with  Telefenua's  March 1995 service
           launch.


                                       29

<PAGE>


           SATURN

                The Company began consolidating  Saturn  effective July 1, 1996.
           Accordingly,  no system selling, general and administrative  expenses
           for 1994 and 1995 were reported. Saturn's actual selling, general and
           administrative  costs  increased from  $0.4  million  in 1994 to $1.2
           million in 1995. The increase is attributable to increased  marketing
           efforts to expand the subscriber base as Saturn's system expanded.

     CORPORATE  GENERAL AND  ADMINISTRATIVE  EXPENSE.  The  Company's  corporate
general  and  administrative  expense  for the  year  ended  December  31,  1995
increased to $0.9 million from $0.7 million in the year ended December 31, 1994,
primarily  due to the hiring of  additional  corporate  staff  dedicated  to the
region.

     DEPRECIATION   AND   AMORTIZATION.   The  Company  had   depreciation   and
amortization  expense of $1 million  for the year ended  December  31,  1995 due
primarily to the  acquisition of Telefenua and the launch of its system in March
1995. The Company had no such expenses in 1994.

     EQUITY IN LOSSES OF AFFILIATED COMPANIES.  The Company recognized equity in
losses of  affiliated  companies  of $1 million and $16.4  million for the years
ended  December 31, 1994 and 1995,  respectively.  The  companies  that comprise
Austar were  incorporated in mid-1994.  The Company acquired an initial interest
in these  companies in the fall of 1994 and increased  its economic  interest in
these  companies to 90% in late December  1995.  Austar  launched its first MMDS
system in August 1995. The Company acquired an initial 50% interest in Saturn in
July 1994.  Accordingly,  the Company recognized equity in losses for Saturn for
only the six months  ended  December  31,  1994,  as compared to the full twelve
months for the year ended  December  31,  1995.  In  addition,  in 1995,  Saturn
initiated  engineering  and design  work and  started  system  construction  and
accordingly  incurred more losses in 1995 as compared to 1994. XYZ was formed in
October of 1994 and began distributing its four channels in April 1995.

     GAIN ON SALE OF INVESTMENT.  In September 1995 the Company sold one half of
its interest in XYZ at cost. As the  recognition  of equity losses  through that
date had reduced the Company's investment to zero, the Company recognized a gain
on the entire amount received of $4.1 million.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company is  responsible  for its  proportionate  share of the  capital
requirements  of the  operating  companies and has funded its share to date with
capital contributed by UIH and from the proceeds of the May 1996 Offering. As of
December 31, 1996, the Company had approximately $29.5 million of cash and short
term investments on hand, excluding the cash on hand at the operating companies.
The Company plans to pursue  additional  sources of funding to meet these needs.
Sources of  additional  capital may  include  debt and equity  financing  at the
operating  company  level,  financing  provided by the  Company's  financial and
strategic  partners  and  additional  debt and equity  financing by the Company.
There can be no  assurance,  however,  that the Company  will be  successful  in
obtaining all or a portion of its anticipated funding needs.

     If the  Company or UAP do not  consummate  an  issuance  of  capital  stock
resulting  in gross  proceeds  to the  Company of at least  $70,000  (an "Equity
Sale")  prior to May 16,  1997,  then the  interest  rate on the  Notes  will be
increased by an additional  0.75% per annum,  until such time as the Equity Sale
is effected. In addition, if the Company or UAP do not consummate an Equity Sale
prior to November  16,  1997,  the then holders of the Notes will be entitled to
receive warrants to purchase common stock of the Company, assuming the aggregate
fair  market  value  of  the  Company's  equity  is  $150,000,  or,  in  certain
circumstances, of UAP. The Company plans to pursue additional sources of funding
that may constitute an Equity Sale,  although there can be no assurance that the
Company  will be  successful  in  concluding  an Equity  Sale prior to May 16 or
November 16, 1997.


                                       30

<PAGE>


     The  following  table sets forth,  as of December 31,  1996,  (i) the total
estimated  funding required for the  construction  and initial  marketing of the
operating  companies'  systems in their existing  license  areas,  including any
capital  invested to date and the application of any operating cash flow sources
for such operating companies,  (ii) the total amount of capital invested in each
of the operating  companies and the portion  funded by the Company and (iii) the
total estimated  additional  funding required based on the assumptions stated in
clause (i) above, and the  Company's  estimated  portion of such  funding.  Such
amounts are expected to be funded over the next 24 to 36 months.  The  estimated
required  additional  funding numbers below have not been reduced to give effect
to any surplus cash flow of any one  operating  company which might be available
to fund the  requirements  of  another  operating  company.  To the  extent  the
operating  companies  fund their  construction  and other costs through  project
financing,  the  Company's  portion of  estimated  additional  funding  would be
reduced  proportionately.  The Company's portion of estimated additional funding
would be increased  proportionately  to the extent cash flow from the  operating
companies  and other  sources of financing  are not  sufficient  to meet project
funding  requirements.  To the extent that the other shareholders of XYZ fail to
fund their pro rata share of the additional shareholder capital, the Company may
fund all or a portion of such shortfall.
<TABLE>
<CAPTION>

                     Estimated Total Project              Capital Invested           Estimated Required
                      Funding Requirements          As of December 31, 1996 (1)      Additional Funding
                   -----------------------------    ----------------------------     ------------------
Operating
Company            The Company         Total        The Company(2)    Total(2)     The Company    Total
-------            -----------   ----------------   --------------    ----------   ------------  -------
                                                      (In millions)
<S>                 <C>             <C>               <C>             <C>            <C>         <C>
Austar............  $ 377.9         $ 377.9           $  185.4(3)     $ 185.4(3)     $ 192.5     $ 192.5
Saturn............    109.7           109.7               23.9(4)        23.9(4)        85.8        85.8
XYZ...............     14.0            56.0               10.8           43.4            3.2        12.6
Telefenua.........     17.4            17.4               16.7           16.7            0.7         0.7
United Wireless...      8.2             8.2                5.0            5.0            3.2         3.2
                    -------         --------           -------        -------        -------     -------
     Total........  $ 527.2         $ 569.2            $ 241.8        $ 274.4        $ 285.4     $ 294.8
                    =======         ========           =======        =======        =======     =======
</TABLE>

(1) Certain amounts  contributed by the Company's  partners were contributed in
    currencies other than  U.S. dollars. Such amounts  have  been translated to
    U.S. dollars using a convenience translation.
(2) Includes  amounts  contributed to Austar  (approximately  $11.1 million) and
    Saturn  (approximately $2.9 million) by shareholders other than the Company,
    which amounts were contributed by such shareholders prior to the acquisition
    of their respective interests by the Company.
(3) Does not include  the $58.6  million  used by the  Company to  increase  its
    economic interest in Austar to approximately 100%.
(4) Does not include the value of shares of Class A Common Stock  exchanged  for
    shares of the Company to increase the Company's interest in Saturn to 100%.

     The indentures  associated with UIH's Senior Secured Discount Notes and the
Company's  Notes  (collectively  the  "Indentures")  place  restrictions  on the
Company and its  restricted  subsidiaries  with respect to incurring  additional
debt. The Company and all of the operating companies are currently  "Restricted"
under the UIH Indenture.  The Company, Austar and Telefenua are restricted under
the Company's  Indenture.  The  restrictions  imposed by the Indentures  will be
eliminated  upon the  retirement  of UIH's  Notes at their  maturity in November
1999,  and upon the  retirement of the Company's  Notes at their maturity in May
2006, respectively.

     Prior to the  close of the May 1996  Offering,  the  Company  was  financed
solely by capital  contributed by UIH.  During the year ended December 31, 1994,
UIH contributed $25.3 million in cash to the Company, $22.8 million of which was
used  to  finance  the  Company's   investments  in  Austar,   XYZ  and  Saturn.
Approximately  $1.9 million was used for costs incurred in the  acquisition  and
development  of its  projects,  the  majority  of which was for  Telefenua.  The
remainder was used for non-operating costs.


                                       31

<PAGE>


     During the year ended December 31, 1995, the Company  recognized  losses of
$17.2  million of which  $16.4  million  was from  non-cash  equity in losses of
affiliated companies. UIH contributed total capital of $68.4 million, consisting
of $29.8  million of UIH's  preferred  stock and the  remainder in cash,  to the
Company  and made  bridge  loans of $9.9  million  to Austar and  indirectly  to
Telefenua through its parent,  Societe Francaise des  Communications et du Cable
S.A. ("SFCC").  The Company used approximately  $45.1 million of the contributed
capital,  including  the UIH  preferred  stock,  to  acquire an  additional  40%
economic  interest in Austar in December  1995. The Company used $6.1 million in
cash to fund the operations of Telefenua and made an additional $22.5 million in
capital  contributions  to the operating  companies.  The Company  received $4.1
million for the sale of 50% of its interest in XYZ and  recognized a gain of the
same amount.  The Company purchased $7.1 million of property and equipment,  the
majority of which was purchased by Telefenua for construction of its system. The
remainder was used for other non-operating costs.

     During the period from January 1, 1996 to May 13, 1996, the closing date of
the May 1996 Offering,  UIH contributed  capital of $17.3 million to the Company
and made  additional  bridge loans of $15.1 million to Austar.  On May 13, 1996,
the  Company  sold the Notes with net  proceeds  to the  Company  from such sale
totaling $215.5 million.  At that time, the Company  acquired $25 million of the
Austar  bridge  loans  from UIH with  proceeds  from the May 1996  Offering  and
converted  those loans  (plus  accrued  interest  of $0.6  million) to equity of
Austar and then an  additional  $25 million in Austar  capital calls was funded,
thereby increasing the Company's interest in Austar to 96%. Prior to the closing
of the May 1996 Offering,  approximately $5 million of the SFCC bridge loans was
converted  into  convertible  debentures  of SFCC,  which are  convertible  into
preferred  stock of SFCC.  The remaining SFCC bridge loans totaling $2.6 million
(including accrued interest) will be either (i) repaid by SFCC, after which time
the Company would invest the proceeds of such  repayment as permitted  under the
Company's Indenture, or (ii) converted by the Company into equity of SFCC.

     During the year ended December 31, 1996, the Company  recognized  losses of
$88  million  of  which  $36.3  million  was  from  non-cash   depreciation  and
amortization  and $5.4  million  of  non-cash  equity in  losses  of  affiliated
companies. The Company also recorded non-cash accretion of interest on the Notes
of $20.1 million. The Company had an increase in receivables and other assets of
$3 million and an increase in accounts payable, accrued liabilities and other of
$13.2 million due to the growth in Austar, Telefenua and Saturn as their systems
continued to be built-out.  The Company also had an increase in accounts payable
for capital  expenditures  of $38.3 million due to payables for  construction of
the systems.  During the year ended  December 31,  1996,  the Company  purchased
$187.1  million of  property,  plant and  equipment,  the  majority of which was
purchased by Austar and Saturn for  construction  of their systems.  The Company
made $12.2 million in capital  contributions  to Saturn and XYZ during the year.
The Company  purchased $199.2 million of short-term  investments and sold $180.6
million of short-term investments as part of its cash management activities. The
remainder of the capital contributions from UIH was used in operations.

     In October 1996,  the Company  acquired from Australis for $7.9 million the
approximately 4% remaining  economic  interest in Austar and purchased  ordinary
shares and convertible  notes of Australis for $4 million,  issued upon exercise
of warrants and other rights granted to the Company.

FOREIGN CURRENCY EXCHANGE RATE RISKS; HEDGING

     The operating  companies'  monetary  assets and  liabilities are subject to
foreign currency exchange risk as certain  equipment  purchases and payments for
certain operating  expenses,  such as programming  expenses,  are denominated in
currencies other than their own functional currency. In addition, certain of the
operating   companies  have  notes  payable  and  notes   receivable  which  are
denominated  in  a  currency  other  than  their  own  functional   currency  or
intercompany loans payable linked to the U.S. dollar.


                                       32

<PAGE>


     In general,  the Company and the  operating  companies do not execute hedge
transactions to reduce the Company's  exposure to foreign currency exchange rate
risks.  Accordingly,  the Company may  experience  economic  loss and a negative
impact on earnings  with respect to its  holdings  solely as a result of foreign
currency exchange rate fluctuations, which include foreign currency devaluations
against the dollar. The Company may also experience economic loss and a negative
impact on earnings related to these monetary assets and liabilities. In general,
exchange  rate  risk  to  the  Company  related  to  the  operating   companies'
commitments for equipment  purchases and operating expenses is generally limited
due to the insignificance of the related monetary asset and liability  balances;
however,  exchange  rate  risk to the  Company  of these  notes  payable,  notes
receivable  and debt linked to the U.S.  dollar have and will continue to impact
the  Company's  reported  earnings.  Because of the manner in which the  Company
accounts for its interest in XYZ,  any adverse  effects on reported  earnings of
these  companies  would  impact  the  Company  through  its  equity in losses of
affiliated companies.

     The  countries  in which  the  operating  companies  now  conduct  business
generally  do not  restrict  the  removal  or  conversion  of local  or  foreign
currency;  however,  there is no assurance this  situation  will  continue.  The
Company may also acquire  interests in companies that operate in countries where
the removal or conversion of currency is restricted.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

     The consolidated  financial  statements of the Company are filed under this
Item  beginning  on Page 34.  The  financial  statement  schedules  required  by
Regulation S-X are filed under Item 14 of this Annual Report on form 10-K.

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

     None.


                                       33


<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To UIH Australia/Pacific, Inc.:

     We  have  audited  the  accompanying  consolidated  balance  sheets  of UIH
Australia/Pacific, Inc. (a Colorado corporation and majority-owned subsidiary of
UIH Asia/Pacific Communications,  Inc.) and subsidiaries as of December 31, 1995
and 1996, and the related consolidated  statements of operations,  stockholders'
equity and cash flows for the years  ended  December  31,  1994,  1995 and 1996.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits. We did not audit the financial statements of Telefenua S.A. as of
and for the year ended December 31, 1995, a subsidiary  which is consolidated in
the  accompanying  consolidated  financial  statements.  UIH  Australia/Pacific,
Inc.'s  consolidated  financial  statements for the year ended December 31, 1995
reflect  assets,  liabilities,  revenues,  expenses  and a net loss  related  to
Telefenua  S.A.  of   $10,989,000,   $9,710,000,   $1,882,000,   $5,438,000  and
$3,556,000,  respectively.  We did not audit  the  financial  statements  of XYZ
Entertainment  Pty  Limited  ("XYZ") as of and for the year ended  December  31,
1995,  an  investment  which  is  reflected  in  the  accompanying  consolidated
financial statements on the equity method of accounting.  UIH Australia/Pacific,
Inc.'s consolidated statement of operations reflects equity in losses related to
XYZ of  $11,729,000  for the year ended  December  31,  1995,  and Note 4 to the
consolidated  financial  statements includes summarized  financial data for XYZ.
The financial  statements of Telefenua S.A. and XYZ as of and for the year ended
December  31,  1995 were  audited  by other  auditors  whose  reports  have been
furnished  to us and  our  opinion,  insofar  as it  relates  to the  summarized
financial  data for  Telefenua  S.A.  and XYZ  included  in Notes 3 and 4 to the
consolidated   financial   statements  and  to  the  amounts   included  in  the
accompanying  consolidated  financial statements  with respect to Telefenua S.A.
and XYZ, is based solely on the reports of the other auditors.

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

     In our opinion,  based on our audits and the reports of other auditors, the
consolidated  financial  statements  referred to above  present  fairly,  in all
material respects, the consolidated financial position of UIH Australia/Pacific,
Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for the years ended December 31, 1994,  1995 and
1996 in conformity with generally accepted accounting principles.



                                         ARTHUR ANDERSEN LLP

Denver, Colorado
March 28, 1997


                                       34


<PAGE>



                         REPORT OF INDEPENDENT AUDITORS

To the shareholders of TELEFENUA SA:

     We have  audited the balance  sheet of TELEFENUA SA as of December 31, 1995
and the related  statement of income and changes in  financial  position for the
year then  ended.  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.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards in France,  which do not differ  substantially from generally accepted
auditing  standards in the United States.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of TELEFENUA SA as of December
31, 1995 and the results of its operations and changes in its financial position
for the year then  ended,  in  conformity  with  generally  accepted  accounting
principles in the United States of America.

     The accounting  practices of the Company used in preparing the accompanying
financial  statements conform with generally accepted  accounting  principles in
the  United  States  of  America,  but  do not  fully  conform  with  accounting
principles  generally  accepted in France.  As a  consequence,  those  financial
statements differ from statutory financial statements that will be submitted for
the approval of the Company's  shareholders  in conformity  with local corporate
laws.

     A description of the  significant  differences  between such principles and
those accounting  principles  generally  accepted in the United States,  and the
effect of those differences on net income, total assets and shareholders' equity
are set forth in Note 2(a) of the notes to the financial statements.



                                          COOPERS & LYBRAND

Papeete, Tahiti
February 16, 1996



                                       35

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors

     We  have  audited  the  accompanying  consolidated  balance  sheet  of  XYZ
Entertainment  Pty  Ltd as of  December  31,  1995  and  1994  and  the  related
consolidated statements of operations,  stockholders'  deficiency and cash flows
for the year ended  December 31, 1995 and the period from October 17, 1994 (date
of inception) to December 31, 1994,  which are expressed in Australian  dollars.
These 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  generally  accepted  auditing
standards in Australia which do not differ in any material respect from auditing
standards generally accepted in the United States.  Those standards require that
we plan and perform the audit to obtain  reasonable  assurance as to whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our  opinion the  consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
XYZ  Entertainment  Pty Ltd as of  December  31,  1995  and the  results  of its
operations  and its cash  flows for the year  ended  December  31,  1995 and the
period from  October 17, 1994 (date of  inception)  to  December  31,  1994,  in
conformity with accounting principles generally accepted in Australia.

     Generally  accepted  accounting  principles  in  Australia  vary in certain
significant respects from generally accepted accounting principles in the United
States.  Application of generally accepted  accounting  principles in the United
States would have affected amounts reported as stockholders'  deficiency and net
loss as at and for the year ended  December  31,  1995 and from the period  from
October  17,  1994  (date of  inception)  to  December  31,  1994 to the  extent
summarized in Note 12 to the financial statements.


                                    Deloitte Touche Tohmatsu
                                    Chartered Accountants


Sydney, Australia
March 15, 1996


                                       36

<PAGE>
<TABLE>
<CAPTION>
                                       UIH AUSTRALIA/PACIFIC, INC.
                                       CONSOLIDATED BALANCE SHEETS
                               (AFTER CORPORATE REORGANIZATION--SEE NOTE 1)
                                          (Stated in Thousands)
                                                                                           December 31,
                                                                                      ---------------------
                                                                                        1995         1996
                                                                                      --------     --------
<S>                                                                                   <C>         <C>
ASSETS
Current assets
   Cash and cash equivalents.....................................................     $  8,730     $ 19,220
   Short-term investments........................................................           --       18,640
   Subscriber receivables........................................................          138        1,625
   Related party receivables.....................................................        1,907        1,958
   Other current assets..........................................................          932        2,393
                                                                                      --------     --------
              Total current assets...............................................       11,707       43,836

Investments in and advances to affiliated companies, accounted for under the
   equity method.................................................................        2,829          --
Other investments in affiliated companies, including marketable equity
   securities....................................................................           --        1,372
Property, plant and equipment, net of accumulated depreciation of $1,217
   and $31,611, respectively.....................................................       27,630      193,170
License fees, net of accumulated amortization of $442 and $2,520,
   respectively .................................................................       10,693       10,387
Goodwill, net of accumulated amortization of $38 and $3,835, respectively........       45,324       58,134
Other non-current assets, net, including $0 and $1,600, respectively, of
   related party receivables.....................................................        1,112       12,424
                                                                                      --------     --------
             Total assets........................................................     $ 99,295     $319,323
                                                                                      ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Accounts payable and accrued liabilities, including $1,488 and $1,575,
          respectively, of related party payables................................     $  7,749     $ 20,468
   Construction payables.........................................................           --       38,331
   Accrued funding obligation....................................................        1,834        1,270
   Other current liabilities.....................................................          169          722
                                                                                      --------     --------
              Total current liabilities..........................................        9,752       60,791

Due to parent....................................................................       11,095        2,758
Senior discount notes and other liabilities......................................          867      251,397
                                                                                      --------     --------
               Total liabilities.................................................       21,714      314,946

Minority interest in subsidiaries................................................        2,515           --
Commitments (Note 12)
Stockholders' Equity:
   Common stock, $.01 par value, 1,000 shares authorized, 487 and 500 shares
     issued and outstanding, respectively........................................           --           --
   Additional paid-in capital....................................................       93,782      112,485
   Unrealized loss on investment.................................................           --       (3,412)
   Cumulative translation adjustments............................................          191        2,197
   Accumulated deficit...........................................................      (18,907)    (106,893)
                                                                                      --------     --------
             Total stockholders' equity..........................................       75,066        4,377
                                                                                      --------     --------
             Total liabilities and stockholders' equity..........................     $ 99,295     $319,323
                                                                                      ========     ========

             The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
                                                  37
<PAGE>

                                       UIH AUSTRALIA/PACIFIC, INC.
                                  CONSOLIDATED STATEMENTS OF OPERATIONS
                               (AFTER CORPORATE REORGANIZATION--SEE NOTE 1)
                          (Stated in Thousands, except Share and Per Share Data)

<TABLE>
<CAPTION>

                                                                                 For the Years Ended
                                                                                     December 31,
                                                                       --------------------------------------
                                                                          1994           1995         1996
                                                                       ----------    -----------   ----------
<S>                                                                     <C>           <C>          <C>

Service and other revenue..........................................     $    --        $  1,883    $  24,977

System operating expense, including $85, $610 and $787,
   respectively, of related party expenses.........................          --          (3,230)     (30,730)
System selling, general and administrative expense.................          --          (2,482)     (24,800)
Corporate general and administrative expense, including $659, $918
   and $750, respectively, of management fees to related party.....         (659)          (920)      (1,376)
Depreciation and amortization......................................          --          (1,003)     (36,269)
                                                                        --------       --------    ---------

     Net operating loss............................................         (659)        (5,752)     (68,198)

Equity in losses of affiliated companies...........................       (1,015)       (16,379)      (5,414)
Gain on sale of investment in affiliated company...................          --           4,132          --
Interest income....................................................          --             157        4,106
Interest expense...................................................          --             (30)     (20,298)
Interest expense, related party, net...............................          --             --          (458)
Other income, net..................................................          --             219           90
                                                                        --------       --------    ---------

     Net loss before minority interest.............................       (1,674)       (17,653)     (90,172)

Minority interest in subsidiary....................................          --             420        2,186
                                                                        --------       --------    ---------

     Net loss......................................................     $ (1,674)      $(17,233)   $ (87,986)
                                                                        ========       ========    =========

Net loss per common share..........................................     $ (3,437)      $(35,386)   $(178,471)
                                                                        ========       ========    =========

Weighted average number of common shares outstanding...............          487            487          493
                                                                        ========       ========    =========




              The accompanying notes are an integral part of these consolidated statements.
</TABLE>

                                                38

<PAGE>
<TABLE>
<CAPTION>

                                               UIH AUSTRALIA/PACIFIC, INC.
                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                      (AFTER CORPORATE REORGANIZATION--SEE NOTE 1)
                                        (Stated in Thousands, except Share Data)

                              Common Stock       Additional     Unrealized      Cumulative
                             ----------------     Paid-in        Loss on       Translation   Accumulated
                             Shares    Amount     Capital       Investment     Adjustments     Deficit      Total
                             ------    ------     -------       ----------     -----------     -------      -----
<S>                          <C>       <C>        <C>            <C>            <C>           <C>          <C>

Balances, January 1, 1994..   --       $  --      $     --       $     --       $     --      $      --    $      --

Issuance of common stock...  487          --            --             --             --             --           --
Capital contributions from
   parent..................   --          --        25,342             --             --             --       25,342
Cumulative translation
   adjustment..............   --          --            --             --            405             --
                                                                                                                 405
Net loss...................   --          --            --             --             --          (1,674)     (1,674)
                             ---        -----     --------        -------         ------      ----------    --------

Balances, December 31,
   1994....................  487          --        25,342             --            405         (1,674)      24,073

Capital contributions from
   parent..................   --          --        68,440             --             --             --       68,440
Change in cumulative
   translation adjustment..   --          --            --             --           (214)            --         (214)
Net loss...................   --          --            --             --             --        (17,233)     (17,233)
                             ---       -----      --------        -------         ------      ---------     --------

Balances, December 31,
    1995...................  487                    93,782            --             191        (18,907)      75,066

Capital contributions
    from parent............   --          --        10,903            --              --             --       10,903
Acquisition of remaining
    50% interest
    in Saturn..............   13          --         7,800            --              --             --        7,800
Unrealized loss on
    investment.............   --          --            --        (3,412)             --             --       (3,412)
Change in cumulative
   translation
   adjustment..............   --          --            --            --           2,006             --        2,006
Net loss...................   --          --            --            --              --        (87,986)     (87,986)
                             ---      ------      --------       -------          ------      ---------     --------

Balances, December 31,
    1996...................  500      $   --      $112,485       $(3,412)         $2,197      $(106,893)    $  4,377
                             ===      ======      ========       =======          ======      =========     ========


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

</TABLE>
                                                 39

<PAGE>
<TABLE>
<CAPTION>
                                       UIH AUSTRALIA/PACIFIC, INC.
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (AFTER CORPORATE REORGANIZATION--SEE NOTE 1)
                                          (Stated in Thousands)

                                                                                        For the Years Ended
                                                                                             December 31,
                                                                                 ----------------------------------
                                                                                    1994        1995         1996
                                                                                 ---------   ---------    ---------
<S>                                                                             <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ....................................................................   $  (1,674)   $ (17,233)  $  (87,986)
Adjustments to reconcile net loss to net cash flows from
  operating activities:
     Depreciation and amortization ..........................................        --          1,003       36,269
     Equity in losses of affiliate companies, net ...........................       1,015       16,379        5,414
     Gain on sale of investment in affiliated company .......................        --         (4,132)        --
     Minority interest share of losses ......................................        --           (420)      (2,186)
     Technical assistance agreement payables.................................        --           --          1,677
     Loan guarantee fee......................................................        --           --           (784)
     Accretion of interest on senior discount notes .........................        --           --         20,067
     Increase in subscriber receivables .....................................        --           --         (1,487)
     Increase in other assets ...............................................      (1,852)      (1,487)      (1,512)
     Increase in accounts payable, accrued liabilities and other ............          11          238       13,185
                                                                                ---------    ---------    ---------
Net cash flows from operating activities ....................................      (2,500)      (5,652)     (17,343)
                                                                                ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments ..........................................        --           --       (199,242)
Sale of short-term investments ..............................................        --           --        180,602
Investments in and advances to affiliated companies and other
   investments ..............................................................     (22,841)     (22,472)     (16,204)
Purchase of additional interests in Austar, net of cash
   acquired in 1995 .........................................................        --         (8,017)      (7,920)
Proceeds from sale of investment in affiliated company ......................        --          4,132           --
Purchase of property, plant and equipment ...................................          (1)      (7,648)    (187,100)
Increase in construction payables............................................        --           --         38,331
                                                                                ---------     --------    ---------
Net cash flows from investing activities ....................................     (22,842)     (34,005)    (191,533)
                                                                                ---------     --------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions from parent ...........................................      25,342       38,600       10,664
Proceeds from offering of senior discount notes .............................        --           --        225,115
Borrowings on bridge loan payable to parent .................................        --          9,927       15,073
Payment of bridge loan payable to parent ....................................        --           --        (25,000)
Deferred debt offering costs ................................................        --           --        (10,007)
Borrowing on other debt .....................................................        --           --          2,465
                                                                                ---------    ---------    ---------
Net cash flows from financing activities ....................................      25,342       48,527      218,310
                                                                                ---------    ---------    ---------

EFFECT OF EXCHANGE RATES ON CASH ............................................        --           (140)       1,056
                                                                                ---------    ---------    ---------
INCREASE IN CASH AND CASH EQUIVALENTS .......................................        --          8,730       10,490
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..............................        --           --          8,730
                                                                                ---------    ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ....................................   $    --      $   8,730    $  19,220
                                                                                =========    =========    =========
NON-CASH INVESTING AND FINANCING ACTIVITIES
     Non-cash capital contribution of preferred stock from parent
        utilized in purchase of additional 40% interest in Austar ...........   $    --      $  29,840    $    --
                                                                                =========    =========    =========
     Non-cash stock issuance utilized in purchase of 50% interest
        in Saturn ...........................................................   $    --      $    --      $   7,800
                                                                                =========    =========    =========
     Assets acquired with capital leases ....................................   $    --           --      $   3,632
                                                                                =========    =========    =========



                      The accompanying notes are an integral part of these consolidated statements.
</TABLE>



                                       40

<PAGE>


                           UIH AUSTRALIA/PACIFIC, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (AFTER CORPORATE REORGANIZATION--SEE NOTE 1)
                        AS OF DECEMBER 31, 1995 AND 1996
                         (Monetary Amounts in Thousands)


1.   ORGANIZATION AND BACKGROUND

     UIH Australia/Pacific, Inc. (the "Company"), a majority-owned subsidiary of
UIH  Asia/Pacific  Communications,  Inc.  ("UAP"),  which is in turn an indirect
wholly-owned  subsidiary of United  International  Holdings,  Inc. ("UIH"),  was
formed on October  14,  1994,  for the  purpose  of  developing,  acquiring  and
managing foreign multi-channel television, programming and telephony operations.
Immediately  prior to the May 1996  offering  (the "May 1996  Offering")  of the
Company's 14% Senior Discount Notes due 2006 (the "Notes"), UIH Australia, Inc.,
UIH  Australia  II,  Inc.  and UIH  Australia  III,  Inc.  (the  "UIH  Australia
Subsidiaries");  UIH New  Zealand,  Inc.  (the  "UIH New  Zealand  Subsidiary");
UIH-SFCC,  Inc. (the "UIH Tahiti Subsidiary");  and UIH Australia Holdings, Inc.
were merged with and into the Company. The UIH Australia Subsidiaries held UIH's
interest in the two companies that form Austar,  the UIH New Zealand  Subsidiary
held UIH's interest in Saturn Communications Limited ("Saturn"),  the UIH Tahiti
Subsidiary  held UIH's interest in Telefenua S.A.  ("Telefenua"),  UIH Australia
Holdings,  Inc.  held UIH's  interest in United  Wireless  Pty Limited  ("United
Wireless") and the Company held UIH's interest in XYZ  Entertainment Pty Limited
("XYZ Entertainment" or "XYZ"). The accompanying  financial statements have been
prepared  on a basis of  reorganization  accounting  as though the  Company  had
performed all foreign development  activities and made all acquisitions of UIH's
ownership  interests in  multi-channel  television,  programming and mobile data
companies in Australia,  Tahiti and New Zealand since inception. The reorganized
Company  commenced  operations  in January  1994 when UIH began its  development
related  activities in the Pacific region. UIH transferred the net assets of the
above  mentioned  subsidiaries,  including  capitalized  development  costs  and
investments  in affiliated  companies,  to the Company at its  historical  cost,
which the Company  reflected as capital  contributions  from the parent company.
Capital contributions  totaled $25,342,  $68,440 and $10,903 for the years ended
December 31, 1994, 1995 and 1996,  respectively.  The accompanying  consolidated
financial  statements have been prepared as though the Company made  investments
in  the  following  entities  on  the  original  date  UIH  or  certain  of  its
wholly-owned subsidiaries made the investment:

     *  The Company  acquired,  through  directly and indirectly held interests,
        an effective 50% economic interest in the two companies that form Austar
        in 1994. In December 1995, the Company increased its effective  economic
        interest  in Austar  (formerly  CEtv) to 90%.  In May 1996,  the Company
        increased its economic  interest in Austar to 94% which was subsequently
        increased to 96% and in October 1996, acquired the remaining 4% economic
        interest in Austar for $7,920.  The companies that comprise  Austar (CTV
        Pty  Limited  ("CTV")  and  STV  Pty  Limited   ("STV"))  have  acquired
        multi-point  microwave  distribution systems ("MMDS") licenses to supply
        subscription   television  services  to  television  households  in  the
        northern,  northeastern and southern regions of Australia outside of the
        country's  largest cities and are currently  constructing  multi-channel
        television  systems to  service  many of the  television  homes in their
        license  areas.  Those  homes  that  cannot  be  served  by MMDS will be
        serviceable  by a direct to home satellite  service  marketed by Austar.
        The Company's  ownership  interests are comprised of direct and indirect
        holdings of convertible  debentures and ordinary  shares of CTV and STV.
        Ownership of the  debentures  entitles the Company to vote for directors
        on the same basis as  ordinary  shares.  The Company is party to various
        securityholder  agreements  which enable it to designate  all of the six
        voting  directors  of both CTV and STV.  The  Company  has  consolidated
        Austar for balance sheet  purposes  effective  December 31, 1995 and for
        income  statement  purposes  effective  January 1, 1996.  Prior to these
        dates,  the Company  accounted for its  investments in CTV and STV under
        the equity method.

                                       41

<PAGE>



    *   The Company  acquired an effective 90% economic interest in Telefenua in
        January 1995. The Company's  economic  interest will decrease to 75% and
        64% once the Company has received a 20% and 40% internal  rate of return
        on its investment in Telefenua, respectively.  Telefenua operates, since
        March 1995, the only multi-channel subscription television system on the
        islands of Tahiti and Moorea in French  Polynesia.  Through its majority
        ownership of UIH SFCC LP, a Colorado limited partnership that holds 100%
        of the preferred  stock of SFCC,  which in turn is the parent company of
        Telefenua,  the Company has the right to appoint  three of the six board
        members.  Furthermore,  by agreement with the common  shareholders,  the
        Company  has the  right  to  appoint  a  fourth  director.  The  Company
        consolidates its investment in Telefenua.

    *   In  July  1994,   the   Company   acquired  a  50%   interest  in  Kiwi
        Communications  Limited,  which  recently  changed  its name to  Saturn.
        Saturn is constructing a wireline multi-channel television system in New
        Zealand,  primarily in the greater  Wellington  area. In July 1996,  the
        Company  acquired the remaining 50% interest in Saturn in exchange for a
        2.6% interest in the Company which was valued at  approximately  $7,800.
        The holder of this interest was granted a one-time  conversion  right to
        exchange such interest for an equivalent interest in the common stock of
        UAP  upon  certain  circumstances.  The  Company  has  consolidated  the
        operations of Saturn since July 1, 1996. Prior to that time, the Company
        accounted for its investment in Saturn under the equity method.

    *   XYZ  Entertainment is  an Australian proprietary company incorporated in
        New  South  Wales.  Century  United  Programming  Ventures  Pty  Limited
        ("CUPV"), an  Australian  corporation,  owned equally by the Company and
        Century Communications  Corp. ("Century"),  holds  a 50% interest in XYZ
        Entertainment.  In  October  1994,  the Company  acquired an initial 50%
        interest  in  XYZ  Entertainment.  In  September  1995,  a  third  party
        purchased a  50% interest  in XYZ  Entertainment,  thereby  diluting the
        Company's  indirect  interest in  XYZ  Entertainment to 25%. The Company
        accounts for its investment through CUPV in XYZ on the equity basis.

    *   The Company acquired a 100% interest in August 1995 in United Wireless,
        a provider of  wireless  mobile data  services in  Australia,  primarily
        Sydney and  Melbourne,  and is in the initial  stages of  deploying  its
        distribution  network and marketing its services.  The Company accounted
        for its acquisition using the purchase method of accounting. The Company
        has consolidated United Wireless since August 1995.

LIQUIDITY AND CAPITAL RESOURCES

     A substantial  portion of the Company's  investments  to date relate to its
investment  in Austar  which is comprised  primarily of MMDS and  direct-to-home
("DTH")  satellite  operations.   The  Company  has  essentially  completed  the
construction and deployment of Austar's entire MMDS network  infrastructure  and
has incurred certain other significant  expenditures,  such as Austar's National
Customer Service Center,  which contemplates  provision of MMDS and DTH services
to a  substantially  larger customer base than currently  exists.  If additional
capital  financings  are not  available to continue to connect new  customers at
Austar,  the Company's  revenues will decline and the current net operating loss
will  increase  over time due to  customer  disconnections,  which are  normally
experienced in connection with multi-channel television operations.  In order to
complete the  anticipated  build-out of Austar and the Company's other projects,
the Company will need a significant  amount of  additional  capital which is not
currently available.

     As of December 31, 1996, the Company had a net working  capital  deficit of
$15,380,  excluding  $1,575 due UIH. Owing to the nature of the  operation,  the
Company  is able to slow the rate of  network  construction  at  Austar  and the
Company's  other  projects  to adjust to the level of funding  sources  that are
available. The Company believes it can, if necessary, substantially  reduce  the


                                       42

<PAGE>

capital required at Austar as the majority of future capital  expenditures  will
be for subscriber installation and premise equipment,  which are controllable by
the Company  based upon the rate of new  subscriber  connection.  The Company is
currently in the process of seeking  additional  sources of funds, which sources
could include  private  equity,  bank and/or public debt and the sale of certain
non-strategic assets. The Company may or may not be successful in completing all
or  any of  such  offerings.  The  Company  believes,  however,  that  continued
financial  support from UIH  combined  with,  if  necessary,  reductions  in the
Company's planned capital expenditures, are sufficient to sustain its operations
through at least early 1998.

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.

     In July 1996,  the  Company  effected a 4.87 for 1 stock  split.  All share
amounts have been restated for all periods presented to reflect this event.

   PRINCIPLES OF CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
the Company and all subsidiaries  where it exercises majority control and owns a
majority economic interest. During the year ended December 31, 1995, the Company
consolidated Telefenua,  and subsequent to August 31, 1995, United Wireless. Due
to the Company's acquisition of the majority economic interest in CTV and STV in
late December  1995, the  accompanying  December 31, 1995  consolidated  balance
sheet  consolidates  the accounts of CTV and STV as of December  31,  1995.  The
Company  recognized  equity losses from its  investments  in CTV and STV through
December  31,  1995.  The Company  consolidated  the  operations  of CTV and STV
beginning January 1, 1996. The Company has consolidated the operations of Saturn
since July 1, 1996. Prior to that time, the Company accounted for its investment
in Saturn under the equity method.  All  significant  intercompany  accounts and
transactions have been eliminated in consolidation.

   CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

     Cash and  cash  equivalents  include  cash and  investments  with  original
maturities of less than three months. The portion of short-term  investments and
the  Company's  investment  in  Australis  Media  Limited (see Note 5) which are
classified as  available-for-sale in accordance with the provisions of Statement
of Financial  Accounting  Standards No. 115, "Accounting for Certain Investments
in Debt and Equity  Securities"  ("SFAS 115"),  are accounted for at fair market
value.  As of December  31,  1996,  the Company  held  approximately  $18,640 of
short-term investments (which are comprised primarily of certificates of deposit
and government securities) classified as available-for-sale securities which are
stated at amortized cost, which approximates fair value, under the provisions of
SFAS 115.


                                       43
<PAGE>



   INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
   EQUITY METHOD

      For those  investments in companies in which the Company's voting interest
is 20% to 50%, its  investments  are held through a combination of voting common
stock,  preferred stock,  debentures or convertible debt, and 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 affiliates,  limited to the
extent of the Company's investment in and advances to the affiliates,  including
any debt guarantees or other funding  commitments.  The Company's  proportionate
share of net earnings or losses of affiliates  includes the  amortization of the
excess of cost over net tangible assets acquired. Investments in and advances to
affiliated companies are as follows:
<TABLE>
<CAPTION>


                                                                 As of December 31, 1995
                                      ---------------------------------------------------------------------------
                                       Investments in
                                      and Advances to         Cumulative Equity         Cumulative
                                         Affiliated             in Losses of           Translation
                                         Companies         Affiliated Companies(1)     Adjustments          Total
                                         ---------         -----------------------     -----------          -----
<S>                                        <C>                   <C>                     <C>              <C>

Saturn.........................            $ 4,520               $   (1,803)             $  112           $ 2,829
XYZ Entertainment..............             11,718(2)               (11,828)                110               --
                                           -------                  -------              ------           -------
                                           $16,238                $ (13,631)             $  222           $ 2,829
                                           =======                =========              ======           =======
</TABLE>

<TABLE>
<CAPTION>
                                                                 As of December 31, 1996
                                      --------------------------------------------------------------------------
                                      Investments in
                                      and Advances to         Cumulative Equity         Cumulative
                                          Affiliated             in Loss of            Translation
                                          Company            Affiliated Company(3)      Adjustment         Total
                                          -------            ---------------------      ----------         -----
<S>                                        <C>                    <C>                    <C>             <C>


XYZ Entertainment..............            $16,202(4)             $ (16,312)             $  110          $    --
                                           =======                =========              ======          =======
</TABLE>
(1) Does  not  include  cumulative  equity  in  losses  for Austar of $3,763, as
    Austar's  balance  sheet was consolidated effective December 31, 1995.
(2) Includes  $4,132 of  investment  prior to the  receipt of $4,132 of proceeds
    received from the sale of 50% of the Company's interest.  As the Company had
    recorded equity in losses from XYZ  Entertainment  in an amount equal to its
    invested  capital,   the  Company  recognized  a  gain  of  $4,132  on  this
    transaction.   In  addition,  the  Company  accrued  an  additional  funding
    obligation of $1,834 as of December 31, 1995.
(3) Does  not  include  cumulative  equity  in  losses for Saturn of $2,733,  as
    Saturn's  balance  sheet was consolidated effective July 1, 1996.
(4) Includes an accrued funding obligation of $1,270 at December 31, 1996.

     The  Company  recognized  $11,729  and  $4,484  of equity  losses  from XYZ
Entertainment  for the years ended  December  31,  1995 and 1996,  respectively,
including  $1,834 and $1,270 of  additional  equity losses  associated  with the
Company's accrued funding obligation to XYZ Entertainment.  The Company does not
have a contractual funding obligation to XYZ Entertainment; however, the Company
would face  significant  and punitive  dilution if it did not make the scheduled
fundings.


                                       44

<PAGE>


   PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment are stated at cost. Additions,  replacements
and  major  improvements  are  capitalized,  and  costs for  normal  repair  and
maintenance of property, plant and equipment are charged to expense as incurred.
All subscriber equipment and capitalized  installation labor is depreciated over
3 years.  Upon  disconnection  of a subscriber  the remaining  book value of the
subscriber   equipment,   excluding   converters   which  are   recovered   upon
disconnection,  and capitalized  labor is written off.  Depreciation  expense is
computed using the  straight-line  method over the asset's estimated useful life
as shown below:

                                             Average Years
                                             -------------
          MMDS distribution facilities.....      5-10
          Cable distribution networks......      5-10
          Subscriber premises equipment
             and converters................         3
          Furniture and fixtures...........        10
          Leasehold improvements...........      6-10
          Other............................       3-5

   LEASED ASSETS

     Assets  acquired under capital  leases are included in property,  plant and
equipment.  The  initial  amount of the  leased  asset and  corresponding  lease
liability  are recorded at the present value of future  minimum lease  payments.
Leased assets are amortized over the life of the relevant lease.

   LICENSE FEES

     The  acquisition  of MMDS licenses has been  recorded at cost.  The cost to
acquire these  licenses  ($10,520),  acquired for a 5-year period for Australia,
will be  amortized  over the  remaining  license  period  upon  commencement  of
operations.  The licenses are renewable  every 5 years.  In Tahiti,  the license
rights, totaling $2,387, are amortized over a 10-year period.

   GOODWILL

     The Company's acquisition of an additional 40% economic interest in CTV and
STV was recorded as a step  acquisition.  The majority of the purchase  price of
$45,081  was  recorded  as  goodwill  as the  underlying  net book  value of all
tangible and intangible assets approximated their respective fair values at that
date. Accordingly, goodwill of $44,790 will be amortized over 15 years beginning
January 1, 1996.  The Company's  acquisition  in July 1996 of the additional 50%
interest in Saturn  resulted in an additional  $8,773 of goodwill which is being
amortized over 15 years.

   RECOVERABLE AMOUNTS OF TANGIBLE AND INTANGIBLE ASSETS

     The  carrying  amount of all tangible  and  intangible  assets are reviewed
periodically  whenever events and  circumstances  indicate the carrying value of
the assets may exceed their recoverable  amount. The recoverable  amounts of all
tangible and intangible  assets have been determined  using net cash flows which
have not been discounted to their present values.

   REVENUE RECOGNITION

       Monthly  service  revenues  are  recognized  as revenue in the period the
related  services  are  provided  to  the  subscribers.  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. To the
extent  installation  fees exceed  direct  selling  costs,  the excess  would be
deferred and amortized over the average contract period.


                                       45

<PAGE>


   CONCENTRATION OF CREDIT RISK

     Financial   instruments   that   potentially   subject   the   Company   to
concentrations  of credit risk  consist  primarily  of  subscriber  receivables.
Concentrations of credit risk with respect to subscriber receivables are limited
due to the large number of customers comprising the Company's customer base.

   INCOME TAXES

     The Company  accounts for income taxes under the provisions of Statement of
Financial  Accounting  Standards No. 109,  "Accounting  for Income Taxes" ("SFAS
109"), 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 tax bases of assets and  liabilities  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  for amounts
which do not satisfy the realization criteria of SFAS 109.

   FOREIGN OPERATIONS

     The  functional  currency  for  the  Company's  foreign  operations  is the
applicable local currency for each affiliate company.  Assets and liabilities of
foreign  subsidiaries are translated at the exchange rates in effect at year 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  result in unrealized  gains or losses
referred to as translation  adjustments.  Cumulative translation adjustments are
recorded as a separate component of stockholders' equity.

     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.

     In  accordance  with  Statement of Financial  Accounting  Standards No. 95,
"Statement of Cash Flows," cash flows from the  Company's  operations in foreign
countries  are  calculated  based on their  reporting  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.

     RECLASSIFICATIONS

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

3.    ACQUISITIONS

       In January 1995, the Company acquired an initial 90% economic interest in
Telefenua  in exchange for a cash  contribution  into  Telefenua of $6,060,  the
contribution of a note and accrued interest due UIH of $817 and equipment leased
to Telefenua  totaling $2,039.  Details of the net assets  acquired,  which were
denominated in French  Pacific  francs and translated to U.S.  dollars using the
exchange rate on the day of the acquisition, are as follows:


                                       46

<PAGE>





         Tangible assets..........................................   $ 4,213
         Intangible assets........................................     1,835
         Other ...................................................       107
         Cash  ...................................................     6,181
         Accounts payable and accrued liabilities.................      (783)
         Due to affiliate.........................................    (2,110)
         Minority shareholders' interest..........................      (527)
                                                                     -------
             Total consideration..................................   $ 8,916
                                                                     =======

        The purchase  price was  allocated to the net assets  acquired  based on
relative fair market values.

     The  Company's  cumulative  investment in Telefenua as of December 31, 1996
includes the cash and notes  contributed of $6,877, an equipment lease of $2,285
and bridge loans in the amount of $4,527, plus additional cash investment during
1996 totaling $3,048. The Company's consolidated assets, liabilities,  revenues,
expenses and net loss after intercompany  eliminations  related to Telefenua for
the year ended December 31, 1995 totaled  $10,989,  $9,710,  $1,882,  $5,438 and
$3,556, respectively.

     In response to a legal  challenge by the  President of Tahiti,  the Conseil
d'Etat of France recently  canceled a decree  authorizing MMDS systems in French
Polynesia and similar French territories. The cancellation could provide a legal
basis to cancel a required  authorization  already  granted to  Telefenua by the
communications agency because the authorization was based in part on the decree.
A law recently enacted by the French Parliament gives Telefenua a legal basis to
ask for a new authorization from the communications  agency, should the existing
authorization  be  nullified.  There can be no assurance,  however,  that if the
existing  authorization is nullified a new authorization will be obtained, or if
a new  authorization  is  obtained,  that it would not differ from the  existing
authorization.

      In  December  1995,  the  Company  acquired an  additional  40%  effective
economic  interest in Austar from other  shareholders  increasing  its effective
economic  interest to 90%.  The  Company  paid  $15,240 in cash and  contributed
170,513  shares  of  UIH's   convertible   preferred  stock  having  an  initial
liquidation  value and fair value of $29,840 for the  additional  40%  effective
economic interest. Details of the net assets acquired, which were denominated in
Australian dollars and translated to U.S. dollars using the exchange rate on the
day of the acquisition, are as follows:

         Tangible assets...........................................  $ 18,267
         Intangible assets.........................................     8,643
         Receivables, prepaids and other...........................     2,704
         Cash  ....................................................     7,222
         Accounts payable and accrued liabilities..................    (6,140)
         Other debt................................................      (890)
         Minority shareholders' interest...........................    (2,363)
         Net investment prior to acquisition of 40%................   (27,153)
                                                                      -------
                                                                          290
         Goodwill                                                      44,790
                                                                     --------
             Total consideration...................................  $ 45,080
                                                                     ========


                                       47

<PAGE>


     The  Company's  cumulative  investment  in Austar as of  December  31, 1995
includes cash invested of $19,903, bridge loans of $5,400, the purchase of a 10%
interest  from  another  shareholder  for  $5,613  and the  purchase  of the 40%
interest from another  shareholder for $45,080.  The Company's  equity in losses
from Austar for the years ended  December 31, 1994 and 1995 are $551 and $3,212,
respectively. The Company invested an additional $149,076 in Austar during 1996,
including  certain  bridge  loans  from UIH  totaling  $19,600  (See Note 8) and
acquired the remaining minority interest in October 1996 for $7,920.

     In 1994, the Company acquired a 50% interest in Saturn.  In July, 1996, the
Company  acquired the remaining 50% of Saturn by issuing 13 shares of its common
stock  valued  at  $7,800.  Details  of the  net  assets  acquired,  which  were
determined  in New Zealand  dollars and  translated  to U.S.  dollars  using the
exchange rate on the day of the acquisition, are as follows:

     Tangible assets..............................................  $ 8,509
     Receivables, prepaids and other..............................      373
     Cash.........................................................      708
     Accounts payable and accrued liabilities.....................   (1,430)
     Net investment prior to acquisition of 50%...................   (9,133)
                                                                    -------
                                                                       (973)
     Goodwill.....................................................    8,773
                                                                    -------
     Total consideration..........................................  $ 7,800
                                                                    =======

     The Company's  cumulative  investment in Saturn as of December 31, 1996 was
$18,561.

4.   INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER
     THE EQUITY METHOD

     Investments in and advances to affiliated companies accounted for under the
equity  method  amount  to  $2,829  and $0 as of  December  31,  1995 and  1996,
respectively.

     Condensed  financial  information  for  the  Company's  significant  equity
investees is presented below.

CTV

     In September  1994, the Company began to fund its 40% economic  interest in
CTV, an Australian company that currently holds MMDS licenses in Australia.  The
Company then  acquired an additional  10% economic  interest in CTV from another
shareholder for $5,613.  As noted above, in December 1995, the Company purchased
an additional 40% economic interest in CTV which increased its economic interest
to 90% and,  accordingly,  the Company has consolidated the balance sheet of CTV
effective December 31, 1995 (see Note 1).

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

                                                            For the Years Ended
                                                                 December 31,
                                                            -------------------
                                                            1994(1)       1995
                                                            ----          -----
CONDENSED CONSOLIDATED INCOME STATEMENT DATA
Revenue...........................................        $    --      $    433
Operating, selling, general and
  administrative expenses.........................           (243)       (4,804)
Depreciation and amortization.....................             (3)       (1,113)
                                                          -------     ---------
     Net operating loss...........................           (246)       (5,484)
Interest, net.....................................            246           914
Other.............................................             --           245
                                                          -------       -------
     Net loss.....................................        $    --       $(4,325)
                                                          =======       =======

 (1) CTV began operations during 1994.

STV

     In October  1994,  the Company  began to fund its 50% economic  interest in
STV, an Australian  company that holds MMDS  licenses in Australia.  In December
1995,  the Company  purchased an additional  40% economic  interest in STV which
increased  its  economic  interest  to 90%,  and,  accordingly,  the Company has
consolidated the balance sheet of STV effective December 31, 1995 (see Note 1).


                                       48

<PAGE>



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

                                                       For the Years Ended
                                                           December 31,
                                                    -----------------------
                                                       1994(1)       1995
                                                    ----------     --------
CONDENSED CONSOLIDATED INCOME STATEMENT DATA
Revenue..........................................   $      --      $     10
Operating, selling, general and
   administrative expenses.......................        (197)       (2,670)
Depreciation and amortization....................          (3)         (158)
                                                    ---------      --------
     Net operating loss..........................        (200)       (2,818)
Interest, net....................................         107           315
                                                   ----------      ---------
     Net loss....................................  $      (93)     $ (2,503)
                                                   ==========      ========

 (1)  STV began operations during 1994.

XYZ

     Condensed  financial  information  for  XYZ  Entertainment  stated  in U.S.
dollars,  which is derived from financial  statements audited by Deloitte Touche
Tohmatsu, is as follows:

                                                                    As of
                                                               December 31, 1995
                                                               -----------------
CONDENSED CONSOLIDATED BALANCE SHEET DATA
Cash.........................................................      $  2,309
Property, plant and equipment, net...........................         2,499
Intangible assets, net.......................................         1,871
Other assets.................................................         1,933
                                                                   --------
     Total assets............................................      $  8,612
                                                                   ========

Accounts payable and accrued liabilities.....................       $16,068
Shareholder loans............................................        21,597
Shareholders' equity.........................................       (29,053)
                                                                   --------
     Total liabilities and shareholders' equity..............      $  8,612
                                                                   ========


                                                        For the Years Ended
                                                           December 31,
                                                       --------------------
                                                        1994(1)     1995
                                                        ----        ----
CONDENSED CONSOLIDATED INCOME STATEMENT DATA
Revenue.............................................   $   --     $  1,266
Operating, selling, general and
   administrative expenses..........................      (183)    (27,511)
Depreciation and amortization.......................       --       (2,662)
                                                       -------    --------
     Net operating loss.............................      (183)    (28,907)
Interest, net.......................................         2         145
                                                       -------    --------
     Net loss.......................................   $  (181)   $(28,762)
                                                       =======    ========

 (1) XYZ Entertainment began operations during 1994.


                                       49

<PAGE>



SATURN

     Condensed  financial information for Saturn, stated in  U.S. dollars, is as
follows:
                                                                     As of
                                                              December 31, 1995
                                                              -----------------
Condensed Consolidated Balance Sheet Data
Cash                                                              $   248
Property, plant and equipment, net.............................     1,478
Other assets...................................................       303
                                                                   ------
     Total assets..............................................    $2,029
                                                                   ======

Accounts payable and accrued liabilities.......................    $2,802
Related party debt.............................................       --
Shareholders' equity...........................................      (773)
                                                                   ------
     Total liabilities and shareholders' equity................    $2,029
                                                                   ======

                                                           For the Years Ended
                                                               December 31,
                                                           -------------------
                                                           1994          1995
                                                           -----      -------
CONDENSED CONSOLIDATED INCOME STATEMENT DATA
Revenue...............................................  $     43      $   148
Operating, selling, general and
   administrative expenses............................      (976)      (2,365)
Depreciation and amortization.........................      (351)        (385)
                                                         -------      -------
     Net operating loss...............................    (1,284)      (2,602)
Other.................................................        69          (55)
                                                         -------      -------
     Net loss.........................................   $(1,215)     $(2,657)
                                                         =======      =======

5.   OTHER INVESTMENTS IN AFFILIATED COMPANIES, INCLUDING  MARKETABLE EQUITY
     SECURITIES

     In May 1996,  the Company used $10,000 of the proceeds from its offering of
the Notes (see Note 7) to acquire a UIH subsidiary which  guaranteed  $10,000 of
debt for Australis Media Limited  ("Australis"),  Austar's  primary  supplier of
programming.  As  consideration  for giving the guarantee,  the Company received
warrants  valued at $784 to acquire  4,171,460  ordinary  shares or  convertible
debentures.  On October 31, 1996, the Company's  $10,000 guarantee of Australis'
debt expired.  The Company used $3,339 of the related cash to acquire  7,736,171
debentures  of Australis.  Further,  the Company  exercised  warrants to acquire
Australis  common stock and debentures at A$0.20 per share for 3,016,832  shares
of  Australis  common  stock  and  1,154,628   debentures.   Each  debenture  is
convertible  into one common share of  Australis.  As of December 31, 1996,  the
Company had recognized an unrealized loss of $3,412 on the Australis  investment
in accordance  with the  provisions of SFAS 115,  thereby  reducing the carrying
value of the investment to $1,372.


                                       50

<PAGE>



6.    PROPERTY, PLANT AND EQUIPMENT
                                                                As of
                                                             December 31,
                                                        --------------------
                                                            1995        1996
                                                        ---------   ---------
MMDS distribution facilities..........................    $15,417    $ 57,073
Cable distribution networks...........................        266      12,912
Subscriber premises equipment and converters..........      7,728     129,337
Furniture and fixtures................................        255       1,462
Leasehold improvements................................      1,582       3,525
Other.................................................      3,599      20,472
                                                          -------    --------
                                                           28,847     224,781
Accumulated depreciation..............................     (1,217)    (31,611)
                                                          -------    --------
Net property, plant and equipment.....................    $27,630    $193,170
                                                          =======    ========

7.  SENIOR DISCOUNT NOTES AND OTHER LIABILITIES

        Senior discount notes and other liabilities consists of the following:

                                                                 As of
                                                              December 31,
                                                           -----------------
                                                             1995       1996
                                                           -------    -------

The Notes, net of unamortized discount...................  $   --     $245,182
Capitalized lease obligations............................     890        4,522
Mortgage note, interest at 7.885%, 7 year term...........      --        1,252
Other....................................................     124        1,337
                                                           ------     --------
                                                            1,014      252,293
    Less current portion.................................    (147)        (896)
                                                           ------     --------
                                                           $  867     $251,397
                                                           ======     ========

     On May 14, 1996, the Company  raised total gross proceeds of  approximately
$225,115 from the private  placement of $443,000  aggregate  principal amount of
the Notes.  No cash interest  payments are required until May 15, 2001, at which
time cash  interest  payments will be payable  semi-annually  on each May 15 and
November 15. The Notes are due May 15, 2006. In September  1996,  the Notes were
exchanged for 14% Senior  Discount Notes due 2006,  Series B. As of December 31,
1996,  the Notes had an accreted  value of  $245,182.  The trading  value of the
Notes as of December 31, 1996 was $230,360.

     If the Company or UAP does not  consummate  an  issuance  of capital  stock
resulting  in gross  proceeds  to the  Company of at least  $70,000  (an "Equity
Sale") prior to May 16,  1997,  then the  interest  rate on the Senior  Discount
Notes will be increased by an additional 0.75% per annum, until such time as the
Equity Sale is effected.  In addition, if the Company or UAP does not consummate
an Equity  Sale  prior to  November  16,  1997,  the then  holders of the Senior
Discount Notes will be entitled to receive  warrants to purchase common stock of
the Company or, in certain  circumstances,  of UAP. The Company  plans to pursue
additional  sources of funding that may constitute an Equity Sale although there
can be no assurance  that the Company will be successful in concluding an Equity
Sale prior to May 16 or November 16, 1997.

8.   RELATED PARTY

     In connection  with the corporate  reorganization  discussed in Note 1, the
Company and UIH have executed a 10-year management  services agreement (the "UIH
Management  Agreement"),  pursuant to which UIH will continue to perform certain


                                       51

<PAGE>

administrative,  accounting,  financial  reporting  and other  services  for the
Company,  which  has no  separate  employees  of its own.  For the  years  ended
December 31, 1994 and 1995 and for the first four months of 1996,  UIH allocated
approximately  $659,  $918 and $250 to the Company for such services.  Effective
May 1,  1996,  pursuant  to the UIH  Management  Agreement,  UIH  will be paid a
management  fee of $750 for the first year of such  agreement,  which fees shall
increase on the first anniversary date of the UIH Management  Agreement and each
anniversary  date  thereafter  by 8% per year.  In addition,  the Company  shall
reimburse UIH for any  out-of-pocket  expenses incurred by UIH in performance of
its duties under the UIH Management  Agreement,  including  travel,  lodging and
entertainment expenses.

     UIH has executed technical assistance  agreements with CTV and STV pursuant
to which it will provide various  management and technical  services.  Under the
agreements,  UIH  receives a  management  fee equal to 5% of CTV and STV's total
revenue,  less certain deductions,  for the first two years, 4% for the next six
years,  3% for the following two years and 2%  thereafter.  In addition,  UIH is
reimbursed for all direct costs associated with services it provides for Austar.
Austar's managing  director,  chief operating officer and marketing director are
employees  of UIH that  have been  seconded  to  Austar.  In  addition,  UIH has
appointed  seven other  management  personnel and all six directors.  During the
years ended December 31, 1995 and 1996, CTV and STV paid UIH a total of $555 and
$2,338 under such agreements, respectively.

     UIH and the parent company of Telefenua have executed a technical  services
agreement  whereby  UIH has  agreed to  provide  technical,  administrative  and
operational assistance to Telefenua.  The parent company has a similar technical
assistance  agreement with Telefenua under which it makes available to Telefenua
UIH's  services  encompassing  the following  areas:  (i)  engineering,  design,
construction and equipment purchasing; (ii) marketing,  selling and advertising;
(iii) accounting,  billing and subscriber  management systems and (iv) personnel
management  and training for a fee equal to 5.5% of  Telefenua's  gross  revenue
through  1996,  3.5% of gross  revenue  for the  following  12 months,  and 2.5%
thereafter.  The fees payable to UIH under its technical services agreement with
an indirect  majority owned  subsidiary  are 5%, 3% and 2% of Telefenua's  gross
revenues  over the same  periods.  UIH is also  reimbursed  for all  direct  and
indirect costs  associated with the services it provides.  UIH has appointed two
of its employees to serve as the managing director and the technical director of
Telefenua. UIH pays these employee's salaries and benefits and charges Telefenua
for these amounts.  During the years ended December 31, 1995 and 1996, Telefenua
paid UIH $615 and $0 under this agreement, respectively.

     Saturn and UIH have  executed a technical  services  agreement  pursuant to
which UIH provides  technical,  administrative  and  operational  assistance  to
Saturn encompassing the following areas: (i) engineering,  design,  construction
and equipment  purchasing;  (ii)  marketing,  pricing and packaging of services;
(iii)  selection  of  programming  and  negotiations  with  suppliers  and  (iv)
accounting, billing and subscriber management systems. UIH receives a management
fee  equal to 5% of  Saturn's  gross  revenue  through  July  1999.  UIH is also
reimbursed for all direct and indirect costs associated with these services. The
managing  director,  technical  director  and customer  operations  director are
employees of UIH that have been seconded to Saturn  pursuant to the terms of the
technical services agreement. During the years ended December 31, 1995 and 1996,
Saturn paid UIH $0 and $525 under this agreement, respectively.

     Included in the due to parent payable is the following:
                                                                   As of
                                                                 December 31,
                                                            -------------------
                                                              1995        1996
                                                            -------     ------
      CTV bridge loans(1)................................   $ 5,400    $     --
      Telefenua bridge loan, including
         accrued interest of $231
         and $0, respectively (2)........................     4,527          --
      CTV/STV technical assistance
         agreement obligations...........................     1,488       1,135
      Telefenua technical assistance
         agreement obligations...........................     1,168       1,879
      Saturn technical assistance
         agreement obligations...........................        --       1,002
      Other..............................................        --         317
                                                            -------    --------
                                                             12,583       4,333
               Less current portion......................    (1,488)     (1,575)
                                                            -------    --------
                                                            $11,095    $  2,758
                                                            =======    ========

                                       52

<PAGE>


(1) The loan extended to CTV had an interest rate of 9.25%. The loan and accrued
    interest were converted into equity of CTV in May 1996.
(2) The  loan  extended  to  Telefenua  is at an  interest  rate  of 14%  and is
    compounded  annually  and has no terms of  repayment.  The  Company  has the
    option to convert the bridge loan into equity of Telefenua.

     Upon  completion  of the  offering  of  the  Notes  discussed  in  Note  7,
approximately  $25,000 of the proceeds were used to acquire certain bridge loans
made by UIH to CTV, STV and Telefenua noted above, including $15,073 advanced to
Austar and Telefenua  subsequent  to December 31, 1995.  The Austar bridge loans
and related accrued interest were converted into equity of Austar in May 1996.

9.   STOCKHOLDERS' EQUITY

     UIH and many of its employees serving as senior management in the Company's
operating companies are parties to employment  agreements,  typically with terms
of three to five years.  The agreements  generally  provide for a specified base
salary  as well as a bonus set at a  specified  percentage  of the base  salary,
which bonus is based on the performance of the respective  company and employee.
The agreements  often provide for the grant of an incentive  interest equal to a
percentage  of the residual  equity  value of the  respective  company  which is
typically  defined as the fair market value of the business less net liabilities
and a reasonable return on shareholders' investment.  The Company has recorded a
liability  for the  estimated  amount  of the  bonus  earned  during  1996.  The
employment  agreements generally also provide for cost of living  differentials,
relocation   and  moving   expenses,   automobile   allowances  and  income  tax
equalization  payments,  if necessary,  to keep the employee's tax liability the
same as it would be in the United States.

10.   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%
to 50% 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 U.S. and foreign activities.  Accordingly, to the extent U.S. 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  Company has an
ownership  interest in Telefenua,  which is located in Tahiti,  a self-governing
territory  of France,  with which the United  States does not have an income tax
treaty. As a result,  the Company may be subject to increased  withholding taxes
on dividend  distributions  and other  payments  from  Telefenua and also may be
subject to double taxation with respect to income generated by Telefenua.

     The Company is included as a member of UIH's  consolidated  tax return and,
after  the  offering  of the  Notes in May  1996,  remained  a member of the UIH
consolidated  group. UIH and the Company are parties to a tax sharing  agreement
that defines the parties' rights and obligations with respect to tax liabilities
and  benefits  relating  to the  Company  and  its  operations  as  part  of the
consolidated   group  of  UIH.  In  general,   UIH  is  responsible  for  filing
consolidated  tax returns and paying the associated  taxes, and the Company will
reimburse  UIH for the  portion of the tax cost  relating to the Company and its
operations.  For financial reporting  purposes,  the Company accounts for income
taxes in accordance with SFAS 109 as if it filed separate income tax returns in


                                       53

<PAGE>

accordance with the  fundamental  provisions of the tax sharing  agreement.  Any
differences in income tax expense  (benefit)  allocated to the Company by UIH in
accordance with the tax sharing  agreement and the income tax expense  (benefit)
which is  recognized  under SFAS 109 will be accounted  for as a deemed  capital
distribution or  contribution.  The primary  differences  between taxable income
(loss)  and net  income  (loss)  for  financial  reporting  purposes  relate  to
accounting  for  equity  in  income  (losses)  of  affiliated   companies,   the
non-consolidation of its consolidated foreign subsidiaries for U.S. tax purposes
and the current  non-deductibility  of interest  expense on the Company's Senior
Discount  Notes for federal  income tax  purposes.  Because  the  Company  holds
certain of its foreign  investments  through  affiliates  which hold investments
accounted for under the equity method in foreign  corporations,  taxable  income
(loss)  generated 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
assets have been established for tax basis in excess of the Company's book basis
(approximately $7,000 and $9,000 at December 31, 1995 and 1996, respectively) in
investments  in affiliated  companies  who, in turn have equity  investments  in
foreign corporations.

     The significant components of the net deferred tax asset are as follows:

                                                                 As of
                                                              December 31,
                                                          ------------------
                                                            1995      1996
                                                          -------    ------
Basis differences in property,
     plant and equipment............................      $   --    $    625
Accrued interest expense on the Notes...............          --       7,826
Company's United States tax net operating
     loss carryforward..............................      $1,189          --
Tax net operating loss carryforward of
     consolidated foreign subsidiaries(1)...........       4,165      25,539
                                                          ------    --------
Deferred tax asset..................................       5,354      33,990
Valuation reserve...................................      (5,354)    (33,990)
                                                          ------    --------
Deferred tax asset, net.............................      $  --     $     --
                                                          ======    ========

(1) For Australian income tax purposes,  the net operating loss carryforward may
    be  limited in the event of a change in control of Austar or a change in the
    business.

     The  difference  between  income  tax  expense  provided  in the  financial
statements and the expected  income tax expense  (benefit) at statutory rates is
reconciled as follows:
<TABLE>
<CAPTION>

                                                                                   For the Years Ended
                                                                                        December 31,
                                                                             --------------------------------
                                                                                1994        1995       1996
                                                                             --------    --------    --------
<S>                                                                          <C>         <C>         <C>

Expected income tax expense (benefit) at statutory rates...................  $  (653)    $(6,721)    $(34,315)
Tax effect of permanent and other differences:
   Book/tax basis differences associated with foreign equity investments...      396       6,388        2,111
   Amortization of licenses................................................      --          157          625
   Amortization of outside basis differences...............................      --           --        1,324
   Non-deductible entertainment............................................      --          222          139
   Effect of net book operating losses not recognized (recognized).........      257         (85)      29,981
   Other...................................................................      --           39          135
                                                                             -------    --------     --------
Total income tax expense (benefit).........................................  $  --      $    --      $     --
                                                                             =======    ========     ========
</TABLE>

                                       54

<PAGE>


11.   REVENUES BY GEOGRAPHIC AREA

     The following table sets forth the Company's revenue by geographic area:

                                                 For the Years Ended
                                                      December 31,
                                           ---------------------------------
                                             1994         1995       1996
                                           -------      -------     ------

AUSTRALIA
   Austar................................ $    --       $  --       $21,244
   United Wireless.......................      --            1          110
NEW ZEALAND
   Saturn................................      --          --           110
TAHITI
   Telefenua.............................      --        1,882        3,513
                                           -------      ------      -------
                                           $   --       $1,883      $24,977
                                           =======      ======      =======

12.   COMMITMENTS

     Austar has license fees payable annually as follows:

                    1997...........................................    $ 2,629
                    1998...........................................      2,629
                    1999...........................................      2,629
                    2000...........................................      2,338
                    2001 and thereafter............................      1,021
                                                                       -------
                                                                       $11,246
                                                                       =======

        Austar has capital lease obligations as follows:

                    1997...........................................    $ 1,327
                    1998...........................................      1,753
                    1999...........................................      2,151
                    2000...........................................        113
                    2001 and thereafter............................         47
                                                                       -------
                                                                         5,391
                    Future finance charges.........................       (869)
                                                                      --------
                                                                      $  4,522
                                                                      ========
      Austar has operating lease obligations as follows:

                   1997............................................     $2,714
                   1998............................................      2,491
                   1999............................................      1,983
                   2000............................................      1,707
                   2001 and thereafter.............................      3,466
                                                                       -------
                                                                       $12,361
                                                                       =======

     During 1994, CTV and STV entered into franchise  agreements with Australis.
The  agreements  carry  15-year  terms and may be extended for an  additional 10
years.  The agreements  provide for an exclusive  license and franchise for MMDS
and  satellite  services and a  non-exclusive  license and  franchise  for cable
services for  all franchisor services including uplink and programming including


                                       55

<PAGE>

programming  including  Channel  [V] (a 24 hour  music  video  channel),  Arena,
Showtime,  Nickelodeon,  TV1,  Encore,  Discovery  and Fox Sports  (the  "Galaxy
Package").

     Under the agreements,  minimum payments are due, which include service fees
based on varying  percentages of net revenues as defined in the  agreement,  and
subscription levies which are dependent on the number of subscribers.

     Austar has secured, beginning in July 1997, for a five-year period a 54 MHz
transponder  capable of broadcasting  between 10 and 15 digital  channels on the
Optus Vision Pty Limited ("Optus") satellite that currently transmits the Galaxy
Package,  and pursuant to an agreement  with  Australis has the right to deliver
such  programming to its customers  through the Galaxy system.  The Company will
pay  approximately  $480 per month in satellite service fees under its agreement
with Optus. Satellite fees payable annually are as follows:

          1997..................................................... $ 2,880
          1998.....................................................   5,760
          1999.....................................................   5,760
          2000.....................................................   5,760
          2001.....................................................   5,760
          2002.....................................................   2,880
                                                                    -------
                                                                    $28,800
                                                                    =======

     Although  Austar's  franchise  agreements  were formerly  exclusive for all
multi-channel  television  including MMDS and cable television  operations,  the
Company and Austar have recently  agreed to allow Foxtel  Management Pty Limited
("Foxtel") to carry the Galaxy  programming  package on Foxtel's  wireline cable
television  systems  throughout  Australia.  This agreement provides that Austar
will be compensated for any Foxtel subscriber in its franchise area in an amount
equal to the profit margin Austar would have received if it had sublicensed such
programming to Foxtel (the "Australis Arrangement").

13.  CONTINGENCIES

     In October 1996, a complaint was served on UIH by an individual who claimed
to have worked with UIH in connection  with the acquisition by Austar of certain
of  its  licenses  claiming  that  UIH  owes  him a  12.5%  equity  interest  in
unspecified  subsidiaries  of  UIH  in  consideration  of  services  purportedly
provided.  This complaint,  seeking an unspecified amount of damages, is pending
in a civil court in Melbourne, Australia. UIH intends to vigorously defend these
claims, which UIH believes are without merit.

     On November 6, 1996,  Austar filed a complaint in the Supreme  Court of New
South Wales, Commercial Division, seeking an injunction to prevent (i) Australis
from transferring its satellite  delivery systems and associated  infrastructure
to its joint venture with Optus and (ii) Optus from using such infrastructure to
deliver DTH services in Austar's  franchise area. Austar believes that using the
infrastructure by any entity other than Austar for the provision of DTH services
within  Austar's  franchise  areas  violates  the  terms of  Austar's  franchise
agreement with Australis which granted Austar an exclusive license and franchise
to use  the  infrastructure  within  its  franchise  areas.  Austar  is  seeking
injunctive relief or, in the alternative, damages associated with this violation
of its franchise agreements.

     On December 6, 1996,  Australis filed counterclaims  against Austar and the
Company alleging generally that Austar and the Company breached implied terms of
the Australis Arrangement by seeking such injunctive relief. In addition,  Optus
claims that the  exclusive  nature of  Austar's  franchise  agreements  violates
Australia's  Trade Practices Act. The Company  intends to vigorously  defend its
position.

                                       56

<PAGE>


    Australis,  Austar's primary supplier of programming,  is engaged in a rapid
roll-out of service  that has required a  significant  amount of capital and has
strained its liquidity.  Australis has recently closed private offerings of debt
and equity  securities  that  Australis  announced  would enable it to carry its
business  through to cash flow positive.  If such financing is not sufficient to
satisfy  Australis'  long-term  capital  needs,  Australis  may have  difficulty
meeting  contractual  obligations  with  respect  to the  four  Galaxy  channels
distributed  directly by  Australis.  The Company  believes that if Austar is no
longer  able to obtain the four Galaxy  channels  provided  by  Australis  on an
exclusive basis and it were required to seek replacement  programming,  it would
have access to the same  programming  directly  from the  suppliers  of the four
Galaxy  channels or sufficient  alternative  programming on  competitive  terms.
There  can be no  assurance,  however,  that  this  would  be the  case  and the
inability of Austar to procure the same or suitable  alternative  programming at
competitive  rates and on an exclusive  basis in its service  areas could have a
material adverse effect on the Company.

14.  PRO FORMA INFORMATION

    The following  unaudited pro forma  information  for the year ended December
31,  1995  gives  effect to the  acquisitions  of the  additional  50%  economic
interests in Austar,  the disposition of the 25% interest in XYZ  Entertainment,
the  acquisition  of the  additional  50%  economic  interest  in Saturn and the
acquisition  of United  Wireless as if each had occurred on January 1, 1995. The
pro forma 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  date.  The pro forma  adjustments  are based  upon  currently
available  information and upon certain assumptions that management believes are
reasonable under current circumstances.
<TABLE>
<CAPTION>

                                                                           For the Year Ended
                                                                            December 31, 1995
                                                 ---------------------------------------------------------------------
                                                                                                   United
                                                               Austar         XYZ      Saturn     Wireless      Pro
                                                   Actual  Transaction(1)  Sale (2) Purchase(3)  Purchase(4)   Forma
                                                   ------  -------------   -------- -----------  ---------- ----------
<S>                                              <C>          <C>         <C>       <C>          <C>        <C>

Service and other revenue....................    $ 1,883      $    443    $    --   $    148     $     33   $   2,507
System operating expense.....................     (3,230)         (793)        --       (863)        (687)     (5,573)
System selling, general and administrative
    expense..................................     (2,482)       (6,681)        --     (1,502)        (341)    (11,006)
Corporate general and administrative
    expense..................................       (920)           --         --         --           --        (920)
Depreciation and amortization expense........     (1,003)       (4,259)        --       (997)         (86)     (6,345)
                                                 -------      --------    -------   --------      -------    --------

     Net operating loss......................     (5,752)      (11,290)        --     (3,214)      (1,081)    (21,337)

Equity in losses of affiliated companies.....                    3,212      4,132      1,438           --      (7,597)
                                                 (16,379)
Interest, net................................        127         1,230         --         --           --       1,357
Other, net...................................      4,771           244     (4,132)       (55)           1         829
                                                 --------     --------    -------   --------      -------    --------

     Net loss................................   $(17,233)     $ (6,604)   $    --   $ (1,831)     $(1,080)   $(26,748)
                                                ========      ========    =======   ========      =======    ========
</TABLE>
(1) Amounts  represent  Austar's  actual  operating  results  for the year ended
    December  31,  1995 as if Austar had been  consolidated  for the entire year
    except for "Equity in losses of affiliated  companies"  which represents the
    elimination of the Company's share of Austar's losses  recognized during the
    year, and except for a portion of "Depreciation  and  amortization  expense"
    totaling  $2,988  which  represents  amortization  related  to the  goodwill
    recorded in connection  with the acquisition of the additional 40% effective
    economic interest, amortized over 15 years on a straight-line basis.


                                       57

<PAGE>

 (2)Represents  elimination of the gain on sale of XYZ and 25% of the equity in
    losses  previously recognized.
 (3)Amounts  represent  Saturn's  actual  operating  results  for the year ended
    December  31,  1995 as if Saturn had been  consolidated  for the entire year
    except for "Equity in losses of affiliated  companies"  which represents the
    elimination of the Company's share of Saturn's losses  recognized during the
    year  ended and  except  for a portion  of  "Depreciation  and  amortization
    expense,"  totaling $612 which represents  amortization of goodwill recorded
    in connection  with the purchase of the  additional  50% interest in Saturn,
    which is amortized over 15 years on a straight-line basis.
 (4)Represents  actual  operating  results of United  Wireless  during the eight
    months ended August 1995,  the period prior to the Company's  acquisition of
    its 100% interest.



                                       58
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

MANAGEMENT

     The directors  and executive  officers of the Company and the key employees
of the  operating  companies and their ages and  positions  with the  respective
company are set forth below.

     Name                             Age     Position
     ----                             ---     --------

     The Company:
          Gene W. Schneider.........   70     Chairman of the Board
          Michael T. Fries..........   34     President, Chief Executive
                                                Officer and Director
          J. Timothy Bryan..........   36     Chief Financial Officer and
                                                Director
          John C. Porter............   39     Chief Operating Officer
          Donald F. Hagans..........   50     Chief Development Officer
          Kevin Ong.................   41     Vice President--Finance
          Mark L. Schneider.........   41     Director

     Operating Companies:
          Robert G. McRann..........   62     Managing Director, Austar
          David C. P. Banks.........   45     Chief Operating Officer, Austar
          Bruce Mann................   41     Director of Sales and Marketing,
                                                Austar
          Robert J. Birrell.........   34     Finance Director, Austar
          Jack B. Matthews..........   45     Chief Executive Officer, Saturn
          Michel Laurent............   44     Managing Director, Telefenua
          Joseph P. Gatto, Jr. .....   50     Chief Executive Officer, United
                                                Wireless

     Senior management of the Company, initially Messrs. Porter and Hagans, will
participate in a non-voting, advisory role to the Board of Directors.

DIRECTORS AND EXECUTIVE OFFICERS

     GENE W.  SCHNEIDER  has served as Chairman of the Board of Directors of the
Company and UAP since their respective formations.  He has served as Chairman of
the Board of Directors of UIH since May 1989 and UIH's Chief  Executive  Officer
since October 1995. Mr.  Schneider was, until November 1991,  Chairman of United
Artists  Entertainment  Company, the third-largest U.S. cable television company
and the  largest  theater  owner in the world.  He was  founder of United  Cable
Television Corporation ("United Cable") in the early 1950's and, as its Chairman
and Chief Executive Officer, built United Cable into the eighth-largest multiple
system  operator  prior to merging  with United  Artists  Entertainment  Company
("United  Artists") in 1989. He has been active in cable television  affairs and
has served on numerous National Cable Television Association ("NCTA") committees
and special  projects  since NCTA's  inception in the early 1950's.  He also has
served on the boards of directors of several other  companies,  including Turner
Broadcasting Corporation.

     MICHAEL T. FRIES has served as Chief Executive Officer of the Company since
November  1996,  as  President  of the Company  and UAP since  their  respective
formations,  and as a Director of the Company and UAP since  November  1996. Mr.
Fries was President of UIH  Asia/Pacific,  Inc., the  predecessor to the Company
previously  responsible  for all  operating  and  development  activities of the
Company in the Asia/Pacific region. Prior to assuming that position in 1995, Mr.
Fries served as Senior Vice President, Development, of UIH, in which capacity he
was  responsible  for managing  UIH's  worldwide  acquisitions  and new business
development  activities  since March 1990,  including  UIH's  expansion into the
Asia/Pacific  market.  From 1985 to 1990,  Mr. Fries was employed by PaineWebber
Incorporated  (New  York)  where he spent  approximately  one year in the firm's


                                       59

<PAGE>

venture  capital  group  and four  years  in the  investment  banking  division,
specializing  in domestic and  international  transactions  for companies in the
media and telecommunications industry.

     J. TIMOTHY BRYAN is the Chief Financial  Officer and a Director of both the
Company and UAP, positions he has held since December 1996. Effective January 1,
1997,  he became the Chief  Financial  Officer of UIH.  Prior to joining  UIH in
December  1996,  Mr. Bryan served as Vice  President of Finance and Treasurer of
Jones Financial Group,  Inc., an affiliate of Jones  International,  Limited and
Jones  Intercable,  Inc.  from 1993 to January  1996,  and as Treasurer of Jones
Intercable,  Inc.  from 1990 to 1993.  From 1988 through  1990, he served in the
Communications  Division of the Corporate  Banking  Department of NationsBank of
North Carolina and from 1983 to 1988,  worked at Mellon Bank  Corporation in the
Corporate and International Banking Departments.

     JOHN C. PORTER has served as Chief  Operating  Officer of the Company since
November 1996 and Chief Operating  Officer of Austar since April 1995,  where he
directly managed the technical, operating and administrative aspects of Austar's
multi-channel  systems and was the principal  executive in the field responsible
for the launch of MMDS and cable systems,  as well as Austar's DTH business.  As
Chief Operating Officer of the Company,  Mr. Porter will continue to participate
in the  management  and  operations of Austar,  along with the  Company's  other
operating companies. Prior to joining Austar, Mr. Porter spent the last 10 years
serving in various  capacities  for Time  Warner  Cable,  a  subsidiary  of Time
Warner, Inc. Most recently, Mr. Porter acted as the Division President,  Central
Ohio, a 170,000 subscriber,  400 employee division. Mr. Porter has over 16 years
of management experience in the U.S.
multi-channel television industry.

     DONALD F. HAGANS has served as Chief Development Officer of the Company and
UAP since their  respective  formations and was a Regional Vice President of UIH
Asia/Pacific  Inc.,  from January 1994 to November  1996.  Mr.  Hagans serves as
chairman of Austar and oversees UIH's interests in XYZ and United Wireless. From
January 1989 until  joining UIH in January  1994,  Mr. Hagans was a principal in
the firm, Hagans Ziegler,  a private  investment group  specializing in domestic
and international  ventures.  Mr. Hagans also acted as the Legislative  Director
for Texas Senator Phil Gramm,  participated extensively in the activities of the
International  Bank  Subcommittee  of the U.S.  Senate and  practiced  law as an
attorney in a private practice.

     KEVIN ONG has served as Vice  President--Finance  of the Company  since May
1996.  Prior to joining  UIH,  Mr. Ong  served in various  financial  and senior
management  positions with U.S. and  international  cable television  operators.
From 1988 to 1994,  Mr. Ong served as Director with Jones  Intercable,  Inc. and
Treasurer  of  Jones  International,  Limited,  where  he  was  responsible  for
financial  operations and various accounting  functions.  From 1977 to 1988, Mr.
Ong was  employed  at KPMG  Peat  Marwick,  attaining  an audit  senior  manager
position.

     MARK L.  SCHNEIDER has been a Director of the Company since  November 1996.
Mr. Schneider is also a Director of UIH and UAP. In December 1996, Mr. Schneider
became  Executive Vice President of UIH. In May 1996, Mr. Schneider became Chief
of Strategic  Planning and Operational  Oversight of UIH. He served as President
of UIH from July 1992 until March 1995 and was Senior Vice President of UIH from
May 1989 until July 1992. During these periods Mr. Schneider was responsible for
all  of  its  international  multi-channel  television  system  and  programming
activities.  Prior to joining  UIH,  he served as Vice  President  of  Corporate
Development at United Cable from March 1987 until May 1989. In that position, he
was responsible for United Cable's  acquisition and development of international
cable television systems and other businesses.

     Gene W. Schneider and Mark L. Schneider are father and son. No other family
relationships  exist  between any other  executive  officers or directors of the
Company.


                                       60
<PAGE>

OTHER MANAGEMENT

     Senior  management  of  the  operating   companies  include  the  following
individuals:

     ROBERT G. MCRANN has served as Managing  Director of Austar  since  joining
that company in March 1995. Mr. McRann is responsible  for the management of all
aspects  of  Austar's  MMDS,  DTH  and  cable  television  operations  including
engineering,  customer service,  marketing and administrative functions. For the
twelve years prior to joining Austar, Mr. McRann served as Senior Vice President
responsible for Cox Cable's San Diego system,  which had annual revenues in 1995
of $140 million and a subscriber  base of over  325,000.  Mr. McRann has over 18
years of management experience in the U.S. multi-channel television industry.

     DAVID C. P. BANKS has  served as Chief  Operating  Officer of Austar  since
joining  Austar in January  1997.  Mr.  Banks  directly  manages the  technical,
operating and administrative aspects of Austar's multi-channel systems. Prior to
joining  Austar and since 1994, Mr. Banks served as a regional  general  manager
for  Australis  Media  Limited,  and a key member of the  management  team which
launched pay TV into the Australian  market for Australis  Media  Limited.  From
1985 until December 1993, Mr. Banks served at various  management  positions for
eight years at Tyco/Wormald  Group, the world's largest fire protection and flow
control  company  with  annual  sales in excess of $3 billion.  Mr.  Banks' most
recent  position  with  Tyco/Wormald  Group  was  Director-Contracting  at  Tyco
Laboratories  Asia  Pacific,  where he was  responsible  for 1500  employees and
annual sales of A$170 million.

     BRUCE  MANN has  served as Sales and  Marketing  Director  of Austar  since
joining that company in April 1995. Mr. Mann is responsible  for the development
of Austar's marketing and sales techniques and has played a critical role in the
successful implementation of these plans throughout Austar's franchise area. Mr.
Mann has been involved in various  marketing  capacities of  communications  and
entertainment  companies  for the past 15 years  including  eight  years at Time
Warner Cable as Director of Marketing-Brooklyn,  Queens. From 1994 until joining
Austar,  Mr. Mann  served as  President,  National  Division,  of Cross  Country
Wireless,  Inc., a U.S. provider of wireless multi-channel  television services.
From 1991 to 1994,  Mr. Mann served as Vice  President-Marketing  of  Washington
Redskins/Jack Kent Cooke Stadium, Inc., specializing in sports and entertainment
related promotion, advertising and marketing.

     ROBERT J. BIRRELL has served as Finance  Director of Austar  since  January
1996 and has been involved with the  development  aspects of the Austar business
since  April 1994.  Mr.  Birrell is  responsible  for the  accounting,  finance,
inventory  control,  investor  relations and legal aspects of Austar's business.
Prior to joining Austar,  Mr. Birrell has been involved with various  activities
in large scale retailing in the Australian  marketplace.  From 1985 to 1993, Mr.
Birrell served as Treasurer of Industrial  Equity Limited,  an Australian  based
investment  company,  and prior to that as Manager  Arbitrage of Macquarie  Bank
Limited.  Mr.  Birrell has over 14 years  experience in the banking and business
environment in Australia.

     JACK B.  MATTHEWS  has served as Chief  Executive  Officer of Saturn  since
joining that company in January 1995. Mr. Matthews is responsible for technical,
operating and  marketing  aspects of the  business.  Mr.  Matthews has served in
various  general  management   capacities  with  several  U.S.  multiple  system
operators including, Cox Cable Communications and Continental Cablevision.  From
August 1993 until joining Saturn,  Mr. Matthews was the Vice  President-Sales  &
Marketing of Arrowsmith Technologies,  a cable technology company which develops
and installs advanced field operations management and operations support systems
for the cable  television  industry.  From 1990 to 1993,  Mr.  Matthews  was the
President of COMM/ONE, a entrepreneurial  business marketing sophisticated video
and  voice  processing  systems.   Mr.  Matthews  has  over  14  years  of  U.S.
multi-channel television industry experience.

     MICHEL LAURENT has served as Managing Director of Telefenua since May 1995.
Since joining  Telefenua,  Mr.  Laurent has been  responsible  for the launch of
Telefenua's  service and rapid  increase in its customer  base.  From 1991 until
joining  Telefenua,  Mr. Laurent held various positions with Videotron  Limited,


                                       61

<PAGE>

the largest cable television and  telecommunications  company in the province of
Quebec and the second largest  multiple system  operator in Canada.  Mr. Laurent
most recently  served as Vice President of Operations for  Videotron's  Montreal
division and was responsible for technical,  operating and marketing  aspects of
the business. Mr. Laurent is fluent in French and English.

     JOSEPH  P.  GATTO,  JR.  has been the  Chief  Executive  Officer  of United
Wireless  since May 1996. Mr. Gatto was the Vice  President--Development  of UAP
focusing on  telecommunications  business  development  within the  Asia/Pacific
region.  Prior to joining  UIH,  Mr.  Gatto was the Director of Sales of Plexsys
International  Corp.,  a  cellular  system  network  manufacturer,  where he was
responsible for worldwide  sales. Mr. Gatto has also served in various sales and
marketing  capacities  for U.S.  and  Asian  telecommunications  and  technology
companies.

ITEM 11.   EXECUTIVE COMPENSATION

     All of the  officers  of the  Company are  employed  by UIH,  the  majority
indirect stockholder of the Company.  The Company pays no separate  compensation
to these  officers;  however,  the  Company  and UIH are  parties to the 10-year
management  agreement (the "UIH  Management  Agreement"),  pursuant to which the
Company pays UIH a management fee for certain services provided to the Company.

     Most of the members of senior  management  of Austar,  Saturn and Telefenua
are U.S. or Canadian  expatriates who are employed by UIH and have been seconded
to the  respective  operating  companies.  The  respective  operating  companies
reimburse UIH for  compensation  paid to these  employees  pursuant to Technical
Assistance Agreements between UIH and each of Austar, Saturn and Telefenua. Gene
W. Schneider,  the Company's Chairman,  is also the Chairman and Chief Executive
Officer of UIH and spends  only a portion of his time on matters  pertaining  to
the Company and its  operations.  The Chief  Executive  Officer of the  Company,
Michael  T.  Fries,   is  also  an  officer  and  employee  of  UIH  and  spends
approximately  75% of his time on  matters  pertaining  to the  Company  and its
operations.  J. Timothy Bryan, the Company's Chief Financial Officer, is also an
officer  and  employee  of UIH and spends  only a portion of his time on matters
pertaining to the Company and its operations. The services of Messrs. Schneider,
Fries and Bryan,  will be provided to the Company pursuant to the UIH Management
Agreement.  While the Company and its  operating  companies do not reimburse UIH
directly  for a  specified  portion  of the  compensation  UIH  pays to  Messrs.
Schneider,  Fries and Bryan,  the Company pays a management fee to UIH under the
UIH  Management  Agreement  for  certain  services,  including  those of Messrs.
Schneider,  Fries and Bryan,  performed on behalf of the Company.  The following
chart summarizes the compensation  paid during the years ended December 31, 1995
and 1996 to the  Company's  Chief  Executive  Officer  and the four most  highly
compensated executive officers of the Company and the operating companies.


                                       62

<PAGE>
<TABLE>
<CAPTION>
                                        SUMMARY COMPENSATION TABLE

                                                                           Long Term
                                                                          Compensation
                                                                           Awards(1)
                                                                           Securities
                                                                           Underlying         All Other
                                         Annual Compensation               Options(#)       Compensation(2)
                                  ------------------------------------    -----------       ---------------
Name and Principal Position       Year          Salary         Bonus
---------------------------       ----         -------       ---------
<S>                               <C>         <C>            <C>            <C>                   <C>

Gene W. Schneider(3).........     1996        $346,827       $      -       100,000               $4,750
   CHAIRMAN                       1995         324,577              -        40,000                4,620

Michael T. Fries(3)..........     1996         230,577              -        10,000                4,750
   CHIEF EXECUTIVE OFFICER        1995         212,769              -        35,000                4,620

Robert G. McRann.............     1996         221,423       79,377(4)            -                4,750
   MANAGING DIRECTOR, AUSTAR      1995         161,538       24,279(4)            -                3,836

John C. Porter(5)............     1996         195,986       77,911(6)            -                4,750
   CHIEF OPERATING OFFICER        1995         138,750       25,748(6)            -                3,468

Donald F. Hagans.............     1996         199,038         35,000             -                    -
   VICE PRESIDENT--AUSTRALIA      1995         175,000             -         12,000                    -

</TABLE>
(1) Options  with  respect to shares of Class A Common  Stock of UIH  granted to
    such executives as officers and employees of UIH.
(2) Consists of matching employer contributions made by UIH under UIH's Employee
    401(k)  Plan.
(3) Total  compensation  paid  by UIH for  duties  performed with respect to the
    Company and other operations of UIH.
(4) Includes  $29,985 and $24,279 of additional cash  compensation  relating to
    the overseas assignment of Mr. McRann during 1996 and 1995, respectively.
(5) Mr. Porter became an employee of UIH on March 27, 1995.
(6) Includes $35,509 and $25,748 of additional cash compensation relating to the
    overseas assignment of Mr. Porter during 1996 and 1995, respectively.

     Messrs. Schneider, Fries and Hagans, as employees and officers of UIH, have
been granted options to acquire stock of UIH. Messrs. McRann and Porter have not
been  granted any options by UIH.  The  following  tables set forth  information
concerning  options to purchase  shares of UIH Class A Common  Stock  granted to
these  executives  in the last fiscal  year as well as the value of  unexercised
options held by such  executives as of December 31, 1996. No such  executive has
exercised any options during the fiscal year ended December 31, 1996.


                                       63
<PAGE>
<TABLE>
<CAPTION>
                                   OPTION GRANTS IN LAST FISCAL YEAR(1)
                                                                                     Potential Realizable
                                                                                       Value at Assumed
                                                                                        Annual Rates of
                                                                                          Stock Price
                                                                                       Appreciation for
                                          Individual Grants                             Option Term(2)
                          ----------------------------------------------------    -------------------------
                                          Percentage
                                           of Total
                           Number of        Options
                          Securities      Granted to
                          Underlying       Employees   Exercise
                            Options       in Fiscal     Price      Expiration
Name                      Granted (#)        Year       ($/Sh)         Date          5% ($)        10% ($)
----                      -----------        ----       ------         ----          ------        -------
<S>                          <C>             <C>        <C>           <C>          <C>          <C>
Gene W. Schneider.....       100,000         15.27      $12.75        12/20/06     $801,841     $2,032,022
Michael T. Fries......        10,000          1.53       12.75        12/20/06       80,184        203,202
Robert G. McRann......             -             -           -               -            -              -
John C. Porter........             -             -           -               -            -              -
Donald F. Hagans......             -             -           -               -            -              -

(1) Stock options  granted are for UIH Class A Common  Stock.  The stock options
    granted during the last fiscal year become  exercisable  with respect to 25%
    of the shares covered  thereby after the first  anniversary of the effective
    date of the grant and with  respect to the  remaining  75% in equal  monthly
    increments over the three-year period thereafter.  The initial 25% of all of
    the options  listed in this table becomes  exercisable on December 20, 1997.
    Vesting of the options  granted is  accelerated  upon a change of control of
    UIH as defined in UIH's stock option plan.
(2) The potential  gains shown are net of the option  exercise  price and do not
    include the effect of any taxes associated with exercise.  The amounts shown
    are  for  the  assumed  rates  of  appreciation   only,  do  not  constitute
    projections of future stock price  performance,  and may not  necessarily be
    realized.  Actual  gains,  if any, on stock option  exercises  depend on the
    future performance of the Common Stock, continued employment of the optionee
    through the term of the options, and other factors.
</TABLE>

<TABLE>
<CAPTION>
           AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
                             YEAR-END OPTION VALUES

                                                               Number of
                                                               Securities                     Value of
                                                               Underlying                   Unexercised
                                                               Unexercised                  In-the-Money
                                                                 Options                      Options
                             Shares                           at FY-End (#)                at FY-End ($)
                          Acquired on      Value              Exercisable/                  Exercisable/
Name                      Exercise (#)  Realized ($)          Unexercisable                Unexercisable
----                      ------------  ------------          -------------                -------------
<S>                            <C>           <C>             <C>                                 <C>
Gene W. Schneider......        -             -               143,125/146,875                     -
Michael T. Fries.......        -             -               115,624/49,375                      -
Robert G. McRann.......        -             -                      -                            -
John C. Porter.........        -             -                      -                            -
Donald F. Hagans.......        -             -                64,500/27,499                      -
</TABLE>


                                       64
<PAGE>


AGREEMENTS WITH EMPLOYEES

     Many  of the  employees  serving  as  senior  management  in the  Company's
operating companies are parties to employment agreements typically with terms of
three to five years.  The  agreements  generally  provide  for a specified  base
salary  as well as a bonus set at a  specified  percentage  of the base  salary,
which bonus is based on the performance of the respective  company and employee.
The agreements  often provide for the grant of an incentive  interest equal to a
percentage  of the residual  equity  value of the  respective  company  which is
typically  defined as the fair market value of the business less net liabilities
and a reasonable return on shareholders'  investment.  The employment agreements
generally also provide for cost of living  differentials,  relocation and moving
expenses,  automobile  allowances  and  income  tax  equalization  payments,  if
necessary,  to keep the  employee's tax liability the same as it would be in the
United States.

     Of the persons identified in the Summary Compensation Table, Mr. McRann has
such an employment  agreement  with UIH.  This  five-year  employment  agreement
provides  for an  annual  base  salary of  $225,000  per  year,  to be  reviewed
annually,  with eligibility for an annual bonus of up to 30% of the base salary,
based  on  the  performance  of  Austar  as  well  as  Mr.  McRann's  individual
performance.  Mr. McRann was also granted an incentive interest, that vests over
a four year  period,  equal to .75% of the  "residual  equity  value" of Austar,
calculated  as (i) ten times EBITDA from the prior 12 months,  less (ii) the sum
of  Austar's  net  liabilities  and an  amount  equal to the  total  shareholder
investment in Austar, plus a 12% compounded annual return on such investment. In
the event of a change of control of Austar,  the  residual  equity value will be
the greater of (x) the amount  calculated above or (y) the net gross proceeds to
the  shareholders  from the event that  causes the  change of  control,  less an
amount  equal  to  the  total  shareholder  investment  in  Austar,  plus  a 12%
compounded  annual return on such  investment.  Austar  reimburses UIH under the
Technical Assistance Agreement for employment costs associated with Mr. McRann.

COMPENSATION OF DIRECTORS

     All of the directors of the Company are also  directors or officers of UIH,
the  majority  stockholder  of the  Company,  or officers of the  Company.  They
receive no separate cash compensation for serving as directors of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Company's Board of Directors has no separate Compensation  Committee as
the Company currently does not have any employees. UIH's Compensation Committee,
none of the members of which are employees or executive officers of the Company,
determine the compensation of the Company's executive officers in their capacity
as employees of UIH. Directors or executive officers of the Company may serve on
the Boards of  Directors  of Austar,  Saturn,  Telefenua  and XYZ and as part of
their  duties may  determine  the  compensation  of those  operating  companies'
employees.  None of the  employees of such  operating  companies,  however,  are
directors of the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION

     The Company's  Articles of Incorporation  eliminates the personal liability
of its directors to the Company and its  stockholders  for monetary  damages for
breach  of  the  directors'  fiduciary  duties  in  certain  circumstances.  The
Company's  Articles of  Incorporation  and Bylaws provide that the Company shall
indemnify its officers and directors to the fullest extent permitted by law. The
Company believes that such indemnification  covers at least negligence and gross
negligence on the part of indemnified parties.

     The Company has entered into  agreements  to indemnify  its  directors  and
officers,  in  addition to the  indemnification  provided  for in the  Company's
Articles of  Incorporation  and Bylaws.  These  agreements  require the Company,
among other  things,  to  indemnify  the  Company's  directors  and officers for
certain expenses (including attorney's fees),  judgments,  fines,  penalties and
settlement   amounts   incurred  by  any  such  person  in  certain  actions  or
proceedings, including actions by or in the right of the Company, arising out of


                                       65

<PAGE>

such person's  services as a director or officer of the Company,  any subsidiary
of the Company or any other company or  enterprise to which the person  provides
services  at the  request  of the  Company.  The  Company  believes  that  these
agreements  are necessary to attract and retain  qualified  persons as directors
and officers.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     UAP owns 487  (97.4%) of the 500 shares of issued  and  outstanding  common
stock of the Company. The remaining 13 shares are owned by Kiwi, the entity from
which the Company  acquired  the  remaining  50%  interest  in Saturn.  Kiwi was
granted a one-time conversion right to exchange its 2.6% interest in the Company
for an equivalent interest in the common stock of UAP.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH UAP AND UIH

     The Company is currently a direct,  majority  owned  subsidiary of UAP, and
prior to the May 1996 Offering,  its operations were funded by UIH, UAP's parent
corporation.  Immediately prior to the May 1996 Offering,  UIH Australia,  Inc.,
UIH   Australia  II,  and  UIH   Australia   III,   Inc.  (the  "UIH   Australia
Subsidiaries");  UIH New  Zealand,  Inc.  (the  "UIH New  Zealand  Subsidiary");
UIH-SFCC,  Inc. (the "UIH Tahiti Subsidiary");  and UIH Australia Holdings, Inc.
were  merged  with  and into  the  Company  (the  "Merger").  The UIH  Australia
Subsidiaries held UIH's interest in Austar,  the UIH New Zealand Subsidiary held
UIH's  interest  in Saturn,  the UIH Tahiti  Subsidiary  held UIH's  interest in
Telefenua,  UIH Australia Holdings,  Inc. held UIH's interest in United Wireless
(the "UIH  Wireless  Subsidiary")  and the  Company  held UIH's  interest in XYZ
Entertainment.  Each  of the UIH  Australia  Subsidiaries,  the UIH New  Zealand
Subsidiary,  the UIH Tahiti  Subsidiary,  the UIH  Wireless  Subsidiary  and the
Company were initially capitalized with $100 and 100 shares of common stock were
issued to UIH, the sole shareholder of such corporations. During the years ended
December 31, 1994,  1995 and 1996, UIH contributed (i) a total of $19.7 million,
$50.8 million and none, respectively,  to the UIH Australia Subsidiaries,  which
amounts were used to fund the UIH Australia Subsidiaries'  investment in Austar;
(ii) a total  of $2.5  million,  none  and  none,  respectively,  to the UIH New
Zealand  Subsidiary,  which  amounts  were  used  to fund  the  UIH New  Zealand
Subsidiary's investment in Saturn, (iii) a total of none, $6.9 million and none,
respectively,  to the UIH Tahiti Subsidiary, which amounts were used to fund the
UIH Tahiti Subsidiary's investment in Telefenua;  (iv) a total of none, $911,000
and $875,000,  respectively,  to the UIH Wireless Subsidiary, which amounts were
used to fund the UIH Wireless Subsidiary's investment in United Wireless and (v)
a total of  $629,000,  $5.1  million  and  $1.8  million,  respectively,  to the
Company,  which  amounts  were  used to fund  the  Company's  investment  in XYZ
Entertainment.  No  additional  shares of capital  stock  were  issued to UIH in
connection with these capital contributions. During the years ended December 31,
1994,  1995 and 1996, UIH made bridge loans (i) totaling none,  $5.4 million and
$19.6 million, respectively, to certain of the UIH Australia Subsidiaries, which
amounts  in turn were used to make  loans to  Austar;  (ii)  totaling  none,  $2
million and $2.8 million, respectively, to the UIH New Zealand Subsidiary, which
amounts in turn were used to make loans to Saturn; and (iii) totaling none, $6.8
million and $600,000,  respectively, to the UIH Tahiti Subsidiary, which amounts
in turn were used to make loans to  Telefenua.  These  bridge  loans are payable
upon demand and bear interest at rates  ranging from 9.25% to 14% per annum.  At
the time of the May 1996  Offering,  the Company  acquired  $25 million of these
bridge loans and the remaining  portion of the bridge loans were  contributed to
the Company.  See "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations -- Liquidity and Capital Resources."

     As a result of the Merger, all of the issued and outstanding  capital stock
of the UIH  Australian  Subsidiaries,  the UIH New Zealand  Subsidiary,  the UIH
Tahiti Subsidiary and the UIH Wireless Subsidiary were canceled.


                                       66

<PAGE>


         In connection with the Saturn Purchase, the Company declared and paid a
dividend  of  387  shares  of  common  stock  to UAP  and  issued  to the  other
shareholder of Saturn,  Kiwi, 13 shares of common stock,  which represented 2.6%
of the Company's issued and outstanding common stock.

     The Company and UIH are parties to UIH  Management  Agreement,  pursuant to
which UIH agreed to  continue  to perform  certain  administrative,  accounting,
financial  reporting and other  services for the Company,  which has no separate
employees of its own.  Pursuant to the UIH Management  Agreement,  UIH is paid a
management  fee of  $750,000  for the first year of such  agreement,  which fees
shall increase on the first anniversary date of the UIH Management Agreement and
each anniversary date thereafter by 8% per year. In addition,  the Company shall
reimburse UIH for any  out-of-pocket  expenses incurred by UIH in performance of
its duties under the UIH Management  Agreement,  including  travel,  lodging and
entertainment  expenses. UIH calculated the management fee for the first year of
the UIH  Management  Agreement,  based  upon  an  estimate  of  staff  hours  to
accomplish the various administrative, accounting, financial reporting and other
services to be provided to the Company under the UIH Management  Agreement.  UIH
then  calculated  the  percentage  those  hours  constituted  of the  respective
employees'  annual work hours and multiplied  that  percentage by the employment
cost for such  employees to UIH. The Company  believes the fee payable under the
UIH  Management  Agreement to be  comparable  to the costs for such  services if
obtained  from a  non-affiliate  of UIH.  The Company  understands  that UIH has
agreed to assign its interests under the UIH Management Agreement to UAP.

     UIH and each of  Austar,  Saturn and  Telefenua  are  parties to  Technical
Assistance  Agreements,   pursuant  to  which  UIH  provides  certain  technical
assistance in connection  with such operating  companies'  design,  development,
construction,   marketing  and  operation  of  their  respective   multi-channel
television systems. In addition, pursuant to such agreements, certain members of
senior management of Austar, Saturn and Telefenua are employees of UIH that have
been  seconded  to the  respective  operating  companies.  Fees paid under these
Technical Assistance  Agreements are typically a percentage (currently 4% to 5%,
declining to 2% in future  years) of gross  revenues  generated by the operating
companies plus reimbursements for costs associated with such seconded employees.
For the year ended December 31, 1994,  Austar,  Saturn and Telefenua had accrued
fees  to  UIH  under  their  respective  Technical   Assistance   Agreements  of
approximately $89,000, $3,000 and $0, respectively.  For the year ended December
31,  1995,  Austar,  Saturn and  Telefenua  had accrued  fees to UIH under their
respective  Technical  Assistance  Agreements  of  approximately  $1.5  million,
$574,000 and $1.2 million,  respectively.  For the year ended December 31, 1996,
Austar,  Saturn and  Telefenua  had  accrued  fees  under  these  agreements  of
approximately  $648,000,  $1  million  and $2  million,  respectively.  The fees
payable to UIH under each of the Technical Assistance Agreements were negotiated
between UIH and their respective  companies and their other shareholders at such
time as UIH did not hold the majority interest in such Operating Companies.  The
Company  understands  that UIH has agreed to assign its interests  under the UIH
Management Agreement to UAP.

TAX SHARING AGREEMENT

     The Company is included as a member of UIH's  consolidated  tax return and,
is a member of the UIH consolidated  group (as long as non-UIH  ownership of the
Company does not exceed  20%).  UIH and the Company are parties to a tax sharing
agreement that defines the parties' rights and  obligations  with respect to tax
liabilities  and benefits  relating to the Company and its operations as part of
the  consolidated  group of UIH.  In  general,  UIH is  responsible  for  filing
consolidated  tax returns and paying the  associated  taxes and the Company will
reimburse  UIH for the  portion of the tax cost  relating to the Company and its
operations.


                                       67

<PAGE>

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a)(1)  Financial Statements

     Included in PART II of the Report:
<TABLE>
<CAPTION>
                                                                                           Page No.
         UIH AUSTRALIA/PACIFIC, INC.
                  <S>                                                                        <C>
                  Report of Independent Public Accountants................................   34
                  Report of Independent Auditors..........................................   35
                  Independent Auditors' Report............................................   36
                  Consolidated Balance Sheets as of December 31, 1995 and 1996............   37
                  Consolidated Statements of Operations For the Years Ended
                    December 31, 1994, 1995 and 1996......................................   38
                  Consolidated Statements of  Stockholders' Equity For the Years Ended
                    December 31, 1994, 1995 and 1996......................................   39
                  Consolidated Statements of Cash Flows For the Years Ended
                    December 31, 1994, 1995 and 1996......................................   40
                  Notes to Consolidated Financial Statements..............................   41
</TABLE>
     (a)(2)  Financial Statement Schedules

     Included in PART IV of the Report:

         (i)  Financial Statement Schedules Required to be Filed:

                  None Required

         (ii)  Separate Financial Statements and Related Schedules
<TABLE>
<CAPTION>
         CTV PTY LIMITED
                 <S>                                                                         <C>
                  Independent Audit Report................................................   72
                  Balance Sheets as of December 31, 1994 and 1995.........................   73
                  Profit and Loss Accounts for the Period Ended
                    December 31, 1994 and the Year Ended December 31, 1995................   74
                  Statements of Cash Flows for the Period Ended
                    December 31, 1994 and the Year Ended December 31, 1995................   75
                  Notes to the Financial Statements.......................................   76
</TABLE>

<TABLE>
<CAPTION>
         STV PTY LIMITED
                  <S>                                                                        <C>
                  Independent Audit Report................................................   87
                  Balance Sheets as of December 31, 1994 and 1995.........................   88
                  Profit and Loss Accounts for the Period Ended
                    December 31, 1994 and the Year Ended December 31, 1995................   90
                  Statements of Cash Flows for the Period Ended
                    December 31, 1994 and the Year Ended December 31, 1995................   91
                  Notes to the Financial Statements.......................................   92
</TABLE>


                                       68
<PAGE>
<TABLE>
<CAPTION>
         XYZ ENTERTAINMENT PTY LIMITED
                  <S>                                                                       <C>
                  Independent Auditors' Report............................................  103
                  Consolidated Statements of Operations for the Period from
                    October 17, 1994 (date of inception) to  December 31, 1994 and the
                    Years Ended December 31, 1995.........................................  104
                  Consolidated Balance Sheets as of December 31, 1995 and 1994............  105
                  Consolidated  Statements of  Shareholders'  Deficiency for the
                    Period from October 17, 1994 (date of inception) to December
                    31, 1994 and the Years Ended December 31, 1995........................  106
                  Consolidated  Statements  of Cash  Flows for the  Period  from
                    October 17, 1994 (date of  inception)  to December  31, 1994
                    and the Years Ended December 31, 1995.................................  107
                  Notes to the Consolidated Financial Statements..........................  108
</TABLE>

<TABLE>
<CAPTION>
          SATURN COMMUNICATIONS LIMITED (FORMERLY KNOWN AS KIWI CABLE COMPANY
          LIMITED)
                  <S>                                                                       <C>
                  Auditors' Report........................................................  122
                  Statement of Financial Performance for the Years Ended
                    December 31, 1994 and 1995............................................  123
                  Statement of Movements in Equity for the Years Ended
                    December 31, 1994 and 1995............................................  124
                  Statement of Financial Position as of December 31, 1994 and 1995........  125
                  Statement of Cash Flows for the Years Ended December 31, 1994
                    and 1995..............................................................  127
                  Notes to and Forming Part of the Financial Statements...................  128
</TABLE>


     (a)(3)  Exhibits

         3.1      Articles of Incorporation of the Registrant, as amended. (1)

         3.2      By-Laws of the Registrant.  (1)

         4.1      The Indenture dated as of May 14, 1996, between the Issuer and
                      American Bank National Association (1)

         4.2      The Articles of Incorporation, as amended, and By-Laws of the
                      Registrant are included as Exhibits 3.1 and 3.2.  (1)

         10.1     Purchase Agreement dated May 8, 1996, among the Issuer,
                      Donaldson, Lufkin & Jenrette Securities Corporation
                      ("DLJ") and Merrill Lynch & Co., Merrill Lynch, Pierce
                      Fenner & Smith Incorporated ("Merrill Lynch").  (1)

         10.2     Memorandum of Variation dated December 21, 1995 to the
                      Subscription and Securityholders Agreement, among United
                      International Holdings, Inc.,("UIHI"), UIH Australia, Inc.
                      ("UIHA"), Salstel Media Holdings Pty Limited ("SMH"),
                      Australis and CTV Pty Limited ("CTV").  (1)

         10.3     Memorandum of Variation dated December 21, 1995 to the
                      Subscription and Securityholders Agreement dated
                      October 12, 1994, among UIHI, UIH Australia II, Inc.
                      ("UIHI II"), Salstel Media Investment Pty Limited ("SMI"),
                       Australis and STV Pty Limited ("STV").  (1)

         10.4     Memorandum of Variation dated April 4, 1996 to the CTV
                      Securityholders Agreement, among UIHI, UIHA, Australis,
                      SMH and CTV.  (1)



                                       69

<PAGE>


         10.5     Memorandum of Variation dated April 4, 1996 to the STV
                      Securityholders Agreement, among UIHI, UIHA II, Australis,
                      SMI and STV.  (1)

         10.6     Security Purchase Agreement dated December 21, 1995, between
                      Media International Holdings Limited ("MHL") and UIHA. (1)

         10.7     Security Purchase Agreement dated December 21, 1995, between
                      MIHL and UIHA II.  (1)

         10.8     Agreement dated December 21, 1995, among UIHI, UIHA and
                      SMH.  (1)

         10.9     Amending Agreement dated April 4, 1996 to CTV Securityholders
                      Agreement, among UIHI, UIHA and SMH.  (1)

         10.10    Agreement dated December 21, 1995, among UIHI, UIHA II and
                      SMI.  (1)

         10.11    Amending Agreement dated April 4, 1996 to the STV
                      Securityholders Agreement, among UIHI, UIHA II and
                      SMI.  (1)

         10.12    XYZ Shareholders Agreement dated September 6, 1995, among
                      Century United Programming Ventures Pty Limited ("CUPV"),
                      Foxtel Management Pty Limited ("Foxtel"), XYZ
                      Entertainment Pty Limited ("XYZ"), Century United
                      Programming Ventures ("CPVC"), and the Issuer.  (1)

         10.13    Shareholders Deed dated June 30, 1995, among Century
                      Communications Corp., CPVC, UIHI, the Issuer and
                      CUPV.  (1)

         10.14    UIH-SFCC L.P. Amended and Restated Agreement of Limited
                      Partnership dated January 6, 1995, among UIH-SFCC Inc. and
                      the limited partners named therein.  (1)

         10.15    Master Agreement dated January 11, 1995, between UIH-SFCC L.P.
                      and Societe Francaise des Communications et du Cable S.A.
                      ("Societe").  (1)

         10.16    Shareholder's Agreement dated January 11, 1995, among
                      UIH-SFCC L.P. and the shareholders named therein.  (1)

         10.17    Franchise Agreement dated October 12, 1994, between Australis
                      and CTV.  (1)

         10.18    Agreement dated June 19, 1996, between Australis, the Issuer
                      and Galaxy Communications Pty Limited ("Galaxy") re: CTV
                      Franchise Agreement.  (1)

         10.19    Franchise Agreement dated October 12, 1994, between Australis
                      and STV.  (1)

         10.20    Agreement dated June 19, 1996, between Australis, the Issuer
                      and Galaxy re: STV Franchise Agreement.  (1)

         10.21    Channel Supply Agreement dated June 30, 1995, among XYZ, CUPV
                      and East Coast Pay Television Pty Limited ("ECT").  (1)



                                       70

<PAGE>

          10.22    Technical Assistance Agreement dated October 12, 1994,
                      between STV and UIMI.  (1)

          10.23    Technical Assistance Agreement dated July 8, 1994, between
                      Kiwi Cable Company BVI, Inc. ("Kiwi") and UIHI.  (1)

         10.24    Technical Assistance Agreement dated January 11, 1995, between
                      Telefenua S.A. and Societe.  (1)

         10.25    Assignment of Rights and Delegation of Duties under Technical
                      Assistance Agreement dated January 11, 1995, between
                      Societe and UIMI.  (1)

         10.26    Management Agreement dated May 1, 1996, between UIH
                      Management, Inc. and the Registrant.  (1)

         10.27    Tax Allocation Agreement dated May 8, 1996, among UIHI, UPI,
                      Inc. and the Issuer.  (1)

         12.1     Statement re:  Ratio of Earnings to Fixed Charges.

         21.1     List of Subsidiaries.

         24.1     Powers of Attorney.

         27.1     Financial Data Schedule.

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

(1)  Incorporated by reference from the Company's Registration Statement on Form
     S-4 (SEC File No. 333-05017) filed on May 31, 1996.


                                       71
<PAGE>

                            INDEPENDENT AUDIT REPORT

To the Board of Directors of
   CTV Pty Limited

     We have audited the accompanying  consolidated  financial statements of CTV
Pty Limited and its  subsidiaries  for the period ended 31 December 1994 and the
year ended 31 December 1995.  These  consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on those consolidated financial statements based on our audits.

     We conducted our audits in accordance  with Australian Auditing  Standards,
which do not differ  substantially from generally accepted auditing standards 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 from material  misstatements.  An audit includes  examining,  on a test
basis,  evidence supporting amounts and disclosures in the financial statements.
An audit also includes assessing the accounting  principles used and significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits  provide a reasonable basis
for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects the consolidated  financial position of
CTV Pty Limited as of 31 December 1994 and 1995, and the consolidated results of
the group's operations and consolidated cash flows for the periods then ended in
accordance with Australian Accounting Standards.

     There are certain differences between Australian  Accounting  Standards and
those  generally  accepted in the United States of America.  Application  of the
generally accepted  accounting  principles in the United States of America would
not result in material differences to these consolidated financial statements.



Arthur Andersen
Chartered Accountants

Sydney, Australia
29 March 1996


                                       72
<PAGE>

<TABLE>
<CAPTION>
                                   CTV PTY LIMITED AND ITS SUBSIDIARIES
                                              BALANCE SHEETS
                                          AS AT 31 DECEMBER 1995

                                                                                  Economic Entity
                                                                                  ---------------
                                                                                    December 31,
                                                                           --------------------------------
                                                                  Note        1994                  1995
                                                                            --------              --------
                                                                                $A                   $A
<S>                                                                <C>    <C>                     <C>
Current assets
     Cash......................................................            19,371,145              9,712,936
     Receivables ..............................................    3          718,939              4,538,627
     Inventory.................................................                  --                  679,628
     Other.....................................................    4           25,582                830,133
                                                                          -----------            -----------
                                                                           20,115,666             15,761,324
                                                                          -----------            -----------
Non-current assets
     Investments ..............................................    5                2                      2
     Property, plant and equipment ............................    6        2,746,809             17,955,579
     Intangibles...............................................    7        5,021,630              7,906,674
                                                                          -----------            -----------
          Total non-current assets ............................             7,768,441             25,862,255
                                                                          -----------            -----------
               Total assets ...................................            27,884,107             41,623,579
                                                                          -----------            -----------
Current liabilities
     Creditors and borrowings .................................    8        2,747,734             15,477,769
        Provisions ............................................                  --                     --
                                                                          -----------            -----------
          Total current liabilities ...........................             2,747,734             15,477,769
                                                                          -----------            -----------
Non-current liabilities
     Creditors and borrowings .................................     9          36,165                684,945
     Provisions................................................    10            --                  156,267
                                                                          -----------            -----------
          Total non-current liabilities .......................                36,165                841,212
                                                                          -----------            -----------
               Total liabilities ..............................             2,783,899             16,318,981
                                                                          -----------            -----------
Net assets.....................................................            25,100,208             25,304,598
                                                                          ===========            ===========
Shareholders' equity
     Share capital ............................................    11          42,729                 42,729
     Reserves .................................................    13       5,116,536              5,116,536
     Retained profits/(accumulated losses) ....................                   206             (5,795,404)
                                                                          -----------            -----------
                                                                            5,159,471               (636,139)
     Convertible debentures ...................................    12      19,940,737             25,940,737
                                                                          -----------            -----------
               Total shareholders' equity .....................            25,100,208             25,304,598
                                                                          ===========            ===========




                       The accompanying notes form an integral part of this balance sheet.
</TABLE>
                                       73

<PAGE>

                                   CTV PTY LIMITED AND ITS SUBSIDIARIES
                                         PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>

                                                                             Economic Entity
                                                                 ---------------------------------------
                                                                 Period Ended               Year Ended
                                                                 ------------               -----------
                                                                 December 31,               December 31,
                                                                 ------------               ------------
                                                                     1994                      1995
                                                                     ----                      ----
                                                                      $A                        $A
<S>                                                               <C>                       <C>
Revenue:
     Service..............................................               --                    579,690
                                                                  ---------                 ----------
                                                                         --                    579,690
                                                                  ---------                 ----------
Expenses:
     General and administration...........................          321,494                  6,406,782
     Depreciation and amortization........................            4,055                  1,491,456
     Management fees......................................              --                      29,651
                                                                  ---------                 ----------
                                                                    325,549                  7,927,889
                                                                  ---------                 ----------
Operating loss............................................         (325,549)                (7,348,199)
                                                                  ---------                 ----------
Non-operating income (expense)
     Interest income......................................          327,355                  1,227,029
     Interest expense and costs of finance................           (1,600)                    (2,180)
     Other, net foreign exchange gains--non-speculative
        trading...........................................              --                     327,740
                                                                  ---------                 ----------
                                                                    325,755                  1,552,589
                                                                  ---------                 ----------
Net profit (loss) before tax..............................              206                 (5,795,610)
Income tax attributable to net profit/(loss)..............              --                         --
                                                                  ---------                 ----------
Net profit/(loss).........................................              206                 (5,795,610)
                                                                  ---------                 ----------
Retained profits/(accumulated losses) at beginning of
   period.................................................              --                         206
                                                                  ---------                 ----------
Retained profits/(accumulated losses) at end of period....              206                 (5,795,404)
                                                                  =========                 ==========
</TABLE>




  The accompanying notes form an integral part of this profit and loss account.

                                       74


<PAGE>
<TABLE>
<CAPTION>
                                   CTV PTY LIMITED AND ITS SUBSIDIARIES
                                         STATEMENTS OF CASH FLOWS

                                                                            Economic Entity
                                                              ---------------------------------------------
                                                              Period Ended                     Year Ended
                                                              ------------                     ------------
                                                              December 31,                     December 31,
                                                              ------------                     ------------
                                                    Note         1994                              1995
                                                                 -----                             ----
                                                                  $A                                $A
                                                                  --                                --
<S>                                                           <C>                               <C>
Cash flows from operating activities
     Receipts from customers....................                      --                           522,211
     Payments to suppliers and employees........                 (297,332)                      (3,973,333)
     Interest received..........................                  327,355                        1,227,029
     Interest and other costs of finance paid...                   (1,600)                          (2,180)
                                                               ----------                       ----------
     Net operating cash flows...................                   28,423                       (2,226,273)
                                                               ----------                       ----------
Cash flows from investing activities
     Purchase of subsidiaries, net of cash
        acquired................................                      (12)                             (10)
     Payments for plant and equipment...........                  (55,871)                     (15,326,279)
     Payments for MDS and broadcast
        licenses................................               (5,021,630)                      (3,437,458)
     Decrease in inventory net of payables......                      --                               --
     Loans granted..............................                 (718,939)                      (3,768,962)
     Payments for investments...................                      --                                (2)
                                                               ----------                      -----------
     Net investing cash flows...................               (5,796,452)                     (22,532,711)
                                                               ----------                      -----------
Cash flows from financing activities
     Proceeds from share issues.................                5,159,265                              --
     Proceeds from issue of convertible
        debentures..............................               19,940,737                        6,000,000
     Proceeds from intercompany loans...........                       --                              --
     Payment on intercompany loans..............                       --                              --
     Proceeds from short term loans.............                   39,781                        8,818,202
     Proceeds from lease financing..............                       --                              --
     Repayment of finance lease principal.......                     (609)                         (45,167)
                                                               ----------                      -----------
     Net financing cash flows...................               25,139,174                       14,773,035
                                                               ----------                      -----------
Net increase/(decrease) in cash held............               19,371,145                       (9,985,949)
Cash at beginning of period.....................                      --                        19,371,145
Effect of different exchange rate...............                      --                           327,740
                                                               ----------                      -----------
Cash at the end of the period................... 8, 16         19,371,145                        9,712,936
                                                               ==========                      ===========



  The accompanying notes form an integral part of this statement of cash flows.
</TABLE>


                                       75
<PAGE>



                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                        NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.   STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES:

   BASIS OF ACCOUNTING

     The  financial  statements  have  been  prepared  in  accordance  with  the
historical cost convention  using the Australian  dollar ("$A") as the reporting
currency and using the accounting  policies  described  below.  They do not take
account of changes in either the  general  purchasing  power of the dollar or in
the prices of specific assets.

     The Company was  incorporated on 21 April 1994. The  comparative  financial
statements  have been  prepared for the period 21 April 1994 to 31 December 1994
and for the year ended 31 December 1995.

   PRINCIPLES OF CONSOLIDATION

     The consolidated  financial  statements include the financial statements of
the parent entity,  CTV Pty Limited,  and its  subsidiaries.  The term "Economic
Entity" used throughout  these financial  statements means the parent entity and
its subsidiaries.

   FOREIGN CURRENCY TRANSACTIONS

     Transactions  in foreign  currencies are converted at the exchange rates in
effect at the date of each transaction.

     Amounts  payable to or by the economic  entity in foreign  currencies  have
been translated  into Australian  currency at the exchange rates current at year
end.

     Exchange  differences  relating to monetary items are brought to account in
the profit and loss account in the period when the  exchange  rates  change,  as
exchange gains or losses.

   INCOME TAX

     The economic entity follows the policy of tax-effect accounting. The income
tax  expense in the profit and loss  account  represents  the tax on the pre-tax
accounting  profit  adjusted  for income and  expenses  never to be  assessed or
allowed for taxation  purposes.  The provision for deferred income tax liability
and the  future  income tax  benefit  represent  the tax  effect of  differences
between income and expense items recognized in different  accounting periods for
book and tax purposes,  calculated  at the tax rates  expected to apply when the
differences reverse.

     The benefit  arising from  estimated  carry forward tax losses has not been
recorded in the future income tax benefit account as realization of such benefit
is considered not to be virtually certain.

   LEASED ASSETS

     Assets  of  the  economic   entity   acquired   under  finance  leases  are
capitalized.  The initial  amount of the leased  asset and  corresponding  lease
liability are recorded at the present value of minimum  lease  payments.  Leased
assets are amortized over the life of the relevant lease.  Lease liabilities are
reduced by the principal component of lease payments.  The interest component is
charged against operating profit.


                                       76

<PAGE>


                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

     Operating  leases are not  capitalized  and  rental  payments  are  charged
against operating profit in the period in which they are incurred.

   INVENTORY

     Inventory consists of home subscriber  equipment including cable,  antennae
and decoders and is valued at cost.

   PROPERTY, PLANT AND EQUIPMENT

     Land and  buildings  are valued at cost.  The carrying  amount of property,
plant and  equipment is reviewed  annually by directors to ensure that it is not
in excess of the recoverable amount from the assets.

     Property, plant and equipment,  excluding freehold land, are depreciated or
amortized  at rates based upon their  expected  useful  lives using the straight
line method.

            Leasehold improvements.................................    6 years
            Computer equipment.....................................    3 years
            Motor vehicles.........................................    5 years
            Furniture and fittings.................................   10 years

   INTANGIBLES

     The  acquisition  of MDS licenses has been brought to account at cost.  The
cost to acquire these licenses,  acquired for a 5 year period, will be amortized
over the remaining license period upon commencement of broadcasting  operations.
They are renewable every 5 years.

     The  licenses  have been issued for a term of five years,  with the license
fee  payable  annually  in  advance.  The  license  fee is payable  to  Spectrum
Management Agency, an agent of the Australian Federal Government.

   RECOVERABLE AMOUNTS OF NON-CURRENT ASSETS

     The  carrying  amount  of all  non-current  assets  are  reviewed  at least
periodically  whenever events and  circumstances  indicate the carrying value of
the assets may exceed their recoverable  amount. The recoverable  amounts of all
non-current assets have been determined using net cash flows which have not been
discounted to their present values.

   PROVISION FOR ANNUAL LEAVE

     Provision has been made in the financial  statements for benefits  accruing
to employees in relation to such matters as annual leave.

   REVENUE RECOGNITION

     Monthly  service  revenues  are  recognized  as  revenue  in the period the
related  services  are  provided  to the  subscribers.  The  Company  recognizes
installation  revenues to the extent of direct  selling  costs in the period the
installation  occurs.  To the extent  installation  fees exceed  direct  selling
costs,  the excess would be deferred  and  amortized  over the average  contract
period.   Financial   instruments  that  potentially   subject  the  Company  to
concentrations   of  credit  risk  consist   primarily  of  trade   receivables.

                                       77

<PAGE>
                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

Concentrations of credit risk with respect to trade  receivables are limited due
to the large number of customers comprising the Company's customer base.

NOTE 2.   INCOME TAX

     (a) Non-current deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>

                                                                                     Economic Entity
                                                                         ---------------------------------------
                                                                         Period ended               Year ended
                                                                         ------------               ----------
                                                                         December 31,               December 31,
                                                                         -------------              ------------
                                                                             1994                       1995
                                                                             ----                       ----
                                                                              $A                         $A
                                                                              --                         --
<S>                                                                        <C>                        <C>
Interest receivable and prepaids....................................       (14,367)                    (339,527)
                                                                           -------                   ----------
Total non-current deferred tax liability............................       (14,367)                    (339,527)
   Net operating loss carryforward.......................... .......                                  2,061,456
                                                                                                     ----------
Total non-current deferred tax asset................................           --                     2,061,456
                                                                           -------                   ----------
   Net non-current deferred tax asset before valuation allowance....       (14,367)                   1,721,929
   Valuation allowance..............................................          --                     (1,721,929)
                                                                           -------                   ----------
Net non-current deferred tax asset (liability)......................       (14,367)                         --
                                                                           =======                   ==========
</TABLE>
     Net operating loss carryforwards have an unlimited  carryforward period for
Australian tax purposes.

     (b) The  difference  between  income tax expense  provided in the financial
statements and the prima facie income tax expense is reconciled as follows:
<TABLE>
<CAPTION>
                                                                                     Economic Entity
                                                                         ---------------------------------------
                                                                         Period ended               Year ended
                                                                         ------------               ----------
                                                                         December 31,               December 31,
                                                                         -------------              ------------
                                                                             1994                       1995
                                                                             ----                       ----
                                                                              $A                         $A
                                                                              --                         --
 <C>                                                                         <C>                <C>
Net profit/(loss)..................................................           206                    (5,795,610)

Prima facie tax thereon @ 36%......................................            74                    (2,086,420)
Tax effect of permanent and other differences:
    --Timing differences...........................................        (14,367)                    (339,527)
    --Amortization of licenses.....................................            --                       198,873
    --Entertainment non-deductible.................................         14,293                      165,618
    --Effect of tax losses not brought to account..................            --                     2,061,456
                                                                           -------                   ----------
Total income tax attributable to net profit/(loss).................            --                           --
                                                                           =======                   ==========
</TABLE>
     (c) Benefit of income tax losses not brought to account

     As at 31 December 1995, the parent entity has unconfirmed unrecouped income
tax losses of  $5,795,404  available to offset  against  future  years'  taxable
income.  The  benefit  of these  losses of  $2,061,456  has not been  brought to
account as  realization  is not  virtually  certain.  The  benefit  will only be
obtained if:

          (i) the company derives future assessable income of a nature and of an
              amount  sufficient to  enable the benefits from the deductions for
              the losses to be realized;

         (ii) the  company   continues  to  comply  with   the   conditions  for
              deductibility imposed by the law;

        (iii) no changes in tax  legislation  adversely  affect  the  company in
              realizing the benefit from the deductions for the losses; and


                                       78

<PAGE>

                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


          (iv) any change in the  business  or control of the  company  does not
               affect the ability to utilize the available losses.


NOTE 3.   RECEIVABLES (CURRENT):
<TABLE>
<CAPTION>
                                                                                    Economic Entity
                                                                                -----------------------
                                                                                1994            1995
                                                                                -----           ----
                                                                                 $A              $A
<S>                                                                             <C>          <C>
Trade debtors..........................................................             --           57,479
Less: provision for doubtful debts.....................................             --           (5,792)
                                                                                ------       ----------
                                                                                    --           51,687
Related parties:
    --United International Holdings Inc................................          95,865         140,217
    --Other............................................................             --          712,554
  --Related body corporate--STV Pty Ltd.................................        623,074       3,627,044
Other persons..........................................................             --            7,125
                                                                                -------       ---------
                                                                                718,939       4,538,627
                                                                                =======       =========
NOTE 4.   OTHER ASSETS (CURRENT):

Prepaid expenses.......................................................          10,465         787,916
Security deposits......................................................          15,117          42,217
                                                                                -------       ---------
Total other assets (current)...........................................          25,582         830,133
                                                                                =======       =========

NOTE 5.   INVESTMENTS (NON-CURRENT):

Investments in associated companies (Note 18)..........................
                                                                                      2               2
                                                                                =======       =========
</TABLE>
NOTE 6.   PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>

<S>                                                                           <C>           <C>
Leasehold improvements:
    --At cost..........................................................             --          151,200
    --Accumulated depreciation.........................................             --           (8,705)
                                                                              ---------      ----------
Total leasehold improvements, net......................................             --          142,495
                                                                              ---------      ----------
Plant and equipment:
    --At cost..........................................................          55,881      15,737,143
    --Accumulated depreciation.........................................          (4,055)       (872,818)
                                                                              ---------      ----------
Total plant and equipment, net.........................................          51,826      14,864,325
                                                                              ---------      ----------
Plant and equipment under lease:
    --At capitalized cost..............................................          44,506         912,820
    --Accumulated depreciation.........................................             --          (61,563)
                                                                              ---------      ----------
Total leased plant and equipment, net..................................          44,506         851,257
                                                                              ---------      ----------
Capitalized network construction expenditures:
    --At cost..........................................................       2,650,477       2,097,502
    --Accumulated amortization.........................................
                                                                                     --              --
                                                                              ---------      ----------
Total capitalized development expenditures, net:.......................       2,650,477       2,097,502
                                                                              ---------      ----------
Total property, plant and equipment, net:..............................       2,746,809      17,955,579
                                                                              =========      ==========
</TABLE>
                                       79
<PAGE>

                                   CTV PTY LIMITED AND ITS SUBSIDIARIES
                              NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 7.   INTANGIBLE ASSETS (NON-CURRENT):
<TABLE>
<CAPTION>
                                                                                 Economic Entity
                                                                          -----------------------------
                                                                              1994             1995
                                                                              ----             ----
                                                                               $A               $A
<S>                                                                      <C>               <C>
MDS licenses:
    --At cost...........................................................     5,018,215        8,196,618
    --Accumulated amortization..........................................           --          (544,093)
                                                                          -----------      ------------
Total MDS licenses net:.................................................     5,018,215        7,652,525
                                                                          ------------      -----------
Program Rights fees at cost:                                                       --           250,000
    --Accumulated amortization..........................................           --            (8,333)
Other at cost...........................................................           --               --
Organization costs at cost:.............................................         3,415           12,482
                                                                          ------------      -----------
Total intangible assets, net............................................     5,021,630        7,906,674
                                                                          ============      ===========

NOTE 8.   CREDITORS AND BORROWINGS (CURRENT):

Unsecured:
     Overdraft..........................................................           --               --
     Trade creditors....................................................         1,684        5,727,304
     Unearned Income....................................................           --            29,062
     Accrued Expenses...................................................     2,698,537          728,113
     Due to related body corporate--United International
        Holdings Inc....................................................        39,781        8,857,983
Secured:
     Finance lease liability (Note 15)..................................         7,732          135,307
                                                                           -----------      -----------
Total current creditors and borrowings..................................     2,747,734       15,477,769
                                                                           ===========      ===========

NOTE 9.   CREDITORS AND BORROWINGS (NON-CURRENT):

Secured
     Finance lease liability (Note 15)..................................        36,165          684,945
                                                                           -----------      -----------
Total non-current creditors and borrowings..............................        36,165          684,945
                                                                           ===========      ===========

NOTE 10.   PROVISIONS (NON-CURRENT):

Annual leave............................................................
                                                                                   --           156,267
                                                                            ==========      ===========
NOTE 11.   SHARE CAPITAL:

Authorized capital:
    --100,000,000 ordinary shares of $1 each............................    100,000,000      100,000,000
                                                                            -----------      -----------
Total authorized capital as at 31 December 1995.........................    100,000,000      100,000,000
Issued and paid up capital:
    --42,729 ordinary shares of $1 each.................................         42,729           42,729
                                                                            -----------      -----------
Total issued and paid up capital........................................         42,729           42,729
                                                                            ===========      ===========

</TABLE>

                                       80

<PAGE>

                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


Movement in issued shares for the year:
<TABLE>
<CAPTION>
                                                                          Number of                        Number of
                                                         Number of        Redeemable       Number of       Redeemable
                                                         Ordinary         Preference        Ordinary       Preference
                                                          Shares            Shares           Shares          Shares
                                                            1994             1994             1995            1995
                                                         --------         ----------       ----------      ----------
<S>                                                        <C>                 <C>           <C>               <C>
Opening number of shares...........................             3              --            42,729             --
Issued during the year.............................        42,726              13               --             --
Redeemed...........................................           --               13               --             --
                                                           ------             ---           -------          ----
Closing number of shares...........................        42,729              --            42,729            --
                                                           ======             ===            ======          ====
</TABLE>


NOTE 12.   CONVERTIBLE DEBENTURES:

     During  the  year  ended 31  December  1995,  the  company  issued  162,643
convertible debentures for $A6,000,000.  These debentures confer rights upon the
holders as creditors  of the company.  They do not confer any right to attend or
vote at general meetings. Interest is payable to the holders equal to the amount
of the  distribution  that the holder would have received if, as at the date the
entitlement to the  distribution  was determined,  all of the debentures of that
holder and all other holders had been converted into shares.

     The convertible  debentures have been included in  shareholders'  equity in
the balance sheet as debenture  holders are entitled to an equivalent  return to
the ordinary shareholders.

     Conversion of debentures is permitted at anytime provided  conversion would
not result in the breach of any  Statute  by the  debenture  holder or any other
person.

     Debentures  may be converted  into fully paid ordinary  shares on a one for
one basis unless the normal value of the issued  shares is  reconstructed  which
would  result in a  different conversion factor.  Debentures may not be redeemed
for cash.

     In the event of a winding up of the  company,  the rights of the  debenture
holders against the company in respect of the debentures are postponed until the
claims of all holders of senior indebtedness have been satisfied in full. Senior
indebtedness means secured obligations, unsecured and unsubordinated obligations
of the company, other than debentures and shares.

NOTE 13.   RESERVES:

                                                       Economic Entity
                                                  ---------------------------
                                                         December 31,
                                                  ---------------------------
                                                     1994           1995
                                                     ----           ----
                                                      $A              $A
Share premium opening balance....................         --       5,116,536
Premium on issues of shares......................  5,116,536              --
Redemption of preference shares..................         --              --
                                                   ---------       ---------
Total reserves...................................  5,116,536       5,116,536
                                                   =========       =========


                                       81

<PAGE>

                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


NOTE 14.   EMPLOYEE ENTITLEMENTS:

   SUPERANNUATION COMMITMENTS

     The economic entity  contributes to a defined  contribution  superannuation
plan for substantially all of its employees.  Each  participating  entity in the
economic entity has a legal  obligation to contribute to the schemes,  which are
as follows:

          (a) Hourly employees and commission  employees--Employee  Retirement
              Fund, a fund administered by MLC. This is a defined contribution
              fund; and

          (b) Salaried employees--CETV Superannuation Fund, a fund administered
              by MLC (contributions 6%). This is a defined contribution fund.

NOTE 15.   COMMITMENTS:
<TABLE>
<CAPTION>
                                                                                              Economic Entity
                                                                                           ----------------------
                                                                                                 December 31,
                                                                                              1994          1995
                                                                                              ----          ----

                                                                                            $A            $A
<S>                                                                                        <C>         <C>
(a)  Annual license fees are payable as follows:
     Not later than one year.........................................................      1,212,627    3,068,099
     Later than one year but not later than two years................................      1,212,627    3,068,099
     Later than two years but not later than five years..............................      3,637,881    5,121,828
     Later than five years...........................................................             --           --
                                                                                           ---------   ----------
                                                                                           6,063,135   11,258,026
                                                                                           =========   ==========
(b)  Finance lease expenditure contracted for is payable as follows:
     Not later than one year.........................................................         12,429      215,798
     Later than one year but not later than two years................................         12,429      233,412
     Later than two years but not later than five years..............................         30,044      553,335
     Later than five years...........................................................             --           --
                                                                                           ---------   ----------
                                                                                              54,902    1,002,545
     Future finance charges..........................................................         11,005      182,293
                                                                                           ---------   ----------
     Net finance lease liability.....................................................         43,897      820,252
                                                                                           =========   ==========
Reconciled to:
     Current liability (Note 8)......................................................          7,732      135,307
     Non-current liability (Note 9)..................................................         36,165      684,945
                                                                                           ---------   ----------
                                                                                              43,897      820,252
                                                                                           =========   ==========
(c)  Operating lease expenditure contracted for is payable as follows:
     Not later than one year.........................................................        137,500      467,767
     Later than one year but not later than two years................................        137,500      467,767
     Later than two years but not later than five years..............................        412,500    1,405,357
     Later than five years...........................................................             --      529,372
                                                                                           ---------   ----------
                                                                                             687,500    2,870,263
                                                                                           =========   ==========
</TABLE>


                                       82

<PAGE>

                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


(d)  On 24 July 1994,  the  Company  entered  into a  franchise  agreement  with
     Australis Media Limited.  The agreement carries a 15 year term beginning on
     24 July 1994 and may be extended for an additional 10 years.  The agreement
     provides for an exclusive license and franchise for MDS and Satellite and a
     non-exclusive  license and franchise for cable for all franchisor  services
     including  uplink and  programming  including  Channel [V] (a 24 hour music
     video channel),  Arena, Showtime,  Nickelodeon,  TV1, Encore, Discovery and
     Fox Sports.

     Under the agreement,  minimum  payments are due, which include service fees
     based on varying  percentages  of net revenues as defined in the agreement,
     and subscription levies which are dependent on the number of subscribers.

NOTE 16.   NOTES TO THE STATEMENT OF CASH FLOWS:

(a)  RECONCILIATION OF CASH

     For the purposes of the statement of cash flows, cash includes cash on hand
     and in banks and deposits at call, net of outstanding bank overdrafts. Cash
     at the end of the financial year as shown in the Statement of Cash Flows is
     reconciled to the related items in the balance sheet as follows:
<TABLE>
<CAPTION>

                                                                                   Economic Entity
                                                                             -----------------------------
                                                                                     December 31,
                                                                             -----------------------------
                                                                                1994               1995
                                                                                -----              ----
                                                                                 $A                $A
<S>                                                                          <C>               <C>

Cash..........................................................                   73,377          (261,963)
Short term money market deposits..............................               19,297,768         9,974,899
                                                                             ----------        ----------
                                                                             19,371,145         9,712,936
                                                                             ==========        ==========
(b)  Reconciliation  of net cash  provided by operating
     activities to operating loss after income tax.

Operating profit (loss) after income tax:.....................                     206         (5,795,610)
     Adjustments for non-cash income and expense items:
     Depreciation and amortization expense....................                   4,055          1,491,456
     Bad debts expense and provision for doubtful debts.......                     --               5,792
Transfers to provisions:
     Annual leave.............................................                     --             156,267
Unrealized foreign exchange gain..............................                     --            (327,740)
     Increase in other receivables............................                     --             (57,479)
     Increase in trade creditors..............................                  49,744          3,785,221
     Increase in inventory....................................                     --            (679,628)
     Increase in other assets.................................                 (25,582)          (804,552)
                                                                             ---------         ----------
Net cash from operating activities............................                  28,423         (2,226,273)
                                                                             =========         ==========

</TABLE>


                                       83

<PAGE>

                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


(c)  SUBSIDIARIES ACQUIRED

     The following  subsidiaries  were acquired by the economic  entity for cash
     consideration.  The  fair  value of net  tangible  assets  acquired  was as
     follows:
                                                             Fair value of
                                                         net tangible assets
                                                         --------------------
                                                          1994          1995
                                                          ----          ----
               Entity                                      $A            $A
               ------
Jacolyn Pty Limited...............................          2            --
Yanover Pty Limited...............................          2            --
Keansburg Pty Limited.............................          2            --
Orloff Pty Limited................................          2            --
Maxi-Vu Pty Limited...............................          2            --
Vinatech Pty Limited..............................          2            --
Palara Vale Pty Limited...........................         --             2
Auldana Pty Limited...............................         --             2
Grovern Pty Limited...............................         --             2
Lystervale Pty Limited............................         --             2
Minorite Pty Limited..............................         --             2
                                                          ---           ---

Fair value of net identifiable assets.............         12             10
Goodwill on acquisition...........................         --             --
                                                          ---            ---
Total consideration...............................         12             10
                                                          ===            ===

(d)  Non-cash financing and investing activities

     During the year the economic  entity  acquired  plant and equipment with an
     aggregate  fair value of  $A821,522  (1994:  $A44,506)  by means of finance
     leases.  These  transactions  are not  reflected  in the  Statement of Cash
     Flows.

NOTE 17.   SUBSIDIARIES:

     The following were subsidiaries at 31 December 1995, and have been included
in  the  consolidated   financial   statements.   The  financial  years  of  all
subsidiaries are the same as that of the parent entity.
<TABLE>
<CAPTION>

                                                                         Book value of                   Contribution to
                                                                            Parent                         Consolidated
                                                                           Entity's         % of           Result for the
                                                                           Investment     Shares Held         Period
                                                                        -------------     -----------     --------------
                             Place of
                           Incorporation     Date of       Type of      1994     1995     1994    1995     1994     1995
Name of Controlled Entity  Formation (a)   Acquisition     Shares        $A       $A        %       %       $A       $A
<S>                          <C>             <C>          <C>            <C>      <C>      <C>     <C>      <C>    <C>
Jacolyn Pty Limited........  Australia       14/6/94      Ordinary                 2               100              --
Yanover Pty Limited........  Australia       21/7/94      Ordinary                 2               100              --
Keansburg Pty Limited......  Australia       14/6/94      Ordinary                 2               100              --
Orloff Pty Limited.........  Australia       14/6/94      Ordinary                 2               100              --
Maxi-Vu Pty Limited........  Australia       4/8/94       Ordinary                 2               100              --
Palara Vale Pty Limited....  Australia       24/4/95      Ordinary                 2               100              --
Auldana Beach Pty Limited..  Australia       24/4/95      Ordinary                 2               100              --
Grovern Pty Limited........  Australia       24/4/95      Ordinary                 2               100              --
Lystervale Pty Limited.....  Australia       24/4/95      Ordinary                 2               100              --
Vinatech Pty Limited.......  Australia       29/7/94      Ordinary                 2               100              --
Minorite Pty Limited.......  Australia       24/4/95      Ordinary                 2               100              --
                                                                                  --                               ---
                                                                                  22                                --
                                                                                  ==                               ===
</TABLE>
(a) All entities operate solely in their place of incorporation/formation.


                                       84

<PAGE>

                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)



NOTE 18.   ASSOCIATED COMPANIES:

     Details of material interests in associated companies are as follows:
<TABLE>
<CAPTION>

                                               Ownership                       Dividends
                                               Interest                        Received
                                             -------------       ---------------------------------
    Name of
   Associated      Principal Activity of                          Balance
    Company         Associated Company       1994     1995         Date         1994        1995
   ----------      ---------------------     ----     ----        -------       ----        ----
<S>                <C>                        <C>      <C>      <C>             <C>          <C>
Communication &    Delivery of subscription
   Entertainment   television services to                          31
   Australia Pty   regional Australia.        50%      50%      December        --           --
   Limited
Ilona Investments  Delivery of subscription
   Pty Limited     television services to                          30
                   regional Australia         50%      50%        June          --           --
</TABLE>


                                                              Economic Entity
                                                              ---------------
                                                             1994         1995
                                                              $A           $A

Aggregate carrying amount of investments in associated         2            2
companies..............................................      ---          ---

Aggregate amount of investments in associated
 companies, as determined under the equity
 method of accounting..................................        2            2
                                                             ===          ===

NOTE 19.   RELATED PARTY DISCLOSURES:

(a)  OTHER DIRECTOR TRANSACTIONS

     Crase Partners,  a director-related  firm of J. K. Crase,  provided general
accounting services to the company during the year. These services were provided
at an arms length basis.

     J. K. Crase,  a director,  purchased  equipment from the company during the
year. The purchase was made on an arms length basis.

(b)  TRANSACTIONS WITH RELATED PARTIES IN THE WHOLLY OWNED GROUP

     The parent entity entered into the following  transactions  during the year
with related parties in the wholly owned group:

      loans  were  advanced  to  subsidiaries  to fund  the  acquisition  of MDS
      licenses.  Loans totaled $A5,021,618 and  $A8,309,384 at December 31, 1994
      and 1995, respectively.

     These transactions were undertaken on commercial terms and conditions.


                                       85

<PAGE>

                      CTV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

(c)  TRANSACTIONS WITH ASSOCIATED COMPANIES

     The  parent  entity  entered  into  certain  transactions  with  associated
companies,  being loans  advanced and received on an arms length basis.  CTV has
amounts  receivable  from STV of $A623,074 and  $A3,627,044 at December 31, 1994
and 1995, respectively.

NOTE 20.   US GAAP INFORMATION:

     The  accounting  policies  followed  in  preparation  for the  consolidated
financial  statements  differ in one respect to those generally  accepted in the
United  States of  America  (US GAAP).  For US GAAP  purposes,  the  convertible
debentures would be classified as a non-current liability and not equity.

     The  calculation of  shareholder's  equity in accordance with US GAAP is as
follows:


                                                           December 31,
                                                     ------------------------
                                                       1994            1995
                                                     ---------       --------
                                                         $A              $A
     Shareholder's equity as per balance sheet....    25,100,208     25,304,598
     Adjustments to reported equity:
          Convertible debentures..................   (19,940,737)   (25,940,737)
                                                     -----------    -----------
     Shareholder's equity in accordance with
        US GAAP...................................     5,159,471       (636,139)
                                                     ===========    ===========


                                       86


<PAGE>



                            INDEPENDENT AUDIT REPORT

To the Board of Directors of
 STV Pty Limited

     We have audited the accompanying  consolidated  financial statements of STV
Pty Limited and its  subsidiaries  for the period ended 31 December 1994 and the
year ended 31 December 1995.  These  consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on those consolidated financial statements based on our audits.

     We conducted our audits in accordance with Australian  Auditing  Standards,
which do not differ  substantially from generally accepted auditing standards 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 from material  misstatements.  An audit includes  examining,  on a test
basis,  evidence supporting amounts and disclosures in the financial statements.
An audit also includes assessing the accounting  principles used and significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provides 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
STV Pty Limited as of 31 December 1994 and 1995, and the consolidated results of
the group's operations and consolidated cash flows for the periods then ended in
accordance with Australian Accounting Standards.

     There are certain differences between Australian  Accounting  Standards and
those  generally  accepted in the United States of America.  Application  of the
generally accepted  accounting  principles in the United States of America would
not result in material differences to these consolidated financial statements.



Arthur Andersen
Chartered Accountants

Sydney, Australia
29 March 1996


                                       87
<PAGE>



                      STV PTY LIMITED AND ITS SUBSIDIARIES
                                 BALANCE SHEET
                             AS AT 31 DECEMBER 1995
<TABLE>
<CAPTION>

                                                                      Economic Entity
                                                                -------------------------
                                                                       December 31,
                                                                -------------------------
                                                     Note          1994             1995
                                                                   ----             ----
                                                                    $A               $A
<S>                                                    <C>      <C>             <C>
Current assets
     Cash..............................                         10,078,250           2,236
     Receivables.......................                3            63,934       1,325,563
     Prepayments and other.............                                 --         382,866
                                                                ----------      ----------

Total current assets...................                         10,142,184       1,710,665
                                                                ----------      ----------
Non-current assets
     Investments.......................                4                 2               2
     Property, plant and equipment.....                5           527,373       6,085,042
     Intangibles.......................                6             3,562       3,727,654
                                                                ----------      ----------
Total non-current assets...............                            530,937       9,812,698
                                                                ----------      ----------

Total assets...........................                         10,673,121      11,523,363
                                                                ----------      ----------

Current liabilities
     Creditors and borrowings..........                7           759,411       4,673,587
                                                                ----------      ----------

Total current liabilities..............                            759,411       4,673,587
                                                                ----------      ----------

Non-current liabilities
     Creditors and borrowings..........                8            36,165         313,981
     Provisions........................                9                --          11,495
                                                                ----------      ----------
Total non-current liabilities..........                             36,165         325,476
                                                                ----------      ----------

Total liabilities......................                            795,576       4,999,063
                                                                ----------      ----------

Net assets.............................                          9,877,545       6,524,300
                                                                ==========      ==========

</TABLE>



       The accompanying notes form an integral part of this balance sheet.


                                       88

<PAGE>



                      STV PTY LIMITED AND ITS SUBSIDIARIES
                                 BALANCE SHEET
                             AS AT 31 DECEMBER 1995


                                                     Economic Entity
                                                 --------------------------
                                                       December 31,
                                                 --------------------------
                                      Note         1994             1995
                                                  -----             ----
                                                    $A               $A
Shareholders' equity
     Share capital............         10          133,296         133,296
     Reserves.................         12        1,426,959       1,426,959
     Accumulated losses.......                  (  122,457)     (3,475,702)
                                                ----------      ----------
                                                 1,437,798      (1,915,447)
Convertible debentures........         11        8,439,747       8,439,747
                                                ----------      ----------
Total shareholders' equity....                   9,877,545       6,524,300
                                                ==========      ==========












       The accompanying notes form an integral part of this balance sheet.



                                       89
<PAGE>



                      STV PTY LIMITED AND ITS SUBSIDIARIES
                             PROFIT AND LOSS ACCOUNT

                                                       Economic Entity
                                               --------------------------------
                                                Period Ended        Year Ended
                                        Note    December 31,       December 31,
                                                -------------------------------
                                                   1994                 1995
                                                -----------        ------------
                                                    $A                    $A
Revenue:
     Service...........................                --               13,819
                                                 --------           ----------
                                                       --               13,819
                                                 --------           ----------
Expenses:
     General and administration........           258,991            3,576,688
     Depreciation and amortization.....             4,055              212,635
                                                 --------           ----------
                                                  263,046            3,789,323
                                                 --------           ----------
Operating loss.........................          (263,046)          (3,775,504)
                                                 --------           -----------
Non-operating income (expense)
     Interest income...................           142,189              422,563
     Interest expense and costs of
        finance........................            (1,600)                (304)
                                                 --------           ----------
                                                  140,589              422,259
                                                 --------           ----------

Net loss before tax....................          (122,457)          (3,353,245)
Income tax attributable to net loss....                --                   --
                                                 --------           ----------
Net loss...............................          (122,457)          (3,353,245)
                                                 --------           ----------
Accumulated losses at beginning of
   period..............................               --              (122,457)
                                                 --------           ----------
Accumulated losses at end of
   period..............................          (122,457)          (3,475,702)
                                                 ========           ==========






  The accompanying notes form an integral part of this profit and loss account.



                                       90
<PAGE>



                                   STV PTY LIMITED AND ITS SUBSIDIARIES
                                         STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                             Economic Entity
                                                                 -------------------------------------
                                                                   Period Ended           Year Ended
                                                                    December 31,          December 31,
                                                                  ------------------------------------
                                                        Notes          1994                  1995
                                                                      ------                 ----
                                                                         $A                   $A
                                                                 Inflows/(Outflows)   Inflows/(Outflows)
<S>                                                     <C>        <C>                  <C>
Cash flows from operating activities:
     Receipts from customers...............                                --                 74,749
     Payments to suppliers and
        employees..........................                           (210,202)           (3,876,242)
     Interest received.....................                             78,255               422,563
     Interest and other costs of finance
        paid...............................                             (1,600)                 (304)
                                                                    ----------          ------------

Net operating cash flows...................                           (133,547)           (3,379,234)
                                                                    ----------          ------------

Cash flows from investing activities:
     Purchase of subsidiaries, net of
        cash acquired......................                                 (2)                  (12)
     Payments for plant, equipment and
        construction in process............                           (486,922)           (5,381,613)
     Payments for MDS licenses.............                             (3,562)           (3,757,962)
     Payments for investments..............                                --                     (2)
     Loans granted.........................                                --             (1,322,587)
                                                                    ----------           -----------

Net investing cash flows...................                           (490,486)          (10,462,176)
                                                                    ----------           -----------

Cash flows from financing activities:
     Proceeds from issues of shares........                          1,560,255                   --
     Proceeds from short-term loans........                            702,890             3,787,493
     Proceeds from debenture issues........                          8,439,747                   --
     Repayment of finance lease
        principal..........................                               (609)              (22,097)
                                                                    ----------           -----------

Net financing cash flows...................                         10,702,283             3,765,396
                                                                    ----------           -----------

Net increase (decrease) in cash held.......                         10,078,250           (10,076,014)
Cash at the beginning of the period........                                 --            10,078,250
                                                                    ----------           -----------


Cash at the end of the period..............                15       10,078,250                 2,236
                                                                    ==========           ===========

</TABLE>

  The accompanying  notes form an integral part of this statement of cash flows.


                                       91







<PAGE>


                      STV PTY LIMITED AND ITS SUBSIDIARIES
                        NOTES TO THE FINANCIAL STATEMENTS

NOTE 1.   STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES:

   BASIS OF ACCOUNTING

     The  financial  statements  have  been  prepared  in  accordance  with  the
historical cost convention  using the Australian  dollar ("$A") as the reporting
currency and using the accounting policies described below. Further, they do not
take account of changes in either the general  purchasing power of the dollar or
in the prices of specific assets.

     The Company was  incorporated  on 28 June 1994. The  comparative  financial
statements  have  been prepared  for the period 28 June 1994 to 31 December 1994
and for the year ended 31 December 1995.

   PRINCIPLES OF CONSOLIDATION

     The consolidated  financial  statements include the financial statements of
the parent entity,  STV Pty Limited,  and its  subsidiaries.  The term "Economic
Entity" used throughout  these financial  statements means the parent entity and
its subsidiaries.

   FOREIGN CURRENCY TRANSACTIONS

     Transactions  in foreign  currencies are converted at the exchange rates in
effect at the date of each transaction.

     Amounts  payable to or by the economic  entity in foreign  currencies  have
been translated  into Australian  currency at the exchange rates current at year
end.

     Exchange  differences  relating to monetary items are brought to account in
the profit and loss account in the period when the  exchange  rates  change,  as
exchange gains or losses.

   INCOME TAX

     The economic entity follows the policy of tax-effect accounting. The income
tax  expense in the profit and loss  account  represents  the tax on the pre-tax
accounting  profit  adjusted  for income and  expenses  never to be  assessed or
allowed for taxation  purposes.  The provision for deferred income tax liability
and the  future  income tax  benefit  represent  the tax  effect of  differences
between income and expense items recognized in different  accounting periods for
book and tax purposes,  calculated  at the tax rates  expected to apply when the
differences reverse.

     The benefit  arising from  estimated  carry forward tax losses has not been
recorded in the future income tax benefit account as realization of such benefit
is considered not to be virtually certain.

   LEASED ASSETS

     Assets  of  the  economic   entity   acquired   under  finance  leases  are
capitalized.  The initial  amount of the leased  asset and  corresponding  lease
liability are recorded at the present value of minimum  lease  payments.  Leased
assets are amortized over the life of the relevant lease.  Lease liabilities are
reduced by the principal component of lease payments.  The interest component is
charged against operating profit.

     Operating  leases are not  capitalized  and  rental  payments  are  charged
against operating profit in the period in which they are incurred.


                                       92


<PAGE>




                      STV PTY LIMITED AND ITS SUBSIDIARIES
                  NOTES TO THE FINANCIAL STATEMENTS-(Continued)

PROPERTY, PLANT AND EQUIPMENT

     Land and  buildings  are valued at cost.  The carrying  amount of property,
plant and  equipment is reviewed  annually by directors to ensure that it is not
in excess of the recoverable amount from the assets.

            Leasehold improvements..................................   6 years
            Computer equipment......................................   3 years
            Motor vehicles..........................................   5 years
            Furniture and fixtures..................................  10 years

     Property, plant and equipment,  excluding freehold land, are depreciated or
amortized  at rates based upon their  expected  useful  lives using the straight
line method.

    INTANGIBLES

     The  acquisition  of MDS licenses has been brought to account at cost.  The
cost to acquire these licenses,  acquired for a 5 year period, will be amortized
over the remaining license period upon commencement of broadcasting  operations.
They are renewable every 5 years.

     The  licenses  have been issued for a term of five years,  with the license
fee  payable  annually  in  advance.  The  license  fee is payable  to  Spectrum
Management Agency, an agent of the Australian Federal Government.

   RECOVERABLE AMOUNTS OF NON-CURRENT ASSETS

     The  carrying  amounts  of all  non-current  assets are  reviewed  at least
periodically  whenever events and  circumstances  indicate the carrying value of
the assets may exceed their recoverable  amount. The recoverable  amounts of all
non-current assets have been determined using net cash flows which have not been
discounted to their present values.

   ANNUAL LEAVE

     Provision has been made in the financial  statements for benefits  accruing
to employees in relation to such matters as annual leave.

   REVENUE RECOGNITION

     Monthly  service  revenues  are  recognized  as  revenue  in the period the
related  services  are  provided  to the  subscribers.  The  Company  recognizes
installation  revenues to the extent of direct  selling  costs in the period the
installation  occurs.  To the extent  installation  fees exceed  direct  selling
costs,  the excess would be deferred  and  amortized  over the average  contract
period.   Financial   instruments  that  potentially   subject  the  Company  to
concentrations   of  credit  risk  consist   primarily  of  trade   receivables.
Concentrations  of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base.


                                       93



<PAGE>
                      STV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 2.   INCOME TAX

     (a) Non-current deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
                                                                                Economic Entity
                                                                         ------------------------------
                                                                         Period Ended       Year Ended
                                                                         December 31,      December 31,
                                                                         ------------------------------
                                                                             1994              1995
                                                                             ----              ----
                                                                              $A                $A
<S>                                                                       <C>                <C>
  Interest receivable and prepaids.................................               --          (133,683)
                                                                          ----------         ---------
  Total non-current deferred tax liability.........................               --          (133,683)
    Net operating loss carryforward................................           42,500         1,195,261
                                                                          ----------         ---------
  Total non-current deferred tax asset.............................           42,500         1,195,261
                                                                          ----------         ----------
    Net non-current deferred tax asset before valuation allowance..           42,500         1,061,578
          Valuation allowance......................................          (42,500)       (1,061,578)
                                                                          ----------        ----------
  Net non-current deferred tax asset (liability)...................               --                --
                                                                          ==========        ==========
</TABLE>

Net  operating  loss  carryforwards  have an unlimited  carryforward  period for
Australian tax purposes.

     (b) The  difference  between  income tax expense  provided in the financial
statements and the prima facie income tax expense is reconciled as follows:
<TABLE>
<CAPTION>
                                                                                Economic Entity
                                                                         ------------------------------
                                                                         Period Ended       Year Ended
                                                                         December 31,      December 31,
                                                                         ------------------------------
                                                                              1994            1995
                                                                             ----            ----
                                                                              $A              $A

<S>                                                                       <C>             <C>
     Net loss......................................................       (122,457)       (3,353,245)
     Prima facie tax thereon @ 36%.................................        (44,085)       (1,207,168)
     Tax effect of permanent and other differences
       --Timing differences........................................            --           (133,683)
       --Entertainment non deductible..............................          1,585           133,397
       --Amortization of licenses..................................            --             12,193
       --Effect of losses not brought to account...................         42,500         1,195,261
                                                                          --------        ----------
     Total income tax attributable to net loss.....................             --                --
                                                                          ========        ==========
</TABLE>

     (c) Benefit of income tax losses not brought to account

     As at 31 December 1995, the parent entity has unconfirmed unrecouped income
tax losses of  $A3,475,702  available to offset  against  future years'  taxable
income.  The  benefit of these  losses of  $A1,237,761  has not been  brought to
account as  realization  is not  virtually  certain.  The  benefit  will only be
obtained if:

          (a) the company derives future assessable income of a nature and of an
     amount sufficient to enable the benefits from the deductions for the losses
     to be realized;

          (b) the  company  continues  to  comply  with  the  conditions for
     deductibility imposed by the law;

          (c) no changes in tax  legislation  adversely  affect the company in
     realizing  the benefit from the deductions for the losses; and

          (d) any change in the  business  or control  of the  company  does not
     affect the ability to utilize the available losses.


                                       94


<PAGE>



                      STV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


NOTE 3.   RECEIVABLES (CURRENT):
<TABLE>
<CAPTION>

                                                                                  Economic Entity
                                                                        ----------------------------------
                                                                             1994                  1995
                                                                             ----                  ----
                                                                              $A                    $A
<S>                                                                     <C>                     <C>
     Accounts Receivable Trade..........................                        --                  3,004
       --Allowance for Bad Debts........................                        --                    (28)
     Non-trade amounts owing by:
        Related parties
         --Wholly owned group...........................                        --                     --
         --Associated companies.........................                        --              1,322,587
        Other persons...................................                    63,934                     --
                                                                         ---------              ---------

     Total current receivables..........................                    63,934              1,325,563
                                                                         =========              =========

NOTE 4.   INVESTMENTS (NON-CURRENT):

     Investments in associated companies (Note 17)......                         2                      2
                                                                         =========              =========

NOTE 5.   PROPERTY, PLANT AND EQUIPMENT:

     Leasehold improvements:
       --At cost........................................                        --                128,274
       --Accumulated amortization.......................                        --                 (7,801)
                                                                        ----------              ---------

     Total leasehold improvements, net..................                        --                120,473
                                                                        ----------             ----------
     Plant and equipment:
       --At cost........................................                    55,881              4,093,944
       --Accumulated depreciation.......................                  (  4,055)              (149,677)
                                                                        ----------             ----------
     Total plant and equipment, net.....................                    51,826              3,944,267
                                                                        ----------             ----------

     Plant and equipment under lease:
       --At capitalized cost............................                    44,506                408,832
       --Accumulated depreciation.......................                        --                (25,343)
                                                                       -----------             ----------
     Total lease plant and equipment, net...............                    44,506                383,489
                                                                       -----------             ----------

     Capitalized network construction expenditures:
       --At cost........................................                   431,041              1,636,813
       --Accumulated amortization.......................                        --                     --
                                                                       -----------            -----------

     Total capitalized development expenditures, net....                   431,041              1,636,813
                                                                       -----------            -----------

     Total property, plant and equipment, net...........                   527,373              6,085,042
                                                                       ===========            ===========
</TABLE>

                                       95


<PAGE>


                                   STV PTY LIMITED AND ITS SUBSIDIARIES
                              NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 6.   INTANGIBLE ASSETS (NON-CURRENT):
<TABLE>
<CAPTION>

                                                                                  Economic Entity
                                                                        ----------------------------------
                                                                             1994                  1995
                                                                             ----                  ----
                                                                              $A                    $A
<S>                                                                       <C>                   <C>

     MDS licenses.......................................                      1,570             3,501,285
       --Accumulated Amortization.......................                        --                (25,536)
     Other licenses.....................................                        --                251,570
       --Accumulated Amortization.......................                        --                 (8,333)
     Other..............................................                      1,992                 8,668
                                                                         ----------           -----------
     Total intangible assets, net.......................                      3,562             3,727,654
                                                                         ==========           ===========

NOTE 7.   CREDITORS AND BORROWINGS (CURRENT):

     Unsecured:
        Trade creditors.................................                      1,689               120,561
        Accrued expenses................................                     47,100                   --
        Due to associated company--CTV Pty Limited......                    623,021             3,627,044
        Due to related body corporate--United
          International Holdings Inc....................                     79,816               863,341
     Secured:
        Secured: Finance lease liability (Note 14)......                      7,732                62,641
                                                                         ----------           -----------
                                                                            759,358             4,673,587
                                                                         ==========           ===========

NOTE 8.   CREDITORS AND BORROWINGS (NON-CURRENT):

     Secured:
        Finance lease liability (Note 14)..............                      36,165               313,981
                                                                         ----------           -----------
     Total non-current creditors and borrowings........                      36,165               313,981
                                                                         ==========           ===========

NOTE 9.   PROVISIONS (NON-CURRENT):

     Annual leave......................................                         --                 11,495
                                                                         ===========          ===========

NOTE 10.   SHARE CAPITAL:

     Authorized capital:
        --100,000,000 ordinary shares of $1
          each.........................................                  100,000,000          100,000,000
                                                                         -----------          -----------
     Total authorized capital..........................                  100,000,000          100,000,000
                                                                         ===========          ===========
     Issued and paid up capital:
       --133,296 ordinary shares of $1.00 each.........                      133,296              133,296
                                                                         -----------          -----------
     Total issued and paid up capital..................                      133,296              133,296
                                                                         ===========          ===========
</TABLE>



                                       96

<PAGE>


                                   STV PTY LIMITED AND ITS SUBSIDIARIES
                              NOTES TO THE FINANCIAL STATEMENTS--(Continued)

Movement in issued shares for the year:
<TABLE>
<CAPTION>
                                                                        Number of                   Number of
                                                         Number of     Redeemable     Number of    Redeemable
                                                          Ordinary     Preference     Ordinary     Preference
                                                           Shares        Shares        Shares        Shares
                                                         ---------     ----------     ---------    -----------
                                                            1994            1994        1995           1995
                                                           ------           ----        ----           ----
<S>                                                       <C>                <C>      <C>              <C>

     Opening number of shares.......................           --             --      133,296            --
     Issued during the year (a).....................      133,296              2           --            --
     Redeemed.......................................          --               2           --            --
                                                          -------           ----      -------          ----
     Closing number of shares.......................      133,296             --      133,296            --
                                                          =======           ====      =======          ====

</TABLE>

NOTE 11.   CONVERTIBLE DEBENTURES:

     During the year ended 31 December 1995, the company had outstanding 986,707
convertible debentures for $A8,439,747.  These debentures confer rights upon the
holders as creditors  of the company.  They do not confer any right to attend or
vote at general meetings. Interest is payable to the holders equal to the amount
of the  distribution  that the holder would have received if, as at the date the
entitlement to the  distribution  was determined,  all of the debentures of that
holder and all other holders had been converted into shares.

     The convertible  debentures have been included in  shareholders'  equity in
the balance sheet as debenture  holders are entitled to an equivalent  return to
the ordinary shareholders.

     Conversion of debentures is permitted at any time provided conversion would
not result in the breach of any  Statute  by the  debenture  holder or any other
person.

     Debentures  may be converted  into fully paid ordinary  shares on a one for
one basis unless the normal value of the issued  shares is  reconstructed  which
would result in a  different  conversion factor.  Debentures may not be redeemed
for cash.

     In the event of a winding up of the  company,  the rights of the  debenture
holders against the company in respect of the debentures are postponed until the
claims of all holders of senior indebtedness have been satisfied in full. Senior
indebtedness means secured obligations, unsecured and unsubordinated obligations
of the company, other than debentures and shares.


NOTE 12.   RESERVES:
                                                       Economic Entity
                                                         December 31,
                                                  ---------------------------
                                                     1994              1995
                                                     ----              ----
                                                      $A                $A

     Share premium opening balance.............          --         1,426,959
     Premium on issue of shares................   1,426,959                --
                                                  ---------         ---------
     Total reserves............................   1,426,959         1,426,959
                                                  =========         =========


                                       97

<PAGE>


                      STV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 13.   EMPLOYEE ENTITLEMENTS:

     Superannuation commitments
     The economic entity  contributes to a defined  contribution  superannuation
plan for substantially all of its employees.  Each  participating  entity in the
economic entity has a legal  obligation to contribute to the schemes,  which are
as follows:

         (a) Hourly employees and commission employees--Employee Retirement
     Fund, a fund administered by MLC. This is a defined contribution fund.

        (b) Salaried employees--CETV Superannuation Fund, a fund administered by
     MLC (contributions 6%). This is a defined contribution fund.


NOTE 14.   COMMITMENTS:
<TABLE>
<CAPTION>

                                                                                                 Economic Entity
                                                                                               --------------------
                                                                                                1994        1995
                                                                                                ----        ----
                                                                                                 $A          $A
<S>                                                                                           <C>         <C>
(a)  Annual license fees are payable as follows:
     Not later than one year........................................................               --     1,227,291
     Later than one year but not later than two years...............................               --     1,227,291
     Later than two years but not later than five years.............................               --     1,686,787
     Later than five years..........................................................               --            --
                                                                                               ------     ---------
                                                                                                   --     4,141,369
                                                                                               ======     =========
(b)  Finance lease expenditure contracted for is payable as follows:
     Not later than one year........................................................           12,429        99,657
     Later than one year but not later than two years...............................           12,429       117,272
     Later than two years but not later than five years.............................           30,043       243,506
     Later than five years..........................................................              --            --
                                                                                               ------     ---------
                                                                                               54,901       460,435
Future finance charges..............................................................           11,004        83,813
                                                                                               ------     ---------

Net finance lease liability.........................................................           43,897       376,622
                                                                                               ======     =========

Reconciled to:
     Current liability (Note 7).....................................................            7,732        62,641
     Non-current liability (Note 8).................................................           36,165       313,981
                                                                                               ------     ---------
                                                                                               43,897       376,622
                                                                                               ======     =========
(c)  Operating lease expenditure contracted for is payable as follows:
     Not later than one year........................................................               --       169,642
     Later than one year but not later than two years...............................               --       169,642
     Later than two years but not later than five years.............................               --       510,984
     Later than five years..........................................................               --       148,112
                                                                                               ------     ---------
                                                                                                   --       998,380
                                                                                               ======     =========
</TABLE>

(d)  On 12 October 1994,  the Company  entered into a franchise  agreement  with
     Australis Media Limited.  The agreement carries a 15 year term beginning on
     12  October  1994 and may be  extended  for an  additional  10  years.  The
     agreement  provides  for an  exclusive  license and  franchise  for MDS and
     Satellite  and a  non-exclusive  license  and  franchise  for cable for all
     franchisor services including uplink and programming  including Channel [V]
     (a 24 hour music video channel), Arena, Showtime, Nickelodeon, TV1, Encore,
     Discovery and Fox Sports.


                                       98

<PAGE>

                      STV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

     Under the agreement,  minimum  payments are due, which include service fees
     based on varying  percentages  of net revenues as defined in the agreement,
     and subscription levies which are dependent on the number of subscribers.

NOTE 15.   NOTES TO THE STATEMENT OF CASH FLOWS:

     (a) Reconciliation of Cash

     For the purposes of the statement of cash flows, cash includes cash on hand
and in banks and deposits at call, net of outstanding bank  overdrafts.  Cash at
the end of the  financial  year as  shown  in the  Statement  of Cash  Flows  is
reconciled to the related items in the Balance Sheet as follows:

                                                         Economic Entity
                                                      ----------------------
                                                        1994           1995
                                                        ----           ----
                                                         $A            $A

Cash.............................................         5,994       2,236
Short-term money market deposits.................    10,072,256         --
                                                     ----------       -----
                                                     10,078,250       2,236
                                                     ==========       =====

     (b)  Reconciliation  of  net  cash  provided  by  operating  activities  to
operating loss after income tax.
<TABLE>
<CAPTION>

                                                                   Economic Entity
                                                           -------------------------------
                                                           Period Ended         Year Ended
                                                           December 31,        December 31,
                                                           ------------        -----------
                                                              1994                 1995
                                                              ----                 ----
                                                               $A                   $A
<S>                                                         <C>                <C>

Operating loss after income tax..........................   (122,457)          (3,353,245)
Adjustments for non-cash income and expense items:
     Depreciation and amortization expense...............      4,055              212,635
     Bad debts expense and provision for doubtful
        debts............................................        --                    28
     Unrealized foreign exchange gain....................        --                   --
     Transfers to provisions:
     Annual leave........................................        --                11,495
     Increase in other receivables.......................    (63,934)              60,930
     Increase (decrease) in trade creditors..............     48,789               71,789
     Increase in other assets............................        --              (382,866)
                                                            --------           ----------
     Net cash from operating activities..................   (133,547)          (3,379,234)
                                                            ========           ==========

</TABLE>

   (c)   Subsidiaries acquired


                                       99

<PAGE>


                      STV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

     The following  subsidiaries  were acquired by the economic  entity for cash
consideration. The fair value of net tangible assets acquired was as follows:

                                                          Fair Value
                                                        of Net Tangible
                                                        Assets Acquired
                                                    ------------------------
                                                    1994                1995
                                                    ----                ----
                 Entity                              $A                  $A
                 ------
     Selectra Pty Limited.......................      2                   --
     Vermint Grove Pty Limited--cash............     --                    2
     Kidilla Pty Limited--cash..................     --                    2
     Dovevale Pty Limited--cash.................     --                    2
     Carryton Pty Limited--cash.................     --                    2
     Xtek Bay Pty Limited--cash.................     --                    2
     Windytide Pty Limited--cash................     --                    2
                                                    ---                  ---
     Fair value of net identifiable assets......      2                   12
     Goodwill on acquisition....................    ---                  ---
     Total consideration........................      2                   12
                                                    ===                  ===


     (d) Non-cash financing and investing activities.

     During the year the economic  entity  acquired  plant and equipment with an
aggregate fair  value of $A354,822  (1994: $A44,506) by means of finance leases.
These transactions are not reflected in the Statement of Cash Flows.

NOTE 16.   SUBSIDIARIES:

     The following were subsidiaries at 31 December 1995, and have been included
in  the  consolidated   financial   statements.   The  financial  years  of  all
subsidiaries are the same as that of the parent entity.
<TABLE>
<CAPTION>

                                                                                                Contribution to
                           Place of                              Book Value of                   Consolidated
        Name of         Incorporation/   Date of      Type of   Parent Entity's    % of         Result for the
   Controlled Entity     Formation(a)  Acquisition     Shares     Investment    Shares Held          Year
   -----------------    -------------  -----------    -------   --------------- ------------    --------------
                                                                  1994   1995     1994  1995     1994    1995
                                                                  ----   ----     ----  ----     ----    ----
                                                                   $A     $A       %     %
<S>                       <C>          <C>            <C>          <C>     <C>     <C>   <C>      <C>     <C>

Vermint Grove Pty         Australia    26/4/95        Ordinary     --       2      100   --       --      --
   Limited

Kidilla Pty Limited       Australia    26/4/95        Ordinary     --       2      100   --       --      --

Dovevale Pty Limited      Australia    26/4/95        Ordinary     --       2      100   --       --      --

Carryton Pty Limited      Australia    26/4/95        Ordinary     --       2      100   --       --      --

Xtek Bay Pty Limited      Australia    26/4/95        Ordinary     --       2      100   --       --      --

Selectra Pty Limited      Australia    29/7/94        Ordinary      2       2      100  100       --      --

Windytide Pty Limited     Australia    26/4/95        Ordinary     --       2      100   --       --      --
                                                                 ----    ----                    ---     ---
                                                                    2      14                     --      --
                                                                 ====    ====                    ===     ===
</TABLE>


(a)  All entities operate solely in their place of incorporation/formation.

                                       100

<PAGE>


                      STV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


NOTE 17.   ASSOCIATED COMPANIES:

     Details of material interests in associated companies are as follows:
<TABLE>
<CAPTION>

    Name of Associated         Principal Activity of        Ownership        Balance             Dividends
          Company                Associated Company         Interest          Date               Received
    ------------------         ---------------------      -------------    -----------        --------------
                                                          1994     1995                       1994      1995
                                                          ----     ----                       ----      ----
<S>                         <C>                            <C>     <C>     <C>                <C>        <C>
Communication &             Delivery of subscription
  Entertainment               television services to
  Australia Pty Limited       regional Australia           50%     50%     31 December          --        --

Chippawa Pty Limited        Delivery of subscription
                              television services to
                              regional Australia           50%     50%       30 June            --        --
                                                                                               ---       ---
                                                                                                --        --
                                                                                               ===       ===
</TABLE>

<TABLE>
<CAPTION>

                                                                                           Economic Entity
                                                                                         -------------------
                                                                                         1994           1995
                                                                                         ----           ----
                                                                                          $A             $A

<S>                                                                                     <C>             <C>

     Aggregate carrying amount of investments in associated companies........               2              2
                                                                                        -----           ----
     Aggregate amount of investment in associated companies, as determined
under the equity method of accounting........................................               2              2
                                                                                        =====           ====
</TABLE>

NOTE 18.   RELATED PARTY DISCLOSURES:

   A. OTHER DIRECTOR TRANSACTIONS

     Crase  Partners,  a  director-related  firm of J.  K.  Crase,  a  director,
provided  general  accounting  services to the company during the period.  These
services were provided at an arms length basis.

   B. TRANSACTIONS WITH RELATED PARTIES IN THE WHOLLY OWNED GROUP

     The parent entity entered into the following  transactions  during the year
with related parties in the wholly owned group:

 *    loans  were  advanced  to  subsidiaries  to fund  the  acquisition  of MDS
licenses and total $A0 and  $A3,863,022.  STV also has amounts payable to United
International  Holdings, Inc. of $A79,816 and $A863,341 at December 31, 1994 and
1995, respectively.

     These transactions were undertaken on commercial terms and conditions.


   C. TRANSACTIONS WITH ASSOCIATED COMPANIES

     The  parent  entity  entered  into  certain  transactions  with  associated
companies,  being loans  advanced and received on an arms length basis.  STV has
receivables from associated  companies  totaling $A0 and $A1,322,587 at December
31, 1994 and 1995, respectively. STV has amounts payable to CTV of $A623,074 and
$A3,627,044 as of the same dates.


                                      101

<PAGE>


                      STV PTY LIMITED AND ITS SUBSIDIARIES
                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 19.   US GAAP INFORMATION

     The  accounting  policies  followed  in  preparation  for the  consolidated
financial  statements  differ in one respect to those generally  accepted in the
United  States of  America  (US GAAP).  For US GAAP  purposes,  the  convertible
debentures would be classified as a non-current liability and not equity.

     The  calculation of  shareholders'  equity in accordance with US GAAP is as
follows:
<TABLE>
<CAPTION>

                                                                                   December 31,
                                                                           ------------------------------
                                                                             1994                1995
                                                                             ----                ----
                                                                              $A                  $A
<S>                                                                        <C>                 <C>
     Shareholders' equity as per balance sheet..............                9,877,545           6,524,300
     Adjustments to reported equity:
          Convertible debentures............................               (8,439,747)         (8,439,747)
                                                                           ----------          ----------
     Shareholders' equity in accordance with US GAAP........                1,437,798          (1,915,447)
                                                                           ==========          ==========
</TABLE>



                                      102
<PAGE>


                            XYZ ENTERTAINMENT PTY LTD

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors

     We  have  audited  the  accompanying  consolidated  balance  sheets  of XYZ
Entertainment  Pty  Limited as of  December  31,  1994 and 1995 and the  related
consolidated statements of operations,  shareholders'  deficiency and cash flows
for the period from  October 17, 1994 (date of  inception)  to December 31, 1994
and the  financial  year  ended  December  31,  1995,  which  are  expressed  in
Australian  dollars.  These 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  generally  accepted  auditing
standards in Australia which do not differ in any material respect from auditing
standards generally accepted in the United States.  Those standards require that
we plan and perform the audit to obtain  reasonable  assurance as to whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our  opinion the  consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
XYZ  Entertainment  Pty Limited as of December 31, 1994 and 1995 and the results
of its  operations  and its cash flows for the years then ended,  in  conformity
with accounting principles generally accepted in Australia.

     Generally  accepted  accounting  principles  in  Australia  vary in certain
significant respects from generally accepted accounting principles in the United
States.  Application of generally accepted  accounting  principles in the United
States would have affected amounts reported as shareholders'  deficiency and net
loss as at and for the period  from  October  17,  1994 (date of  inception)  to
December 31, 1994 and the year ended December 31, 1995 to the extent  summarized
in Note 12 to the financial statements.


Deloitte Touche Tohmatsu
Chartered Accountants

Sydney, Australia
March 15, 1996

                                      103

<PAGE>



                            XYZ ENTERTAINMENT PTY LTD
                      CONSOLIDATED STATEMENT OF OPERATIONS
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                                         1994              1995
                                                            Note          $A                $A
<S>                                                         <C>       <C>              <C>

Revenue
     Channel supply.................................                       Nil          1,117,091
     Other..........................................                       Nil            592,149
     Interest.......................................                     2,829            196,291
                                                                       -------         ----------
                                                                         2,829          1,905,531
                                                                       -------         ----------
Operating expenses
     Cost of services...............................                       Nil         24,677,575
     Selling, general and administrative............                   236,703         12,475,597
     Depreciation and amortization..................          2            Nil          3,594,737
                                                                       -------         ----------

Cost of operations..................................                   236,703         40,747,909
                                                                       -------         ----------

Net loss before income taxes........................                   233,874         38,842,378
                                                                       -------         ----------

Income taxes........................................          3            Nil                Nil
                                                                       -------         ----------

Net loss............................................          2        233,874         38,842,378
                                                                       -------         ----------

Net loss per share..................................                   116,937         19,421,189
                                                                       =======         ==========

Weighted average number of ordinary shares out-
   standing during the period.......................                         2                  2
                                                                       =======         ==========

</TABLE>



         The accompanying notes form part of these financial statements.


                                      104
<PAGE>


                                        XYZ ENTERTAINMENT PTY LTD
                                        CONSOLIDATED BALANCE SHEET
                                     AS OF DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>

                                                                         1994             1995
                                                            Note          $A               $A

<S>                                                          <C>      <C>             <C>
ASSETS
Current assets
     Cash and cash equivalents..........................               670,754          3,105,803
     Receivables........................................                33,000          1,006,241
     Amounts due from stockholder.......................                   Nil             21,219
     Program material rights (net of accumulated
        amortization of $Anil and $A1,430,000)..........                   Nil          2,298,935
                                                                       -------         ----------
           Total current assets.........................               703,754          6,432,198
                                                                       -------         ----------
Non-current assets
     Property, plant and equipment......................      4         57,448          3,361,070
     Investment in associated company...................      6            Nil            245,518
     Amounts due from related party.....................      8            Nil          1,326,578
     Program material rights (net of accumulated
        amortization of $Anil and $A180,000)............                   Nil            217,916
                                                                       -------         ----------
           Total non-current assets.....................                57,448          5,151,082
                                                                       -------         ----------
               Total assets.............................               761,202         11,583,280
                                                                       =======         ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
     Creditors, trade...................................                   Nil         20,792,868
     Other creditors and accruals.......................                   Nil             75,656
     Amounts due to related party.......................                   Nil                Nil
                                                                       -------         ----------
          Total current liabilities.....................                   Nil         20,868,524
                                                                       -------         ----------
Non-current liabilities
     Creditors, trade...................................                   Nil            743,086
     Amounts due to stockholders........................      8        995,074         29,047,920
                                                                       -------         ----------
          Total non-current liabilities.................               995,074         29,791,006
                                                                       -------         ----------
               Total liabilities........................               995,074         50,659,530
                                                                       -------         ----------
Commitments and Contingencies (See Notes)
Stockholders' deficiency
     Redeemable preferences shares, par value $A1.00 per
         share: Authorized 100,000 shares, none issued
           and outstanding  ............................                   Nil                Nil

     Ordinary shares, par value $A1.00 per share:
        Authorized 900,000 shares, 2 issued and               9              2                  2
           outstanding  ................................                   Nil                Nil
     Accumulated deficit................................              (233,874)       (39,076,252)
                                                                     ---------        -----------
               Total stockholders' deficiency...........              (233,872)       (39,076,250)
                                                                      --------        -----------
               Total liabilities and stockholders'
                  deficiency............................               761,202         11,583,280
                                                                      ========        ===========
</TABLE>
         The accompanying notes form part of these financial statements.

                                      105


<PAGE>
                            XYZ ENTERTAINMENT PTY LTD
               CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIENCY
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                     Ordinary         Accumulated           Total
                                                        $A                $A                 $A
<S>                                                     <C>          <C>            <C>
Balance at October 17, 1994....................                                             Nil
Issue of ordinary shares.......................          2                                    2
Net loss.......................................                         (233,874)      (233,874)
                                                                     -----------    -----------

Balance at December 31, 1994...................          2              (233,874)      (233,872)
                                                       ---           -----------    -----------
Net loss.......................................                      (38,842,378)   (38,842,378)
                                                                     -----------    -----------

Balance at December 31, 1995...................          2           (39,076,252)   (39,076,250)
                                                       ===           ===========    ===========

</TABLE>








         The accompanying notes form part of these financial statements.


                                      106

<PAGE>


                            XYZ ENTERTAINMENT PTY LTD
                      CONSOLIDATED STATEMENT OF CASH FLOWS
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                                 1994                1995
                                                                  $A                  $A
<S>                                                             <C>               <C>

Cash flows from operating activities
     Cash receipts in the course of operations.............          Nil              370,348
     Cash payments in the course of operations.............     (269,703)         (17,351,047)
     Interest received.....................................        2,829              196,291
                                                                --------          -----------
     Net cash used in operating activities.................     (266,874)         (16,784,408)
                                                                --------          -----------
Cash flows from investing activities
     Payments for property, plant and equipment............      (57,448)          (4,999,012)
     Proceeds from sale of program material rights.........          Nil            2,304,795
     Payment for investment................................          Nil                   (1)
     Payments for program material rights..................          Nil           (7,164,583)
                                                                 -------          -----------
     Net cash used in investing activities.................      (57,448)          (9,858,801)
                                                                 -------          -----------
Cash flows from financing activities
     Proceeds from issues of shares........................            2                  Nil
     Proceeds from stockholder loans.......................      995,074           29,078,258
                                                                 -------          -----------
     Net cash provided by financing activities.............      995,076           29,078,258
                                                                 -------          -----------
Net increase in cash and cash equivalents held.............      670,754            2,435,049
Cash and cash equivalents at the beginning of the
   period .................................................          Nil              670,754
                                                                 -------          -----------
Cash and cash equivalents at the end of the period.........      670,754            3,105,803
                                                                 =======          ===========
Reconciliation of Net Loss to Net Cash Used in
   Operating Activities
     Net loss .............................................     (233,874)         (38,842,378)
     Add non-cash items:
          Amounts set aside to provisions..................          Nil            1,771,817
          Depreciation and amortization....................          Nil            3,594,737
          Gain on disposal of program material rights......          Nil             (189,213)
          Loss on disposal of program material rights......          Nil            1,511,315
          Gain on disposal of fixed assets.................          Nil             (168,358)
          Loss on disposal of fixed assets.................          Nil                9,690
                                                                --------          -----------
     Net cash used in operating activities before change
        in assets and liabilities..........................    (233,874)          (32,312,390)
     Change in assets and liabilities:
          Increase in trade receivables....................     (33,000)             (994,460)
          (Increase) decrease in other receivables.........         Nil            (1,518,255)
          Increase in creditors............................         Nil            18,040,697
                                                               --------           -----------
               Net cash used in operating activities.......    (266,874)          (16,784,408)
                                                               ========           ===========
</TABLE>
         The accompanying notes form part of these financial statements.

                                      107
<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995

NOTE 1--STATEMENT OF ACCOUNTING POLICIES

     The  significant  policies  which have been adopted in the  preparation  of
these consolidated financial statements are:

   (a) BASIS OF PREPARATION

     This statement of significant accounting policies is given to assist in the
understanding  of the  consolidated  financial  statements.  For the purposes of
these  consolidated  financial  statements,   XYZ  Entertainment  Pty  Ltd  (the
"Company") and its controlled entities (subsidiaries) (collectively,  "XYZ") are
defined  under  Australian  law  as the  Economic  Entity.  This  term  is  used
throughout  these  Notes  to  the   consolidated   financial   statements.   The
consolidated   financial  statements  have  been  prepared  in  accordance  with
accounting principles generally accepted in Australia (Australian GAAP), include
disclosures required by the United States Securities and Exchange Commission and
are presented in Australian  dollars ($A). The accounting  principles  differ in
certain  respects from accounting  principles  generally  accepted in the United
States (US GAAP). The significant differences and the approximate related effect
on the  consolidated  financial  statements are set out in Note 12. Although the
company is  financially  dependent on related  bodies  corporate for its ongoing
viability, the financial statements have been prepared on a going concern basis,
after  considering  undertakings by related bodies  corporate to provide ongoing
financial support.  The financial  statements have been prepared on the basis of
historical costs and do not take into account changing money values.  Consistent
accounting  policies have been employed in the preparation  and  presentation of
the consolidated financial statements.

     The company was incorporated on October 17, 1994 and commenced trading from
that date. Through its controlled entities, the company provides programming for
four of eight  channels  of the  multi-channel  base  programming  package  (the
"Galaxy  Package")  offered  and  distributed  by the  Satellite A and B license
holders in Australia. The Galaxy Package is distributed via satellite, microwave
Multipoint  distribution  system  and  other  transmission  technologies  by the
Satellite B license  holder through  distribution  facilities in the six largest
capital cities in Australia and regional Western  Australia,  and by franchisees
to substantially all of the population in Australia.

     The  Company's  programming  for the four channels was first aired on April
23,  1995  by the  Satellite  A and B  license  holders.  Regional  distribution
commenced in New South Wales in August 1995 and in other states in October 1995.

     Programming  provided by the Company as at the date of this report includes
Red, a music video channel; ARENA, a general entertainment channel; NICKELODEON,
a children's/family/classic channel; and DISCOVERY, a documentary channel.

   (b) PRINCIPLES OF CONSOLIDATION

     The accounts have been prepared by consolidating  the financial  statements
of all the entities  that comprise the Economic  Entity,  being the Company (the
chief entity) and its controlled entities. A list of controlled entities appears
in Note 7.

     The purchase method of accounting has been used to account for subsidiaries
acquired during the period. The Company undertakes a valuation of the net assets
acquired  in  purchase   transactions  in  accordance  with  generally  accepted
accounting  principles.  Accordingly, the  Company  has  stated  the net assets


                                      108

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995


acquired  from  purchased  companies  at  their  estimated  fair  values  at the
date of  acquisition.  The  consolidated  accounts  include the  information and
results of each  controlled  entity from the date on which the  Company  obtains
control and until such time as the Company ceases to control such entity.

     In preparing  the  consolidated  accounts,  the  intercompany  balances and
transactions, and any unrealized profits arising within the Economic Entity have
been eliminated in full.

   (c) REVENUE AND REVENUE RECOGNITION

     Sales  revenue  comprises  license  fees earned  from a related  entity for
development  and  production  of  channels  of  programming   for   subscription
television broadcasting services. Revenue is recognized at the time subscription
services are provided to customers.

   (d) RECOVERABLE AMOUNT OF NON-CURRENT ASSETS

     The carrying  amounts of all  non-current  assets are reviewed to determine
whether they are in excess of their  recoverable  amount as of the balance sheet
date.  If the carrying  amount of a non-current  asset  exceeds the  recoverable
amount, the asset is written down to the lower amount. In assessing  recoverable
amounts,  the  relevant  net cash inflows  arising  from the  continued  use and
subsequent  disposal of  non-current  assets have not been  discounted  to their
present value unless otherwise indicated.

   (e) FOREIGN CURRENCY TRANSACTIONS

     Foreign currency  transactions are translated to Australian currency at the
rates of exchange existing at the dates of the transactions.  Amounts receivable
and payable in foreign  currencies at the balance  sheet date are  translated at
the rates of exchange existing on that date.

     Exchange  differences relating to amounts payable and receivable in foreign
currencies  are  recorded in the profit and loss  account as  exchange  gains or
losses in the financial year in which the exchange rates change.

   (f) TAXATION

     XYZ adopts the liability method of tax effect accounting. The tax effect of
temporary  differences  which arise from items recorded in different periods for
income tax and accounting purposes,  are carried forward on the balance sheet as
deferred tax assets and deferred tax  liabilities,  as applicable.  Deferred tax
assets arising from temporary differences are not recorded unless realization of
the asset is assured  beyond a  reasonable  doubt.  Deferred  tax  assets  which
include  tax  losses  are only  recorded  when their  realization  is  virtually
certain.

     The recovery of deferred tax assets (both  recognized and  unrecognized) is
contingent  upon  sufficient  taxable  income  being  earned in future  periods,
continuation  of the relevant tax laws and each relevant  company  continuing to
comply with the appropriate legislation.


                                      109


<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995


   (g) PLANT AND EQUIPMENT

     ACQUISITION

     Items  of  plant  and  equipment  are  recorded  at  historical   cost  and
depreciated as outlined below.

     DEPRECIATION

     Items of plant and equipment are depreciated  over their  estimated  useful
lives on a straight-line  basis.  The estimated useful lives of such items range
from four to ten years.  Items of plant and equipment are  depreciated  from the
date the asset commences earning revenue.

     Leases

     Payments made under  operating  leases are charged against profits in equal
installments over the accounting periods covered by the lease term, except where
an  alternative  basis is more  representative  of the pattern of benefits to be
derived from the leased property.

   (h) SUPERANNUATION

     XYZ contributes to one defined  contribution  fund for all employee groups.
Contributions of $A135,675 were made to the fund during the year as a percentage
of salaries based on statutory requirements.

   (I) Program Material Rights

     Program  material rights are recognized as an asset and stated at the lower
of unamortized  cost and net realizable  value. The rights represent the ability
to use  television  programs over a specified  period of time, as set out in the
license  agreements.  Program material rights acquired under license  agreements
are  recognized  when  the  license  period  begins  and  all of  the  following
conditions are met:

          (i) The cost of each license fee for each program is known or is
     reasonably determinable;

          (ii) The  program  material has  been  accepted  by  the  licensee in
     accordance  with the terms of the license agreement; and,

          (iii) The licensor can deliver the program  material  rights,  and the
     licensee can exercise the rights.

     Amortization  of the cost of  program  material  rights is  charged  to the
statement  of  operations  based on the  regular  assessment  of the  benefit of
individual license agreements,  over the term of the agreement.  If the benefits
are reasonably  determinable through the number of times a particular program is
aired,  then costs are charged to the  statement of operations  accordingly.  An
accelerated method of amortization is used when the first broadcast of a program
is  estimated  to be more  valuable  than its reruns.  Costs are  allocated on a
straight-line  basis  over the  period of the  agreement  if each  broadcast  is
expected to produce approximately the same amount of revenue.


                                      110

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995


     Program  material  rights  are  classified  as  current  assets if they are
expected to be used within one year.

   (j) STATEMENT OF CASH FLOWs

     For the purposes of the statement of cash flows,  cash and cash equivalents
includes bank  overdrafts  and all highly liquid  investments  which are readily
convertible to cash at the Company's option.

   (k) LOSS PER SHARE

     Loss per share is calculated  by dividing net loss by the weighted  average
number of issued ordinary shares outstanding during the period.

   (l) PROVISIONS

     Employee Entitlements

     Provision  is made for  benefits  accruing to employees in respect of wages
and  salaries,  annual  leave,  long  service  leave,  and sick leave when it is
probable  that  settlement  will be required  and are capable of being  measured
reliably.

     Provisions made in respect of wages and salaries, annual leave, sick leave,
and other employee entitlements expected to be settled within twelve months, are
measured at their nominal values.

     Provisions  made in respect of other  employee  entitlements  which are not
expected to be settled within twelve months are measured as the present value of
the estimated  future cash outflows to be made by the economic entity in respect
of services provided by employees up to the reporting date.

   (m) DATE OF INCORPORATION

     The  company  was   incorporated   on  October  17,  1994  and  accordingly
comparative figures cover the period from inception.

   (n) INVESTMENTS

     ASSOCIATED COMPANIES

     The Company equity accounts for its investments in associated  companies in
equity supplementary financial statements.  Investments in which the Company has
a material interest and over which it exercises significant influence,  but does
not control, are considered to be associated companies.  The ability to exercise
significant  influence  over the  strategic  operating,  investing and financing
policies of a company may be indicated  by, for example,  representation  on the
board  of  directors,   participation  in  policy-making   processes,   material
intercompany  transactions,  interchange of management personnel or provision of
technical information.

     Investments  in  associated  companies are carried at the lower of cost and
recoverable amount.  Dividends are recorded in the profit and loss account after
they have been declared by the associated company in a general meeting.


                                      111

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995

     During the year,  the Company  entered into an agreement  with  Nickelodeon
Australia,  Inc to produce  NICKELODEON  AUSTRALIA,  a children's  channel.  The
Company  jointly  controls  Nickelodeon  Australia  Management  Pty Limited with
Nickelodeon  Australia,  Inc,  and as such  has the  capacity  to  significantly
influence  decision-making in these companies.  The term of the joint venture is
15 years.

     Selected  disclosures under the equity method of accounting relating to the
entity  in which the  Company  is able to  exercise  significant  influence  are
provided in Note 6.

     None of the shares in  associated  companies  are listed on the  Australian
Stock Exchange.


NOTE 2--EXPENDITURES

<TABLE>
<CAPTION>
                                                               1994               1995
                                                                $A                 $A
<S>                                                             <C>            <C>
Expenses included in the net loss were:
Depreciation and amortization:
    --plant and equipment.........................              Nil              828,647
    --program material rights.....................              Nil            2,766,090
                                                                ---            ---------
          Total depreciation and amortization.....              Nil            3,594,737
                                                                ===            =========
Amounts set Aside to Provision:
    --employee entitlements--annual leave.........              Nil               75,656
    --provision for doubtful debts................              Nil            1,696,160
                                                                ---            ---------
                                                                Nil            1,771,816
                                                                ===            =========
Exchange (gain) loss, net, on foreign currency
  transactions:
     Exchange gain on foreign currency
        transactions..............................              Nil             (368,670)
                                                                ---             --------
     Exchange (gain) loss, net....................              Nil             (368,670)
                                                                ===             ========
</TABLE>


NOTE 3--INCOME TAXES

     At December  31, 1995 XYZ had  accumulated  tax losses  carried  forward of
approximately  $A7,997,055 (1994:  $A71,840).  The losses may be carried forward
indefinitely under Australian income tax legislation.



                                      112

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995


     The tax effects of temporary differences,  at the Australian statutory rate
of 36%,  which  give rise to  significant  portions  of  deferred  tax assets or
liabilities and the corresponding  valuation  allowance at December 31, 1995 are
as follows:

                                                 1994                 1995
                                                  $A                   $A
Deferred tax assets
     Tax loss carryforward.............         77,978            9,816,188
     Accrued expenses and other........            Nil              266,479
                                                ------           ----------
                                                77,978           10,082,667
Deferred tax liabilities
     Depreciation and amortization.....            Nil            1,897,111
                                                ------           ----------
     Net deferred tax assets...........         77,978            8,185,556
     Less valuation allowance..........         77,978            8,185,556
                                                ------           ----------
                                                   Nil                  Nil
                                                ======           ==========

     Tax losses of  $A1,897,111  (1994:  $Anil) have been brought to account and
fully applied against deferred tax liabilities.

     XYZ has provided a valuation allowance for the total amount of net deferred
tax assets since realization of these assets is not assured,  principally due to
the  Economic  Entity  being in the start-up  phase of  operations.  For US GAAP
purposes as described in Note 12, a valuation  allowance for the total amount of
the net deferred tax assets has also been provided.


NOTE 4--PROPERTY, PLANT AND EQUIPMENT

                                                   1994              1995
                                                    $A                $A

Plant and equipment--at cost..................    57,448           4,026,837
Less: accumulated depreciation...............        Nil            (665,767)
                                                  ------           ---------
     Total property, plant and equipment.....     57,448           3,361,070
                                                  ======           =========

     There have been no current valuations included in the above amounts.


                                      113

<PAGE>



                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995



NOTE 5--COMMITMENTS AND CONTINGENCIES

                                                            1994       1995
                                                             $A         $A
Contracts for Expenditure for Program Material Rights
    --Not later than one year..............................  Nil     174,082
    --Later than one year but not later than two years.....  Nil         Nil
    --Later than two years but not later than three years..  Nil         Nil
    --Later than three years but not later than four years.  Nil         Nil
    --Later than four years but not later than five years..  Nil         Nil
    --Later than five years................................  Nil         Nil
                                                             ---     -------
                                                             Nil     174,082
                                                             ===     =======
Commitments Under Non-cancelable Operating Leases
    --Not later than one year..............................  Nil      11,794
    --Later than one year but not later than two years.....  Nil      12,362
    --Later than two years but not later than three years..  Nil      10,976
    --Later than three years but not later than four years.  Nil         568
    --Later than four years but not later than five years..  Nil         Nil
    --Later than five years................................  Nil         Nil
                                                             ---      ------
                                                             Nil      35,700
                                                             ===      ======

   CONTINGENCIES

     The  Company and its  controlled  entities  are party to matters  involving
certain claims which arise in the normal course of business,  none of which,  in
the opinion of  management,  is expected to have a materially  adverse effect on
the Company's consolidated financial position or results of operation.

   REGULATION

     Management asserts that no communication of any kind has been received from
the Australian  Broadcasting  Authority ("ABA"), the Australian  Competition and
Consumer  Commission of Australia  ("ACCC"),  or the Foreign  Investment  Review
Board of Australia  ("FIRB"),  or any other agency  indicating  that the Company
and/or  its  controlled  entities  is or  may  be in  violation  of  any  law or
regulation  of the  Commonwealth  of  Australia  or any  subdivision  or  agency
thereof.


NOTE 6--INFORMATION ABOUT INVESTMENTS IN ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
                                                                                                             Equity-
                                                                    Ownership           Carrying             Accounted
        Name of Company              Principal Activity             Interest            Amount               Amount
                                                                    --------            --------             ----------
                                                                 1994       1995     1994     1995         1994   1995
                                                                    Percent           $A       $A           $A     $A
<S>                            <C>                               <C>         <C>     <C>    <C>            <C>

Nickelodeon Australia          Production and Development
   Management Pty Limited      of the Nickelodeon Channel        N/A         50       Nil   245,518         Nil  245,518
</TABLE>

     The balance date of the associate is June 30.


                                      114

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995

     The  carrying  amount of the  investment  in the  associated  company is as
follows:
                                                                         $A
Carrying amount of investment in shares in associate company.......           1
Amounts due from associated company at the balance date ...........   1,941,677
Provision for non-recoverability...................................  (1,696,160)
                                                                     ----------
                                                                        245,518
                                                                     ==========

     The  carrying  amount of the  investment  equates  to the  equity-accounted
amount at December 31, 1995 as follows:

                                                                        $A
Carrying amount of investment in shares in
   associated company...........................................              1
XYZ's maximum obligation to contribute to the
   operating losses of the associated company. .................     (1,696,160)
                                                                     ----------
                                                                     (1,696,159)
Amounts due from associated company at the balance date.........      1,941,677
                                                                     ----------
                                                                        245,518
                                                                     ==========


NOTE 7--PARTICULARS IN RELATION TO CONTROLLED ENTITIES
<TABLE>
<CAPTION>

                                                               Book Value of           Contribution to
                                                                Investment            Consolidated Loss
                                                             -----------------       --------------------
                                         Class    Interest
                                           of       Held       1994         1995       1994           1995
                                         Share    Percent       $A           $A         $A             $A
<S>                                       <C>       <C>         <C>           <C>    <C>        <C>

Chief Entity
     XYZ Entertainment Pty
        Limited.....................                                                  233,874    38,842,378
Corporate Bodies Corporate
     XYZ Programming Pty
        Limited.....................      Ord       100         Nil            2          Nil           Nil
     Arena Television Pty Limited...
                                          Ord       100         Nil            2          Nil           Nil
     Quest Television Pty Limited...
                                          Ord       100         Nil            2          Nil           Nil
     Max Television Pty Limited.....
                                          Ord       100         Nil            2          Nil           Nil
     Red Television Pty
        Limited.....................      Ord       100         Nil            2          Nil           Nil
                                                                                      -------    ----------
     Consolidated net loss..........                                                  233,874    38,842,378
                                                                                      =======    ==========
</TABLE>


     Each of the controlled  entities are incorporated in, and carry on business
in, Australia.


NOTE 8--RELATED PARTY DISCLOSURES

   Ownership Interests in Related Parties

Information  in  relation  to  ownership  interests  in  controlled  entities is
provided in Note 7.


                                      115

<PAGE>


                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995


   REMUNERATION OF DIRECTORS

The directors of the Company during the period were:

     D F Hagans (appointed  12/12/94)
     A Tow (appointed 11/5/95)
     R J Freudenstein(appointed 6/9/95)
     R J Birrel(appointed 17/10/94, resigned 11/5/95)
     M W Booth (appointed 17/10/94, resigned 12/12/94, reappointed 6/9/95)
     D  Garry (appointed 17/10/94, resigned 17/10/94)
     L  M  Head (appointed 17/10/94, resigned 17/10/94)
<TABLE>
<CAPTION>

                                                                                              1994      1995
                                                                                               $A        $A
<S>                                                                                            <C>      <C>
Total income received,  or due and receivable,  by directors of the Company from
   the Company and any related  body  corporate,  and by all  directors  of each
   entity in the Economic Entity from  corporations of which they are directors,
   or related bodies corporate or an entity controlled by the chief entity.................    52,500   363,786
                                                                                               ======   =======
The number of directors of the Company whose total income falls within the following
   bands:                                                                                          No        No
   $ANil -- $A9,999........................................................................         4         7
                                                                                               ======   =======
</TABLE>


   LOANS TO DIRECTORS

     There were no loans in  existence at balance date (or at December 31, 1994)
made,  guaranteed or secured by the Company to directors of a corporation in the
Economic  Entity  or a related  body  corporate,  their  spouses,  relatives  or
relatives of spouses.

   LOANS FROM DIRECTOR RELATED ENTITIES
<TABLE>
<CAPTION>

                        TERMS AND CONDITIONS
     TYPE OF                    OF                 NAME OF RELATED              DIRECTOR        1995
   TRANSACTION          TYPE OF TRANSACTION           ENTITY                    RELATED          $A
<S>                      <C>                     <C>                     <C>                  <C>

                         Non-interest bearing,   Century United
Loans advanced           no set terms over       Programming Ventures    D Hagans and         14,523,960
   from stockholder....  payment                 Pty Limited             A Tow

Loans advanced           Non-interest bearing,   Foxtel Management Pty   R Freudenstein
 from stockholder......  set terms of            Limited                 and M Booth          14,523,960
                         repayment                                                            ----------
                                                                                              29,047,920
                                                                                              ==========
</TABLE>


   Loans from  director  related  entities  at  December  31,  1994  amounted to
$995,074.  Of  this  amount,   $820,074  had  been  advanced  by  UIH  Australia
Programming Inc. and $175,000 by Century Programming  Ventures Corp., both being
joint and equal stockholders in the Company at that date.


                                      116

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995


   LOANS TO DIRECTOR RELATED ENTITIES
<TABLE>
<CAPTION>

                        TERMS AND CONDITIONS
     TYPE OF                    OF                 NAME OF RELATED              DIRECTOR      1995
   TRANSACTION          TYPE OF TRANSACTION           ENTITY                    RELATED        $A
<S>                     <C>                    <C>                      <C>                 <C>


                        Non-interest bearing,  Century United
Loans advanced to       no set terms of        Programming Ventures     D Hagans and
   stockholder......... repayment              Pty Limited              A Tow               881,633
                                                                                            =======
</TABLE>

   There were no loans to Director Related Entities at December 31, 1994.

     OTHER TRANSACTIONS WITH DIRECTOR RELATED ENTITIES

<TABLE>
<CAPTION>
                        TERMS AND CONDITIONS
     TYPE OF                    OF                 NAME OF RELATED              DIRECTOR      1995
   TRANSACTION          TYPE OF TRANSACTION           ENTITY                    RELATED        $A
<S>                   <C>                    <C>                      <C>                   <C>

Establishment and
   restructuring      Normal commerical      UIH Australia
   fees paid......... terms and conditions   Programming Inc.         D Hagans              250,000

Establishment and
   restructuring      Normal commerical      Century Programming
   fees paid......... terms and conditions   Ventures Corp.           A Tow                 250,000

Establishment,
   operating and                             Century United
   management         Normal commercial      Programming Ventures     D Hagans and
   fees.............. terms and conditions   Pty Limited              A Tow                 860,444

Channel supply                               Continental Century
   license fee        Normal commercial      Pay Television Pty
   revenue........... terms and conditions   Limited                  A Tow                 943,358

Channel supply
   license fee        Normal commercial      Foxtel Management        R Freuderstein
   revenue........... terms and conditions   Pty Limited              and M Booth           330,753
                                             Continental Century

</TABLE>

     There  were no other transactions with Director Related Parties at December
31, 1994.



                                      117

<PAGE>
                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995



   LOANS TO OTHER RELATED ENTITIES
<TABLE>
<CAPTION>
                        TERMS AND CONDITIONS
     TYPE OF                    OF                       NAME OF RELATED            1995
   TRANSACTION          TYPE OF TRANSACTION                  ENTITY                  $A
<S>                      <C>                         <C>                          <C>
Loans advanced to        Non-interest bearing,
   associated            no set terms of             Nickelodeon Australia
   company.............. repayment                   Management Pty Limited       1,941,677

                         Non-interest bearing,
Loans advanced to        no set terms of
   related party........ repayment                   Nickelodeon Australia Inc.   1,326,578
</TABLE>

     There were no loans to Other Related Entities at December 31, 1994.

   OTHER TRANSACTIONS WITH OTHER RELATED ENTITIES
<TABLE>
<CAPTION>
                        TERMS AND CONDITIONS
     TYPE OF                    OF                     NAME OF RELATED            1995
   TRANSACTION          TYPE OF TRANSACTION                ENTITY                  $A
<S>                        <C>                    <C>                           <C>

                                                    Nickelodeon Australia
                        Normal commercial           Management Pty
Subscriptions payable.. terms and conditions        Limited                       113,219
</TABLE>

     There were no other  transactions  with other related  entities at December
31, 1994.

   TRANSACTIONS WITHIN THE WHOLLY-OWNED GROUP

     During the financial period,  the company provided  management  services to
other entities in the wholly-owned group at no charge. In addition,  the company
paid  license  fees  and  reimbursed  certain  costs to  other  entities  in the
wholly-owned  group in the  ordinary  course of business and on normal terms and
conditions.

   CONTROLLING ENTITIES

     The chief (parent) entity in the economic entity is XYZ  Entertainment  Pty
Limited.

     The ultimate holding company in the wholly-owned group is XYZ Entertainment
Pty Limited.


                                      118

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995


     The chief entity, at the year end, was jointly controlled by Century United
Programming  Ventures Pty Limited  ("CUPV") and Foxtel  Management  Pty Limited.
Both companies are incorporated in Australia.

     CUPV is jointly owned by UIH Australia Programming Inc. ("UIH") and Century
Programming Ventures Corp. ("CPVC"). The ultimate parent entity of UIH is United
International  Holdings, Inc.  The ultimate  parent  entity  of CPVC is  Century
Communications Corporation.

     Foxtel  Management  Pty  Limited is jointly  owned by The News  Corporation
Limited and Telstra Corporation Limited.


NOTE 9--SHARE CAPITAL
<TABLE>
<CAPTION>

                                                                      1994                1995
                                                                       $A                  $A
<S>                                                                 <C>                <C>
Authorized Capital
     900,000 ordinary shares of $A1.00 each....................       900,000             900,000
     100,000 redeemable preference shares of $A1.00 each.......       100,000             100,000
                                                                    ---------           ---------
                                                                    1,000,000           1,000,000
                                                                    ---------           ---------
Issued and Paid-Up Capital
     2 ordinary shares of $A1.00 each..........................             2                   2
                                                                    =========           =========
</TABLE>


     Upon  incorporation the Company issued two fully paid ordinary shares of $1
each.


NOTE 10--FINANCIAL REPORTING BY SEGMENTS

     The Company predominantly operates in Australia and in one industry,  being
programming for subscription television services.


NOTE 11--NON-HEDGED FOREIGN CURRENCY BALANCES

     The Australian  dollar  equivalent of foreign currency balances included in
the accounts which are not effectively hedged are as follows:

                                               1994                1995
                                                $A                  $A
US Dollars
   Liabilities
        Current............................       Nil           1,719,055
        Non-current........................   995,074             743,085
                                              -------           ---------
             Total.........................   995,074           2,462,140
                                              =======           =========
   Assets
        Current............................       Nil              25,729
                                              =======           =========
Sterling
   Liabilities
        Current............................       Nil              10,949
                                              =======           =========


                                      119

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995


NOTE 12--SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
         IN AUSTRALIA AND THE UNITED STATES

     As stated in note 1, the consolidated financial statements of XYZ have been
prepared  in  accordance  with  accounting   principles  generally  accepted  in
Australia,  which differ in certain  significant  respects from those  generally
accepted in the United States.  A description of the major  differences  between
Australian GAAP and US GAAP affecting the Company follows:

   (a) STATEMENT OF CASH FLOWS

     Under US GAAP,  a Statement  of Cash Flows would not provide a subtotal for
"net cash used in operating activities before changes in assets and liabilities"
as shown in Reconciliation of Net Loss to Net Cash Used in Operating Activities.

   (b) DEFERRED TAXATION

     Australian GAAP adopts the full liability  method of tax effect  accounting
whereby deferred tax assets and liabilities  arising from timing differences are
recorded in the balance  sheet at the rate of tax expected to be  applicable  at
the time those timing  differences  reverse. A deferred tax asset in relation to
available  tax losses  may be  recognized  to the  extent  that there is virtual
certainty of its recovery against future taxable income.

     Under US GAAP,  deferred  taxes are provided on all temporary  differences.
Temporary  differences encompass timing differences and other events that create
differences  between  the tax basis of an asset or  liability  and its  reported
amount in the financial  statements.  A deferred tax asset is recorded in a loss
period and is reduced by a valuation  allowance  to the extent it is more likely
than not that the deferred tax asset will not be realized.

     No deferred tax asset has been recognized in these accounts.

   (c) INVESTMENTS IN AND ADVANCES TO ASSOCIATED COMPANIES

     The Economic  Entity  equity  accounts for its  investments  in  associated
companies in equity supplementary  financial  statements.  Corporations in which
the Economic  Entity has a material  interest and over which the Economic Entity
exercises  significant  influence,  but does not control,  are  considered to be
associated  companies.  The ability to exercise  significant  influence over the
strategic  operating,  investing  and  financing  policies  of a company  may be
indicated   by,  for  example,   representation   on  the  board  of  directors,
participation in policy-making  processes,  material intercompany  transactions,
interchange of management personnel or provision of technical information.

     Investments  in  associated  companies are carried at the lower of cost and
recoverable amount.  Dividends are recorded in the profit and loss account after
they have been declared by the associated company in a general meeting.

     Under US GAAP,  the equity method of accounting is used for  investments in
which  the  Company  exerts  significant  influence.   Under  this  method,  the
investment,  originally recorded at cost, is adjusted to recognize the Company's
share of net earnings or losses of the associates,  limited to the extent of the
Company's  investment  in and  advances to the  associates,  including  any debt
guarantees or other contractual funding commitments.


                                      120

<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
                      AND THE YEAR ENDED DECEMBER 31, 1995

     Investments in and advances to associated companies are as follows:

                                                                        $A
Investment.........................................................         1
Amounts due from associated company (net of provision
   for non-recoverability of $A1,696,160)..........................   245,517
                                                                      -------
                                                                      245,518
                                                                      =======

   (d)  RECONCILIATION  OF NET LOSS AND  STOCKHOLDERS'  DEFICIENCY  AS REPORTED
UNDER AUSTRALIAN GAAP TO US GAAP

   A reconciliation of net loss and  stockholders'  deficiency as reported under
Australian GAAP to US GAAP is not required as there is no difference between the
results reported under Australian GAAP and US GAAP at the balance date.

   FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS AND OTHER DISCLOSURES

   The  carrying  amount of the  following  instruments  approximate  fair value
because of the short  maturity of these  instruments--cash  at bank,  promissory
notes, trade and other receivables,  and trade creditors and accruals (including
amounts owing to related entities).

   NEW ACCOUNTING PRINCIPLES

   The US Financial  Accounting  Standards  Board ("FASB")  issued  Statement of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed  of" ("SFAS  121")
which is required to be adopted by affected companies for fiscal years beginning
after  December 15, 1995.  The Company does not believe that the  provisions  of
SFAS 121 will have a material effect on the Company's reported results.

NOTE 13--REPORTING OF SIX MONTH PERIODS
                                                                 Six Months
                                                   Six Months       Ended
                                                     Ended       December 31,
                                                 June 30, 1995       1995
                                                 -------------   ------------
                                                       $A             $A
Revenue
     Channel Supply.............................     100,747     1,016,344
     Other......................................         Nil       592,149
     Interest...................................      62,587       133,704
                                                  ----------    ----------
                                                     163,334     1,742,197
Operating Expenses
     Cost of services...........................  15,732,400     8,945,175
     Selling, general and administrative .......   7,162,916     5,312,681
     Depreciation and amortization..............   1,366,875     2,227,862
                                                  ----------    ----------
                                                  24,262,191    16,485,718
                                                  ----------    ----------
NET LOSS........................................  24,098,857    14,743,521
                                                  ==========    ==========


                                      121

<PAGE>
                                AUDITORS' REPORT

To the shareholders of
 Saturn Communications Limited (formerly Kiwi Cable Company Limited):

     We  have  audited  the   accompanying   financial   statements   of  Saturn
Communications Limited (formerly Kiwi Cable Company Limited) for the years ended
31 December 1994 and 1995. These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on those
financial statements based on our audits.

     We conducted our audits in accordance with New Zealand Auditing  Standards,
which do not differ  substantially from generally accepted auditing standards 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 from material  misstatements.  An audit includes  examining,  on a test
basis,  evidence supporting amounts and disclosures in the financial statements.
An audit also includes assessing the accounting  principles used and significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects the financial position of Saturn Communications Limited
as of 31 December 1994 and 1995, and the results of the Company's operations for
the years then ended in accordance with New Zealand Accounting Standards.

     There are certain differences between New Zealand Accounting  Standards and
those  generally  accepted in the United States of America.  Application  of the
generally accepted  accounting  principles in the United States of America would
not result in material differences to these financial statements.


Arthur Andersen

Wellington, New Zealand
20 February 1996


                                      122
<PAGE>



                          SATURN COMMUNICATIONS LIMITED
                       STATEMENT OF FINANCIAL PERFORMANCE

                                                       For the years
                                                     Ended 31 December
                                                     -----------------
                                    Note           1994             1995
                                                   NZ$               NZ$

Programming Revenue..............                   70,389            169,223
Other Revenue....................                       --             57,835
                                                ----------        -----------
Total Revenue....................                   70,389            227,058
Expenses
Programming Expenses.............                  203,901            448,243
Selling, general & administration                  684,811          1,306,969
Management fee expense to                          309,426             17,209
   related party.................
Other operating expenses.........                  845,791          2,506,326
                                                ----------        -----------
Deficit before taxation for the       2        (1,973,540)         (4,051,689)
   year..........................
Income tax expense...............    11                --                  --
                                               -----------         ----------
Net deficit for the year.........              (1,973,540)         (4,051,689)
                                               ===========         ==========






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



                                      123
<PAGE>


                          SATURN COMMUNICATIONS LIMITED
                        STATEMENT OF MOVEMENTS IN EQUITY
                  FOR THE YEARS ENDED 31 DECEMBER 1994 and 1995

                                                                        NZ$
                                                                    ----------
Balance, at December 31, 1993...................................... (2,314,485)
Contributions from owners..........................................  7,155,259
Net deficit........................................................ (1,973,540)
                                                                    -----------
Balance, at December 31, 1994......................................  2,867,234
Net deficit........................................................ (4,051,689)
                                                                    -----------
Balance, at December 31, 1995...................................... (1,184,455)
                                                                    ===========




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


                                      124
<PAGE>



                          SATURN COMMUNICATIONS LIMITED
                         STATEMENT OF FINANCIAL POSITION



                                                       As at 31 December
                                                     ---------------------
                                              Note     1994         1995
                                                       NZ$          NZ$
Owner's Equity
Share capital [Shares issued: 347,368
   (1994: 347,368)]......................       3     347,368      347,368
Reserves.................................       3   6,981,575    6,981,575
Retained earnings........................          (4,461,709)  (8,513,398)
                                                   -----------  -----------
                                                    2,867,234   (1,184,455)
Non-Current Liabilities
Related party loan.......................       8         --     3,076,199

Current Liabilities
Accounts Payable & Accruals
     Trade creditors.....................             103,584      135,894
     Other...............................             110,868      122,207
                                                  -----------   ----------
                                                      214,452      258,101
Employee Entitlements....................              24,554       62,747
Converter Deposits.......................              24,356          --
Current-portion finance lease liability..       9      23,701       14,270
Related party payables...................       8          --      879,336
                                                  -----------   ----------
                                                      287,063    1,214,454
                                                  -----------   ----------
Total Liabilities And Equity.............           3,154,297    3,106,198
                                                  ===========   ==========






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


                                      125


<PAGE>



                          SATURN COMMUNICATIONS LIMITED
                  STATEMENT OF FINANCIAL POSITION--(Continued)


                                                   As at 31 December
                                                 --------------------
                                         Note     1994          1995
                                                  NZ$           NZ$
Non-Current Assets
Property, plant and equipment
   Cost .............................          3,297,551     4,150,307
   Accumulated depreciation..........         (1,300,597)   (1,887,172)
                                              -----------   -----------
                                           4   1,996,954     2,263,135
Investments--Unlisted Shares..........                --         5,000
                                              ----------    -----------
                                               1,996,954     2,268,135
Current Assets
Cash    .                                        733,407       379,547
Accounts receivables
     Customers.......................                --         21,746
     Employees.......................             34,472        32,545
     Others..........................             17,143        33,463
     Provision for doubtful debts....                 --       (10,000)
                                              ----------   ----------
                                                  51,615        77,754
Inventories..........................            170,709       160,074
Prepayments..........................                 --        29,351
Related party receivables............      8     201,612       191,337
                                              ----------   -----------
                                               1,157,343       838,063
                                              ----------   -----------
Total Assets.........................          3,154,297     3,106,198
                                              ==========   ===========




   The accompanying notes form an integral part of these financial statements


                                      126


<PAGE>



                          SATURN COMMUNICATIONS LIMITED
                             STATEMENT OF CASH FLOWS
                       FOR THE YEAR ENDED 31 DECEMBER 1995

<TABLE>
<CAPTION>


                                                                   For the years ended
                                                                      31 December
                                                                   -------------------
                                                           Note      1994         1995
                                                                     NZ$          NZ$

<S>                                                         <C>  <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
     Customers.........................................              22,031      171,749
Cash was disbursed to:
     Payments to suppliers and employees...............          (1,496,891)  (3,624,231)
                                                                 -----------  -----------
Net cash flows from operating activities...............     10   (1,474,860)  (3,452,482)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
     Proceeds from sale of fixed assets................             142,306       69,829
Cash was applied to:
     Purchase of fixed assets..........................            (726,123)    (932,018)
     Purchase of investments...........................                  --       (5,000)
                                                                 ----------   -----------
Net cash flows from investing activities...............            (583,817)    (867,189)

CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
     Share issue.......................................      3    7,155,259          --
     Related party loans...............................                  --    3,965,811
Cash was applied to:
     Related party loan repayment......................          (4,402,250)          --
                                                                 -----------  ----------
Net cash flow from financing activities................           2,753,009    3,965,811
Net increase/(decrease) in cash held...................             694,332     (353,860)
Add opening cash brought forward.......................              39,075      733,407
                                                                 ----------   ----------
Ending cash carried forward............................             733,407      379,547
                                                                 ==========   ==========

</TABLE>





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



                                      127
<PAGE>



                          SATURN COMMUNICATIONS LIMITED
              NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
                       FOR THE YEAR ENDED 31 DECEMBER 1995

1.   STATEMENT OF ACCOUNTING POLICIES

   a) The  reporting  entity  changed its name  subsequent to year end from Kiwi
Cable  Company  Limited  to  Saturn  Communications   Limited.  These  financial
statements  have been prepared under the  requirements of the Companies Act 1955
and the Financial Reporting Act 1993.

     The measurement base adopted is that of historical cost and the New Zealand
dollar ("NZ$") as the reporting currency.


   b) CURRENCY

     These financial statements have been prepared in New Zealand dollars.


   c) FIXED ASSETS

     All fixed assets are  recorded at cost.  Additions,  retirements  and major
improvements  are  capitalized  and costs for normal repair and  maintenance are
charged to expense as incurred.


   d) DEPRECIATION

     Depreciation  is provided on a straight  line basis on all  tangible  fixed
assets at rates calculated to allocate the assets' cost, less estimated residual
value, over their estimated useful lives.

     Major depreciation rates are:

            Plant and equipment.........      10-20%
            Leasehold improvements......         20%
            Office equipment............         20%
            Motor vehicles..............         20%

     e) INCOME TAX

     The income tax expense  charged to the  statement of financial  performance
includes  both the current year  liability  and the income tax effects of timing
differences  after  allowing  for   non-assessable   income  and  non-deductible
expenses.

     Deferred   taxation  is  calculated   using  the  liability   method  on  a
comprehensive basis. Debit balances in the deferred tax account arising from net
accumulated  timing  differences  and future  income tax  benefits  arising from
income tax losses  carried  forward are only  recognised if  realisation is more
likely than not.

     f) INVENTORIES

     Inventories are valued at lower of actual cost or net realisable value.


                                      128
<PAGE>



                          SATURN COMMUNICATIONS LIMITED
              NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
                       FOR THE YEAR ENDED 31 DECEMBER 1995

     g) LEASES

     Finance leases,  which effectively transfer to the entity substantially all
of the  risks and  benefits  incident  to  ownership  of the  leased  item,  are
capitalised  at the  lower of the fair  value of the  leased  property,  and the
present value of the minimum lease payments. The leased assets and corresponding
liabilities  are disclosed  and the leased assets are amortised  over the period
the entity is expected to benefit from their use.

     Operating   lease   payments,   where  the   lessors   effectively   retain
substantially  all the risks and benefits of ownership of the leased items,  are
included in the determination of the operating surplus in equal instalments over
the lease term.


   h) EXPENDITURE CARRIED FORWARD

     Significant  items of expenditure  having a benefit or relationship to more
than one period are written off over the period to which they relate.


   i) REVENUE RECOGNITION

     Monthly  service  are  recognised  as revenue  in the  period  the  related
services are provided to the  subscribers.  Installation  fees are recognised as
revenue to the extent of direct selling costs.


   j) FOREIGN CURRENCIES

     Transactions  in foreign  currencies are translated at the New Zealand rate
of exchange ruling at the date of transaction.

     At balance date foreign  monetary  assets and liabilities are translated at
the closing rate, and exchange  variations  arising from these  translations are
included in the statement of financial performance as operating items.


ADDITIONAL UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES

   k) USE OF ESTIMATES

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


   l) CASH AND CASH EQUIVALENTS

     Cash and  cash  equivalents  include  cash and  investments  with  original
maturities of less than three months.


                                      129

<PAGE>
                          SATURN COMMUNICATIONS LIMITED
              NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
                       FOR THE YEAR ENDED 31 DECEMBER 1995

   m) NEW ACCOUNTING PRINCIPLES

     The  Financial  Accounting  Standards  Board  (FASB)  issued  Statement  of
Financial  Accounting  Standards  No.  121  "Accounting  for the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to be disposed  of" ("SFAS  121")
which is required to be adopted by affected companies for fiscal years beginning
after  December  15,  1995.  SFAS No. 121 requires  that  long-lived  assets and
certain identifiable  intangibles to be held and used by the Company be reviewed
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying  amount of an asset may not be  recoverable.  The  Company  adopted the
principles of this  statement on January 1, 1996. The provisions of SFAS 121 did
not have an effect on the Company's reported results.

     The  Financial  Accounting  Standards  Board  (FASB)  issued  Statement  of
Financial   Accounting   Standards  No.  123  "Accounting  for  the  Stock-Based
Compensation" ("SFAS 123") which is required to be adopted by affected companies
for fiscal years beginning after December 15, 1995. The Company does not believe
that the  provisions  of SFAS 123 will have a material  effect on the  Company's
reported results.

   n) CHANGES IN ACCOUNTING POLICIEs

     There have been no material changes in accounting policies during the year.
All policies have been applied on consistent bases with previous years.


2.   DEFICIT BEFORE TAXATION

     HAS BEEN DETERMINED

                                                                1994     1995
                                                                 NZ$      NZ$
        After charging:
             Audit fees and expenses............               15,080    6,000
             Depreciation.......................              570,904  586,575
             Interest...........................                8,151       82
             Rental and leasing costs...........               71,804   77,489

3.   SHARE CAPITAL

                                                                1994     1995
                                                                NZ$      NZ$
     Issued 347,368 ordinary shares of $1.00 each
       (1994 347,368 shares) fully paid.........              347,368  347,368
                                                              -------  -------
                                                              347,368  347,368
                                                              =======  =======

     On 8 July 1994 United International Holdings, Inc, (UIH), a publicly listed
company  incorporated in the USA, acquired a 50% interest in the company via the
issue of 173,684 shares by the company.


                                      130

<PAGE>


                          SATURN COMMUNICATIONS LIMITED
       NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)
                       FOR THE YEAR ENDED 31 DECEMBER 1995


     The shares were purchased by UIH at a price of $US14.39 ($NZ24.12),  giving
rise to a share premium reserve at balance date of $US2,389,509 ($NZ4,005,883).

     Also on the 8 July 1994 the balance of the Todd International loan account,
being $US 1,775,000  ($NZ2,975,692)  after forgiveness of $US50,176  ($NZ84,117)
and repayment of $US900,000 ($NZ1,508,801), converted to equity.


4.   FIXED ASSETS
<TABLE>
<CAPTION>
                                                                                1994
                                                                 -----------------------------------
                                                                            Accumulated   Net Book
                                                                    Cost    Depreciation   Value
                                                                 --------   ------------  ----------
<S>                                                              <C>        <C>           <C>
     Leasehold improvements.................................       121,516     (49,341)      72,175
     Office equipment (including Finance Lease Assets)......       227,909     (74,638)     153,271
     Plant and equipment....................................     2,895,750  (1,159,362)   1,736,388
     Motor vehicles.........................................        52,376     (17,256)      35,120
                                                                 ---------  ----------    ---------
                                                                 3,297,551  (1,300,597)   1,996,954
                                                                 =========  ==========    =========
</TABLE>

<TABLE>
<CAPTION>
                                                                                1995
                                                                 -----------------------------------
                                                                            Accumulated   Net Book
                                                                   Cost     Depreciation   Value
                                                                 --------   ------------  ----------
<S>                                                              <C>        <C>           <C>
     Leasehold improvements.................................       127,912     (74,197)      53,715
     Office equipment (including Finance Lease Assets)......       445,160    (143,085)     302,075
     Plant and equipment....................................     3,477,675  (1,640,460)   1,837,215
     Motor vehicles.........................................        99,560     (29,430)      70,130
                                                                 ---------  ----------    ---------
                                                                 4,150,307  (1,887,172)   2,263,135
                                                                 =========  ==========    =========
</TABLE>



5.   CONTINGENT LIABILITIES

     There are no contingent liabilities outstanding at year end (1994: nil).


6.   CAPITAL EXPENDITURE COMMITMENTS

     Estimated  capital  expenditure  contracted  for at  balance  date  but not
provided for NZ$659,235 (1994: nil).


                                      131

<PAGE>


                          SATURN COMMUNICATIONS LIMITED
       NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)
                       FOR THE YEAR ENDED 31 DECEMBER 1995

7.   OPERATING LEASE COMMITMENTS

     At balance date the Company had the following  operating lease  commitments
for office space and certain vehicles:
<TABLE>
<CAPTION>
                                                                                  1995                 1994
                                                                                   NZ$                 NZ$
<S>                                                                            <C>                  <C>
     Payable:
          within 1 year................................................          449,982              84,985
          between 1 and 2 years........................................          457,468              82,535
          between 2 and 3 years........................................          357,915              80,031
          between 3 and 4 years........................................          233,425              52,487
          between 4 and 5 years........................................          233,425              52,487
          greater than 5 years.........................................          571,989             393,653
                                                                               ---------             -------
                                                                               2,304,204             746,178
                                                                               =========             =======

</TABLE>

8.   RELATED PARTIES

     During the year ended December 31, 1995, Saturn Communications Limited were
involved in the following related party transactions:

          United International Holdings, Inc
           (significant shareholder)
               Received funding.........................NZ$3,910,256 (1994: nil)

          Funding was  provided by United  International  Holdings for Saturn to
meet its day to day obligations. The funding has been provided interest free and
repayable on demand. Although the amount is repayable on demand, a call will not
be made until Saturn can afford to meet its day to day  obligations and pay back
this funding.


          An affiliate of Todd International
           Limited (significant shareholder)
               Received funding............................NZ$45,279 (1994: nil)

     Todd provided funding allowing Saturn to meet its day to day obligations.

     An affiliate of United International Holdings
          Received payment of prior year balance
          Cash Received............................... NZ$22,195 (1994: nil)
          Balance Receivable.......................... NZ$12,227 (1994: $34,422)

     Saturn also have a receivable balance owing from:

          Todd International Limited (significant
           shareholder)
             Receivable.............................NZ$191,337(1994: NZ$201,613)

     The receivable from Todd  International is denominated in US dollars and is
on interest free terms.


                                      132

<PAGE>


                          SATURN COMMUNICATIONS LIMITED
       NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)
                       FOR THE YEAR ENDED 31 DECEMBER 1995


     Funding was  provided by United  International  Holdings for Saturn to meet
its day to day  obligations.  The funding has been  provided  interest  free and
repayable on demand.  Although the amount is repayable on demand a call will not
be made until Saturn can afford to meet its day to day  obligations and pay back
this funding.

     United International  Holdings--Tahiti
        (subsidiary of United International
        Holdings, Inc.) Received payment of
        prior year balance
          Cash Received............................  NZ$  Nil (1994: $22,195)
          Balance Receivable.......................  NZ$  12,227 (1994: $12,227)

     Saturn also has the following balances with:

     Todd International Limited (significant shareholder)
          Receivable...............................   NZ$191,337(1994: $201,612)
          Payable..................................   NZ$ 45,279(1994: Nil)

     The receivable from Todd  International is denominated in US dollars and is
on interest free terms. The payable is denominated in New Zealand dollars and is
interest free repayable on demand.

9.   FINANCE LEASES

     At 31 December the following finance lease existed:

                                                   Asset              Lease
                                                   Value            Liability
                                                   NZ$                 NZ$

     Canon photocopier and fax
     1995........................................  19,263              14,270
     1994........................................  24,400              23,701

     The finance lease payment commitments as at balance date were payable:

                                                     1995               1994
                                                      NZ$                NZ$

     within 1 year................................   7,752              9,431
     between 1 and 2 years........................   6,518              7,752
     between 2 and 3 years........................      --              6,718
                                                    ------             ------
                                                    14,270             23,901
                                                    ======             ======


                                      133



<PAGE>


                          SATURN COMMUNICATIONS LIMITED
       NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)
                       FOR THE YEAR ENDED 31 DECEMBER 1995

10.   RECONCILIATION OF NET DEFICIT AFTER TAXATION TO NET CASH OUTFLOW FROM
      OPERATING ACTIVITIES
<TABLE>
<CAPTION>


                                                                    For the Years Ended
                                                                        December 31,
                                                                    --------------------
                                                                     1994         1995
                                                                     NZ$          NZ$

<S>                                                              <C>          <C>

Net deficit after taxation...................................    (1,973,540)  (4,051,509)
Add non-cash items:
     Depreciation............................................       570,905      586,575
     Provision for doubtful debts............................           --        10,000
     Add/(less) movements in working capital items
     (Increase) in receivables and prepayments...............       (48,358)     (65,489)
     (Increase)/decrease in inventories......................      (170,709)      10,635
     Increase/(decrease) in accounts payable and accruals....       134,897       19,293
     Increase in employee entitlements.......................        11,945       38,193
                                                                 ----------   ----------

          Net cash outflow from operations...................    (1,474,860)  (3,452,302)
                                                                 ==========   ==========

</TABLE>

11.   INCOME TAXATION

     The Company has accumulated tax losses of approximately NZ$7,500,000 (1994:
NZ$3,785,650), tax effect NZ$2,475,000 (1994:NZ$1,249,330),  carried forward and
available  to offset  against  future  assessable  income.  The benefit of these
losses has not been brought to account. The ability to utilise these losses will
not expire,  subject to the company  maintaining  continuity  of  ownership  and
meeting other requirements of income tax legislation.

     The Company's net deferred tax asset is as follows:

                                                        As at December 31,
                                                   --------------------------
                                                     1994              1995
                                                   --------          --------
Net operating loss carryforward................    1,249,330         2,475,000
Valuation allowance............................   (1,249,330)       (2,475,000)
                                                  -----------       -----------
Net deferred tax asset.........................          --                 --
                                                  ===========       ===========


                                      134


<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 28th day of March, 1997.


                                   UIH Australia/Pacific, Inc.
                                   a Colorado corporation

                                   By:      /S/ J. Timothy Bryan
                                            ---------------------------------
                                            J. Timothy Bryan
                                            Chief Financial Officer

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
---------                                           -------------------------
<S>                                                  <C>                                <C>

                    *
--------------------------------------
Gene W. Schneider                                    Director and Chairman of
                                                       the Board                        March 27, 1997

                    *
--------------------------------------
Michael T. Fries                                     Director, President and
                                                       Chief Executive Officer          March 27, 1997

/s/ J. Timothy Bryan
-------------------------------------
J. Timothy Bryan                                     Director and Chief
                                                       Financial Officer                March 27, 1997

                    *
-------------------------------------
Valerie L. Cover                                     Controller (Principal
                                                       Accounting Officer)              March 27, 1997

                    *
------------------------------------
Mark L. Schneider                                    Director                           March 27, 1997



*  By:   /S/ J. Timothy Bryan
         ---------------------------
         J. Timothy Bryan
         Attorney-in-fact
</TABLE>



                                      135