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

                                    FORM 10-K

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

                   For the fiscal year ended February 28, 1998
                                       or
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the transition period from _______ to_________

                           Commission File No. 0-21974

                       UNITED INTERNATIONAL HOLDINGS, INC.
             (Exact name of Registrant as specified in its charter)

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

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

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

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

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

                 Class A Common Stock, par value $0.01 per share

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

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

     The aggregate market value of the voting stock held by nonaffiliates of the
Registrant,  computed by reference to the last sales price of such stock,  as of
the close of trading on May 22, 1998 was $17.00.

     The number of shares outstanding of the Registrant's common stock as of May
22, 1998 was:

          Class A Common Stock - 26,535,548 shares and
          Class B Common Stock - 12,823,324 shares
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<PAGE>
<TABLE>
<CAPTION>
                                           UNITED INTERNATIONAL HOLDINGS, INC.
                                          FISCAL 1998 ANNUAL REPORT ON FORM 10-K

                                                    Table of Contents

                                                                                                                      Page
                                                                                                                     Number
                                                                                                                     ------

                                                         PART I
<S>           <C>                                                                                                     <C>
Item 1.       Business..........................................................................................        2 

Item 2.       Properties........................................................................................       31

Item 3.       Legal Proceedings.................................................................................       31

Item 4.       Submission of Matters to a Vote of Security Holders...............................................       31

                                                         PART II

Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters.............................       32

Item 6.       Selected Financial Data...........................................................................       32

Item 7.       Management's Discussion and Analysis of Financial Condition and Results of Operations.............       34

Item 8.       Financial Statements and Supplementary Data.......................................................       50

Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............       50

                                                         PART III

Item 10.      Directors and Executive Officers of the Registrant................................................       96

Item 11.      Executive Compensation............................................................................       99

Item 12.      Security Ownership of Certain Beneficial Owners and Management....................................      103

Item 13.      Certain Relationships and Related Transactions....................................................      105

                                                         PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K...................................      106

</TABLE>
<PAGE>


                                     PART I
ITEM 1.   BUSINESS
------------------

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

     United International  Holdings, Inc. ("UIH" or the "Company") was formed in
1989 as a Delaware  corporation  for the purpose of  developing,  acquiring  and
managing foreign multi-channel television, programming and telephony operations.
Recognizing  the  opportunities  that  exist to bring  multi-channel  television
services  to  countries  that have few or none,  UIH has,  since its  formation,
focused on and invested in multi-channel  television  systems outside the United
States.  UIH  originally  focused its  efforts in Europe and  Israel,  where the
economies were sufficiently developed to support the operations and where demand
for service was  significant.  To capitalize on the  opportunities  to apply its
expertise  in  building  and  operating  multi-channel   television  systems  in
developing  markets  with  attractive   economic,   regulatory  and  demographic
profiles,  UIH has  expanded  the scope of its  operations  over time to include
portions of Latin America and the Asia/Pacific region.

     In its early years, UIH acquired primarily minority ownership  interests in
systems, which it, nonetheless,  actively managed. Having successfully built and
developed many  multi-channel  television  systems  around the world,  UIH began
rationalizing its operations in 1996 to focus on large,  majority-owned systems,
with  the goal of  significantly  expanding  the  scale  of its  operations  and
increasing   the   Company's   financial   flexibility.   Through  a  series  of
transactions,  UIH has  acquired  controlling  interests  in the majority of its
large,  primary systems,  and management believes the Company is well-positioned
to capitalize on the growth opportunities of its operating companies.

     The Company has ownership  interests in, and provides  management  services
to, existing  multi-channel  television and telephony  operating and development
systems or programming services in 23 foreign countries. UIH operates systems in
three  geographic  regions:  (i) Europe,  primarily  through  United  Pan-Europe
Communications,  N.V. ("UPC"), which is one of Europe's largest  privately-owned
multiple system  operators;  (ii)  Asia/Pacific,  primarily through its indirect
100%  ownership  interest in CTV Pty Limited and STV Pty Limited  (collectively,
"Austar"), which is the largest provider of multi-channel television services in
regional Australia; and (iii) Latin America,  primarily through its 34% interest
in VTRH S.A. ("VTRH"),  which is the largest multi-channel  television
provider in Chile.  The  Company's  operating  systems  served an  aggregate  of
approximately  3.2  million  subscribers  (excluding  approximately  3.0 million
programming   subscribers)   and  passed   approximately   7.7  million  of  the
approximately  9.9 million homes in their  respective  service areas at December
31, 1997.  UIH's  equity  interest as of such date in those  subscribers,  homes
passed and homes in the Company's  service areas was  approximately 2.0 million,
4.9 million and 6.1 million, respectively.

     The Company  believes  that the  development  of the cable  television  and
programming industries in the United States over the past four decades indicates
the growth  potential in markets  outside the United States that are, to varying
degrees,  far less developed in terms of the availability,  geographic reach and
market penetration of multi-channel  television  services.  In addition,  recent
technological  developments enable the Company to select from a variety of means
of delivering services to cost effectively pursue growth potential in particular
markets and develop systems capable of providing related communications services
such as telephony.  Partially in response to telecom deregulation in many of the
Company's markets, the Company has established a telecom and technology group to
evaluate  communication  opportunities  in each of the various  markets that the
Company has existing multi-channel television operations.  Given the strength of
UIH's existing world-wide  multi-channel  television business,  coupled with the
convergence  of  telecommunications  technologies,  the  Company  believes it is
uniquely positioned to dramatically  enhance telephone service,  provide greater
access and expand telecommunications systems in many countries.

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

     The Company, through its subsidiaries and affiliates, manages multi-channel
television,  telephony,  Internet/data  services and  programming  operations in
various foreign countries.  For financial  information  concerning such business
segments,  see the footnotes to the Company's  financial  statements included in
Item 8 "Financial Statements and Supplementary Data."

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

     A number of  technologies  are available for the delivery of  multi-channel
television  and  telecommunications  services  to  a  subscriber's  home.  Cost,
technical  effectiveness  and the potential for future  services are the primary
considerations  in selecting the technology  most  appropriate  for a particular
market. Factors such as population density, terrain, construction conditions and

                                       2
<PAGE>

regulatory  controls  contribute  to the cost and technical  effectiveness  of a
particular  delivery  technology.  The Company has used a number of the delivery
systems described below (fiber-optic  cable,  coaxial cable,  wireless and other
types of delivery  systems) in its existing  operating  systems,  based upon the
needs and conditions of the respective  market. The Company's system engineering
and design  strategy  continues to focus on using the most  appropriate  type or
types  of  delivery  systems  for  the  markets  it  serves,  also  taking  into
consideration  the ability to provide  additional or ancillary  services such as
telephony.

     CABLE  TELEVISION.   A  cable  television  system  receives  satellite  and
broadcast television signals by means of high antennae, a microwave relay system
or satellite earth stations, and then amplifies the signals and distributes them
by coaxial or fiber-optic  cable to the premises of its  subscribers,  who pay a
fee for the  service.  A cable  television  system  may also  originate  its own
programming.

     The physical plant of a cable television  system consists of four principal
operating components:  (i) the "headend" facility, which receives television and
radio signals with microwave relay systems, special antennae and satellite earth
stations; (ii) the distribution network originating at the headend and extending
throughout the system that consists of coaxial or  fiber-optic  cables placed on
poles or buried underground and associated electronic  equipment;  (iii) a "drop
cable" that extends from the distribution network into the subscriber's home and
connects to the subscriber's television set; and, in certain circumstances, (iv)
a  converter  located  in the  subscriber's  home which is  necessary  to expand
channel  capacity  to permit  reception  of more than 12  channels  (unless  the
subscriber has a cable-ready television set) or to unscramble scrambled signals.

     A significant advantage of cable television over alternative  multi-channel
television  technologies  is that cable has the  capacity  to transmit a greater
number of channels and a larger  amount of data. In addition,  cable  television
operators  can provide  interactive  services to  subscribers  such as telephone
service, television shopping services and interactive television programming.

     Many of the  operating  companies  in which the  Company  has an  ownership
interest  utilize  cable  television   technologies,   although  in  some  cases
supplemented by other multi-channel television technologies.  Because of cable's
greater  channel  capacity  and  ability  to handle  interactive  services,  the
Company's existing operating systems typically  construct cable delivery systems
when to do so is cost  effective as compared to  alternative  technologies.  The
high  population  density in the  franchise  areas of the  Company's  Israel and
Amsterdam systems, for example, makes cable delivery systems very cost effective
to construct and operate.

     "WIRELESS" CABLE TELEVISION SYSTEMS. Multi-channel multi-point distribution
system  ("MMDS")  and   subscription   television   service  ("STVS")  have  the
capabilities of providing directly to homes,  apartment houses, hotels and other
buildings,  television  signals  that  provide  programming  in a manner that is
similar to cable television  systems.  MMDS uses microwave  signals  transmitted
from antennae and received by household  reception antennae with an unobstructed
line-of-sight  to  the  transmitting   antenna.   MMDS  networks  provide  video
programming  and  data  transmission  to  individual   subscribers   offering  a
complement of channels comparable,  although not as numerous, to that offered by
cable  television  systems.  MMDS  is  a  more  cost-effective  way  of  serving
low-density  rural areas than the construction of an underground or aerial cable
distribution  network.  The  Company's  Australia,  Tahiti,  Czech  Republic and
Ireland operating systems use MMDS in a majority of their franchise areas.

     DIRECT-TO-HOME.  Direct-to-home  ("DTH")  and  direct  broadcast  satellite
("DBS") services provide programming by direct satellite  transmission to houses
that have a satellite  dish.  High powered DTH satellites are designed to enable
broadcasters  and programmers to reach the maximum number of television  viewers
possible. Programming distributed over a DTH satellite is accessed by households
and also by local cable  systems  that  redistribute  that  programming  through
ground-based cable to households. In addition, the total television audience can
be increased  significantly  because the  satellite's  high  transmission  power
enables  households  equipped  with  satellite  dishes and related  equipment to
receive the  programming  directly from the satellite.  The Company's  Australia
systems utilize DTH service for a portion of the systems.

     TELEPHONY. As a result of telecom deregulation,  various operating entities
within UIH are either now offering or will be offering  local and long  distance
telephone  service.  In areas in which  the  Company  already  operates  a cable
television  system,  such  telephony  service can be offered over existing fiber
optic and coaxial cable in a technology  known as  "cablephone." In other areas,
such as the Company's operations in Monor, Hungary, and Wellington, New Zealand,
the Company's  operating  units are using a dual coaxial and copper twisted pair
system to provide telephone service. The Company in all cases chooses technology
that is both the most cost efficient and reliable for the  particular  telephony
project.

                                       3
<PAGE>

     The ability to offer  telephone  service is influenced to a large degree by
local regulation. In Europe, UPC has full telephony licenses in Norway, Holland,
Belgium and Austria and has a license to offer  telephony in the Monor region of
Hungary. In Holland,  the Company's 50%-owned  subsidiary A2000 Holding N.V. has
launched  a  telephone  service,  and the  Company  anticipates  the  launch  of
telephone  service  in other of its  operating  units in Europe.  In Chile,  the
Company's  34%-owned  subsidiary VTRH initiated telephone service in the fall of
1997, with  continuing  plans to roll out the service to a larger portion of its
subscriber  base in 1998.  In New Zealand,  the Company's  65%-owned  subsidiary
Saturn  Communications  Limited  commenced a telephone service offering in April
1998.

     DATA SERVICES.  With the increasing use of electronic  means to communicate
(i.e.,  the Internet,  electronic  commerce),  the Company has begun to market a
data transmission service to its customers. In many cases the Company's existing
cable  television  infrastructure  is capable of handling such services,  and in
every case the  provision of data service is taken into account when  rebuilding
or upgrading  existing  plant.  In Europe,  the Company has been offering  "high
speed" data services in several of its operating areas, with transmission  rates
considerably  in excess of those obtained over a normal twisted pair phone line.

     PROGRAMMING.  Multi-channel  television  systems  offer  various  types  of
programming,  usually marketed as basic service,  tier services  (expanded basic
service), premium services, pay-per-view programs and packages including several
of the services at combined rates.  Basic service usually consists of signals of
broadcast  channels and certain signals received from satellites.  Multi-channel
television systems also may offer premium services to their  subscribers,  which
consist of feature films,  sporting  events and other special  features that are
presented  without  commercial  interruption.  The  operator  buys  the  premium
services  from  suppliers at a cost usually  based on the number of  subscribers
receiving  the  services  from the cable  operator  or  develops  and  furnishes
programming itself.  Premium service programming is significantly more expensive
than the basic service  programming and  consequently is priced  separately when
sold to subscribers.

     In many of its  systems,  the Company has  recently  launched  pay-per-view
service,  which is a service that allows subscribers to receive single programs,
frequently  consisting of motion  pictures that have  recently  completed  their
theatrical exhibitions and major sporting events, and to pay for such service on
a program-by-program basis.

     Programming  is  typically  licensed  from various  companies  that produce
original  programming or have the distribution  rights to existing  programming.
Programming  is  generally  transmitted  to  a  system's  headend  facility  via
satellite  although it may also be supplied by pre-recorded  tape. The Company's
primary programming  objective is to procure  appropriate  programming that will
enhance the value of the multi-channel  television  systems in which the Company
has an ownership  interest.  Based on industry  experience in the United States,
the Company believes that development of attractive  programming  available only
on a  multi-channel  television  service will stimulate  subscription  rates and
revenues for its multi-channel television systems.

     Programming license agreements typically have terms of three to five years.
Currently,  a majority  of the basic  service  programming  is  supplied  to the
operating companies at no cost. The remainder is licensed under a variety of fee
arrangements,  ranging  from an annual flat fee to a variable fee based upon the
number  of  subscribers  in an  operating  company's  system  that  receive  the
programming  service.  Most  suppliers that in the past have not charged for the
use of their basic service  programming  have indicated that they will seek some
type of fee arrangement upon  renegotiation  of the licenses.  Unlike the United
States where multi-channel  television  operators purchase premium services from
programmers  and then set the rate charged to its subscribers for such services,
in the European and other markets premium service suppliers set the subscription
rate  charged  and pay  the  multi-channel  television  operator  a  commission,
typically  40%,  for carrying the premium  service.  Accordingly,  multi-channel
television  system's  profit  margins on such  premium  services  are  generally
smaller than in the United States.

     The Company  invests in thematic  television  channels to be distributed by
operating systems in which the Company has an ownership  interest as well as for
sale to other multi-channel television operators in contiguous markets. The data
set forth below reflects these programming  services in which the Company has an
interest:

                                       4

<PAGE>
<TABLE>
<CAPTION>
                                                    Programming                                 Ownership       Targeted
        Country                                       Services                                   Interest        Market
----------------------       --------------------------------------------------------          -------------   ----------
<S>                          <C>                                                                  <C>          <C>
Malta.................       Premium movie channel                                                 25.0%       Malta
                             Hit movies of the 60's, 70's and 80's channel
                             General entertainment/sports channel

The Czech Republic....       General entertainment/documentary channel                            100.0%       Czech/Slovak
                             Children's channel                                                                  Republics

Spain.................       Documentary channel                                                   33.5%       Spain/Portugal
                             Children's channel
                             Movie channel
                             Music video channel

Australia.............       Documentary, adventure, history and lifestyle programming             25.0%       Australia
                             Children's educational, entertainment and cartoons/family-
                               oriented drama and entertainment
                             Music video with local presenters
                             Drama, comedy, general entertainment, programming and
                               library movies

Israel................       General entertainment channel                                          7.0%       Israel
                             Movie channel
                             Children's channel
                             Sports channel
                             Nature, science and art documentaries channel

Hungary...............       HBO Hungary
                             Science and nature channel                                            50.0%       Hungary
                             Hungarian music channel

</TABLE>

SOURCES OF REVENUE

     Multi-channel   television  system  revenues  are  derived  primarily  from
subscriber  fees  and  installation  charges  and,  to  a  lesser  extent,  from
advertising sales.

     A subscriber to a multi-channel television system generally pays an initial
connection  charge and a fixed monthly fee for basic service.  The amount of the
monthly  basic  service fee varies from one area to another and  typically  is a
function,  in part, of the number of channels and services included in the basic
service  package  and the  cost of such  services  to the  multi-channel  system
operator. In most instances, a separate monthly fee for each premium service and
certain other specific programming, such as pay-per-view services, is charged to
subscribers.

     Monthly  service  fees for  basic,  tier  and  premium  services  generally
constitute  the  major  source of  revenue  for  systems.  However,  unlike  the
experience in the United States,  installation  charges are a significant source
of operating cash flow for the Company's  growing  systems and are  particularly
important during the construction  phase of development.  Reconnect  charges for
subscribers  who  previously  disconnected  are  also  included  in  a  system's
revenues, but generally are not a major component of revenues.

     U.S.  multi-channel  television system operators have been able to generate
additional  revenue  through the sale of  commercial  spots and channel space to
advertisers.  As with other forms of  advertising,  the operator  receives a fee
from the advertisers which is based on the volume of advertising and the time of
the day at which it is  broadcast.  However,  most of the countries in which the
Company's  existing  operating  systems are located  currently limit or prohibit
system operators from offering advertising services.

                                       5
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP STRUCTURE OF THE COMPANY

     UIH's operating systems are currently a combination of (i) highly-penetrated, mature systems that generate stable cash flow and
which,  management believes,  have the opportunity to increase revenues and cash flows through the introduction of new services such
as cable telephony,  tiered  programming,  pay-per-view and Internet/data  services and (ii) earlier stage businesses that typically
have  established  leading market positions and large subscriber  bases,  and whose number of subscribers  management  believes will
continue to increase primarily through aggressive marketing within their respective service areas. UIH's principal strategies are to
(i) increase the revenues and cash flows of its existing  systems;  (ii) continue to capitalize on  opportunities to rationalize its
operations; (iii) pursue selected new acquisition and development opportunities;  and (iv) finance its operating companies primarily
through internally generated cash flow and borrowings by its regional holding and operating companies under existing facilities. The
Company's operations are organized in three geographic regions: Europe,  Asia/Pacific and Latin America. For strategic purposes and,
in some cases, because of foreign ownership  restrictions,  the Company has often initially invested in operating systems with local
strategic  partners.  In some cases,  such as in many of the Company's  European and Australian  systems,  the Company  subsequently
acquired its partners'  interests in these systems.  Below is a summary of the ownership  structure of the Company's  three regional
holding companies as well as the Company's  interests in its operating companies as of February 28, 1998. The Company's interests in
such  systems  are often held by various  holding  companies  and its voting  rights and rights to  participate  in earnings of such
entities may differ from the interests indicated in the chart below.
<S>                              <C>   
************************************************************************************************************************************
*                                                               UIH                                                                *
************************************************************************************************************************************
              100%  *                                                        100%  *                        
************************************* **********************************************************************************************
*        UIH Europe, Inc. ("UIHE")  * *                    United International Properties, Inc. ("UIPI")                          *
************************************* **********************************************************************************************
                    *                                                              *
                    *                                   ***************************************************************
              100%  *                              98%  *                                   * 100%                    *         
************************************* *************************************** ************************** ***************************
* United Pan-Europe Communications  * *UIH Asia/Pacific Communications, Inc.* * UIH Latin America, Inc.* *        Other UIPI       *
*        N.V. ("UPC")(1)(2)         * *              ("UAP")*               * *        ("UIH LA")      * *                         *
************************************* *************************************** ************************** *Hungary:                 *
                    *                                    *                                  *            * Monor Communications    *
                    *                              100%  *                                  *            *  Group, Inc.            *
************************************* *************************************** ************************** *  ("Monor")         48.6%*
*Austria:                           * *     UIH Australia/Pacific, Inc.     * *Brazil:                 * *Ireland:                 *
* Telekabel Group                   * *           ("UIH A/P")(6)            * * TV Cabo e Comunicacoes ** Tara Television         *
*  ("Telekabel")               95.0%* *************************************** *  de Jundiai, S.A.      * *  Limited ("Tara")  75.0%*
*Belgium:                           *                    *                    *  ("Jundiai")      46.3%* *Spain/Portugal:          *
* Radio Public S.A.                 *                    *                    * TV Show Brasil,        * * Ibercom, Inc.           *
*  ("Radio Public")           100.0%* *************************************** *  S.A. ("TVSB")(9) 45.0%* *  ("IPS")           33.5%*
*Czech Republic:                    * *Australia:                           * *Chile:                  * ***************************
* Kabel Net Group                   * * CTV Pty Limited ("CTV") and         * * VTR Hipercable S.A.    *
*  ("Kabel Net")              100.0%* *  STV Pty Limited ("STV")            * *  ("VTRH")         34.0%*
* Ceska Programova                  * *  (collectively, "Austar")(7)  100.0%* *Mexico:                 *
*  Spolecnost SRO ("TV Max")  100.0%* * Austar Satellite Pty Limited        * * Tele Cable de Morelos, *          
*France:                            * *  ("Austar Satellite")         100.0%* *  S.A. de C.V.          *
* Mediareseaux Marne S.A.           * * United Wireless Pty Limited         * *  ("Megapo")       49.0%* 
*  ("Mediareseaux")            99.6%* *  ("United Wireless")          100.0%* *Peru:                   * ***************************
*Hungary:                           * * XYZ Entertainment Pty Limited       * * TV Cable, S.R. Ltda    * *      * Other UAP        *
* Kabelkom Holding Company          * *  ("XYZ Entertainment")         25.0%* *  ("Tacna")       100.0%* *                         *
*  ("Kabelkom")(3)             50.0%* *Tahiti:                              * * Cable Star S.A.        * *China:                   *
*Ireland:(through UII               * * Telefenua S.A.                      * *  ("Cable Star")   99.2%* * Hunan International TV  *
*partnership(4)                     * *  ("Telefenua")(8)              90.0%* *Latin America           * *  Communications Company *
* Princes Holdings Ltd.             * *New Zealand:                         * *Programming:            * *  Limited ("HITV")  49.0%*
*  ("Princes Holdings")             * * Saturn Communications Limited       * * United Family          * *Philippines:             *
*Israel:(through UII                * *  ("Saturn")                    65.0%* *  Communications LLC    * * Sun Cable Systems       *
*partnership(4)                     * *                                     * *  ("UFC")          50.0%* *  ("Sun Cable")(10) 40.0%*
* Tevel Israel International        * *************************************** ************************** ***************************
*  Communications Ltd.("Tevel")23.3%*
*Malta:(through UII                 *
*partnership(4))                    *
* Melita Cable TV PLC               *
* ("Melita")                   25.0%*
*Netherlands:                       *
* A2000 Holding NV (Amsterdam)      *
*  ("A2000")                   50.0%*
* Kabeltelevisie Group              *
*  (Eindhoven)("KTE")         100.0%*
*Norway:                            *
* Janco Multicom AS                 *
*  ("Janco")(5)                87.3%*
*Romania:                           *
* Multicanal Holdings SRL           *
*  ("Multicanal")              90.0%*
* Control Cable Ventures SRL        *
*  ("Control Cable")          100.0%*
*Slovak Republic:                   *
* Trnavatel SRO ("Trnavatel")  75.0%*
* Slovatel SRO ("Kabel Tel")  100.0%*
*************************************
</TABLE>                                                          6
<PAGE>

(1)  On December 11, 1997,  UIH through UIHE acquired the remaining 50% interest
     in  UPC  owned  by  several   subsidiaries  of  Philips   Electronics  N.V.
     (collectively,  "Philips"),  thereby making UPC an effectively wholly-owned
     subsidiary  (subject  to certain  employee  equity  incentive  compensation
     arrangements).
(2)  For  applicable  corporate  law and tax  considerations,  in June  1996 the
     Company  and Philips  transferred  approximately  8.4% of UPC's  issued and
     outstanding  ordinary shares on a fully diluted basis (to take into account
     shares of UPC held by a  wholly-owned  subsidiary  of UPC) to a  foundation
     administering UPC's employee equity incentive plan. The options vest over a
     three year period. As of December 31, 1997, options representing a total of
     approximately  5.5% of UPC's outstanding  ordinary shares have been granted
     under UPC's equity  incentive plan, of which options  representing  2.3% of
     UPC's  outstanding  shares have been exercised  with notes,  including some
     unvested  options that remain subject to  forfeiture.  Upon the exercise of
     options,  the foundation  issues depository  certificates  representing the
     beneficial  interest in the underlying  shares. All of the voting rights of
     the underlying shares remain with the foundation, the governing board which
     consists of representatives of UPC. The foundation has contractually agreed
     to vote the UPC shares as directed by UPC.  Employees have the right, under
     certain  circumstances,  to  require  UPC to  purchase  their  options  and
     interests in the underlying  shares at fair market value.  UPC is recording
     the  difference  between the  estimated  fair market value and the exercise
     price per share as a deferred  compensation  liability for each  accounting
     period.  All of the underlying shares will remain with the foundation until
     the time of an initial public offering of the underlying  shares of UPC, at
     which  time  such  shares  will be  distributed  to the  persons  who  have
     exercised the options or such persons may require UPC to  repurchase  their
     options at fair market value.  If no public  offering is  consummated,  the
     shares held by the foundation will ultimately revert to UPC.
(3)  UPC  has  a  50%  legal  ownership  in  Kabelkom,  which  is  reduced  by a
     preferential  claim by Time  Warner  Entertainment  Company  ("TWE")  to an
     economic ownership of 47.2%.
(4)  United  International  Investments  ("UII")  is  a  United  States  general
     partnership  between  UPC  and  Tele-Communications   International,   Inc.
     ("TINTA").  In April and May 1998, UPC signed  memorandums of understanding
     ("MOU") with TINTA to acquire TINTA's  interests in Tevel and Melita and to
     sell UPC's interest in Princes Holdings to TINTA for a net payment to TINTA
     of approximately $71.0 million.
(5)  In  November  1997,  UPC's  wholly-owned   subsidiary   Norkabelgruppen  AS
     ("Norkabel") merged with and into UPC's approximately 70%-owned subsidiary,
     Janco Kabel TV to form Janco, in which UPC holds an 87.3% interest. From an
     economic  perspective,  however,  UPC has all the rights and obligations of
     full  ownership  of  Janco,  and UPC  consolidates  100%  of its  financial
     results.  UPC has the right to acquire,  and Janco's other  shareholder has
     the right to put to UPC,  the  remaining  interest  in Janco for a purchase
     price of approximately Norwegian  kroner("NKr")165.9 million ($21.9 million
     at February 28, 1998).
(6)  Pursuant to the terms of the indentures governing UIH A/P's senior discount
     notes, UIH A/P issued on November 16, 1997 warrants exercisable for 3.4% of
     its common stock on a fully diluted  basis.  The warrants have an aggregate
     exercise price of approximately $5.1 million.
(7)  UIH A/P holds a combined  effective 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.  UIH A/P holds
     approximately  14.9% of the ordinary  shares of CTV and STV, which accounts
     for an approximately  0.3% economic interest in Austar.  UIH A/P also holds
     all of CTV's  and  STV's  convertible  debentures,  which  accounts  for an
     approximately  97.8% economic  interest in Austar.  Through its 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, UIH A/P has an  additional  effective  1.9% economic
     interest in Austar. Although UIH A/P 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 various agreements,  UIH
     A/P has the right to nominate all of CTV's and STV's voting directors. CTV,
     STV and their  respective  security  holders are parties to agreements that
     contain  provisions  relating to election of  directors,  governance of the
     companies  and other  matters  concerning  ownership  and  operation of the
     companies. Under agreements among the security holders, the Company has the
     right to nominate all voting  directors of CTV and STV.  While  adoption of
     these agreements did not require compulsory  notification to the Australian
     government,  they may be determined by the government to have resulted in a
     change  of  control  of  CTV  and  STV in  which  case,  if the  government
     determines  that such change of control is against the  national  interest,
     the  voting  arrangements  may be  unwound  so that  the  Company  would be
     entitled  to appoint  only one half of the  directors  of CTV and STV.  See
     "Regulation--Australia."


                                       7
<PAGE>

(8)  UIH-SFCC Holdings, L.P. ("UIH-SFCC"), a limited partnership wholly owned by
     UIH  A/P,  is  the   general   partner  of  a  limited   partnership   (the
     "Partnership")  that owns 100% of the preferred stock of Societe  Francaise
     des  Communications et du Cable S.A. ("SFCC"),  representing  approximately
     40% of the share capital of SFCC.  SFCC,  the parent  company of Telefenua,
     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  distributions
     made by SFCC until UIH-SFCC has received a 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  matched  pro  rata by UIH  A/P's
     partners,   would  increase  the  64%  that  UIH-SFCC  receives  after  the
     preferential distributions are made on the first $10 million.
(9)  In January 1998,  UIH LA increased its ownership  interest in TVSB from 40%
     to 45%,  and in April 1998,  UIH LA  exercised  its option to purchase  the
     remaining 55% interest in TVSB for  approximately  $12 million,  subject to
     receipt of required regulatory approvals.
(10) UAP has loaned Sun Cable $8.3  million as of  December  31,  1997 (the "Sun
     Cable Loan").  The Sun Cable Loan is structured in such a manner as to give
     UAP a 40%  equity  interest  in Sun Cable  and its  business  upon  certain
     conditions. UAP has also loaned $3.3 million as of December 31, 1997 to Sun
     Cable,  which is not  convertible to equity.  While current  Philippine law
     does not permit  foreign  ownership  in the cable  television  sector,  the
     Company  believes that a law allowing  foreign  ownership up to 40% will be
     passed in the next 12-24 months.  In the event such  legislation is passed,
     UAP may convert the Sun Cable Loan into a 40% equity stake in Sun Cable. In
     April 1998, Sun Cable and SkyCable  formed a joint  venture,  which created
     the second largest  multiple system operator ("MSO") in the Philippines and
     the largest MSO  outside  Manila.  The  Company  holds an  effective  19.6%
     interest in this joint venture,  which is owned 49% by Sun Cable and 51% by
     SkyCable.


                                       8
<PAGE>

SUMMARY OPERATING DATA

   The operating data set forth below  reflects the aggregate  statistics of the
operating systems in which the Company has an ownership interest.
<TABLE>
<CAPTION>
                                                                     As of December 31, 1997                                        
                               -----------------------------------------------------------------------------------------------------
                                                                                                  UIH          UIH           UIH    
                                Homes in                                            UIH        Equity in    Equity in     Equity in 
                                Service      Homes       Basic        Basic       Paid-in       Homes in      Homes         Basic   
                                  Area       Passed   Subscribers  Penetration   Ownership   Service Area     Passed     Subscribers
                               ---------     ------   -----------  ------------  ---------   ------------   ----------   -----------
EUROPE
------
<S>                            <C>        <C>         <C>              <C>      <C>           <C>           <C>           <C>
UPC SYSTEMS:
Netherlands (A2000)
  Cable..................        572,000    565,740     518,160        91.6%       50.0%        286,000       282,870       259,080 
Austria
  Cable..................      1,064,000    890,305     435,859        49.0%       95.0%      1,010,800       845,790       414,066 
Norway
  Cable..................        529,924    457,551     319,654        69.9%       87.3%        462,624       399,442       279,058 
Hungary
  Cable..................        300,000    290,690     266,775        91.8%       50.0%        150,000       145,345       133,388 
Israel
  Cable..................        360,000    350,392     241,874        69.0%       23.3%         83,880        81,641        56,357 
Ireland
  Cable/MMDS.............        355,000    350,989     136,160        38.8%       20.0%         71,000        70,198        27,232 
Belgium
  Cable..................        133,000    133,000     127,529        95.9%      100.0%        133,000       133,000       127,529 
Netherlands (KTE)
  Cable..................         98,393     95,442      90,671        95.0%      100.0%         98,393        95,442        90,671 
Malta
  Cable..................        179,000    153,917      58,033        37.7%       25.0%         44,750        38,479        14,508 
Czech Republic
  Cable/MMDS/MATV........        271,100    145,650      51,571        35.4%      100.0%        271,100       145,650        51,571 
Romania
  Cable..................        150,000     69,620      40,188        57.7%    90.0-100.0%     143,000        67,498        39,428 
Slovak Republic
  Cable..................         36,239     22,193      18,476        83.3%    75.0-100.0%      30,779        18,030        14,987 
France
  Cable..................         86,000     28,267       6,758        23.9%       99.6%         85,656        28,154         6,731 
                               ---------  ---------   ---------                               ---------     ---------     --------- 
    Total UPC............      4,134,656  3,553,756   2,311,708                               2,870,982     2,351,539     1,514,606 
                               ---------  ---------   ---------                               ---------     ---------     --------- 
OTHER UIH SYSTEMS:
Hungary (Monor Telefon)
  Cable/Telephony(3).....         85,000    144,571      88,455        61.2%       46.3%         39,355        66,936        40,955 
Spain/Portugal (IPS)
  Programming............            N/A        N/A     485,000         N/A        33.5%            N/A           N/A       162,475 
Ireland (Tara)
  Programming(4).........            N/A        N/A     361,984         N/A        75.0%            N/A           N/A       271,488 
                               ---------  ---------   ---------                               ---------     ---------     --------- 
    Total Europe.........      4,219,656  3,698,327   3,247,147                               2,910,337     2,418,475     1,989,524
                               ---------  ---------   ---------                               ---------     ---------     ---------
ASIA/PACIFIC (UAP)
------------------
Australia (Austar)
  MMDS/DTH...............      1,635,000  1,589,000     196,205        12.3%       98.0%      1,602,300     1,557,220       192,281 
Philippines
  Cable..................        600,000    175,414      66,112        37.7%       39.2%        235,200        68,762        25,916 
Tahiti
  MMDS...................         31,000     20,128       6,304        31.3%       88.2%         27,342        17,753         5,560 
New Zealand
  Cable..................        141,000     23,518       3,059        13.0%       63.7%         89,817        14,981         1,949 
Australia (XYZ
 Entertainment)
  Programming............            N/A        N/A     577,205         N/A        24.5%            N/A           N/A       141,415 
Australia (United
 Wireless)
  Wireless Data..........            N/A        N/A         N/A         N/A        98.0%            N/A           N/A           N/A 
China
  Microwave Relay(6).....            N/A        N/A         N/A         N/A        48.0%            N/A           N/A           N/A 
                               ---------  ---------   ---------                               ---------     ---------     ---------
    Total UAP............      2,407,000  1,808,060     848,885                               1,954,659     1,658,716       367,121 
                               ---------  ---------   ---------                               ---------     ---------     ---------
</TABLE>
                                                                     9
<PAGE>
<TABLE>
<CAPTION>
                                                                     As of December 31, 1997                                        
                               ----------------------------------------------------------------------------------------------------
                                                                                                 UIH          UIH           UIH    
                                Homes in                                          UIH        Equity in    Equity in     Equity in 
                                Service     Homes       Basic        Basic       Paid-in       Homes in      Homes         Basic   
                                 Area       Passed   Subscribers  Penetration   Ownership   Service Area     Passed     Subscribers
                               ---------    ------   -----------  ------------  ---------   ------------   ----------   -----------
<S>                            <C>        <C>         <C>              <C>      <C>           <C>           <C>           <C>
LATIN AMERICA (UIH LA)
----------------------
Chile
  Cable/Telephony........      2,321,000  1,495,527     372,673        24.9%       34.0%        789,140       508,479       126,709 
Mexico
  Cable..................        341,600    173,309      54,349        31.4%       49.0%        167,384        84,921        26,631 
Brazil (Jundiai)
  Cable..................         70,000     55,270      20,278        36.7%       46.3%         32,410        25,590         9,389 
Brazil (TVSB)
  MMDS...................        387,000    387,000      11,232         2.9%       40.0%        154,800       154,800         4,493 
Peru
  Cable..................        140,000     33,179       6,644        20.0%    99.2-100.0%     139,120        32,962         6,602 
Latin America
  Programming(5).........            N/A        N/A   1,614,650         N/A        50.0%            N/A           N/A       807,325 
                               ---------  ---------   ---------                               ---------     ---------     --------- 
    Total UIH LA.........      3,259,600  2,144,285   2,079,826                               1,282,854       806,752       981,149 
                               ---------  ---------   ---------                               ---------     ---------     --------- 
    Total UIH............      9,886,256  7,650,672   6,175,858                               6,147,850     4,883,943     3,337,794
                               =========  =========   =========                               =========     =========     =========
</TABLE>

                                       As of and for the Year Ended
                               ---------------------------------------------
                                    December 31, 1997  (In thousands)(1)
                               ---------------------------------------------
                                                 Net                   Long-
                                               Income     Adjusted     Term
                                 Revenue       (Loss)     EBITDA(2)    Debt
                                ---------    ----------   ---------    -----
EUROPE
------
UPC SYSTEMS:
Netherlands (A2000)
  Cable..................       $ 50,062     $ (16,695)   $ 16,662    $210,215
Austria
  Cable..................         80,603        (5,307)     39,864     121,230
Norway
  Cable..................         45,108       (36,789)     18,199      73,680
Hungary
  Cable..................         25,706         1,389       7,987          --
Israel
  Cable..................         98,419        15,937      50,898       6,564
Ireland
  Cable/MMDS.............         34,270        (2,400)     12,586      53,763
Belgium
  Cable..................         19,170        (5,674)      7,491          --
Netherlands (KTE)
  Cable..................         10,199          (764)      6,276      40,350
Malta
  Cable..................         12,038           386       5,049      19,182
Czech Republic
  Cable/MMDS/MATV........          3,500       (10,088)     (3,144)         --
Romania
  Cable..................            990           269         628          --
Slovak Republic
  Cable..................            768          (678)       (401)         --
France
  Cable..................          1,257        (3,544)     (2,305)         --
                                --------     ---------    --------    --------
    Total UPC............        382,090       (63,958)    159,790     524,984
                                --------     ---------    --------    --------
OTHER UIH SYSTEMS:
Hungary (Monor Telefon)
  Cable/Telephony(3).....         14,403        (9,594)      7,903      43,614
Spain/Portugal (IPS)
  Programming............          9,958        (7,473)     (3,347)      1,098
Ireland (Tara)
  Programming(4).........             51        (5,864)     (5,657)      1,691
                                --------     ---------    --------    --------
    Total Europe.........        406,502       (86,889)    158,689     571,387
                                --------     ---------    --------    --------

                                       10
<PAGE>

                                        As of and for the Year Ended
                                ---------------------------------------------
                                     December 31, 1997  (In thousands)(1)
                                ---------------------------------------------
                                                 Net                   Long-
                                               Income     Adjusted     Term
                                 Revenue       (Loss)     EBITDA(2)    Debt
                                ---------    ----------   ---------    -----
ASIA/PACIFIC (UAP)
------------------
Australia (Austar)
  MMDS/DTH...............       $ 56,230     $ (87,169)   $(16,925)   $ 73,635
Philippines
  Cable..................          5,589        (1,315)      1,220          --
Tahiti
  MMDS...................          4,118        (4,266)        229         913
New Zealand
  Cable..................            422        (5,787)     (6,014)      3,423
Australia (XYZ
 Entertainment)
  Programming............         12,846        (7,957)     (4,372)         --
Australia (United
 Wireless)
  Wireless Data..........            470        (3,337)     (2,427)         --
China
  Microwave Relay(6).....             --          (437)       (341)         --
                                --------     ---------    --------    --------
    Total UAP............         79,675      (110,268)    (28,630)     77,971
                                --------     ---------    --------    --------
LATIN AMERICA (UIH LA)
----------------------
Chile
  Cable/Telephony........        114,318       (20,611)     21,348     122,065
Mexico
  Cable..................         10,483         1,844       2,965         206
Brazil (Jundiai)
  Cable  ................          8,571         1,072       2,815          58
Brazil (TVSB)
  MMDS...................          6,469        (1,753)        307          --
Peru
  Cable..................          1,462        (1,738)     (1,154)         --
Latin America
  Programming(5).........            369       (12,490)    (12,580)      1,459
                                --------     ---------    --------    --------
    Total UIH LA.........        141,672       (33,676)     13,701     123,788
                                --------     ---------    --------    --------
    Total UIH............       $627,849     $(230,833)   $143,760    $773,146
                                ========     =========    ========    ========

                                       11
<PAGE>
<TABLE>
<CAPTION>
                                                                     As of December 31, 1996                                        
                               ----------------------------------------------------------------------------------------------------
                                                                                                 UIH          UIH           UIH    
                                Homes in                                           UIH        Equity in    Equity in     Equity in 
                                Service     Homes       Basic        Basic       Paid-in       Homes in      Homes         Basic   
                                 Area       Passed   Subscribers  Penetration   Ownership   Service Area     Passed     Subscribers
                               ---------    ------   -----------  ------------  ---------   ------------   ----------   -----------
<S>                            <C>        <C>         <C>              <C>      <C>           <C>           <C>           <C>
EUROPE
------
UPC SYSTEMS:
Netherlands (A2000)
 Cable...................        562,000    555,459     523,940        94.3%       25.0%        140,500       138,865       130,985 
Austria
  Cable..................        838,600    623,100     428,453        68.8%       47.5%        398,335       295,973       203,515 
Norway
  Cable..................        277,123    221,441     156,915        70.9%       50.0%        138,562       110,721        78,458 
Hungary
  Cable..................        266,000    265,058     247,013        93.2%       23.5%         62,510        62,289        58,048 
Israel
  Cable..................        340,000    334,426     231,712        69.3%       11.7%         39,780        39,128        27,110 
Ireland
  Cable/MMDS.............        452,077    340,993     121,475         35.6%      10.0%         45,208        34,099        12,148 
Belgium
  Cable..................        133,000    133,000     127,815        96.1%       50.0%         66,500        66,500        63,908 
Netherlands (KTE)
  Cable..................         91,872     89,116      84,660        95.0%       50.0%         45,936        44,558        42,330 
Malta
  Cable..................        179,000    145,371      51,500        35.4%       21.3%         38,127        30,964        10,970 
Czech Republic
  Cable/MMDS/MATV........        258,600    121,782      35,288         29.0%      50.0%        129,300        60,891        17,644 
Romania
  Cable..................        126,000     50,072      30,210        60.3%    25.5-45.0%       32,130        17,070         9,200 
Slovak Republic
  Cable..................         36,239     13,435       9,003        67.0%       37.5%         13,590         5,038         3,376 
France
  Cable.................         133,000      6,780       1,488        21.9%       47.5%         63,175         3,221           707 
                               ---------  ---------   ---------                               ---------     ---------      -------- 
    Total UPC............      3,693,511  2,900,033   2,049,472                               1,213,653       909,317       658,399 
                               ---------  ---------   ---------                               ---------     ---------      -------- 
OTHER UIH SYSTEMS:
Hungary (Monor Telefon)
  Cable/Telephony(3).....         85,000    125,000      70,638        56.5%       43.3%         36,805        54,125        30,586
Spain/Portugal (IPS)
  Programming............            N/A        N/A     184,000         N/A        33.5%            N/A           N/A        61,640
Ireland (Tara)
  Programming(4).........            N/A        N/A      70,606         N/A       100.0%            N/A           N/A        70,606
                               ---------  ---------   ---------                               ---------    ----------     ---------
   Total Europe..........      3,778,511  3,025,033   2,374,716                               1,250,458       963,442       821,231
                               ---------  ---------   ---------                               ---------    ----------     ---------
ASIA/PACIFIC (UAP)
------------------
Australia (Austar)
  MMDS/DTH...............      1,621,770  1,529,000     103,447         6.8%       97.4%      1,579,604     1,489,246       100,757 
Philippines
  Cable..................        575,000    113,402      40,129        35.4%       40.0%        230,000        45,361        16,052 
Tahiti
  MMDS...................         31,000     19,584       5,187        26.5%       87.7%         27,187        17,175         4,549 
New Zealand
  Cable..................        141,000     14,280       1,697        11.9%       97.4%        137,334        13,909         1,653 
Australia (XYZ
 Entertainment)
  Programming............            N/A        N/A     340,000         N/A        24.4%            N/A           N/A        82,960 
Australia (United
 Wireless)
  Wireless Data..........            N/A        N/A         N/A         N/A        97.4%            N/A           N/A           N/A 
China
  Microwave Relay(6).....            N/A        N/A         N/A         N/A        49.0%            N/A           N/A           N/A 
                               ---------  ---------   ---------                               ---------     ---------     --------- 
    Total UAP............      2,368,770  1,676,266     490,460                               1,974,125     1,565,691       205,971 
                               ---------  ---------   ---------                               ---------     ---------     --------- 
</TABLE>
                                                                     12
<PAGE>
<TABLE>
<CAPTION>
                                                                     As of December 31, 1996                                        
                               ----------------------------------------------------------------------------------------------------
                                                                                                 UIH          UIH           UIH    
                                Homes in                                           UIH        Equity in    Equity in     Equity in 
                                Service     Homes       Basic        Basic       Paid-in       Homes in      Homes         Basic   
                                 Area       Passed   Subscribers  Penetration   Ownership   Service Area     Passed     Subscribers
                               ---------    ------   -----------  ------------  ---------   ------------   ----------   -----------
<S>                            <C>        <C>         <C>              <C>      <C>           <C>           <C>           <C>
LATIN AMERICA (UIH LA)
----------------------
Chile
  Cable..................      2,321,000  1,482,000     321,730        21.7%       34.0%        789,140       503,880       109,388 
Mexico
  Cable..................        341,600    166,117      54,446        32.8%       49.0%        167,384        81,397        26,679 
Brazil (Jundiai)
  Cable..................         70,000     41,889      11,126        26.6%       46.3%         32,410        19,395         5,151 
Brazil (TVSB)
  MMDS...................        387,000    387,000      12,011         3.1%       40.0%        154,800       154,800         4,804 
Peru
  Cable..................        140,000     13,720       3,325        24.2%    97.7-100.0%     137,470        13,425         3,255 
Latin America
  Programming(5).........            N/A        N/A         N/A         N/A        50.0%            N/A           N/A           N/A 
                               ---------  ---------   ---------                               ---------     ---------     ---------
    Total UIH LA.........      3,259,600  2,090,726     402,638                               1,281,204       772,897       149,277 
                               ---------  ---------   ---------                               ---------     ---------     --------- 
    Total UIH...........       9,406,881  6,792,025   3,267,814                               4,505,787     3,302,030     1,176,479 
                               =========  =========   =========                               =========     =========     ========= 
</TABLE>

                                        As of and for the Year Ended
                                ---------------------------------------------
                                     December 31, 1996  (In thousands)(1)
                                ---------------------------------------------
                                                 Net                   Long-
                                               Income     Adjusted     Term
                                 Revenue       (Loss)     EBITDA(2)    Debt
                                ---------    ----------   ---------    -----
EUROPE
------
UPC SYSTEMS:
Netherlands (A2000)
 Cable...................       $ 44,359     $  (9,941)   $ 21,200    $180,607
Austria
  Cable..................         78,010        (1,981)     40,578          --
Norway
  Cable..................         29,279       (15,004)      9,294      69,382
Hungary
  Cable..................         21,732         3,134       8,702          --
Israel
  Cable..................         92,676        15,291      45,830       4,845
Ireland
  Cable/MMDS.............         28,608        (4,298)     10,832      52,338
Belgium
  Cable..................         18,699        (1,437)      7,237          --
Netherlands (KTE)
  Cable..................          8,849        (1,393)      5,575      11,118
Malta
  Cable..................          8,767        (3,586)      2,478      15,345
Czech Republic
  Cable/MMDS/MATV........          3,593        (4,937)     (3,468)         --
Romania
  Cable..................            315           101         212          --
Slovak Republic
  Cable..................            329          (271)       (205)         --
France
  Cable.................              90        (2,412)     (2,231)         --
                                --------     ---------    --------    --------
    Total UPC............        335,306       (26,734)    146,034     333,635
                                --------     ---------    --------    --------
OTHER UIH SYSTEMS:
Hungary (Monor Telefon)
  Cable/Telephony(3).....         11,732        (5,332)      4,906      30,000
Spain/Portugal (IPS)
  Programming............          3,445       (12,732)     (9,364)         --
Ireland (Tara)
  Programming(4).........             --        (2,591)     (2,542)         --
                                --------     ---------    --------    --------
   Total Europe..........        350,483       (47,389)    139,034     363,635
                                --------     ---------    --------    --------

                                       13

<PAGE>
                                        As of and for the Year Ended
                                ---------------------------------------------
                                     December 31, 1996  (In thousands)(1)
                                ---------------------------------------------
                                                 Net                   Long-
                                               Income     Adjusted     Term
                                 Revenue       (Loss)     EBITDA(2)    Debt
                                ---------    ----------   ---------    -----
ASIA/PACIFIC (UAP)
------------------
Australia (Austar)
  MMDS/DTH...............       $ 17,461     $ (44,623)   $(19,356)   $   2,961
Philippines
  Cable..................          2,604          (391)        282           --
Tahiti
  MMDS...................          3,513        (4,192)       (815)       1,257
New Zealand
  Cable..................            188        (4,609)     (3,833)          --
Australia (XYZ
 Entertainment)
  Programming............          6,164       (14,895)     (8,974)          --
Australia (United
 Wireless)
  Wireless Data..........             90        (2,483)     (1,740)          --
China
  Microwave Relay(6).....            N/A           N/A         N/A          N/A
                                --------     ---------    --------     --------
    Total UAP............         30,020      (71,193)     (34,436)       4,218
                                --------     ---------    --------     --------
LATIN AMERICA (UIH LA)
----------------------
Chile
  Cable..................         88,423       (13,487)     13,950        7,131
Mexico
  Cable..................          9,920         2,098       5,949          453
Brazil (Jundiai)
  Cable..................          3,454          (884)        369           97
Brazil (TVSB)
  MMDS...................          5,592        (2,112)       (582)          --
Peru
  Cable..................            830        (1,188)       (751)         194
Latin America
  Programming(5).........            N/A           N/A         N/A        1,459
                                --------     ---------    --------     --------
    Total UIH LA.........        108,219       (15,573)     18,935        9,334
                                --------     ---------    --------     --------
    Total UIH............       $488,722     $(134,155)   $123,533     $377,187
                                ========     =========    ========     ========

(1)  The financial  information  presented  above has been taken from  unaudited
     financial  information  of the  respective  operating  companies  that were
     providing service as of December 31, 1997.  Certain  information  presented
     above has been derived from  financial  statements  prepared in  accordance
     with foreign  generally  accepted  accounting  principles which differ from
     U.S. generally accepted accounting principles. In addition, certain amounts
     have been  converted to U.S.  dollars  using the December 31, 1997 exchange
     rates for the convenience translation, which is not in accordance with U.S.
     generally  accepted  accounting   principles.   Operating  systems  in  the
     following countries reported to the Company in U.S. dollars:  Ireland (Tara
     only), Hungary,  Spain, Brazil, Mexico, Chile, Peru and Tahiti.  Therefore,
     the  financial  information  presented  above for these  countries  was not
     affected by the convenience translation.
(2)  Adjusted EBITDA represents net income (loss), as determined using generally
     accepted  accounting  principles  which may  differ  from those used in the
     United States, plus net interest expense, income tax expense, depreciation,
     amortization,  minority interest, management fee expense, currency exchange
     gains (losses) and other  non-operating  income (expense)  items.  Industry
     analysts generally consider adjusted EBITDA to be an appropriate measure of
     the performance of  multi-channel  television  operations.  Adjusted EBITDA
     should not be considered as an  alternative  to net income or to cash flows
     or to  any  other  generally  accepted  accounting  principles  measure  of
     performance  or  liquidity  as  an  indicator  of  an  entity's   operating
     performance.
(3)  The  subscriber  information  presented is for the operating  company Monor
     Telefon, and the financial  information presented is for its parent company
     Monor.  The Company  owns a 48.6%  interest in Monor,  which holds a 95.27%
     interest in the operating company Monor Telefon. The number of homes passed
     and basic subscribers includes the sum of cable and telephony statistics in
     Monor Telefon's service area; however,  the number of homes in service area
     does not include any duplication of homes.

                                       14
<PAGE>

(4)  Tara Television  offers a free  introductory  period for its channel.  Tara
     Television began collecting revenues in August 1997.
(5)  UFC launched  service in June 1997. UFC offers a free  introductory  period
     for its  service;  therefore,  the  number of basic  subscribers  presented
     represents the subscribers under contract at the end of the period.
(6)  The  Company  has a 49%  interest  in HITV,  a joint  venture  that  owns a
     microwave  relay system in the Hunan Province that transmits two provincial
     channels to  approximately  400,000 cable  television  homes in the region.
     HITV launched service in July 1997.

OPPORTUNITIES IN FOREIGN MARKETS

EUROPEAN OPERATIONS

Overview
--------

     On December 11, 1997, the Company acquired from Philips its entire interest
in UPC for approximately $223 million (the "UPC Transaction").  Prior to the UPC
Transaction,  the Company and Philips  each owned 50% of UPC,  except for shares
held by a foundation  benefiting UPC employees and management, pursuant to UPC's
equity  incentive  plans.  See Item 7  "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations" for a complete discussion of the
UPC  Transaction.  Through  UPC,  UIH  is  one of  the  largest  private  sector
multi-channel   cable  television   operators  in  Europe,   with  interests  in
well-established systems, as well as systems under construction, in 11 countries
in Europe and in Israel.  UIH effectively holds all of the voting control of UPC
and owns all of its issued and outstanding shares, other than approximately 8.4%
of such  shares,  which  have been  registered  in the name of a  foundation  to
support UPC's employee equity incentive plan. UPC's operations consist primarily
of  large,  developed  systems,  including  systems  in  Austria,  Belgium,  The
Netherlands  and Norway  (the "UPC  Established  Systems").  With the  continued
liberalization of the communications  market in Europe, the Company believes UPC
is well-positioned  within its markets to exploit anticipated  opportunities for
growth in video services,  Internet/data  services and cable telephony services.
As  of  December  31,  1997,  UPC's  affiliated  companies  passed  a  total  of
approximately  3.6  million  homes and had an  aggregate  of  approximately  2.3
million  subscribers  and,  on an equity  basis,  UPC passed  approximately  2.4
million homes and had approximately 1.5 million subscribers.

     The  UPC  Established   Systems  have  been   characterized  by  very  high
penetration rates (ranging from 49.0% to 95.9% as of December 31, 1997), low net
churn  rates (a  monthly  average  of  approximately  0.625%  for the year ended
December 31, 1997) and stable  positive  cash flow.  All of the UPC  Established
Systems  (each of which has been  operating for more than ten years) and many of
its other systems have long-term  licenses to provide cable television  services
in their  operating  areas.  Although  the UPC  Established  Systems  have  high
penetration  rates and low churn rates,  the cash flow per  subscriber  of these
systems is  significantly  lower than levels  achieved in the United  States and
many other  countries  in which UIH  operates.  UPC is  installing  fiber  optic
two-way  digital  networks  in many of its  systems in an  attempt  to  increase
revenue  and cash  flow  per  subscriber  by  offering  enhanced  communications
services  such  as  impulse  pay-per-view,   Internet/data  services  and,  when
permitted,  cable  telephony.  UPC  also  plans  to  expand  its  operations  by
selectively building out cable infrastructure in certain unserved regions in its
existing  markets and, where  appropriate,  by investing in new  development and
acquisition opportunities.

     To  date,  UPC has  successfully  launched,  or has  plans to  launch,  the
following  communications  services in the UPC Established Systems, which are in
addition to its existing basic cable television service.

                                       15
<PAGE>
<TABLE>
<CAPTION>
                                                                                       Launch Date/
                                                                                   --------------------
                                                    Service                        Expected Launch Date
                                    -----------------------------------            --------------------
<S>                                 <C>                                               <C>
Austria..........................   Expanded basic tier (7 channels)                  May 1997
                                    Impulse pay-per-view (10 channels)                May 1997
                                    Internet/data services                            September 1997
                                    Cable telephony                                   1998 - 1999

Belgium..........................   Expanded basic tier (12 channels)                 October 1996
                                    Internet/data services                            September 1997
                                    Impulse pay-per-view (1)                          January 1999

Netherlands/A2000................   Expanded basic tier (11 channels)                 October 1996
                                    Impulse pay-per-view (5 channels)                 April 1997
                                    Cable telephony                                   July 1997
                                    Internet/data services                            October 1997

Netherlands/KTE..................   Expanded basic tier (8 channels)                  October 1996
                                    Impulse pay-per-view (1)                          May 1998
                                    Internet/data services                            1998 - 1999
                                    Cable telephony                                   1999

Norway...........................   Expanded basic tier (14 channels)                 1989
                                    Premium services (3 channels)                     1990
                                    Internet/data services                            1998
                                    Impulse pay-per-view (1)                          1998 - 1999
                                    Cable telephony                                   1999
</TABLE>
--------------------
(1) Number of channels to be determined.

     UPC launched cable  telephony  services in A2000,  its 50%-owned  system in
Amsterdam,  in July 1997. This roll-out has been  successful with  approximately
2.6% of marketed homes  purchasing  service as of December 31, 1997. UPC intends
to leverage  the cable  telephony  experience  it has gained in  Amsterdam as it
expands cable telephony offerings to its other systems.

     UPC also has majority  interests in systems in the Czech Republic,  France,
Romania and the Slovak Republic, which are at various stages of construction and
development  (the  "UPC  Development  Projects"),  and  non-consolidated  equity
interests  in systems in  Hungary,  Israel,  Ireland  and Malta (the "UPC Equity
Investments").  The Company believes these interests have significant  value and
UPC is evaluating the potential sale of a portion of, or potentially acquiring a
majority  interest in, these and  selected  other  systems in order to do one or
more of the following: (i) rationalize its operations, (ii) reduce debt or (iii)
provide additional capital for the growth of the UPC Established Systems.

Austria: Telekabel
------------------

     UPC owns 95% of Telekabel,  which provides  communications  services to the
Austrian cities of Vienna,  Klagenfurt,  Graz,  Baden and Wiener Neustadt and is
the largest  multi-channel  distribution  system in Austria with over 40% market
share. Telekabel's largest subsidiary,  Telekabel Wien, which serves the city of
Vienna and represents over 87% of Telekabel's total  subscribers,  is one of the
larger  clusters of cable systems in the world,  passing  approximately  782,800
homes with more than 378,820 subscribers as of December 31, 1997.

     UPC is  capitalizing  on  Telekabel's  strong market  position by expanding
Telekabel's  service  offerings  as its  network  is  upgraded  to full  two-way
capability.  The upgraded network,  which passed approximately  339,900 homes or
38% of the total homes  passed as of December  31,  1997,  allowed  Telekabel to
launch an expanded basic (tiered)  service,  impulse  pay-per-view  services and
Internet/data   services  in  1997.  The  launch  of   Telekabel's   tiered  and
pay-per-view  services  in Vienna was the first  launch of such  services  by an
Austrian cable television  company.  In addition,  Telekabel plans to launch the
initial phase of a cable telephony service in September 1998.

     Telekabel  owns the complete  cable system  infrastructure  for each of its
systems from the headend to the home.  Under  Austria's  new  telecommunications
law, however, the owner of a telecommunications  network must permit other users
to access its  network if  certain  thresholds  are  satisfied.  In early  1992,
Telekabel  Wien  initiated the rebuild and upgrade of its existing cable network
in Vienna.  The rebuild and upgrade of the network includes the overlay of trunk
lines with fiber optic technology,  as well as the replacement of all 45,000 UHF
amplifiers  and 60,000  passive  network  components.  The headend is also being
upgraded  concurrently  with the installation of 200 additional fiber nodes. The
upgrade  is  expected  to be fully  completed  by  mid-1999  and will  allow the
operating systems to have full two-way  capability,  which will enable Telekabel
to increase its channel capacity from 45 to 85 analog channels.  Telekabel's new
high capacity 860 MHz two-way network will also provide sufficient  bandwidth in

                                       16
<PAGE>

the  upstream  and  downstream  to provide  the  capability  for future  digital
services as well as enhanced video and communications services.

     Telekabel's  cable  systems  compete  with a DTH service  that is available
throughout  Austria.  Currently,  DTH  penetration  of the  Austrian  market  is
approximately  33%,  concentrated  primarily  in the rural areas of the country;
however, penetration in Vienna is approximately 11%. Telekabel competes with DTH
service on the basis of quality of service and superior programming selection.

Belgium:  Radio Public
----------------------

     Radio  Public,  a  100%-owned   subsidiary  of  UPC,   primarily   provides
communications  services in  selected  areas of  Brussels  and nearby  Leuven in
Belgium.  Radio Public, which currently has over 95% penetration,  plans to grow
through  the  introduction  of new  services  that are not  subject to the price
regulations applicable to basic cable services. In late 1996, Radio Public began
phase one of a  three-phase  program to upgrade its network  through fiber optic
overlay  of its trunk  lines and  replacement  of all  amplifiers.  Phase one is
scheduled to be completed by the end of 1998. The implementation of full two-way
capability will enable Radio Public to increase its channel  capacity from 56 to
72 analog channels.

     As  Radio  Public  upgrades   portions  of  its  network  to  full  two-way
capability,  it plans to introduce  new services  such as impulse  pay-per-view.
Radio  Public's  management  believes  that  there is a strong  demand  for such
services  within  its  market as  evidenced  by the  success  of Radio  Public's
expanded basic  service,  which was launched in October 1996. In the same month,
Radio  Public  launched  a tiered  service  of nine  channels,  the first  cable
provider  in Belgium to launch such a service,  by  providing  subscribers  with
advanced analog decoder boxes at a monthly rental. Introduction of Internet/data
service occurred in September 1997. When the upgrade is fully completed in early
1999,  Radio  Public will also be in a position  to  introduce  cable  telephony
services,  with impulse pay-per-view  services expected to be introduced shortly
thereafter.

     Radio Public  currently pays copyright fees at the rate of 15% of its basic
services revenue to cover the cost of 15 programs (principally those produced by
public broadcasters). Since 1996, the assembled collecting agencies attempted to
increase  copyright  fees by 40% but to date,  all operators have refused to pay
such an increase.  Radio Public believes a limited increase in fees is likely to
occur,  and in the past Radio  Public has been able to pass such cost  increases
through to customers.

     With the exception of Etterbeek  (15,000  subscribers),  where Radio Public
has an agreement  with the  municipality  scheduled to expire in 2016 to operate
the network, Radio Public owns the complete cable system infrastructure for each
of its systems  from the headend to the home.  Radio  Public  currently  employs
860 MHz distribution technology.

     Radio Public currently faces limited  competition,  the most significant of
which  is  DTH  service.  Within  Radio  Public's  service  area,  however,  DTH
competition is limited as local authorities apply a restrictive  policy in terms
of building  permits and levy taxes on the  ownership  of  satellite  dishes.  A
second license has been granted to another cable operator in the city of Leuven,
which started operations in 1998. In addition,  Radio Public has now applied for
a license  outside its current  territory  in areas  where other  operators  are
present.  Radio Public currently competes and will continue to compete primarily
on the basis of the quality and content of its programming  packages, as well as
its pricing.

Norway:  Janco
--------------

     Since its acquisition of control, UPC's strategy for its Norway systems has
been to integrate  more fully its operating  subsidiaries  to take  advantage of
economies of scale in  implementing  the  technical,  operational  and marketing
expertise offered by UPC. In an effort to increase its position in the Norwegian
cable television market, UPC acquired from Helsinki Media in January 1997, 70.2%
of Janco Kabel TV, a cable system with a non-exclusive  license to provide cable
television service in Oslo, Norway. In November 1997, UPC merged Norkabelgruppen
AS  ("Norkabel")  into Janco Kabel TV forming Janco,  following which merger UPC
retained an 87.3% interest in Janco. From an economic  perspective,  UPC has all
the rights and obligations of full ownership of Janco, and UPC consolidates 100%
of Janco's financial results.  UPC has the right to acquire on or before July 2,
2001,  and  Helsinki  Media  has the  right to put to UPC on July 2,  2001,  the
remaining  interest in Janco,  for a purchase  price of  approximately  NKr165.9
million ($22.5 million as of December 31, 1997),  subject to certain adjustments
based upon the  operating  results of Janco.  UPC has deposited  Dutch  guilders
("NLG")47 million ($24.0 million at December 31, 1997) as collateral against the
purchase of the remaining interest in Janco.

     As a result of the  merger,  Janco is  Norway's  largest  cable  television
operator with  approximately  47% of the total Norwegian cable television market
as of December 31, 1997.  Janco owns and  operates 16 cable  television  systems

                                       17
<PAGE>

located  primarily in southeastern  Norway and along the southwestern  coast, as
well as its main network in Oslo, Norway. The  well-established  Norwegian cable
television  market has high  penetration,  approximately  70% as of December 31,
1997,  primarily  due to poor  over-the-air  reception  in much  of  Norway  and
significant demand for television entertainment.  UPC's goals are to continue to
increase Janco's subscriber base, to improve revenue per subscriber by providing
additional  programming  and services and to increase per subscriber  revenue in
the former Janco Kabel TV systems to equal or exceed the per subscriber  revenue
the Company currently  receives from the former Norkabel  systems.  UPC plans to
launch Internet/data services in 1998 and cable telephony service in 1999.

      Janco  owns  the  complete  cable  system  infrastructure  for each of its
systems  from the  headend to the home,  except  for cable and plant  located on
housing association property,  which is legally owned by the association.  Janco
uses a total of 16 CATV  headends  and 39 SMATV  headends  to operate  its cable
television systems. Janco's systems have security devices to scramble signals to
prevent  unauthorized  receipt of its  services.  UPC's  plan is to upgrade  the
network in Norway to full two-way capability, with the exception of 75,000 homes
in southern rural areas.  Initially,  fiber will extend to nodes of 2,000 homes;
however,  the network  upgrade has been planned such that each node can be split
further to 500 homes at  relatively  little  incremental  cost should demand for
services require it.

     All Norwegian cable  television  companies offer similar levels of service;
therefore,  Janco  competes  primarily on the basis of price.  The DTH market in
Norway is also beginning to grow, as DTH companies,  particularly  Telenor,  are
competing  more  effectively  on price and entrance  costs for  subscribers  are
declining.  Janco's  cable  television  systems also compete with private  SMATV
systems.  Janco's  systems  generally  offer more  channels  of  programming  to
subscribers and provide better picture quality than SMATV systems.  UPC believes
that the  quantity  and quality of SMATV  programming  offered are  important to
Janco's competitive position.

The Netherlands (Amsterdam):  A2000
-----------------------------------

     A2000,  a 50/50 joint venture  between UPC and U S WEST,  currently  enjoys
basic  penetration  rates of  approximately  92% in its two  systems  that serve
Amsterdam,  Landsmeer,  Purmerend,  Zaanstad and Ouder-Amstel and Hilversum, The
Netherlands.  As a result of this high  penetration  and the rate  regulation of
basic cable services in A2000's  franchise areas,  A2000 has focused its efforts
on increasing its per subscriber  revenue growth through the introduction of new
services.  A2000 has pursued this  strategy,  launching a nine channel  expanded
basic tier in October 1996, impulse pay-per-view services in April 1997, a cable
telephony  service in July 1997 and  Internet/data  services  in  October  1997.
Approximately  2.6% of  A2000's  marketed  customers  have  signed  up for cable
telephony service as of December 31, 1997. UPC intends to draw on the experience
it has gained in A2000 as it rolls out enhanced  communications  services in its
other systems.

     The basic programming  service content is overseen by a programming council
in each municipality.  The programming  council retains the right to request the
removal or addition  of certain  programming  providers  in the basic tier as it
deems necessary. The council has no authority over any services beyond the basic
tier.  While  tariffs for basic  programming  services  are  regulated  by local
governmental authorities, the recently amended Dutch Media Act provides that the
maximum tariffs may be determined by Dutch governmental order.

     A2000 owns the complete cable system infrastructure for each of its systems
from the headend to the home. A2000 is currently in the process of upgrading its
cable network with a fiber optic overlay and is replacing all of its  amplifiers
and passive  network  components.  A2000 had in excess of 165,000  homes rebuilt
with full two-way  capability at December 31, 1997, with total rebuild  expected
to be  complete  by the end of the third  quarter  of 1999.  The  upgrade of the
headend and network will enable  A2000 to increase  its channel  capacity in its
systems from 45 to 85 channels.  A2000's  initiation  of the new 860 MHz two-way
network should also provide sufficient  bandwidth in the upstream and downstream
to allow for the capacity of future digital services,  as well as enhanced video
and communications services.

     To date, the A2000 systems have maintained  stable,  high penetration rates
(approximately  92%), and competition from off-air television  signals,  DTH and
local SMATV  systems has been  limited.  In July 1997,  the A2000  systems began
offering cable telephony  services on a limited basis in direct competition with
the Dutch PTT ("KPN")  and other  providers  of cable  telephony  services.  UPC
believes that A2000 has negotiated reasonable  interconnect  agreements,  leased
line agreements and other agreements  necessary for the cable telephony services
the A2000 systems currently provide.

     UPC and U S WEST each  currently  own 50% of the ordinary  share capital of
A2000.  A2000 holds 100% ownership in  Kabeltelevisie  Amsterdam  B.V.  ("KTA"),
which operates cable systems in Amsterdam,  Landsmeer,  Purmerend,  Zaanstad and
Ouder-Amstel,  and holds a 100% ownership in A2000 Hilversum B.V. ("KTH"), which
operates a cable system in Hilversum.  The  Municipality  of Amsterdam  owns one
priority share in KTA.

                                       18
<PAGE>

     The boards of A2000,  KTA and KTH consist of an even  number of  directors:
one half  appointed  by U S WEST and one half  appointed by UPC.  Certain  major
decisions require approval by the shareholders  with a qualified  majority of at
least 75%. The A2000, KTA and KTH management  boards consist of at least a chief
executive officer, appointed by UPC, and a chief financial officer, appointed by
U S WEST, as well as other members  appointed by both.  Certain major  decisions
affecting  KTA, such as approval of business plans and annual  budgets,  require
approval of the majority of the supervisory board of KTA, one member of which is
appointed by the Municipality of Amsterdam.

The Netherlands (Eindhoven):  KTE and Combivisie
------------------------------------------------

     In Eindhoven, The Netherlands, UPC operates the KTE system, which has basic
penetration of approximately 95%. In July 1997, UPC acquired  Kabeltelevisie Son
en Breugel B.V. ("Son en Breugel"), the 5,000-subscriber system in the Eindhoven
cluster.  Effective January 1, 1998, UPC acquired certain assets,  including the
cable systems of Combivisie.  The Company  believes it has thus created a large,
densely-populated   system  with  the  critical  mass   necessary  to  introduce
economically  new  communications  services.  Subsequent to the  transaction the
assets and liabilities of both KTE and Combivisie were merged, forming The Cable
Network Brabant Holding BV ("CNBH").

     KTE  introduced an expanded  basic service in October 1996,  and expects to
launch impulse pay-per-view  services in May 1998 and Internet/data  services in
1998 and 1999.  UPC  intends to roll out these  services  simultaneously  to the
Combivisie  system.  In addition,  UPC plans to introduce  the initial  phase of
cable telephony services in these systems in early 1999.

     KTE owns the complete cable system  infrastructure  for each of its systems
from the headend to the home.  During 1994,  KTE  upgraded its fiber  network by
replacing all of its coaxial trunk with a fiber optic trunk.  The new technology
incorporates  860 MHz  capability  that  provides  sufficient  bandwidth  in the
upstream and downstream to allow for the  introduction of digital  services,  as
well as enhanced video and communications  services.  This upgrade also included
the  municipalities  for which KTE  operates a cable  network,  representing  an
additional  16,000  subscribers.  KTE recently  completed the replacement of its
amplifiers  and  passive   network   components  to  accommodate   full  two-way
capability. UPC expects the Combivisie system to be fully two-way capable during
1999.

     To date,  KTE and  Combivisie  have  maintained a high level of penetration
(approximately  95%) and competition from off-air  television  signals,  DTH and
local SMATV systems has been limited.

UPC Equity Investments (Israel, Ireland, Malta and Hungary)
-----------------------------------------------------------

     UPC has non-consolidated  equity investments in systems in Israel, Ireland,
Malta and  Hungary.  The  Company  believes  that  these  systems,  which in the
aggregate  had  approximately  703,000  subscribers  at December 31, 1997,  have
significant  value.  As  part  of  the  Company's  focus  on  rationalizing  its
operations,  UPC may sell all or a portion of, or acquire majority positions in,
these systems.

UII
---

     UII, a Colorado  general  partnership  formed in 1991,  holds  interests in
multi-channel  distribution systems in Israel,  Ireland and Malta. UPC and TINTA
each hold a 50% partnership interest in UII. As a consequence of a difference in
capital contributions upon the acquisition by UII of its equity interests in the
entities  referred to below,  the  interests  of UPC and TINTA in such  entities
cannot  directly be deduced from the 50%  partnership  interest.  UPC's  current
indirect  economic  interest in these systems is as follows:  20% in the Ireland
system, 23.3% in the Israel system and 25% in the Malta system. In April and May
1998,  UPC  signed  MOUs with TINTA to acquire  TINTA's  interests  in Tevel and
Melita and to sell UPC's interest in Princes Holdings to TINTA for a net payment
to TINTA of approximately $71.0 million.

     ISRAEL: TEVEL. Tevel has exclusive cable television broadcasting franchises
for the entire Tel Aviv  metropolitan  area, the region of  Ashdod-Ashkelon  (30
miles  south of Tel Aviv) and the  Jezreel  Valley  (80 miles  northeast  of Tel
Aviv). These franchise areas cover  approximately  360,000 homes,  approximately
24% of the homes in Israel,  giving  Tevel a  substantial  share of the  Israeli
multi-channel  television  market.  Tevel's  growth  strategy is to increase its
subscriber base by completing line  extensions  within existing  franchise areas
and to increase  penetration  rates by offering a wider variety of  programming,
including multimedia and Internet/data services.  Future growth in revenues will
depend upon increased  penetration  rates in built and unbuilt  franchise areas,
acquisition  and  distribution  of  additional  programming  that  will  justify
increases in service rates and increased sales of additional  services,  such as
impulse pay-per-view services.

                                       19
<PAGE>
     Tevel,  together  with  four of the five  other  Israeli  cable  television
companies,  owns a programming company, Israel Cable Programming Company Limited
("ICP").  ICP  purchases   programming  rights  for  subsequent  sale  to  cable
television  operators  in Israel and produces two  cable-exclusive  channels:  a
general  entertainment  channel and a movie  channel.  A children's  channel,  a
sports channel and a channel showing nature,  science and art  documentaries are
produced by third parties.

     The  Company  believes  that the  current  pricing of Tevel's  pay-per-view
services are competitive  with the home video cassette rental and motion picture
entertainment alternatives in Israel. The DTH market in Israel is very small, as
the Company  estimates only  approximately  10,000 households in the country had
satellite  dishes as of December  31,  1997.  The Company  does not believe that
present DTH services  compete with Tevel's  systems because Israel is not in the
general  transmission  path of  existing  European  programming  satellites  and
equipment  capable of receiving those distant  signals is relatively  expensive.
The Israeli government recently declared, however, its intention to open DTH for
competition in late 1998 or early 1999. Such service,  if widely available,  may
affect Tevel's existing operations and the price structure of its services.

     IRELAND:  PRINCES  HOLDINGS.  Princes  Holdings,  through two  wholly-owned
subsidiaries  and one 96% owned  subsidiary  (collectively,  the "PHL  Operating
Companies"),  owns interests in  established  cable  television  systems and has
exclusive  franchises  through 2001 to construct  and operate MMDS  networks for
areas  covering  approximately  355,000  homes,  or  approximately  69%  of  all
potential  MMDS homes in Ireland.  Given the strong demand for more  programming
options as evidenced by high  subscription  rates in existing  cable  television
systems in  Ireland,  including  those  owned by Princes  Holdings,  the Company
believes that the expansion of multi-channel  television  services into recently
activated  franchise areas presents an opportunity for significant growth in the
number of  subscribers.  As these  franchises  are developed,  Princes  Holdings
expects to become the  largest  multi-channel  television  provider  in Ireland,
holding franchises  covering a service area containing over 32% of the country's
television  households.  Princes Holdings is currently the largest MMDS operator
in Ireland.

     Princes Holdings is currently focusing on improving subscriber  penetration
through increased  marketing and sales efforts.  Princes Holdings plans to offer
additional  programming  and tiered and packaged  services over time to increase
the revenues generated from each subscriber.

     MALTA:  MELITA.  Melita  holds an  exclusive  franchise  to  deliver  cable
television  services for Malta, a group of islands located in the  Mediterranean
Sea between Italy and North Africa with a population of  approximately  375,000.
The license  expires in 2006 and is renewable upon  application to and review by
the  government.  Melita's  network  currently  passes  over 86%  (approximately
154,000) of the homes on the island.  Because English is widely spoken in Malta,
Melita is able to take  advantage  of the  abundant  supply of English  language
programming available for licensing from various programming companies.

     Melita's  growth strategy is to continue to market its services to homes in
its franchise areas, as well as to provide an increased amount of programming to
increase its appeal to  subscribers.  In 1996,  Melita  created a "live"  sports
channel showing English Premier League Football and in 1997, introduced a second
"live"  sports  channel  featuring  Italian  soccer,  as well as four  other new
channels.

     HUNGARY:  KABELKOM.  United  Communications  International  ("UCI") and TWE
formed  Kabelkom,  a  Delaware  general  partnership,  to invest in and  further
develop  cable  opportunities  in Hungary.  Kabelkom,  through its  wholly-owned
subsidiary  Kabelkom  Kabeltelevizio  Kft, to date has  purchased  an  ownership
interest in ten existing Hungarian cable television systems located in different
cities  throughout the country,  with the most recent  acquisition  occurring in
August 1996.  Kabelkom has substantially  completed the rebuilding and upgrading
of its cable  infrastructures  to support increased  channel  capacity.  UPC has
succeeded in increasing  revenues per  subscriber as it upgrades the systems and
adds new services in step with the growth of Hungary's economy.

     In September 1991,  Kabelkom  launched a pay movie channel (HBO Hungary) to
supply its  systems  with  additional  programming  as well as for sale to other
cable television operators.  The channel currently offers programming consisting
of a broad mix of U.S.,  European and  Hungarian  films.  Kabelkom  licenses HBO
Hungary to other operating systems in addition to the operating systems in which
it has an ownership  interest.  In February 1995,  Kabelkom  launched its second
channel of Hungarian language  programming,  "Spektrum TV," a science and nature
channel. In June 1997, a third channel of Hungarian music was launched.

     UPC's  ownership  interest in Kabelkom was originally  held through UCI. In
September  1996,  UPC  purchased   Telewest  Europe  Group's  interest  in  UCI,
increasing  its ownership in Kabelkom from 3.9% to 50%.  Generally,  UPC and TWE
share  distributions  in proportion to their  respective  capital  contributions
until each partner has received an amount equal to the capital contributed by it
plus  interest on such  contributions  at an annual rate of 12%. On the basis of
these capital  contributions,  the respective  economic interests  currently are
47.2% for UPC and 52.8% for TWE.  With  respect to  ownership in each of the ten

                                       20
<PAGE>

systems,  Kabelkom  formed local joint ventures with private  enterprises or the
municipality  that owned and  operated  the  systems.  As of December  31, 1997,
Kabelkom  held net ownership  interests  ranging from 70% to 100% in nine of the
ten local  Hungarian  cable  television  systems and a minority  interest in the
remaining system.

     On  April  1,  1998,  UPC  and  TWE  signed  an  MOU  for  the  purpose  of
restructuring  the  assets of  Kabelkom.  Under  the terms of the MOU,  UPC will
acquire TWE's 50% ownership  interest in Kabelkom's  Hungarian cable  television
systems and TWE and other partners will acquire UPC's 50% ownership  interest in
Kabelkom's Hungarian programming business. In addition, the MOU provides for the
sale of  UPC's  ownership  interest  in TV Max,  a  Czech  Republic  programming
business,  to TWE.  The MOU  requires  UPC to make a net  payment to TWE of $9.5
million upon closing which is expected to occur in the second  quarter of fiscal
year 1999.

UPC Development Projects
------------------------

     UPC is currently pursuing various  development  projects throughout Europe,
including  projects  in the  Czech  Republic,  France,  Romania  and the  Slovak
Republic.  UPC is currently  building out its franchises and has initiated cable
television  operations in each of these  countries.  Although these  development
projects  will require more time to realize  returns  comparable  to the returns
generated by the UPC Established Systems,  they provide the potential for UPC to
expand beyond its established base. In pursuing development  opportunities,  UPC
searches for projects that, once developed,  would provide  clustering and scale
effects comparable to the UPC Established Systems.

UPC Acquisitions
----------------

     Subject,  in  certain  circumstances,  to the  consent  of certain of UPC's
lenders,  UPC  intends to pursue  acquisition  opportunities  which  allow it to
rationalize  its  operations  or which  offer  the  opportunity  to  create  new
clusters. This acquisition strategy would allow UPC to achieve greater economies
of scale. Below is a summary of UPC's recent acquisition activities.

     COMBIVISIE.  Effective  January  1,  1998,  UPC  acquired  certain  assets,
including the cable  systems of  Combivisie  for  approximately  $89.5  million.
Combivisie   administered  the  cable   television   systems  on  behalf  of  18
municipalities  in the region  surrounding  KTE. The purchase was funded with an
approximately $29 million draw on UPC's Tranche A Facility and approximately $60
million from a credit facility from a bank.  Subsequent to the transaction,  the
assets and liabilities of both KTE and Combivisie were merged to form CNBH.

     On February  20,  1998,  CNBH  secured a NLG250  million  ($123  million at
December 31, 1997) nine-year term facility.  The CNBH facility bears interest at
the applicable LIBOR plus a margin ranging from 0.60% to 1.60% per annum, and is
secured by, among other things,  an encumbrance  over CNBH's assets and a pledge
by Cable  Network  Netherlands  Holding of its shares of CNBH.  The facility was
used to  refinance  the  existing  KTE  facility,  to  complete  the  Combivisie
acquisition  and for the  development  and  exploitation  of  enhanced  cable TV
services, data services and telephony services.

     JANCO.  In January 1997,  UPC acquired  from Helsinki  Media 70.2% of Janco
Kabel  TV,  a  cable  system  with a  non-exclusive  license  to  provide  cable
television  service in Oslo,  Norway. In November 1997, UPC merged Norkabel into
Janco Kabel TV to form  Janco.  As a result of such  merger,  UPC holds an 87.3%
interest in Janco. Janco's articles of association grant certain minority rights
to Helsinki Media. From an economic perspective, however, UPC has all the rights
and obligations of full ownership of Janco, and UPC consolidates 100% of Janco's
financial  results.  UPC has the right to acquire on or before July 2, 2001, and
Helsinki  Media  has the  right  to put to UPC on July 2,  2001,  the  remaining
interest in Janco for a purchase price of approximately  NKr165.9 million ($22.5
million as of December 31, 1997),  subject to certain adjustments based upon the
operating  results of Janco.  UPC has deposited  NLG47 million ($24.0 million at
December 31, 1997) as collateral  against the purchase of the remaining interest
in  Janco.  As a  result  of this  merger,  UPC has a  leading  position  in the
Norwegian  cable  television  market with  service in most of  Norway's  largest
cities.  At  December  31,  1997,  pro  forma  for  the  merger,   Janco  passed
approximately  457,600  homes  and  served  approximately  319,700  subscribers,
representing a basic  penetration  rate of 70%. UPC plans to expand offerings in
the Norwegian market to include other broadband  communications products such as
Internet/data services and cable telephony services.

     SON EN  BREUGEL.  In July  1997,  UPC  acquired  the Son en  Breugel  cable
television system located near UPC's KTE system for approximately NLG5.9 million
($2.9  million  as of  December  31,  1997).  The  Son  en  Breugel  system  has
approximately 5,000 subscribers and has been integrated into KTE.

                                       21
<PAGE>

UPC Dutch Asset Rationalization
-------------------------------

     On April 2, 1998,  UPC and N.V. NUON  Energie-Onderneming  voor  Gelderland
("NUON"),  a Netherlands energy company,  signed a definitive agreement to merge
all of  their  Netherlands  broadband  cable  television  and  telecommunication
companies and activities into a newly-formed  company,  United Telekabel Holding
N.V.  ("UTH").  UPC will  contribute  its wholly owned interest in CNBH, its 50%
ownership interest in A2000 and its wholly-owned  interest in Son en Breugel for
a 51% interest in UTH.  NUON will  contribute  its  ownership  interests in N.V.
Telekabel  Beheer  for a 49%  interest  in UTH.  Closing of the  transaction  is
subject to certain  conditions  precedent  including  third party  consents  and
shareholder approval.  Upon closing, a correction payment will be made by either
UPC or NUON to balance  the  ownership  interests  based upon  agreed  valuation
methodology.  Further,  both parties will be committed to minimum funding levels
or become subject to future dilution.  The closing agreements provide UPC with a
call option to acquire 50% of NUON's ownership  interest in UTH and provide NUON
with a put option to sell 50% of its ownership interest in UTH. The call and put
options are in effect for a two-year  period starting one year after the closing
of the transaction which is expected to occur before July 1, 1998.

Other Europe
------------

     UIH also holds  interests  in several  other  operations  in Europe.  These
operations  include (i) a 48.6%  interest in Monor, a company that is building a
fiber-optic  telecommunications  network  in the Monor  region of  Hungary  with
approximately   145,000  homes  passed  and   approximately   62,000   telephony
subscribers  and 26,000 cable  television  subscribers  as of December 31, 1997;
(ii) a 33.5% interest in a programming  venture in Spain that had  approximately
485,000  subscribers  as of  December  31,  1997 and (iii) a 75%  interest  in a
programming venture in Ireland that had approximately  362,000 subscribers as of
December 31, 1997.

ASIA/PACIFIC OPERATIONS

Overview
--------

     The Company, through its 98%-owned subsidiary UAP, is a leading provider of
multi-channel  television  services in Australia  and the  Asia/Pacific  region.
Through its wholly-owned subsidiary,  Austar, UAP is the second largest provider
(based on subscribers)  of  multi-channel  television  services in Australia and
largest provider of  multi-channel  television  services in regional  Australia,
operating  MMDS  networks  and  marketing  a  DTH  service  in  franchise  areas
encompassing approximately 1.6 million television homes, or approximately 25% of
the total Australian  market.  UAP, through its 65%-owned New Zealand subsidiary
Saturn, is constructing a wireline cable and telephony system in Wellington, New
Zealand, a market with approximately 141,000 television homes. In addition,  Sun
Cable,  in which UAP holds a note  convertible  (subject to local  restrictions)
into a 40% ownership interest,  owns and operates cable television systems in 15
markets in the Philippines with an aggregate of approximately 66,000 subscribers
and a total of approximately  175,000 television homes in its operating areas as
of December  31,  1997.  In April 1998,  Sun Cable and  SkyCable  formed a joint
venture, which created the second largest MSO in the Philippines and the largest
MSO outside  Manila.  UAP's other  businesses  include (i) a 25% interest in XYZ
Entertainment,  a  programming  company  that  provides  five  channels  to  the
Australian  multi-channel  television  market,  four of  which  are  part of the
eight-channel  programming  package  which  includes two movie  channels and one
sports  channel  (the "Core  Package")  (with a total of  approximately  577,000
programming  subscribers  as of December 31, 1997) and (ii) up to a 90% economic
interest in Telefenua, the only provider of multi-channel television services in
Tahiti, with MMDS in a market with approximately 31,000 television homes. UIH is
evaluating the sale of its interest in Telefenua.

     The Company  believes  that UAP is  well-positioned  to  capitalize  on the
strong demand for multi-channel television and other telecommunications services
in  its  markets.  As of  December  31,  1997,  UAP's  multi-channel  television
operating systems had an aggregate of approximately 1.8 million television homes
passed   and   approximately   272,000   subscribers    (excluding   programming
subscribers),  compared to  approximately  324,000  television  homes passed and
approximately  29,000  subscribers  as of December 31, 1995 (with a  substantial
majority  of such  growth  resulting  from  Austar's  build  out and  subscriber
marketing).   During  this  same  period,  subscribers  to  XYZ  Entertainment's
programming increased from approximately 65,000 to approximately 577,000.

Australia:  Austar
------------------

     Austar is the largest  provider  of  multi-channel  television  services in
regional Australia (areas outside Australia's six largest cities). Through 1997,
Austar had launched MMDS in all of its  metropolitan  markets and DTH service in
non-metropolitan   markets.   These  markets  represent  1.6  million  franchise
television  homes.  Due to the relatively  small size and low housing  densities

                                       22
<PAGE>

which  characterize  the markets in its  franchise  areas,  Austar is  primarily
utilizing  MMDS  and DTH  wireless  technologies  to  deliver  its  service.  In
addition,  Austar has  constructed a wireline cable network in Darwin,  a market
containing  approximately 27,000 serviceable homes, where dense vegetation makes
an MMDS service 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 began marketing its services in late 1995 and has grown
its subscriber base from approximately 5,200 subscribers as of December 31, 1995
to approximately  196,000  subscribers as of December 31, 1997.  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.  Austar is currently  the only provider of
multi-channel  television  services in substantially all of its franchise areas.
As of December 31, 1997,  Austar had launched service in all of its metropolitan
and non-metropolitan markets.

     For the year ended  December  31,  1997,  Austar  spent  $83.8  million for
construction  of  MMDS  headend  and  transmission  facilities  for  all  of its
operating systems.  Variable  installation and equipment costs for each MMDS and
DTH  subscriber  are  currently  approximately  $338 and  $634  per  subscriber,
respectively.  These  subscriber  costs are  partially  offset by the  Company's
metropolitan and  non-metropolitan  installation charges of $13 to $32 and $130,
respectively.  Austar  retains  ownership of all MMDS and DTH customer  premises
equipment.

     Austar is currently  providing the  eight-channel  Core  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   $29,   with  a  one-time   installation   charge   ranging  from
approximately   $13  to  $32  for   metropolitan   subscribers   and   $130  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
primarily  of  foreign  movies,  art films  and  features.  Austar  is  charging
approximately $5 per month for World Movies. As of December 31, 1997, Austar had
21,332 subscribers for its World Movies premium channel.

     Austar's monthly "churn"  (calculated as total  disconnects as a percentage
of average  subscribers)  averaged  5.4% during 1996 and declined to 4.2% during
1997.  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.  Austar
plans  to  focus  more  on  rural,  non-metropolitan  growth  in  future  years.
Approximately   33%   of   Austar's   total   serviceable   homes   are  in  its
non-metropolitan franchise area, but only 21% of its total subscribers are rural
customers. Because non-metropolitan customers normally pay a higher installation
rate,  churn is  generally  less than the churn  for  metropolitan  subscribers.
During 1997, Austar's average monthly churn rate in its non-metropolitan markets
was approximately 2%.  Furthermore,  Austar has implemented  several operational
plans to decrease churn, including direct debit banking for customers,  customer
retention and loyalty programs, and complimentary installs on customer transfers
within the same  service  region.  Finally,  the  Company  is in the  process of
improving  the  breadth  and  quality of its  programming  package  through  the
negotiation and launch of additional sports and other programming products.

     The Core  Package  is  currently  the most  widely-distributed  programming
package in Australia and is the core  programming  offering of Austar and Foxtel
Management Pty Limited ("Foxtel"). Management believes that approximately 75% of
Australia's  multi-channel television subscribers subscribe to the Core Package.
The channels in the Core 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 Core Package consists of the
following eight channels:
<TABLE>
<CAPTION>
Core Package                                                    Programming Genre
------------                                                    -----------------
<S>                                                             <C>
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
</TABLE>
                                       23
<PAGE>
     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:
<TABLE>
<CAPTION>
Other Channels                                                  Programming Genre
--------------                                                  -----------------
<S>                                                             <C>
CMT.........................................................    country music videos
BBC World...................................................    world news
CNBC........................................................    business news
Lifestyle...................................................    personal and home improvement
The Comedy Channel..........................................    comedy
TNT(1)......................................................    library movies
Cartoon Network(1)..........................................    cartoons
CNN International(2)........................................    world news
TVSN(3).....................................................    shopping
Fox Sports II...............................................    sports
</TABLE>
     (1) TNT and Cartoon  Network  share one channel.
     (2) The Gold Coast (MMDS) only.
     (3) DTH only.

     Austar  also offers an  eight-channel  "Digital  Radio"  service to its DTH
customers.  In March 1996,  Austar  began  offering its first  optional  premium
channel, World Movies, which consists primarily of foreign movies, art films and
features.  Austar is  charging  approximately  $5 per  month  for World  Movies.
Initial  demand for this  service has been strong  with 21,332  customers  as of
December 31, 1997, approximately 11% of Austar's basic subscribers.

     In May 1998,  Australis  Media Limited  ("Australis"),  a major supplier of
programming to Austar, was placed into receivership in Australia. As a result of
the receivership and of the subsequent termination of various agreements,  as of
May 20, 21 and 22, 1998,  Australis  ceased to be a provider of programming  and
signal to Austar.

     On May 19,  1998,  Austar  entered  into a 50/50 joint  venture  with Optus
Vision Pty Limited  ("Optus")  for the  ownership  and  operation of a satellite
distribution  platform. As of May 21, 1998, this platform was fully operational.
In  addition,  Austar has signed  agreements  with Foxtel under which it will be
provided with several channels  currently carried by Austar,  including the Core
Package.  These  developments  have caused only minor disruptions and changes in
service to Austar's existing customer base.

     Also as of May 19, 1998, Austar was granted  additional  programming rights
by Optus which would permit the carriage of certain  channels of programming not
previously  available to Austar.  The specific packages of service to be offered
by Austar pursuant to these arrangements has not yet been concluded.

     Under the terms of the Austar Bank  Facility,  the  termination of Austar's
franchise  agreements  with  Australis  is  an  event  of  default  if  (i)  the
termination is initiated by Austar, (ii) the termination is not rectified within
seven days and (iii) the termination would likely have a material adverse effect
on Austar.  Austar  received the advance consent of the lenders under the Austar
Bank Facility to terminate  its franchise  agreement  with  Australis,  and such
banks have not given  notice  that a  termination  would  constitute  a material
adverse effect. Austar believes that, based upon its successful migration to the
signal platform and programming  agreements  described  above,  there will be no
such material adverse effect.

     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  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
UAP 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 and a small cable
television  system  in the  14,000-home  market  of  Mildura,  Austar  does  not
currently  have  any  operational  subscription  television  competitors  in its
operating areas. In the Gold Coast, Austar is currently providing 17 channels of
programming  as its basic  package,  which  includes the Core Package as well as
nine additional channels, at a monthly rate of approximately $23 with a one-time
installation charge of approximately $13. Foxtel offers the Core Package as well
as 17 other satellite or locally originated channels for a monthly fee of $28

                                       24
<PAGE>

and an  installation  charge of $19. At  December  31,  1997,  Austar had 17,000
subscribers in the Gold Coast and estimates that Foxtel has 8,000 subscribers in
this market.

New Zealand:  Saturn
--------------------

     UIH A/P owns 65% of Saturn,  which launched service on the initial portions
of its  hybrid  fiber  coaxial  ("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-1999.  Saturn's  system  will  allow the
integrated  delivery of pay TV, telephony,  Internet access, high speed data and
future interactive services.  Saturn recently executed 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. In April
1998,  Saturn  launched  a  full  complement  of  telephone   services  to  both
residential   and   business   markets.   Saturn's   cable  system  also  passes
approximately  6,000  homes  on the  Kapiti  Coast  north of  Wellington.  As of
December 31, 1997, Saturn's activated networks passed approximately 24,000 homes
and serviced  approximately 3,000 subscribers.  In addition,  Saturn has secured
additional  rights to use existing  poles to attach its network cable in markets
representing 500,000 homes, subject to local planning approval, and is exploring
the possibility of expanding its networks and services to these markets.

     Saturn  competes  with four  broadcast  networks  as well as several  other
free-to-air  regional  channels  and Sky TV  ("Sky"),  the  largest  provider of
subscription  television services with a five-channel encrypted UHF subscription
television  service.  Sky has recently announced a launch of a DBS in the second
half  of  1998.   Telecom  New  Zealand   ("Telecom"),   New  Zealand's  largest
telecommunications  service  provider,  is the primary  competition  to Saturn's
planned local loop telephony service.

Australian Programming:  XYZ Entertainment
------------------------------------------

     Through  its 25%  interest  in XYZ  Entertainment,  UIH A/P  provides  four
channels (Discovery, Nickelodeon/Nick at Nite, Channel [V] and Arena or the "XYZ
Channels") of the eight channels which are distributed as the Core Package,  the
most  widely-distributed  programming  package in  Australia.  During 1997,  XYZ
Entertainment also launched another channel, Lifestyle.

Tahiti:  Telefenua
------------------

     UIH A/P has an up to 90% economic  interest in Telefenua,  which operates a
16 channel MMDS in a franchise  area that,  as of December  31,  1997,  included
approximately  20,000 serviceable homes. The Company and its partners are in the
early  stages  of  negotiations  relating  to 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.

Philippines:  Sun Cable
-----------------------

     UAP holds a note in Sun Cable,  which,  upon certain events, is convertible
into a 40% equity  interest in Sun Cable,  the third  largest  cable  television
operator in the Philippines with wireline cable television systems in 15 markets
that had a total of approximately 600,000 television homes at December 31, 1997.
Sun Cable is also exploring the provision of cable  telephony  services over its
networks,  many  of  which  are  HFC.  At  three  lines  per  100  persons,  the
Philippines'  telephone  penetration  rate is currently one of the lowest in the
world.

     In April 1998, Sun Cable and SkyCable, the largest multi-channel television
service operator in the Philippines, formed a joint venture into which Sun Cable
contributed its properties and SkyCable contributed its multi-channel television
properties outside of Manila, and in which SkyCable will hold a 51% interest and
Sun Cable will hold a 49%  interest.  The joint  venture  is the second  largest
multi-channel television operator in the Philippines and the largest outside the
Manila metro area with approximately  160,000  subscribers and approximately 1.3
million franchise homes.

UAP Development Opportunities
-----------------------------

     UAP is engaged in the origination and development of new  opportunities  to
construct,  acquire or distribute  multi-channel television systems and services
in newly emerging markets throughout the Asia/Pacific  region. These development
projects  include  potential  investments  and/or  acquisition  opportunities in
Taiwan, Japan, Indonesia and Malaysia.

                                       25
<PAGE>

LATIN AMERICAN OPERATIONS

Overview
--------

     Through  UIH  LA,  a  wholly-owned  subsidiary  of the  Company,  UIH  owns
interests  in and  operates  multi-channel  television  distribution  systems in
Chile,  Brazil,  Mexico and Peru.  The Company  believes that many  countries in
Latin  America  are  characterized  by  rapidly  growing  economies,  increasing
political  stability,  declining  inflation  and  low  multi-channel  television
penetration.  In addition, many Latin American countries are placing an emphasis
on privatization of businesses. UIH LA's current strategy is to (i) increase the
subscribers,  revenues  and cash flows of its  existing,  larger core  operating
companies,  (ii) purchase  significant  or majority  ownership  positions in new
multi-channel  television  operating  companies and/or  development  projects in
Latin America and (iii) reduce the indebtedness of UIH LA with proceeds from the
sale of selected assets.

     UIH LA currently owns a 34% interest in VTRH, the largest cable  television
operator in Chile,  serving an estimated  57% of the total homes passed in Chile
as of December 31, 1997.  UIH LA is currently  evaluating for sale its ownership
positions in (i) systems in Mexico,  which it currently plans to divest in order
to reduce  debt and (ii)  Jundiai,  a system  located in  Jundiai,  Brazil.  The
Company  anticipates  that a portion of the  proceeds  of any such sales will be
used to repay certain UIH LA indebtedness.

Chile:  VTRH
------------

     As of December 31,  1997,  VTRH passed a total of  approximately  1,478,900
cable homes and had approximately 369,200 total pay television  subscribers.  In
June 1997, VTRH launched cable telephony  operations in one 18,000-home  area of
Santiago,  and as of December 31,  1997,  VTRH had passed  approximately  16,700
cable telephony homes with approximately 3,500 cable telephony subscribers. VTRH
expects that its packaging of video,  Internet/data and cable telephony services
will position it as a fully integrated provider of telecommunications  services.
VTRH,  which  distributes  television  signals  through the use of wireline  and
wireless  cable,  is  currently  the  only  operator  of  MMDS  in the  Santiago
metropolitan area (where 40% of the Chilean population  resides) and is the only
operator of DTH in Chile. VTRH has upgraded  approximately 80% of its network to
technology  that will eventually  support cable telephony  operations and should
enable the Company to offer other  interactive  services  such as  Internet/data
access and impulse pay-per-view.

     Historically,  VTRH's basic cable  service has  included  all  programming,
including soccer matches, movie channels and special events, in a single package
for a basic  monthly  fee. The fee for the package is not  constant,  but rather
varies depending on the geographic area of the subscriber,  the market size, the
number of channels being provided and the level of  competition.  More recently,
however,  VTRH has introduced tiered services with  premium channels  sold on an
a la carte basis. Like most Latin American operators, VTRH's  programming relies
mainly on international sources such as the United States, Europe, Argentina and
Mexico to compile  their  channel  lineups.  Domestic  cable TV  programming  is
beginning to develop,  however,  particularly around local sporting events, such
as soccer matches.

     VTRH has budgeted  approximately  $48 million for capital  expenditures  in
1998 primarily for the equipment  necessary to upgrade  certain  portions of the
network for cable telephony  services and for additional  cable  infrastructure.
VTRH expects to fund these expenditures from operations and project financing.

     The Chilean  cable  television  market has only two  dominant  providers of
cable  television  (i) VTRH  with  approximately  a 60%  market  share  and (ii)
Metropolis-Intercom  S.A.  ("Metropolis-Intercom"),   a  joint  venture  between
Tele-Communications,  Inc.  ("TCI")  and  the  local  telephony  provider,  with
approximately a 40% market share.  As of December 31, 1997,  Metropolis-Intercom
had  approximately  250,000  subscribers,   1.4  million  homes  passed,  a  18%
penetration and 7 headends,  while as of the same date,  VTRH had  approximately
373,000  subscribers,  1.5  million  homes  passed,  a 25%  penetration  and  36
headends.  Metropolis-Intercom  is prohibited from offering  telephony  services
because it leases most of its network from the local telephony provider.

     UIH LA currently  owns 34% of VTRH.  In  connection  with the  formation of
VTRH, UIH LA and VTR S.A., VTRH's other  shareholder,  agreed to reset ownership
percentages  based upon  independent  valuations of the  respective  assets each
party  contributed as of December 31, 1997. This valuation  process is currently
underway and is not expected to be completed  until June 1998.  If the appraised
value of the  assets  UIH LA  contributed  to VTRH is less than 34% of the total
assets contributed to VTRH by both parties, UIH LA will be obligated to purchase
sufficient shares to restore its ownership percentage to 34%. Conversely, if UIH
LA assets are greater than 34%, UIH LA's ownership will be adjusted accordingly.

                                       26
<PAGE>

Following such  ownership  percentage  adjustments,  if any, UIH LA, at its sole
election,  may increase its ownership to 50% at a purchase  price based upon the
appraised value of VTRH.

Brazil:   Jundiai and TVSB
--------------------------

     UIH LA currently  has ownership  interests in two systems in Brazil:  (i) a
46.3% interest in Jundiai,  which holds nonexclusive  cable television  licenses
for the city of Jundiai and (ii) a 45.0% interest in TVSB, an owner and operator
of a 31 channel  exclusive  license MMDS networks.  As of December 31, 1997, UIH
LA's Brazilian operations passed a total of approximately  442,300 homes and had
estimated  total  subscribers  of  approximately  31,500.  UIH  LA is  currently
evaluating a sale of its 46.3% interest in Jundiai to them in order to focus all
of its cable operations on the new license tender process.  In January 1998, UIH
LA increased its interest in TVSB to 45%, and is currently  negotiating with its
partner in TVSB to purchase the remaining 55% ownership interest.

Mexico:  Megapo
---------------

     UIH LA and its  Mexican  partner  recently  engaged an  investment  bank to
explore  the  possible  sale of the  Mexican  operations.  UIH LA  plans  to use
proceeds  of any such sale to reduce  indebtedness  at UIH LA.  UIH LA has a 49%
interest in subsidiaries of Megapo in Mexico,  one of the largest  multi-channel
television markets in Latin America with over 14.6 million television households
and two million multi-channel  television  households.  As of December 31, 1997,
Megapo owned and operated cable  television  systems with  approximately  54,400
subscribers,  approximately  341,600  homes  under  franchise,  and a  total  of
approximately  173,300  households  passed in Acapulco,  Cuernavaca,  Oaxaca and
Chilpacingo,  Mexico.  Although UIH LA is restricted by Mexican law to a maximum
49% ownership  interest in Megapo,  UIH LA's agreement with Megapo provides that
UIH LA may  appoint  two of the five  directors  for  each of the six  operating
subsidiaries and one of the two management  committee members for each operating
subsidiary.  Generally,  most  significant  actions of an  operating  subsidiary
require the  approval of at least four board  members,  giving UIH LA veto power
over such actions. Additionally, four of the operating subsidiaries have entered
into technical assistance agreements with a subsidiary of the Company to provide
assistance relating to the design and construction of the cable systems network,
marketing of services and the management of subscriber and information systems.

     In Mexico,  cable  operators were  generally  granted  exclusive  operating
licenses for a given  territory  although under Mexico's new  Telecommunications
Law,  exclusive cable franchises were phased out by the end of 1997,  opening up
the  industry  to  overbuilds.   Cable   operators  also  have  faced  increased
competition from MMDS operators and DTH, which was introduced in 1997.

Peru:  Cable Star and Tacna
---------------------------

     UIH LA is currently  involved in the  development  of two cable  systems in
Peru: Cable Star, located in Arequipa,  Peru's second largest city, in which UIH
LA holds a 99.0%  interest,  and Tacna,  which has a license  to  provide  cable
television services to 30,000 franchise homes in the cities of Tacna and Alto De
La Alianza,  in which UIH LA holds a 100% interest.  At December 31, 1997, Cable
Star  passed   approximately   27,100  homes  and  served   approximately  5,200
subscribers  representing a basic  penetration  rate of 19.2%,  and Tacna passed
approximately  6,100  homes  and  had  1,400  subscribers  representing  a basic
penetration rate of 23.0%.

Programming Venture:  UFC
-------------------------

     In 1997, UIH LA and International Family Entertainment  ("IFE") created UFC
which was owned 50% by UIH LA and 50% by IFE.  In July 1997,  UFC  launched  two
channels  of  Spanish  and  Portuguese  language   family-oriented   programming
distributed via satellite  throughout Latin America. In September 1997, Fox Kids
International  acquired IFE, and UIH LA funded 100% of the cash  requirements of
UFC until May 1998. In May 1998, UIH LA acquired the 50% ownership interest from
IFE   and   then   entered   into  a   joint   venture   with  a   division   of
Metro-Goldwyn-Mayer,  Inc. ("MGM") to form MGM Networks Latin America, LLC ("MGM
Networks LA"). Under the terms of the joint venture with MGM, UIH LA contributed
its 100% interest in UFC for a 50% interest in MGM Networks LA, and MGM acquired
a 50% interest in MGM Networks LA by  contributing  its Brazil channel (MGM Gold
Brazil) and committing to fund the first $9.9 million ($6.7 million of which was
funded at closing) required by MGM Networks LA. MGM Networks LA has also entered
into a trademark  license  agreement  with MGM for the use of the MGM brand name
and also into a program license agreement to acquire programming from MGM. As of
May 1998, MGM Networks LA distributed its signal to more than 3 million homes in
14 countries throughout Latin America.

                                       27
<PAGE>

Argentina:  Bahia Blanca, Comodoro, Trelew and Santa Fe
-------------------------------------------------------

     In  October  1997,  the  Company  completed  the  sale of all of its  cable
television assets in Argentina, including the regions of Bahia Blanca, Comodoro,
Trelew  and  Santa Fe (the  "Argentina  Transaction").  The sale  price  for the
Argentina  Transaction was $268.2  million,  $25.3 million of which consisted of
remaining  purchase  money notes  payable to sellers  which were  assumed by the
buyers from the Company's original acquisition of the systems in 1996 and 1997.

COMPETITION

     Multi-channel  television systems compete with broadcast television,  which
consists of  television  signals that the viewer is able to receive  directly on
his set using his own antenna  ("off-air").  The extent of such  competition  is
dependent in part upon the quality and quantity of the signals available by such
off-air  reception  as  compared  to the  services  provided  by  the  available
multi-channel  television  systems.  Accordingly,  it has  generally  been  less
difficult  to obtain  higher  penetration  rates in areas where there is off-air
signal  interference,  where such  signals are weak or where  signals  available
off-air  are  limited,  than in areas  where high  quality  off-air  signals are
available  without  the  aid of  multi-channel  television  systems.  Thus,  the
construction  of more  powerful  transmission  facilities  near a system  or the
increase in the number of television signals in such areas could have an adverse
effect on revenues.

     Multi-channel television systems also compete to varying degrees with other
communications and entertainment media, including motion pictures and home video
cassette  recorders,  and depend upon the  continued  popularity  of  television
itself.

     Some types of multi-channel  television systems described above may compete
in a particular market with the type of multi-channel television system in which
the  Company  has an  ownership  interest.  However,  in  deciding to acquire or
develop a system,  the Company  considers the competitive forms of multi-channel
technology  available and endeavors to select the type or types most appropriate
for that  particular  market.  Where  possible,  the  Company  tries  to  obtain
exclusive rights to provide multi-channel  television services using any form of
technology  or  to  reach  agreements  with  operators  of  competing  types  of
multi-channel   television   systems  to  complement   each  other's   available
programming.

REGULATION

     The  provision of  multi-channel  television  services and telephony in the
countries in which the Company operates is regulated by national, and in certain
areas by local, governmental  authorities.  The scope of regulation varies among
the countries.  Generally, exclusive or non-exclusive franchises or licenses are
awarded to  multi-channel  television  operators.  Franchises and licenses often
require  the  payment  of  fees.  Local  laws  sometimes  limit  the  amount  of
subscription  fees  that may be  charged  and  often  regulate  the  content  of
programming  and use of advertising.  Below is a summary of certain  regulations
and franchise terms effecting the Company's major operating systems.

European Community
------------------

     For  national  jurisdictions  within the  European  Community  ("EC"),  the
timetable and details of the liberalization of cable infrastructures are defined
by EC  directives.  The  European  and  national  legal  frameworks  are rapidly
changing. As members of the EC, The Netherlands,  Belgium and Austria are either
in the process of enacting new rules for telecom and media  infrastructures  and
services or have just completed these  codifications.  Although not an EC member
state,  Norway generally adheres to the same principles and it respects the same
implementation timetable.

     The   liberalization  of   telecommunications   infrastructure   and  cable
television  networks is one of the main policy goals of the European  Commission
in support of an information society. The EC Cable TV Networks Directive ensures
that cable  television  networks  are  allowed to  interconnect  with the public
telecommunications network and each other directly. The conditions and rules for
licensing  and   inter-connection  are  established  by  each  member  state  in
accordance  with  the  principles  set  forth  in the EC  directives.  Licensing
conditions are based only on essential  requirements,  conditions or permanence,
availability and quality of the service provided and financial  obligations with
regard to universal service.  Interconnection is ensured on  non-discriminatory,
proportional, and transparent terms, based on objective criteria.

     The   European   Commission   recently   issued  a   proposal   to  require
telecommunications  organizations to separate  legally their  telecommunications
activities from their cable television network  operations.  In individual cases
of dominance,  the European  Commission could impose further  measures,  such as
divestiture.   In  addition,  the  European  Commission  proposed  to  lift  all
restrictions  on the use of  telecommunications  networks  for the  provision of
cable television capacity before January 1, 2000.

                                       28
<PAGE>

Austria
-------

     The Austrian Telecommunications Law of 1997, as amended, permits the use of
cable networks for telecommunications  services.  Licenses issued by the Telekom
Control  Commission  are required for mobile  telephony  services,  public voice
telephony  services  and  public  offer  of  leased  lines  by  means of a fixed
telecommunication  network that the provider  operates  itself and, under normal
circumstances,  are  issued  within  six  weeks  following  application,  if the
applicant meets the technical  requirements  and the applicant is deemed capable
of  providing  the  service in  accordance  with the  license,  particularly  in
relation to the quality of service and the  service  obligation.  Telekabel  has
applied  for,  and has been  granted,  a  license  for  providing  public  voice
telephony services in Austria.

     Telekabel is aware of the notification  requirements to the Telekom Control
Commission for the provision of Internet  services and to the Regional Radio and
Cable Broadcast Authority for the provision of pay-per-view services.  Telekabel
has  filed  these  notifications.  According  to  the  Austrian  Copyright  Act,
Telekabel  has to conclude  agreements  with the Austrian  Collecting  Societies
stipulating  the conditions for  retransmitting  broadcasts on which  copyrights
exist, which applies to Telekabel's pay-per-view services.  Negotiations between
Telekabel and the Collecting Societies are still in progress. While UPC believes
the negotiations will conclude successfully, there can be no such assurances.

Belgium
-------

     In Belgium, cable television licenses are no longer exclusive and new cable
operators only need an authorization from the appropriate  regulating  Minister.
These  authorizations  are renewed for nine-year terms,  unless renounced by the
distributor  or revoked by the  Minister in case of  noncompliance  by the cable
operator with the cable decree.

     Recent cable decrees  grant the cable  operators a right of way for the use
of public and private  property for the  installation  and exploitation of their
cable systems. As a consequence, the cable operators no longer need to renew the
concession  agreements  with the various  municipalities  as was the case in the
past. It is unclear whether the existing municipal  concessions  agreements that
had not yet  expired  when the new cable  decree was  introduced,  and hence the
obligation for the cable  operators to pay franchise fees to the  municipalities
provided for therein, will be maintained.  Although this is currently subject to
debate,  Radio  Public  believes  that the outcome of this  discussion  will not
affect its ability to operate in the region.

     In line with the  liberalization  process in the EC, the Belgian Parliament
adopted in December  1997 a law  abolishing  the  remaining  monopoly  rights of
Belgacom, the national telecommunications operator.  Belgacom's competitors have
been granted the right to access  Belgacom's  leased  lines and to  interconnect
with Belgacom's network on a  non-discriminatory  and cost-oriented basis. Radio
Public has already obtained a license to offer Internet-related services.

Norway
------

     Governmental   approval   is  required   to   establish  a  cable   network
infrastructure  in  Norway.  Generally,  networks  can only be  established  and
operated   upon   obtaining   a   concession   from  the  State   Authority   of
Telecommunication.  Janco has all of the necessary  licenses and concessions for
the operation of its current business.

     Cable  television  networks may also offer value  services,  digital mobile
communications,  data services,  resale of spare  capacity on leased lines,  and
satellite  communications.  As of  January 1, 1998,  alternative  networks  were
permitted to offer voice telephony services;  however, the regulations regarding
such  services  have not yet been  finalized.  Cable  telephony  is also open to
competition  and  anti-competition  provisions  designed  to balance  the strong
market  position of dominant  providers of such service may apply  although some
government  regulations  implementing  the  anti-competition  aspects of the new
telecommunications regime have not yet been finalized.

The Netherlands
---------------

     Under  the  forthcoming  Telecommunications  Act,  simple  registration  is
sufficient for the  construction,  maintenance  and operation of cable networks.
For the use of frequencies and/or numbers, operators need to apply for licenses,
which will be granted  provided that there is sufficient  frequency  bandwith or
numbers.

                                       29
<PAGE>

     The statutory  monopoly of KPN was abolished in July 1997. KPN is, under EC
and national law, obliged to make available facilities required for, or directly
related to, interconnection and/or special access.

     The 1997 Media Act allows  cable  operators  to provide  their own services
over their  networks and allows for local  inserts of  advertising  under strict
conditions.

Australia
---------

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

     The Broadcasting  Services Act of 1992 ("BSA")  regulates the ownership and
operation  of all  categories  of  television  and radio  services in  Australia
including cable, DTH, MMDS or any other means of transmission. The BSA regulates
subscription  television broadcasting services by requiring each service to have
an individual  license.  Companies  associated with Austar hold approximately 50
satellite and 100 non-satellite  subscription  television broadcasting licenses.
These licenses,  together with Austar's MMDS licenses,  enable Austar to provide
subscription television broadcasting services by MMDS in its franchise areas.

     The  Radiocommunications  Act  regulates  the use of the radio  spectrum in
Australia,  including the issue and use of MMDS  apparatus  licenses.  Apparatus
licenses authorize the licensee (and certain persons authorized by the licensee)
to operate specified  radiocommunications devices. The apparatus licenses issued
to Austar authorize the operation of radiocommunications transmitters at each of
Austar's MMDS  networks and permit the  transmission  of signals over  specified
frequencies to Austar's subscribers.

     The Company's increase in its ownership of Austar and certain amendments to
the articles of association and securityholder agreements of Austar made in 1995
affected the number of Austar directors designated by the Company and the manner
in which those  directors  are elected.  While those matters did not require any
advance notification or approval under Australian law, they could be reviewed in
the future by the  Treasurer of Australia  under  provisions  of the  Australian
Foreign  Acquisitions  and  Takeovers Act of 1975  ("FATA").  If so reviewed and
determined  by the  Treasurer  to have  resulted  in a change of  control  of an
Australian  person to a foreign  person that is against the  national  interest,
there would be no violation of law but the Treasurer could,  among other things,
require control of Austar to be restored to its previous position.  Prior to the
ownership  increase,  the Company was entitled to appoint  directly three of six
directors of Austar.  While the Company  believes  that it is unlikely  that the
Treasurer  would reach such a conclusion if it decided to review  Austar,  there
can be no such assurance.  If the Treasurer were to require control of Austar to
be restored to the  maximum  extent  permitted  by the FATA,  the Company  could
appoint  only  one-half  of the  directors  of  Austar  and it might  no  longer
affirmatively  control Austar.  While the Company believes a determination under
the FATA would not affect the Company's 100% economic interest in Austar,  there
can be no assurance that such would be the case. If the Treasurer were to review
matters, the Company would seek to minimize the effect of any required change on
its relationship  with Austar through a restructuring of its ownership  interest
or  arrangements  providing for the  designation of  independent  persons as the
directors it does not designate.

Chile
-----

     Regulation  of the cable  television  and  telephony  industry  in Chile is
minimal.  Cable and  telephony  registrations  are through the  Subsecretary  of
Telecommunications  and the Ministry of Transportation and Telecommunications is
the  government  body  responsible  for  regulating,  granting  concessions  and
registering  all  telecommunications.  Wireline  cable  television  licenses are
non-exclusive and granted for indefinite  terms,  based on a business plan for a
particular  geographic  area.  There is a 15% value  added  tax  levied on cable
television  services  but no  royalty  or  other  charges  associated  with  the
re-transmitting of programming from off-air  broadcasting  television  networks.
MMDS  licenses  have a term of 25 years and are  renewable  for an additional 25
years.  VTRH has  licenses in every major and medium  sized  market in Chile.  A
total of 157  licenses,  including  14 for  MMDS,  have been  granted  for cable
television.  Chilean  law  allows  for 100%  foreign  ownership  in local  cable
concerns  and  foreign  citizens  can  serve  on a  holding  company's  Board of
Directors.  Cross  ownership  between  cable  television  and  telephony is also
permitted.

                                       30
<PAGE>

EMPLOYEES

     As of February  28,  1998,  the  Company,  together  with its  consolidated
subsidiaries, had approximately 1,900 employees. None of the Company's employees
are subject to collective bargaining  agreements.  The Company believes that its
relations with its employees are good.

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

     The Company holds interests in foreign  operating  entities.  As is typical
during the development, construction and early operation stages of multi-channel
television systems, the operating companies in which the Company holds ownership
interests  generally  have not paid  dividends  or  other  distributions  to the
Company. Since its inception,  the Company's primary source of operating revenue
has been the management fees it receives from operating  companies.  The Company
currently earns management fees from individual operating companies.  See Item 7
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

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

     The Company leases its executive  offices in Denver,  Colorado,  as well as
its regional operating offices.  The Company's  facilities and the facilities of
its subsidiaries,  are in the opinion of management,  suitable and adequate. The
Company's   various   operating   companies   lease  or  own  their   respective
administrative  offices,  headend  facilities,  tower  sites and other  property
necessary for their operations.

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

     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 (in French  Polynesia)  has legally
challenged  the decree and authority of the Conseil  Superieur de  l'Audiovisuel
("CSA") to award  Telefenua  the  authorizations  to operate an MMDS  service 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. There can be no assurance that if the existing authorization is nullified
a new  authorization  will be  obtained.  If  Telefenua  does  not  obtain a new
authorization,   there  is  no  assurance   that   Telefenua  will  receive  any
restitution.  In addition,  any available restitution could be limited and could
take years to obtain.

     In April 1997,  following a trial in the United States  District  Court for
the District of Colorado, the Company and its majority-owned affiliate, UIH Asia
Investment  Company,  as plaintiffs,  obtained a jury verdict  against The Wharf
(Holdings)  Limited  ("Wharf  Holdings"),  its  wholly-owned  subsidiary,  Wharf
Communications  Investments Limited and Wharf Holdings' deputy chairman, Stephen
Ng (the  "Wharf  Group"),  on  claims  of  securities  fraud,  fraud,  breach of
fiduciary  duty,  breach of contract and  negligent  misrepresentation,  and was
awarded  $67.0  million in  compensatory  damages and $58.5 million in exemplary
damages. In May 1997, the Court awarded  prejudgment  interest of $28.2 million,
and entered  judgment on the  verdicts.  In October  1997,  the Court denied the
defendants'  motion for a reduction  in the amount of damages,  for a new trial,
and/or for a  judgment  as a matter of law.  On  November  4,  1997,  defendants
appealed  the  judgment  to the United  States  Court of  Appeals  for the Tenth
Circuit.  On December 31, 1997,  Wharf Holdings  filed a separate  appeal to the
Tenth Circuit related to the contempt  sanctions that the District Court imposed
as a  result  of  Wharf  Holdings'  refusal  to  turn  over  certain  assets  in
satisfaction  of the  judgment.  On January 29, 1998,  Wharf  Holdings  posted a
$173.5 million  supersedeas  bond to secure the judgment entered in favor of the
Company.  Although  the Company  and UIH Asia  Investment  Co.  intend to defend
vigorously  the  appeals,  there can be no assurance  that the judgment  will be
affirmed or that the damages will be collected.

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

     No matters were submitted to a vote of security  holders during the quarter
ended February 28, 1998.

                                       31
<PAGE>
                                     PART II

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

     The  Company's  Class A Common  Stock  trades on the Nasdaq Stock Market sm
under the symbol  "UIHIA." The following  table sets forth the range of high and
low  sale  prices  reported  on the  Nasdaq  Stock  Market  sm for  the  periods
indicated:
                                                            High          Low
                                                          --------      -------
Year ended February 28, 1998:
   First Quarter.......................................    10 1/4       8 1/4
   Second Quarter......................................    11 1/2       9 3/4
   Third Quarter.......................................    13 3/4       10 5/16
   Fourth Quarter......................................    14 9/16      10 3/8

Year Ended February 28, 1997:
   First Quarter.......................................    16 3/4       13 1/2
   Second Quarter......................................    16           10 1/2
   Third Quarter......................................     13 63/64     12
   Fourth Quarter......................................    14 1/8       10 1/8


     As of May 22, 1998, there were approximately 115 holders of record of Class
A Common Stock and 38 holders of record of Class B Common Stock.

     The  Company  has never  paid cash  dividends  on its  common  stock and is
currently  restricted  from paying cash dividends by the terms of the indentures
governing the Company's  senior secured discount notes. See Item 7 "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
Item 8 "Financial Statements and Supplementary Data" Note 8.

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

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


                                       32
<PAGE>
<TABLE>
<CAPTION>
                                                                                      For the Years Ended
                                                              -------------------------------------------------------------------
                                                                   February 28,           February 29,          February 28,
                                                              ----------------------      ------------     ----------------------
                                                                1998          1997            1996           1995          1994
                                                              --------      --------      ------------     --------      --------
Statement of Operations Data:                                           (In thousands, except share and per share data)
   <S>                                                      <C>           <C>            <C>             <C>          <C>
   Service and other revenue..............................   $  98,047     $  30,244       $  2,363        $    701     $     --
   Management fee income from related parties.............         575         1,311            507             912          746
   System operating expense...............................     (65,631)      (26,251)        (4,224)         (1,651)          --
   System selling, general and administrative expense.....     (62,803)      (33,655)        (3,524)         (2,103)          --
   Corporate general and administrative expense...........     (28,553)      (20,365)       (18,959)        (16,196)     (10,126)
   Depreciation and amortization..........................     (91,656)      (38,961)        (2,331)         (1,701)        (182)
                                                             ---------     ---------       --------        --------     --------
   Net operating loss.....................................    (150,021)      (87,677)       (26,168)        (20,038)      (9,562)

   Equity in losses of affiliated companies, net..........     (68,645)      (47,575)       (48,635)         (6,106)      (2,551)
   Gain on sale of investments in affiliated companies          90,020        65,249         16,013              --          356
   Interest (expense) income, net.........................    (116,482)      (66,330)       (27,628)         (2,787)       1,034
   Provision for loss on marketable equity securities
     and investment related costs.........................     (14,793)       (5,859)        (6,055)         (2,865)      (2,754)
   Other..................................................      (3,520)        3,367          1,162           1,182         (407)
   Extraordinary charge for early retirement of debt......     (79,091)           --             --              --           --
                                                             ---------     ---------       --------        --------     --------
   Net loss...............................................   $(342,532)    $(138,825)      $(91,311)       $(30,614)    $(13,884)
                                                             =========     =========       ========        ========     ========
   Net loss per common share:
     Basic and diluted loss before extraordinary charge...   $   (6.75)(1) $   (3.59)(1)   $  (2.69)(1)    $  (1.10)    $  (0.68)(2)
     Extraordinary charge.................................       (2.02)           --             --              --           --
                                                             ---------     ---------       --------        --------     --------
     Basic and diluted net loss...........................   $   (8.77)(1) $   (3.59)(1)   $  (2.69)(1)    $  (1.10)    $  (0.68)(2)
                                                             =========     =========       ========        ========     ========
     Weighted-average number of common shares
       outstanding........................................  39,211,501    39,035,776     34,017,660      27,802,250   20,344,726(2)
                                                            ==========    ==========     ==========      ==========   ==========
</TABLE>
<TABLE>
<CAPTION>
                                                                                            As of
                                                            ---------------------------------------------------------------------
                                                                  February 28,           February 29,           February 28,
                                                            -----------------------      ------------      ----------------------
                                                               1998          1997           1996             1995          1994
                                                            ----------     --------      ------------      --------      --------
Balance Sheet Data:                                                                     (In thousands)
   <S>                                                      <C>            <C>             <C>             <C>           <C>
   Cash, cash equivalents and short-term investments......  $  358,122     $140,743        $161,983        $215,955      $ 68,660
   Investments in and advances to affiliated companies....  $  318,437     $253,108        $272,205        $ 85,280      $ 10,114
   Property, plant and equipment, net.....................  $  440,735     $219,342        $ 31,102        $ 13,741      $  2,989
   Goodwill and other intangible assets, net..............  $  432,005     $132,636        $45,629         $     --      $     --
   Total assets...........................................  $1,679,835     $819,936        $580,206        $370,290      $107,312
   Senior secured notes and other debt....................  $1,866,096     $667,394        $371,374        $202,416      $  4,504
   Total liabilities......................................  $2,024,365     $773,240        $384,482        $212,946      $ 12,145
   Stockholders' (deficit) equity.........................  $(392,280)     $ 15,096        $151,976        $138,870      $ 93,836
</TABLE>

(1)  Net loss per common  share  amounts  include  the accural of  dividends  on
     convertible  preferred  stock which are  recorded  directly  to  additional
     paid-in capital.
(2)  As the  Company's  capital  structure  prior to  fiscal  year  1994 was not
     indicative of the Company's on-going capital structure, unaudited pro forma
     net loss per common share has been  presented  for the year ended  February
     28, 1994 and historical per share data was not presented. The unaudited pro
     forma  information was prepared using a  weighted-average  number of common
     shares outstanding for the year ended February 28, 1994, plus shares issued
     subsequent to February 28, 1993 in connection  with the Apollo  Transaction
     (as defined in Item 13 "Certain  Relationships  and Related  Transactions")
     and the cancellation of amounts due to the Company,  as if they were issued
     on March 1, 1993.

                                       33
<PAGE>

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

     THE FOLLOWING DISCUSSION CONTAINS,  IN ADDITION TO HISTORICAL  INFORMATION,
FORWARD-LOOKING  STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.  THE COMPANY'S
ACTUAL  RESULTS  MAY DIFFER  SIGNIFICANTLY  FROM THE  RESULTS  DISCUSSED  IN THE
FORWARD-LOOKING  STATEMENTS.  FACTORS  THAT COULD  CAUSE OR  CONTRIBUTE  TO SUCH
DIFFERENCES  INCLUDE,  BUT ARE NOT LIMITED TO, THOSE  DISCUSSED BELOW AND IN THE
COMPANY'S REPORT ON FORM 8-K DATED SEPTEMBER 24, 1996.

     The following discussion and analysis of financial condition and results of
operations cover the years ended February 28, 1998 ("Fiscal 1998"), February 28,
1997 ("Fiscal 1997") and February 29, 1996 ("Fiscal 1996") and should be read in
conjunction  with the Company's  consolidated  financial  statements and related
notes thereto included elsewhere herein. Such consolidated  financial statements
provide additional  information regarding the Company's financial activities and
condition.

     The  Company  conducts  no  operations  other than  through  its  operating
companies in which it holds varying interests.  Because the operating  companies
have, since inception,  been engaged primarily in  organizational,  start-up and
construction   activities   and  have  not  achieved  the  expected   subscriber
penetration  levels expected from mature systems,  the Company believes that its
historical  results of  operations  discussed  herein are not  indicative of its
future  results of operations.  On December 11, 1997, the Company  completed the
UPC Transaction, and as a result consolidated UPC's balance sheet as of December
31,  1997  and  three  weeks of its  operations  in the  Company's  consolidated
statement of operations  for Fiscal 1998.  For the year ended  February 28, 1999
("Fiscal  1999") the Company will  consolidate  the results of operations of UPC
for an entire year, which will dramatically affect future consolidated financial
results.

INTRODUCTION

     The Company was formed in 1989 for the purpose of developing, acquiring and
managing foreign multi-channel television,  programming and telephony operations
outside the United States. The Company currently, through UPC, owns interests in
multi-channel  television  operating  systems in 12  countries  in Europe and in
Israel. The Company has historically  accounted for UPC under the equity method.
Beginning  December 11, 1997,  the Company  consolidated  the  operations of UPC
including its consolidated  subsidiaries (the Austria,  Belgium, Czech Republic,
France,  Netherlands  (KTE),  Norway,  Romania  and  Slovak  Republic  operating
systems). The Company,  through UIH LA and UAP, holds interests in multi-channel
television operating systems and related business development projects in Chile,
Brazil, Mexico, Peru, Australia, New Zealand, Tahiti, the Philippines and China.
Prior to the Argentina Transaction,  the Company consolidated the results of the
Bahia Blanca,  Argentina system. The Company also holds interests in a telephony
project in Hungary as well as programming  companies for the  Australia,  Spain,
Portugal, Ireland and Latin America markets.

     The Company's  consolidated  financial  statements do not  consolidate  the
operating results of its minority-owned operating companies.  Historically,  the
only revenue  reflected on the Company's  consolidated  statements of operations
other than revenue of consolidated  subsidiaries is management fees from related
parties and certain operating entities. General and administrative costs include
salaries,  employee  benefits,  rent and other routine overhead  expenses of the
Company as well as legal, accounting and consulting fees.

     The Company  accounts for its share of the income or loss of its  operating
companies  based on the calendar year results of each  operating  company.  This
creates a two-month  delay in reporting  the  operating  company  results in the
Company's  consolidated  results  for its  fiscal  year-end.  Based on  reported
historical  results and the activities of the operating  companies,  the Company
believes this two-month delay has not had and will not have a significant impact
on reported operating results of the Company.

     For  those  investments  in  companies  in which  the  Company's  ownership
interest is 20% to 50%, its investments are held through a combination of voting
common stock,  preferred  stock,  debentures or convertible debt and the Company
exerts  significant   influence  through  board  representation  and  management
authority,  or in which majority  control is deemed to be temporary,  the equity
method of  accounting is used.  Under this method,  the  investment,  originally
recorded at 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 contractual 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.

                                       34
<PAGE>

     The cost  method  of  accounting  is used for other  holdings  in which the
Company's  voting interest is less than 20% and where the Company does not exert
significant influence,  except for its holdings of marketable equity securities.
For holdings of  marketable  equity  securities  in which the  Company's  voting
interest  is less  than 20% and  where the  Company  does not exert  significant
influence, the holdings are carried at fair market value.

LIQUIDITY AND CAPITAL RESOURCES

     Since  its  inception,  the  Company  has  financed  its  operations,   its
development  opportunities  and  its  investments  in  and  development  of  its
operating  systems  primarily  through the sale of equity and debt securities as
well as through the sale of  appreciated  assets.  Since  1989,  the Company has
raised total gross cash proceeds of  approximately  $287.3 million from the sale
of its common equity in a series of private  transactions  and public  offerings
and approximately  $606.3 million from the sale of senior secured discount notes
(the  "Senior  Notes"),  net of  $531.8  million  used to redeem  previous  note
offerings.  The following table  summarizes the total gross cash proceeds raised
by the Company from sales of its common stock and its Senior Notes:
<TABLE>
<CAPTION>

                                                                                                     Gross Proceeds
                                                                                                     (In millions)
                                                                                                     --------------
     <S>                                                                                                <C> 
     Management and original investors...........................................................       $ 28.5
     Private equity offerings (April and July 1993)..............................................         30.0
     Initial public offering (July 1993).........................................................         76.5
     Public equity offering (November 1994)......................................................         86.3
     Public equity offering (November 1995)......................................................         66.0
                                                                                                        ------
         Total equity proceeds...................................................................        287.3
                                                                                                        ------
     November 1994 14% senior secured discount notes.............................................        200.9
     November 1995 14% senior secured discount notes.............................................         75.9
     February 1996 14% senior secured discount notes.............................................         49.1
     February 1998 10.75% senior secured discount notes, net of $531.8 million to redeem the
       existing 14% senior secured discount notes................................................        280.4
                                                                                                        ------
         Total Senior Notes proceeds, net........................................................        606.3
                                                                                                        ------
         Total equity and debt proceeds, net.....................................................       $893.6
                                                                                                        ======
</TABLE>

OBLIGATIONS

     From November 1994 through  February  1996,  the Company raised total gross
proceeds of approximately  $325.9 million from the public and private  offerings
of $599.4 million  aggregate  principal amount at maturity of 14% senior secured
discount  notes.  In February  1998,  the Company raised total gross proceeds of
$812.2  million from a private  offering of senior  secured  discount notes (the
"1998 Notes").  The Company used $531.8 million of the proceeds  (which included
approximately  $65.6  million  for  tender  premiums  and  associated  costs) to
repurchase  the  existing  Senior  Notes.  The  1998  Notes  were  issued  at  a
significant  discount from their aggregate principal amount at maturity and will
accrete at a rate of 10.75% per annum, compounded  semi-annually to an aggregate
principal  amount on February 15, 2003 of $1.375  billion.  Cash  interest  will
commence to accrue on the 1998 Notes on February 15, 2003. Commencing August 15,
2003,  cash interest on the 1998 Notes will be payable on February 15 and August
15 of each year until  maturity  at a rate of 10.75%  per annum.  The 1998 Notes
will mature on February 15, 2008, and will be redeemable at various  premiums to
par at the option of the Company,  on or after February 15, 2003. The 1998 Notes
are secured by a first priority lien on the capital stock and intercompany notes
to the Company of UIPI and UIHE.  The Company  will hold its future  investments
in, and conduct its future operations through, UIPI and UIHE.

     In December  1995,  in  connection  with the  Company's  acquisition  of an
additional 40% economic interest in Austar, the Company issued 170,513 shares of
its Convertible Preferred Stock, Series A ("Series A Preferred Stock"), having a
liquidation  value  at  issuance  of  approximately  $29.8  million  as  partial
consideration  for the 40%  interest  it  acquired  in  Austar  (increasing  its
interest at that time to 90%).  In June 2000,  the Company is required to redeem
the Series A Preferred  Stock not previously  converted at the then  liquidation
value.  Assuming that none of the Series A Preferred Stock is converted prior to
redemption,  the total cost to the Company of  redeeming  the Series A Preferred
Stock would be approximately $35.7 million.

                                       35
<PAGE>

SUBSIDIARY CREDIT FACILITIES

     Since  its  formation  in July  1995,  UPC  has  funded  the  construction,
upgrading and  operations of its operating  companies and  development  projects
through cash from  operations,  proceeds from debt  facilities of certain of its
operating  companies and cash  contributed by UIH upon formation of UPC. As part
of the UPC Transaction,  (i) UPC purchased 3.17 million shares of Class A Common
Stock of the Company held by Philips,  (ii) UIH  purchased  part of the accreted
amount of UPC's 9.96% Series A and 10.03% Series B Convertible Pay-in-Kind Notes
(the "PIK  Notes")  and  redeemed  them for  shares of UPC,  (iii) UPC repaid to
Philips the remaining  accreted  amount of the PIK Notes,  (iv) UPC  repurchased
Philips'  interest in UPC and (v) the Company made a payment to UPC, with UPC in
turn  making  a  payment  to  Philips,  in  lieu  of  the  issuance  of a  stock
appreciation right by UPC. The Company  effectively owns 100% of UPC as a result
of the UPC  Transaction,  except for shares held by a foundation  benefiting UPC
employees and management,  pursuant to UPC's equity  incentive  plans. The final
purchase  price  (excluding   transaction-related  costs)  was  $425.2  million,
comprised of $168.7 million for the purchase by the Company and repayment by UPC
of UPC's PIK Notes,  $33.2  million  allocated  to the  purchase  by UPC of 3.17
million  shares  of the  Company's  Class A  Common  Stock  and  $223.3  million
allocated to the purchase of Philips'  interest in UPC. The UPC  Transaction was
funded by a long-term  revolving credit facility through UPC with a syndicate of
banks (the  "Tranche A  Facility")  ($151.5  million),  a bridge  bank  facility
through a subsidiary  of UPC (the "Tranche B Facility")  ($111.2  million) and a
cash investment by the Company of $162.5 million.  The maximum amount  available
under the Tranche A Facility is approximately  NLG1.1 billion ($544.6 million as
of December 31, 1997), of which  approximately  NLG479.0 million ($237.1 million
as of December 31, 1997) was used to repay  existing debt of UPC in  conjunction
with the UPC Transaction.  UPC plans to use any additional borrowings under such
facility for general corporate purposes, including capital expenditures, working
capital requirements of its subsidiaries and acquisitions.

     In  addition  to  contributions  from  the  Company,  UAP  has  funded  its
operations,  primarily in Australia,  through private debt offerings by UIH A/P.
In 1996 and 1997,  UIH A/P raised total gross proceeds of  approximately  $255.0
million  from the sale of its 14% senior  discount  notes due 2006 (the "UIH A/P
Notes").  The UIH A/P  Notes  currently  accrete  interest  at a rate of  14.75%
compounded  semi-annually.  Upon  the  sale  by  UIH  A/P of  equity  securities
generating  gross  proceeds  of at least $70.0  million,  the UIH A/P Notes will
accrete  interest  at a rate  of  14%.  In  addition,  Austar  has in  place  an
Australian $("A$")200.0 million ($130.1 million converted using the December 31,
1997 exchange rate) senior bank facility (the "Austar Bank Facility"),  proceeds
of which are  being  used to  finance  the  installation  of  equipment  for new
subscribers  and working  capital  needs.  The Austar Bank Facility  consists of
three  sub-facilities:  (i) A$50.0 million  revolving  working capital facility,
(ii) A$60.0  million  cash advance  facility and (iii) A$90.0  million term loan
facility.  This term loan  facility  will be  available  to the extent  that any
drawdown,   if  added  to  the  existing  aggregate  outstanding  balance  under
sub-facilities  (i) and (ii),  would not exceed five times annualized cash flows
(as defined),  and upon Austar having achieved and maintained total  subscribers
of at least 200,000. The working capital facility is fully repayable on June 30,
2000. The cash advance  facility is fully repayable  pursuant to an amortization
schedule  beginning  December 31, 2000 and ending June 30, 2004.  As of December
31, 1997, Austar had drawn the entire amount of the working capital facility and
the cash advance  facility  totaling  A$110.0  million ($71.5 million  converted
using the December 31, 1997 exchange rate).  Although management does not expect
to meet the  requirements  for drawing down the term loan facility  during 1998,
they have  engaged  the lender  under the Austar Bank  Facility in a  discussion
regarding  an  amendment  to the Austar  Bank  Facility.  If  approved,  such an
amendment would allow Austar to draw all or a portion of the A$90.0 million term
loan facility in advance of the time period currently  envisioned.  There can be
no assurance, however, that such an amendment will ultimately be approved.

     UIH LA has funded its operations  through $110.0 million drawn under a bank
credit facility in April 1997. The credit facility was repaid in full in October
1997 with proceeds from the Argentina  Transaction.  Subsequent to the Argentina
Transaction,  UIH LA arranged a $40.0  million  short-term  bank  facility  with
Toronto Dominion  (Texas),  Inc. (the "UIH LA Revolving Credit  Facility"),  due
November 25, 1998.  The  outstanding  balance under this facility as of February
28, 1998 was $33.0 million.

     The indentures and credit agreements  associated with the Senior Notes, the
UIH A/P Notes,  the Tranche A Facility and Tranche B Facility at UPC, the UIH LA
Revolving Credit Facility and the Austar Bank Facility place restrictions on the
Company and its  restricted  subsidiaries  with respect to incurring  additional
debt and paying dividends.

                                       36
<PAGE>

SALE OF APPRECIATED ASSETS

     In January 1996, the Company sold its 25% interest in a company  developing
a cable  television  system in Rio de Janeiro,  Brazil for  approximately  $13.5
million,  recognizing a gain of approximately $11.9 million. In August 1996, the
Company sold its 34% interest in a company  developing a cable television system
in Sao  Paulo,  Brazil  for  $78.1  million  in cash and a note  receivable  and
recognized a gain of $65.2 million. In October 1997, the Company sold all of its
Argentina  multi-channel  television  system  assets  for  approximately  $211.1
million  (subject to finalization of post-closing  adjustments),  resulting in a
gain of approximately $90.0 million.  UIH LA plans to sell certain other assets,
including  its  Mexico  system,  and to apply the  proceeds  of such  sales,  if
sufficient,  to (i) the repayment of the UIH LA Revolving Credit Facility,  (ii)
the  construction  of its  existing  systems and (iii) the pursuit of  new-build
opportunities, primarily in Brazil.

     In July 1997, SaskTel Holdings (New Zealand) Inc.  ("SaskTel")  purchased a
35% equity  interest in Saturn by  investing  New Zealand  $("NZ$")29.9  million
(approximately  $19.6 million) directly into Saturn for its newly-issued shares.
The Company believes that SaskTel, a division of Saskatchewan Telecommunications
Holdings   Corporation  of  Saskatchewan,   Canada,  will  contribute  telephony
expertise to Saturn in providing cable/telephony service in the Wellington,  New
Zealand area.

CASH SOURCES

     The Company had $337.2 million of unrestricted  cash, cash  equivalents and
short-term  investments  on hand as of February 28, 1998.  The Company  advanced
approximately  $94.7  million to  subsidiaries  subsequent to February 28, 1998,
which  was  utilized  primarily  to  repay  existing   subsidiary  level  credit
facilities.   The  Company  believes  that  this  cash  balance,  combined  with
internally  generated  cash  flow  and  amounts  available  under  the  existing
subsidiary  level credit  facilities of its  subsidiaries,  will provide it with
sufficient  capital to meet the growth  plans of its existing  subsidiaries  and
affiliates.  In  addition,  UIH is  considering  the  sale  of a  number  of its
operations.  If the  Company  completes  any such  sales,  it intends to use the
proceeds  from such sales to reduce debt and finance the growth of its  existing
operations.  To the extent the Company  pursues new  acquisition  or development
opportunities,  the  Company  would  need to raise  additional  capital,  either
through  issuances of its debt or equity securities or through operating company
borrowings.

     In conjunction with the issuance of the November 1994 14% Senior Notes, the
Company issued 394,000 warrants to purchase a total of 1,786,699 shares of Class
A Common Stock at a price of $15 per share. Holders of the warrants required the
Company to  purchase a total of 76,070  warrants  during a put option  period in
February  1996.  The  remaining  317,930  outstanding   warrants   (representing
1,441,739  shares of Class A Common  Stock) are  exercisable  at any time before
November 15, 1999, and would result in proceeds to the Company of  approximately
$21.6 million, if exercised.

     On November 17, 1997, pursuant to the terms of the indentures governing the
UIH A/P Notes,  UIH A/P issued warrants to purchase a total of 488,000 shares of
its common stock,  which  represented 3.4% of its common stock. The warrants are
exercisable  at a price of $10.45 per share which would result in gross proceeds
of  approximately  $5.1  million,  if  exercised.  The warrants are  exercisable
through May 15, 2006.

     Because the Company does not currently  generate  positive  operating  cash
flow, its ability to repay its obligations on the 1998 Notes at maturity in 2008
as well as any  other  obligations  that  become  due  before  such time will be
dependent on developing one or more additional sources of cash. The Company does
not expect any operating company to pay dividends in the foreseeable  future and
accordingly does not expect any distributions to be made by any affiliates, many
of whom are  restricted  due to existing loan  agreements.  The Company plans to
develop additional cash flow through the addition of revenue generating services
to many of its systems, as well as by obtaining controlling ownership of systems
whose cash flows it will be able to access,  subject to existing credit facility
restrictions.

                                       37
<PAGE>

FUNDINGS

EUROPE:
                                                                    Through
         Project                                               February 28, 1998
         -------                                               -----------------
                                                                (In thousands)
         UPC..............................................         $264,947(1)
         Monor............................................           27,682
         IPS..............................................           13,920
         Tara.............................................            6,643
                                                                   --------
                                                                   $313,192
                                                                   ========

         (1)   Does not include the value of 3.17 million  shares of UIH Class A
               Common Stock ($50.0  million)  issued to Philips at the formation
               of UPC in July 1995.

     Subsequent  to February 28, 1998,  the Company  loaned $63.0 million to UPC
which UPC used to repay a portion of the  Tranche B Facility.  The Company  does
not expect to contribute additional capital to UPC for its on-going operating or
development  requirements,  as  UPC  will  finance  its  operating  systems  and
development  opportunities  with its  operating  cash  flow,  asset  sales,  and
possible equity and debt  financings,  including  additional  amounts  available
under its Tranche A Facility.

     The Company  anticipates  the aggregate  future  funding  requirements  for
Monor, IPS and Tara will be less than $5.0 million over the next year.

ASIA/PACIFIC:
                                                                    Through
         Project                                               February 28, 1998
         -------                                               -----------------
                                                                 (In thousands)
         Austar...........................................       $338,990(1)(2)
         Saturn...........................................         28,376(1)(3)
         Telefenua........................................         16,738
         XYZ Entertainment................................         14,090
         Sun Cable........................................         12,336
         United Wireless..................................          7,637
         HITV.............................................          6,073
                                                                 --------
                                                                 $424,240
                                                                 ========

         (1)   Does not include  amounts  contributed  to Austar  (approximately
               $11.0  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.
         (2)   Includes  A$110.0  million  ($83.9  million  converted  using the
               exchange rate on each funding date) of amounts borrowed under the
               Austar Bank  Facility  and $28.8  million  paid by the Company to
               increase its economic  interest in Austar to approximately  100%.
               Does not  include  the $29.8  million  of  non-cash  issuance  of
               preferred stock by the Company to increase its economic  interest
               in Austar to 90%.
         (3)   Does not include the $7.8 million of common stock  exchanged  for
               shares of UIH A/P to  increase  UIH A/P's  interest  in Saturn to
               100% effective July 1996 or the $19.6 million invested by another
               shareholder for its 35% interest in Saturn in July 1997.

AUSTAR

     The Company  expects  that Austar will require  additional  fundings in the
future. The amount of capital needed is dependent  primarily upon three factors:
(i) the number of new subscribers  added;  (ii) the level of churn, that is, the
level of existing  subscribers who disconnect from Austar's  service;  and (iii)
the mix of DTH versus MMDS installations. Substantially all fixed costs required
to operate  Austar's  service have already  been  incurred.  The average cost to
install a subscriber  includes variables such as equipment,  marketing and sales
costs, and installation  costs. The average cost of a subscriber who disconnects
is reduced by the recovery of certain  equipment  (principally  converters).  In
addition,  installation  costs  are  further  reduced  if a  new  subscriber  is
installed in a previously  disconnected  home.  For the year ended  December 31,

                                       38
<PAGE>

1997, Austar experienced  average monthly churn of 4.2%,  exceeding its budgeted
figure for monthly churn of 3.2%,  which had a negative  $5.5 million  impact on
operating and capital costs.

     Austar plans to continue to expand and add subscribers; however, the timing
of such  expansion  and the  funds  required  for  such  expansion  are  largely
variable.  Based upon  current  plans and  budgeted  churn,  Austar will require
approximately  $50.0-$75.0 million to continue on its current expansion path for
the period from April 1, 1998 to December 31, 1998 and approximately $50.0-$75.0
million  for  similar  expansion  plans for 1999.  The sources of funds for such
expansion  may  include  the  raising  of private  or public  equity,  continued
investment by UIH, the drawdown of the remaining amount ($58.5 million converted
using the  December  31, 1997  exchange  rate)  under the Austar  Bank  Facility
(assuming that certain  financial ratios are met, which ratios are not currently
being met) or the sale of  non-strategic  assets.  The Company may or may not be
successful in completing all or any of such  financings.  The Company  believes,
however,  that its  committed  financial  support  combined  with, if necessary,
reductions in Austar's  planned capital  expenditures  are sufficient to sustain
Austar's operations through at least early 1999.

SATURN

     The Company  expects  that Saturn will require  additional  fundings in the
future. Saturn's capital needs include capital for the completion of the network
required by Saturn to offer cable  television  and  telephony  services  and the
capital required to install customers.  Management  currently estimates that the
Company's  portion of the total  funding  required  for Saturn is  approximately
$50.0-$55.0  million  for the  period  from  April  1,  1998  until  Saturn  has
sufficient cash flows from operations to cover such needs, although there can be
no  assurances  that further  additional  capital will not be required.  Of this
amount,  approximately $35.0 million is required as a fixed cost to complete the
construction  of the network,  and the  remainder is required as a result of the
installation  of customers.  The sources of funds for such expansion may include
the  raising of private  or public  equity,  continued  investment  by UIH,  the
raising of  equipment  and/or  bank  financing  (where the  Company  has already
commenced   discussions  with  several   potential   lenders)  or  the  sale  of
non-strategic assets. The Company may or may not be successful in completing all
or any of such financings.  The Company  believes,  however,  that its committed
financial  support  combined with, if necessary,  reductions in Saturn's planned
capital  expenditures,  are sufficient to sustain Saturn's operations through at
least early 1999.

OTHER

     The Company  anticipates  that aggregate  future funding  requirements  for
Telefenua,  XYZ Entertainment,  United Wireless, Sun Cable and HITV will be less
than $5.0 million over the next year.

LATIN AMERICA:
                                                                    Through
         Project                                               February 28, 1998
         -------                                               -----------------
                                                                (In thousands)
         VTRH.............................................         $ 92,754
         Megapo...........................................           31,248
         UFC..............................................           12,099
         Cable Star.......................................            9,766
         TVSB.............................................            8,100
         Jundiai..........................................            6,652
         Tacna............................................              817
                                                                   --------
                                                                   $161,436
                                                                   ========

     Subsequent to February 28, 1998, the Company loaned $31.7 million to UIH LA
to reduce the UIH LA Revolving  Credit Facility by $25.0 million and for general
corporate  use. The Company  currently  has an option to increase its  ownership
interest in VTRH up to 50% based upon a revaluation of the properties originally
contributed  to the joint  venture.  Thus,  the  Company  could fund  additional
amounts to increase  its  ownership  percentage  (subject to maximum and minimum
values) of the joint venture.  Other than this option,  the Company  expects the
aggregate  future  funding  requirements  for VTRH  will be  approximately  $8.0
million over the next year. On April 15, 1998, the Company  exercised its option
to purchase an additional 55% interest in TVSB for approximately  $12.0 million.
The purchase  price will be payable 50% upon approval by the Brazilian  National
Telecommunications  Agency  ("ANATEL"),  which is  expected  prior to August 15,

                                       39
<PAGE>

1998,  and 50% within one year of the date  ANATEL  approval  is  received.  The
Company expects the aggregate future funding  requirements for Megapo,  Jundiai,
Cable Star,  Tacna and UFC will be less than $20.0  million  over the next year.
UIH LA plans to fund the majority of its remaining project  requirements as well
as potentially  obtaining new Brazilian cable licenses through proceeds from the
sale of certain non-core assets,  the available  balance on the UIH LA Revolving
Credit  Facility  and/or  proceeds  from  further  investments  by UIH or  other
financial or strategic partners.

STATEMENTS OF CASH FLOWS

FISCAL 1998

     The Company  incurred a net loss during the year ended February 28, 1998 of
$342.5 million, which included non-cash operating items such as depreciation and
amortization  expense  totaling $91.7 million,  accretion of interest on the UIH
and UIH A/P senior notes and  amortization  of financing  costs totaling  $110.6
million and equity in losses of affiliated companies of $70.3 million.

     Cash and cash equivalents increased $234.7 million from $68.7 million as of
February 28, 1997 to $303.4 million as of February 28, 1998.  Principal  sources
of cash during the year ended  February  28,  1998  included  gross  proceeds of
$812.2 million from the sale of the 1998 Notes, $211.1 million net cash proceeds
from the sale of the  Company's  Argentine  cable  systems,  $110.0  million  of
borrowings under the UIH LA Credit Agreement, $85.2 million of borrowings on the
Austar Bank Facility,  $38.0 million from the UIH LA Revolving  Credit Facility,
net proceeds from the net change in  short-term  investments  of $36.6  million,
$29.9  million  gross  proceeds from the issuance of the UIH A/P senior notes in
September 1997,  $22.0 million from cash  contributions  from minority  interest
partners and $20.1 million of repayments on notes receivable and other sources.

     During the year ended  February 28,  1998,  cash was used  principally  for
redemption of the existing  Senior Notes of $531.8  million,  investments in the
Company's affiliated companies totaling $177.6 million,  repayment of debt under
the UIH LA Credit Agreement of $110.0 million,  purchases of property, plant and
equipment  totaling  $115.0  million  to  continue  the  build-out  of  existing
projects, primarily Austar, payments on the Company's seller notes for Comodoro,
Trelew,  Santa Fe and Bahia  Blanca,  Argentina  totaling  $46.4  million,  debt
financing costs of $30.9 million,  payment of construction payables that existed
as of February  28, 1997  totaling  $29.6  million,  $8.4  million  deposited in
restricted  cash,  $20.0 million for repayment of other debt and other investing
and  financing  uses,  and the funding of operating  activities of $60.7 million
during the period.

FISCAL 1997

     The Company  incurred a net loss during the year ended February 28, 1997 of
$138.8 million, which included non-cash operating items such as depreciation and
amortization  expense  totaling $39.0 million,  accretion of interest on the UIH
and UIH A/P senior notes and  amortization  of financing  costs  totaling  $73.7
million and equity in losses of affiliated companies of $47.6 million.

     Cash and cash equivalents decreased $43.4 million from $112.2 million as of
February 29, 1996 to $68.8 million as of February 28, 1997. Principal sources of
cash during this period included $225.1 million gross proceeds from the issuance
of the UIH A/P senior notes in May 1996,  $78.1 million from the sale of Net Sao
Paulo,  which was  satisfied  with $43.1  million  in cash at closing  and $35.0
million in  payments  on a note  receivable,  $38.3  million of an  increase  in
construction  payables and $27.3 million of repayments on other notes receivable
and other sources.

     During the year ended February 28, 1997, cash was used  principally for the
purchase of property,  plant and equipment  totaling $204.4 million to construct
Austar's  and  Telefenua's  systems,  investments  in the  Company's  affiliated
companies totaling $100.3 million, the purchase of net short-term investments of
$34.7 million,  $11.9 million of repayments on sellers  notes,  $25.4 million of
financing costs and other uses, and the funding of operating activities of $35.5
million during the period.

                                       40
<PAGE>

FISCAL 1996

     The Company  incurred a net loss during the year ended February 29, 1996 of
$91.3 million,  which included non-cash operating items such as depreciation and
amortization expense totaling $2.3 million, accretion of interest on the UIH and
UIH A/P senior notes and  amortization of financing costs totaling $35.2 million
and equity in losses of affiliated companies of $48.9 million.

     Cash and cash equivalents  increased $81.5 million from $30.7 million as of
February 28, 1995 to $112.2 million as of February 29, 1996.  Principal  sources
of cash during this period  included  $125.0  million  gross  proceeds  from the
issuance of the November  1995 14% Senior Notes and the February 1996 14% Senior
Notes,  $62.0  million,  net, from the public equity  offering in November 1995,
$135.5  million in proceeds  from the net change in short-term  investments  and
restricted  cash released,  $12.8 million in proceeds from the sale of a portion
of XYZ  Entertainment  and other  affiliates  and $10.8 million of borrowings on
other debt and other sources.

 During  the year  ended  February  29,  1996,  cash was  used  principally  for
investments in affiliated  companies  totaling $204.7  million,  the purchase of
property,  plant and equipment  totaling $10.2 million to construct Austar's and
Telefenua's  systems,  $29.6 million of financing  costs and other uses, and the
funding of operating activities of $20.1 million during the period.

RESULTS OF OPERATIONS

FISCAL 1998, FISCAL 1997 AND FISCAL 1996

SERVICE AND OTHER  REVENUE.  The Company's  service and other revenue  increased
$67.8  million  during Fiscal 1998 and $27.9  million  during  Fiscal 1997,  the
detail of which is as follows:
<TABLE>
<CAPTION>

                                                                       Fiscal 1998        Fiscal 1997        Fiscal 1996
                                                                       -----------        -----------        -----------
                                                                                        (In thousands)
<S>                                                                      <C>                <C>                <C>
Europe............................................................       $ 9,996            $    --            $  480
Asia/Pacific......................................................        68,961             24,977             1,883
Latin America.....................................................        19,090              5,267                --
                                                                         -------            -------            ------
       Total service and other revenue............................       $98,047            $30,244            $2,363
                                                                         =======            =======            ======
</TABLE>

EUROPE:

UPC

     The Company began  consolidating the results of UPC effective  December 11,
1997.  Accordingly,  the Company has  recorded  $9.9 million of revenue from UPC
during  Fiscal 1998.  During the year ended  December  31, 1997,  as compared to
December 31, 1996, UPC's revenue  increased $28.2 million to $173.3 million from
$145.1  million,  a 19.4% increase.  A substantial  portion of this increase was
directly  attributable  to the  increase in  ownership of Norkabel on October 1,
1996 and the acquisition of Janco Kabel TV in Norway effective  January 1, 1997.
The remaining  increase in revenue was comprised of increased revenue in Austria
and the Czech Republic from  subscriber  growth and in the  Netherlands  from an
increase in the average  revenue per  subscriber.  In addition,  revenue for the
year ended December 31, 1997 includes revenue from several of UPC's  development
systems  including  France,  the  Slovak  Republic  and  Romania  which were not
included in the December 31, 1996 operating results. The increase in revenue was
negatively  impacted by $26.2  million  due to  fluctuations  in exchange  rates
between 1996 and 1997.

                                       41
<PAGE>

ASIA/PACIFIC:

AUSTAR

     Service and other revenue at Austar  increased  $42.6  million,  or 200.9%,
from $21.2 million for the year ended December 31, 1996 to $63.8 million for the
year ended  December 31, 1997.  This  increase was  primarily  due to subscriber
growth from an average of  approximately  54,000  subscribers  during 1996 to an
average of approximately 150,000 subscribers during 1997, as Austar continues to
roll-out its services.  The increase in revenue was negatively  impacted by $4.6
million due to fluctuations in exchange rates between 1996 and 1997.

     The  Company  began   consolidating  the  results  of  Austar's  operations
effective  January 1, 1996.  Accordingly,  the  Company  reported no service and
other revenue from Austar in 1995. Service and other revenue at Austar increased
$20.8  million from $0.4  million for the year ended  December 31, 1995 to $21.2
million for the year ended December 31, 1996. This increase was primarily due to
subscriber  growth  (103,447 at December 31, 1996  compared to 5,204 at December
31, 1995) as Austar began the rapid roll-out of its services  initially launched
in August 1995.

LATIN AMERICA:

     The Company  consolidated the results of Bahia Blanca effective November 1,
1996 through the eight months  ended August 31, 1997.  Accordingly,  the Company
reported no revenue for Bahia  Blanca for the first nine months of Fiscal  1997.
Bahia Blanca's revenue,  consisting primarily of service fees, was $17.6 million
through the eight months ended August 31, 1997. The remainder of Latin America's
revenue for the year ended December 31, 1997 was attributable to Tacna and Cable
Star.

MANAGEMENT FEE INCOME FROM RELATED PARTIES. Management fee income decreased $0.7
million during Fiscal 1998 and increased $0.8 million during Fiscal 1997.

SYSTEM OPERATING  EXPENSE.  System operating expense increased $39.4 million and
$22.0 million  during Fiscal 1998 and Fiscal 1997,  respectively,  the detail of
which is as follows:
<TABLE>
<CAPTION>
                                                                        Fiscal 1998       Fiscal 1997        Fiscal 1996
                                                                        -----------       -----------        -----------
                                                                                        (In thousands)
<S>                                                                       <C>              <C>                 <C>
Europe ...........................................................        $ 6,135          $ 1,074             $1,078
Asia/Pacific......................................................         50,296           22,358              3,146
Latin America.....................................................          9,200            2,819                 --
                                                                          -------          -------             ------
       Total system operating expense.............................        $65,631          $26,251             $4,224
                                                                          =======          =======             ======
</TABLE>

EUROPE:

UPC

     The Company began  consolidating the results of UPC effective  December 11,
1997.  Accordingly,  the Company has recorded  $2.8 million of system  operating
expense from UPC during Fiscal 1998. During the year ended December 31, 1997, as
compared to December 31, 1996, UPC's operating expense increased $9.9 million to
$57.5 million from $47.6 million,  a 20.8%  increase.  A substantial  portion of
this increase was directly attributable to the increase in ownership in Norkabel
on October 1, 1996 and the  acquisition  of Janco Kabel TV effective  January 1,
1997, as well as operating  expenses  related to development  systems in France,
the Slovak Republic and Romania which were not included in the December 31, 1996
operating  results.  In addition,  operating  expenses  during the twelve months
ended  December  31, 1997 as compared to December 31,  1996,  included  expenses
related to the  introduction  of new  services  including  tier  programming  in
Austria,  Belgium and the  Netherlands and data services in Austria and Belgium.
The increase in operating expense was positively impacted by $8.7 million due to
fluctuations in exchange rates between 1996 and 1997.

                                       42
<PAGE>

ASIA/PACIFIC:

AUSTAR

     The Company reported an increase in system operating expense from Austar of
$24.8  million,  or 137.8%,  from $18.0 million for the year ended  December 31,
1996 to $42.8  million for the year ended  December 31, 1997.  This increase was
primarily due to an increase in satellite  programming fees and copyright costs,
which   corresponds  to  the  increase  in  subscribers  and  additional   basic
programming  services;  an  increase  in salaries  and  benefits  related to the
additional  personnel  necessary to support  Austar's  launch of local and state
offices in its  markets;  and an  increase  in  customer  subscriber  management
expenses  related to the volume  increases in telephone,  billing and collection
costs.  The  remainder  of the increase  related to increases in system  travel,
maintenance,  vehicle costs and management  fees.  Austar has  experienced  high
operating  expense  relative to service  revenue due to certain fixed  operating
expenses. Austar expects operating expense as a percentage of service revenue to
decline in future periods because a significant portion of Austar's distribution
facilities and network costs,  such as local and state office  staffing  levels,
operating costs and wireless  license costs,  have already been incurred and are
fixed in relation  to changes in  subscriber  volumes.  Other  system  operating
expense, such as those related to programming and subscriber management expense,
will vary in direct  proportion  to the number of  subscribers.  The increase in
operating expense was positively impacted by $3.1 million due to fluctuations in
exchange rates between 1996 and 1997.

     The  Company  began   consolidating  the  results  of  Austar's  operations
effective January 1, 1996. Accordingly, the Company reported no system operating
expense from Austar in 1995.  System operating expense at Austar increased $15.0
million,  or 500%,  from $3.0  million for the year ended  December  31, 1995 to
$18.0 million for the year ended December 31, 1996.  This increase was primarily
attributable to the rapid roll-out of Austar's  services  initially  launched in
August 1995 and the corresponding increase in subscribers.

LATIN AMERICA:

     The Company  consolidated the results of Bahia Blanca effective November 1,
1996 through the eight months  ended August 31, 1997.  Accordingly,  the Company
reported no system operating  expense for Bahia Blanca for the first nine months
of Fiscal 1997.  Bahia Blanca's  system  operating  expense for the eight months
ended August 31, 1997 was $8.1  million,  consisting  primarily  of  programming
expenses and salaries.

SYSTEM SELLING,  GENERAL AND ADMINISTRATIVE EXPENSE. System selling, general and
administrative  expense  increased  $25.9  million  during Fiscal 1998 and $33.4
million during Fiscal 1997, the detail of which is as follows:
<TABLE>
<CAPTION>
                                                                        Fiscal 1998       Fiscal 1997         Fiscal 1996
                                                                        -----------      -----------         -----------
                                                                                        (In thousands)
<S>                                                                      <C>               <C>                  <C>
Europe...........................................................        $ 5,748           $   720              $1,042
Asia/Pacific.....................................................         50,006            31,140               2,482
Latin America....................................................          7,049             1,795                  --
                                                                         -------           -------              ------
      Total system selling, general and administrative expense...        $62,803           $33,655              $3,524
                                                                         =======           =======              ======
</TABLE>

 EUROPE:

 UPC

     The Company began  consolidating the results of UPC effective  December 11,
1997.  Accordingly,  the Company has recorded  $3.4  million of system  selling,
general and administrative  expense from UPC during Fiscal 1998. During the year
ended  December 31, 1997,  as compared to December 31, 1996,  UPC's  general and
administrative  expense  increased  $12.0  million to $58.6  million  from $46.6
million, a 25.7% increase.  A substantial  portion of this increase was directly
attributable to the increase in ownership in Norkabel on October 1, 1996 and the
acquisition  of Janco Kabel TV  effective  January 1, 1997,  as well as expenses
related to development  systems in France, the Slovak Republic and Romania which
were not included in the December 31, 1996 operating  results.  System  selling,
general and  administrative  expense during the twelve months ended December 31,
1997  also  included  expenses  related  to the  introduction  of  new  services
including tier  programming  in Austria,  Belgium and the  Netherlands  and data
services  in Austria  and  Belgium,  as well as  compensation  expense of $2,477

                                       43
<PAGE>

related to UPC's  employee  equity  incentive  plan. The increase in expense was
positively  impacted by $8.8  million  due to  fluctuations  in  exchange  rates
between 1996 and 1997.

ASIA/PACIFIC:

AUSTAR

     System selling,  general and  administrative  expense from Austar increased
$15.9 million, or 59.1%, from $26.9 million for the year ended December 31, 1996
to $42.8  million  for the year ended  December  31,  1997.  This  increase  was
primarily due to an increase in salaries  associated with the National  Customer
Operations  Center ("NCOC") and Austar's  corporate  headquarters as a result of
additional  personnel  necessary  to support  the  increase in  subscribers,  an
increase  in   marketing   costs   related  to  print,   radio  and   television
advertisements  associated  with  subscriber  acquisition  and  retention and an
increase in direct sales  commissions  due to  subscriber  growth.  In addition,
Austar   experienced   certain  one-time  charges  for  the   restructuring  and
consolidation  of various  regional  offices.  Austar  expects  system  selling,
general and administrative expense as a percentage of service revenue to decline
in future  periods  because a  significant  portion of  Austar's  infrastructure
costs,  such as the NCOC,  its  corporate  management  staff  and  media-related
marketing costs, have already been incurred and are fixed in relation to changes
in subscriber volumes. Other system selling,  general and administrative expense
relating to commissions and acquisition costs is expected to vary in relation to
the number of customer sales and installations.  The increase in system selling,
general and administrative  expense was positively  impacted by $3.1 million due
to fluctuation in exchange rates between 1996 and 1997.

     The  Company  began   consolidating  the  results  of  Austar's  operations
effective January 1, 1996. Accordingly,  the Company reported no system selling,
general and administrative expense from Austar in 1995. System selling,  general
and administrative  expense at Austar increased $22.4 million,  or 497.8%,  from
$4.5 million for the year ended  December 31, 1995 to $26.9 million for the year
ended December 31, 1996.  This increase was primarily  attributable to the rapid
roll-out  of  Austar's  services  initially  launched  in  August  1995  and the
corresponding increase in subscribers.

LATIN AMERICA:

     The Company  consolidated the results of Bahia Blanca effective November 1,
1996 through the eight months  ended August 31, 1997.  Accordingly,  the Company
reported no system general and  administrative  expense for Bahia Blanca for the
first  nine  months  of  Fiscal  1997.   Bahia   Blanca's   system  general  and
administrative  expense  for the eight  months  ended  August 31,  1997 was $5.6
million,  consisting primarily of marketing-related  costs and salaries with the
remainder consisting of billing, office and utility costs.

CORPORATE   GENERAL   AND   ADMINISTRATIVE   EXPENSE.   Corporate   general  and
administrative  expense increased $8.2 million from $20.4 million in Fiscal 1997
to $28.6 million in Fiscal 1998,  and increased  $1.4 million from $19.0 million
in Fiscal 1996 to $20.4 million in Fiscal 1997.  The increase in Fiscal 1998 was
primarily  attributable to professional services incurred in connection with the
lawsuit against the Wharf Group and professional consulting services incurred in
connection with assisting  company  management in evaluating  various  strategic
issues including capital formation and strategic asset deployment alternatives.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  expense increased
$52.7  million  during Fiscal 1998 and $36.6  million  during  Fiscal 1997,  the
detail of which is as follows:
<TABLE>
<CAPTION>
                                                                        Fiscal 1998       Fiscal 1997       Fiscal 1996
                                                                        -----------       -----------       -----------
                                                                                        (In thousands)
<S>                                                                       <C>              <C>                <C>
Europe...........................................................         $ 6,343          $    80            $  407
Asia/Pacific.....................................................          80,802           36,269             1,003
Latin America....................................................           3,503            1,789                 4
Corporate........................................................           1,008              823               917
                                                                          -------          -------            ------
    Total depreciation and amortization expense..................         $91,656          $38,961            $2,331
                                                                          =======          =======            ======
</TABLE>

                                       44
<PAGE>

EUROPE:

     The Company began  consolidating the results of UPC effective  December 11,
1997.  Accordingly,  the Company has recorded $6.1 million of  depreciation  and
amortization expense from UPC during Fiscal 1998. During the year ended December
31, 1997, as compared to December 31, 1996, UPC's  depreciation and amortization
expense  increased  $22.0  million  to $76.8  million  from $54.8  million,  the
majority of which was  directly  attributable  to the  increase in  ownership in
Norkabel  effective  October  1,  1996 and the  acquisition  of  Janco  Kabel TV
effective  January 1, 1997,  with the remainder  attributable to new development
systems.  This increase in expense was positively  impacted by $11.6 million due
to fluctuations in exchange rates between 1996 and 1997.

ASIA/PACIFIC:

AUSTAR

     Depreciation and amortization  expense from Austar increased $43.5 million,
or 130.2%  from $33.4  million  for the year ended  December  31,  1996 to $76.9
million for the year ended December 31, 1997. This increase was primarily due to
the larger  fixed  asset base due to the  significant  deployment  of  operating
assets to meet  subscriber  growth as well as an increase in expense  related to
subscriber  disconnects.  The increase in depreciation and amortization  expense
was  positively  impacted by $5.3 million due to  fluctuation  in exchange rates
between 1996 and 1997.

     The  Company  began   consolidating  the  results  of  Austar's  operations
effective January 1, 1996. Accordingly, the Company reported no depreciation and
amortization expense from Austar in 1995.  Depreciation and amortization expense
from  Austar  increased  $32.1  million  from $1.3  million  for the year  ended
December 31, 1995 to $33.4  million for the year ended  December 31, 1996.  This
increase was primarily  attributable to the  significant  deployment of Austar's
operating assets  beginning in early 1996 and continuing  throughout the year as
Austar launched service and gained subscribers in a number of new markets.

LATIN AMERICA:

     The Company  consolidated the results of Bahia Blanca effective November 1,
1996 through the eight months ended August 31, 1997. Bahia Blanca's depreciation
expense  consolidated by the Company was $0.8 million in Fiscal 1997 compared to
$3.3 million in Fiscal 1998.

     GAIN ON SALE OF INVESTMENTS IN AFFILIATED  COMPANIES.  In October 1997, the
Company sold all of its  Argentine  multi-channel  television  system assets for
approximately  $211.1 million cash,  resulting in a gain of approximately  $90.0
million (subject to finalization of post-closing  adjustments).  In August 1996,
the Company sold its 34% interest in Net Sao Paulo for $78.1 million,  resulting
in a gain of $65.2 million.  In September 1995, the Company sold one-half of its
interest in XYZ  Entertainment,  thereby diluting the Company's interest to 25%,
and  recognized a gain of  approximately  $4.1  million.  In January  1996,  the
Company sold its 25% interest in TV-Cabo Rio  Telecomunicacoes,  S.A.  ("TV-Cabo
Rio") resulting in a gain of approximately $11.9 million.

     INTEREST INCOME.  Interest income decreased $5.5 million and increased $4.9
million  during  the years  ended  February  28,  1998 and  1997,  respectively,
compared  to the amounts for the  corresponding  periods in the prior year.  The
decrease  in  Fiscal  1998 was due to  reduced  cash and  short-term  investment
balances  related to the  funding of the  Company's  investments  in  affiliated
operating  systems,  and the increase in Fiscal 1997 was due to a higher average
cash balance as a result of asset sales and debt financings. The 1998 Notes were
issued in February 1998, hence the consolidated statement of operations includes
only one month of associated  interest  income on excess cash balances in Fiscal
1998.

INTEREST EXPENSE. Interest expense increased $44.6 million, or 56.0%, from $79.7
million during Fiscal 1997 to $124.3  million during Fiscal 1998.  This increase
was primarily due to the continued accretion of interest on the Company's $599.4
million  aggregate  principal  amount Senior  Notes,  new accretion on the $46.3
million aggregate principal amount UIH A/P September 1997 Notes and accretion of
interest for an entire year on the $455.6 million aggregate principal amount UIH
A/P May 1996 Notes.  Fiscal 1998 interest expense also included  amortization of
deferred  financing  costs of $10.7 million  compared to $3.3 million for Fiscal
1997.

                                       45
<PAGE>

     Interest  expense  increased $43.7 million,  or 121.4%,  from $36.0 million
during  Fiscal 1996 to $79.7  million  during  Fiscal  1997.  This  increase was
primarily  due to the  accretion  of interest on the  Company's  $599.4  million
aggregate  principal  amount  Senior Notes for an entire year,  and accretion of
interest  on the May 1996  $455.6  million  aggregate  principal  amount UIH A/P
Notes.  Fiscal 1997  interest  expense also  included  amortization  of deferred
financing costs of $3.3 million compared to $1.0 million for Fiscal 1996.

PROVISION FOR LOSS ON MARKETABLE EQUITY SECURITIES AND INVESTMENT RELATED COSTS.
The provision for loss on marketable  equity  securities and investment  related
costs  totaled  $14.8  million,  $5.9  million and $6.1  million in Fiscal 1998,
Fiscal  1997 and Fiscal  1996,  respectively.  In  December  1997,  based on the
financial  difficulties  and  potential  insolvency  of  Australis,  the Company
determined  that the loss relating to its investment in Australis was other than
temporary.  As a result,  the Company recorded a provision for this loss of $4.8
million in Fiscal 1998. Cumulative unrealized losses on the Company's investment
in International  Broadcasting  Corporation,  Ltd.  ("IBC"),  a  publicly-traded
Thailand  corporation,  totaled $2.7  million as of February  28,  1997.  During
Fiscal 1998, the Company determined these losses to be other than temporary, and
recorded  a  provision  of $3.6  million,  reducing  the  carrying  value of the
Company's  investment  in IBC to $0.8  million.  As of February 28,  1998,  this
investment  has been adjusted to fair market  value,  resulting in an unrealized
gain of $0.4  million.  The  remainder  of the balance in Fiscal  1998,  and the
Fiscal 1997 and Fiscal 1996 provisions,  consists of the Company's  write-off of
various non-strategic investments.

EXTRAORDINARY  CHARGE  FOR EARLY  RETIREMENT  OF DEBT.  In  connection  with the
issuance of the 1998 Notes,  the Company paid $531.8  million to repurchase  the
existing  Senior  Notes  which had an  accreted  value of $466.2  million  as of
February 5, 1998. This tender premium of $65.6 million,  combined with the write
off of unamortized  deferred financing costs and other transaction related costs
totaling $13.5 million,  resulted in an extraordinary  charge during Fiscal 1998
of $79.1 million.

                                       46
<PAGE>
EQUITY IN LOSSES OF AFFILIATED COMPANIES, NET. The Company recognized net equity
in losses of  affiliated  companies of $68.6  million,  $47.6  million and $48.6
million for Fiscal 1998, Fiscal 1997 and Fiscal 1996, respectively, as follows:
<TABLE>
<CAPTION>
                                   Fiscal 1998                     Fiscal 1997                           Fiscal 1996
                        ----------------------------------  -------------------------------    --------------------------------
                         Company           Equity in         Company         Equity in          Company          Equity in
                        Ownership      Income (Losses) of   Ownership   Income (Losses) of     Ownership    Income (Losses) of
                         Interest     Affiliated Companies   Interest  Affiliated Companies     Interest   Affiliated Companies
                        ---------     --------------------  --------   --------------------     ---------  --------------------
                                         (In thousands)                    (In thousands)                     (In thousands)
<S>                       <C>              <C>               <C>             <C>                 <C>          <C>
EUROPE
UPC(1)................     100%            $(42,236)          50.0%          $(24,665)            50.0%       $(15,559)(2)
Other UPC affiliates..    various              (195)            --                 --               --              --
UCI(3):
 Norkabel.............      --                   --             --                 --              8.3%            651 (4)
 Swedish Cable........      --                   --             --                 --              2.2%            (61)(4)
 Kabelkom.............      --                   --             --                 --              3.9%             64 (4)
 UCI..................      --                   --             --                 --              8.3%             (6)(4)
                                                                                                              -------- 
 Suspended loss(5)....                                                                                            (648)
                                                                                                              --------
  Loss recognized.....                                                                                              --
                                                                                                              --------
UII:
 Melita(6)............      --                   --             --                 --             42.5%           (598)(4)
 Tevel................      --                   --             --                 --             23.3%          1,054 (4)
 Princes Holdings(6)..      --                   --             --                 --             20.0%           (925)(4)
 UII..................      --                   --             --                 --             50.0%            274 (4)
                                                                                                              --------
  Loss recognized.....                                                                                            (195)
                                                                                                              --------
UII Management........      --                   --             --                 --             50.0%            468 (4)
Santander.............      --                   --             --                 --             25.0%           (213)(4)
Kabel Net.............      --                   --             --                 --             66.7%         (1,217)(7)
Programming assets....      --                   --             --                 --            100.0%           (247)(7)
Monor.................    48.6%              (4,590)          48.6%            (2,648)            48.4%         (4,825)
IPS...................    33.5%              (2,348)          33.5%            (4,321)            33.5%           (413)
                                           --------                          --------                         --------
                                            (49,369)                          (31,634)                         (22,201)
                                           --------                          --------                         --------
ASIA/PACIFIC(8)
Austar................   100.0%(9)               --          100.0%(9)             -- (9)        100.0%         (3,036)(9)

Saturn................    65.0%(11)              --          100.0%(10)          (930)(10)        50.0%         (1,434)
XYZ Entertainment.....    25.0%              (2,408)          25.0%            (4,484)            25.0%        (11,638)
Sun Cable.............    40.0%                (656)          40.0%              (218)            40.0%           (148)
HITV..................    49.0%                (220)          49.0%                (6)            49.0%            (10)
                                           --------                          --------                         --------
                                             (3,284)                           (5,638)                         (16,266)
                                           --------                          --------                         -------- 
LATIN AMERICA
VTRH..................    34.0%              (7,805)          34.0%            (2,130)              --              --
Cablevision...........      --                   --          100.0%            (4,066)           100.0%           (988)
STX...................      --                   --          100.0%               775             65.0%            204
Net Sao Paulo.........      --                   --           34.0%            (1,649)            34.0%         (5,837)
Megapo................    49.0%                (386)          49.0%              (678)            49.0%            (47)
TVSB..................    40.0%                (616)          40.0%            (1,277)            40.0%         (1,582)
UFC...................    50.0%              (7,477)          50.0%               (10)              --              --
Jundiai...............    46.3%                 426           46.3%              (458)              --              --
                                           --------                          --------                         --------
                                            (15,858)                           (9,493)                          (8,250)
                                           --------                          --------                         -------- 
OTHER                     various              (134)         various             (810)           various        (1,918)
                                           --------                          --------                         --------
Total equity in
losses of affiliated
companies, net........                     $(68,645)                         $(47,575)                        $(48,635)
                                           ========                          ========                         ========
</TABLE>
     (1)  The  Company   consolidated  UPC's  balance  sheet  and  statement  of
          operations effective December 11, 1997.
     (2)  The Company and  Philips  formed UPC as a 50/50 joint  venture in July
          1995; therefore, the amount above includes the Company's proportionate
          share of  equity  losses  from UPC for the  period  from  July 1, 1995
          through December 31, 1995.
     (3)  The Company's ownership interest with respect to equity in losses from
          UCI was calculated based on the Company's average  ownership  interest
          in UCI throughout the fiscal year.
     (4)  Amounts represent the Company's  proportionate  share of equity income
          (losses) for the period from January 1, 1995 through June 30, 1995. In
          July 1995, the Company contributed these interests to UPC.

                                       47
<PAGE>
     (5)  Amount  represents  losses in  affiliated  companies  in excess of the
          Company's equity advances (including contractual funding commitments).
     (6)  The Company's ownership interest with respect to equity in losses from
          Melita and Princes Holdings is calculated net of minority interest.
     (7)  Amounts represent the Company's  proportionate  share of equity losses
          for the period from April 1, 1995 through June 30, 1995. In July 1995,
          the Company contributed these interests to UPC.
     (8)  In May 1997, UIH exchanged a 2% interest in UAP for the remaining 2.6%
          interest  in UIH A/P.  As a result of this  transaction,  UAP became a
          98%-owned  subsidiary  of  the  Company.  The  ownership   percentages
          presented for Fiscal 1998 for all Asia/Pacific companies reflect UAP's
          ownership in each operating company.
     (9)  The Company consolidated Austar's balance sheet effective December 31,
          1995 and Austar's income statement effective January 1, 1996.
     (10) For the period from January 1, 1996 through June 30, 1996, the Company
          had a 50% ownership interest in Saturn.
     (11) In July 1997, a strategic  partner  purchased a 35% equity interest in
          Saturn, reducing UAP's ownership interest to 65%.

INFLATION AND FOREIGN CURRENCY EXCHANGE RATE RISKS

     The Company's foreign 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  Company's  foreign  operating  companies  have notes payable and
notes  receivable that are denominated in and, loans payable that are linked to,
a currency other than their own functional currency. 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  and
equity  with  respect to its  holdings  solely as a result of  foreign  currency
exchange rate fluctuations,  which include foreign currency devaluations against
the dollar.

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

     The  functional  currency  for  the  Company's  foreign  operations  is the
applicable local currency for each affiliate company, except for countries which
have  experienced   hyper-inflationary   economies.  For  countries  which  have
hyper-inflationary  economies,  the financial  statements are prepared in United
States dollars. 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'  (deficit) equity. During the year ended February 28,
1998,  the  Company  recorded  a  negative  change  in  cumulative   translation
adjustments  of  $50,274,  primarily  due to (i) the  strengthening  of the U.S.
dollar compared to the Australian  dollar of approximately  22%,  resulting in a
translation  adjustment during the period of approximately  $25,876 and (ii) the
strengthening  of the U.S. dollar compared to the Dutch guilder of approximately
16%,  resulting in a translation  adjustment  during the period of approximately
$11,872.

     Transactions  denominated  in currencies  other than the local currency are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in  exchange  rates  result in  transaction  gains and losses  which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions.

     Cash  flows  from  the  Company's   operations  in  foreign  countries  are
translated based on their 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.

FOREIGN INVESTMENT RISK

     The Company's  foreign  operating  companies  are all directly  affected by
their respective countries' government,  economic,  fiscal and monetary policies

                                       48
<PAGE>

and other political factors.  The Company believes that its operating companies'
financial  conditions  and  results  of  operations  have  not  been  materially
adversely affected by these factors.

     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.  In the
future,  the Company may also acquire  interests  in  companies  that operate in
countries where the removal or conversion of currency is restricted.

NEW ACCOUNTING PRINCIPLES

     The Company has adopted  Statement of Financial  Accounting  Standards  No.
128,  "Earnings Per Share" ("SFAS 128").  The adoption of SFAS 128 had no effect
on the  Company's  previously-reported  primary loss per share.  "Basic loss per
share" is determined by dividing net loss from continuing  operations  available
to  common  shareholders  by  the  weighted-average   number  of  common  shares
outstanding  during each  period.  "Diluted  earnings  per share"  includes  the
effects of potentially  issuable common stock, but only if dilutive.  Because of
reported  losses,  there are no  differences  between basic and diluted loss per
share amounts for the Company for any of the years presented.

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
130"),  which is required to be adopted by affected  companies  for fiscal years
beginning  after  December 15, 1997.  SFAS 130 requires that an  enterprise  (i)
classify  items of other  comprehensive  income by their  nature in a  financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained  earnings and additional  paid-in capital in the equity
section  of a  statement  of  financial  position.  Other  comprehensive  income
includes cumulative  translation  adjustments and unrealized gains and losses on
available-for-sale securities.

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information"  ("SFAS 131"), which requires that a public
business  enterprise report certain financial and descriptive  information about
its reportable segments.  The Company plans to adopt SFAS 131 for the year ended
February 28, 1999.

     The American  Institute of Certified  Public  Accountants  recently  issued
Statement  of Position  98-5,  "Reporting  on the Costs of Start-Up  Activities"
("SOP 98-5"),  which is required to be adopted by affected  companies for fiscal
years  beginning  after  December  15,  1998.  SOP  98-5  defines  start-up  and
organization  costs,  which must be  expensed  as  incurred.  In  addition,  all
deferred start-up and organization  costs existing as of January 1, 1999 must be
written-off and accounted for as a cumulative effect of an accounting change.

YEAR 2000 CONVERSION

     The  Company  has  established  a  central   committee  to  coordinate  the
identification,  evaluation,  and  implementation of changes to computer systems
and applications necessary to achieve a year 2000 date conversion with no effect
on customers or disruption to business  operations.  These actions are necessary
to  ensure  that  the  systems  and  applications  will  recognize  and  process
information  for the year 2000 and  beyond.  Major areas of  potential  business
impact have been identified and are being  dimensioned,  and initial  conversion
efforts are underway. The Company also is communicating with suppliers, dealers,
financial institutions and others with which it does business to coordinate year
2000  conversion.  The total cost of compliance  and its effect on the Company's
future  results  of  operations  is  being  determined  as part of the  detailed
conversion  planning.  In addition,  the Company could be  materially  adversely
affected by the failure of its vendors to achieve year 2000 date conversion.

FORWARD-LOOKING STATEMENTS

     Certain   statements  in  this  Report  may   constitute   "forward-looking
statements"   within  the  meaning  of  the  federal   securities   laws.   Such
forward-looking   statements  may  include,   among  other  things,   statements
concerning  the  Company's  plans,  objectives  and future  economic  prospects,
expectations, beliefs, future plans and strategies, anticipated events or trends
and similar  expressions  concerning matters that are not historical facts. Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company,  or industry  results,  to be materially  different from any future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking statements. Such factors include, among other things, changes in
television   viewing   preferences  and  habits  by  subscribers  and  potential
subscribers,  their acceptance of new technology,  programming  alternatives and
new services  offered by the Company,  the Company's  ability to secure adequate
capital to fund system growth and development,  risks inherent in investment and
operations in foreign  countries,  changes in government  regulation,  and other
factors referenced in this Report.

                                       49
<PAGE>

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

     The consolidated  financial  statements of the Company are filed under this
Item as follows:
<TABLE>
<CAPTION>
                                                                                                                    Page
                                                                                                                   Number
                                                                                                                   ------
     <S>                                                                                                             <C>
     UNITED INTERNATIONAL HOLDINGS, INC.
     Report of Independent Public Accountants.................................................................       51
     Independent Auditors' Report.............................................................................       52
     Independent Auditors' Report.............................................................................       53
     Report of Independent Accountants........................................................................       54
     Report of Independent Accountants........................................................................       55
     Report of Independent Auditors...........................................................................       56
     Consolidated Balance Sheets as of February 28, 1998 and 1997.............................................       57
     Consolidated Statements of Operations for the Years Ended February 28, 1998, February 28, 1997, and
       February 29, 1996......................................................................................       58
     Consolidated Statements of Stockholders' (Deficit) Equity for the Years Ended February 28, 1998,
       February 28, 1997 and February 29, 1996................................................................       59
     Consolidated Statements of Cash Flows for the Years Ended February 28, 1998, February 28, 1997 and
       February 29, 1996 .....................................................................................       61
     Notes to Consolidated Financial Statements...............................................................       63
</TABLE>

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

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

     None.

                                       50
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To United International Holdings, Inc.:

     We have  audited the  accompanying  consolidated  balance  sheets of United
International  Holdings,  Inc. (a Delaware  corporation)  and subsidiaries as of
February  28,  1998  and  1997  and  the  related  consolidated   statements  of
operations,  stockholders'  (deficit)  equity and cash flows for the years ended
February 28, 1998,  February  28, 1997 and  February 29, 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.  With respect to the year ended  February 28, 1997, we did not audit
the financial statements of Tele Cable de Morelos,  S.A. de C.V. ("Megapo"),  as
of and for the year ended December 31, 1996, an investment which is reflected in
the accompanying  consolidated  financial  statements using the equity method of
accounting.  With respect to the year ended  February 29, 1996, we did not audit
the financial  statements of XYZ  Entertainment  Pty Ltd ("XYZ  Entertainment"),
Megapo,  Monor  Communications  Group, Inc. ("Monor"),  Cabodinamica TV Cabo Sao
Paulo S.A. ("Net Sao Paulo"), or Telefenua S.A.  ("Telefenua") as of and for the
year  ended  December  31,  1995,   investments   which  are  reflected  in  the
accompanying  consolidated  financial  statements  using  the  equity  method of
accounting (with respect to XYZ Entertainment,  Megapo, Monor and Net Sao Paulo)
or  consolidated  (with respect to Telefenua).  United  International  Holdings,
Inc.'s consolidated statement of operations for the year ended February 28, 1997
reflects equity in income  (losses)  related to Megapo of ($678,000) and for the
year ended February 29, 1996 reflects equity in income  (losses)  related to XYZ
Entertainment,  Megapo,  Monor  and Net Sao  Paulo of  ($11,638,000),  $841,000,
($4,448,000) and  ($4,837,000),  respectively.  United  International  Holdings,
Inc.'s  consolidated  financial  statements for the year ended February 29, 1996
reflects  revenues,  expenses and a net loss related to Telefenua of $1,882,000,
$5,438,000 and $3,556,000, respectively. Those financial statements were audited
by other  auditors  whose  reports  have been  furnished  to us and our opinion,
insofar as it relates to the amounts included in the  accompanying  consolidated
financial statements and related footnotes for such entities, 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  and the  reports  of  other  auditors  provide  a
reasonable basis for our opinion.

     In our opinion,  based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of United International  Holdings,  Inc. and subsidiaries
as of February 28, 1998 and 1997, and the results of their  operations and their
cash flows for the years ended February 28, 1998, February 28, 1997 and February
29, 1996 in conformity with generally accepted accounting principles.



                                                ARTHUR ANDERSEN LLP


Denver, Colorado
May 25, 1998





                                       51
<PAGE>

                            XYZ ENTERTAINMENT PTY LTD
                          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















                                       52
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of:
   Tele Cable de Morelos, S.A. de C.V.
   Tele Cable Mexicano, S.A. de C.V.
   Vision por Cable de Oaxaca, S.A. de C.V.
   Telecable de Chilpancingo, S.A. de C.V.
   Mega-Com-M Servicios, S.A. de C.V.
   Cuernamu, S.A. de C.V.

We have  audited  the  accompanying  combined  balance  sheets of Tele  Cable de
Morelos,  S.A. de C.V. and related  companies (all of which are  subsidiaries of
Megapo Comunicaciones de Mexico, S.A. de C.V.) as of December 31, 1995 and 1996,
and the related  combined  statements of  operations,  stockholders'  equity and
changes  in  financial  position  for the years then  ended,  all  expressed  in
thousands  of Mexican  pesos.  The  combined  financial  statements  include the
accounts of Tele Cable de Morelos,  S.A. de C.V., Tele Cable  Mexicano,  S.A. de
C.V., Vision por Cable de Oaxaca, S.A. de C.V., Tele Cable de Chilpancingo, S.A.
de C.V.,  Mega-Com-M  Servicios,  S.A. de C.V. and Cuernamu,  S.A. de C.V. These
companies are under common  ownership  and common  management.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects, the combined financial position of Tele Cable de Morelos, S.A. de C.V.
and related companies as of December 31, 1995 and 1996, and the combined results
of their operations,  changes in their stockholders' equity and changes in their
financial  position  for the years  then  ended in  conformity  with  accounting
principles generally accepted in Mexico.

Accounting  principles  generally accepted in Mexico vary in certain significant
respects from accounting principles generally accepted in the United States. The
application  of the latter  would have  affected  determination  of combined net
income  (loss) for each of the two years in the period  ended  December 31, 1996
and determination of combined  stockholders' equity and combined total assets at
December 31, 1995 and 1996, to the extent summarized in Note 13.

The accompanying combined financial statements have been translated into English
for the convenience of readers in the United States of America.


                                Galaz, Gomez Morfin, Chavero, Yamazaki, S.C.

Raymundo Diaz Gonzalez

Acapulco, Mexico
March 31, 1997


                                       53
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of
Monor Communications Group, Inc. and Subsidiaries

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Monor
Communications  Group,  Inc. and  Subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of loss,  shareholders' equity, and cash
flows  for  the  years  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 audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material   respects,   the   consolidated   financial   position  of  Monor
Communications  Group,  Inc. and  Subsidiaries as of December 31, 1995 and 1994,
and the  consolidated  results of their  operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.



                                                Coopers & Lybrand L.L.P.


Lincoln, Nebraska
March 15, 1996


                                       54
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS



March 8, 1996


To the Board of Directors and Stockholders
Cabodinamica TV Cabo Sao Paulo S.A.

1.   We have audited the balance sheet of Cabodinamica TV Cabo Sao Paulo S.A. as
     of  December  31, 1995 and 1994 and the related  statements  of income,  of
     movement  in  stockholders'  equity  and of cash  flows for the years  then
     ended, expressed in U.S. dollars. Such audits were made in conjunction with
     our audits of the financial statements expressed in local currency on which
     we issued an unqualified  opinion dated January 30, 1995.  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.

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

3.   As stated in Note 2, United  International  Holdings,  Inc. has  prescribed
     that  accounting  principles  generally  accepted  in the United  States of
     America  be applied  in the  preparation  of the  financial  statements  of
     Cabodinamica TV Cabo Sao Paulo S.A. to be included in United  International
     Holding's   consolidated   financial   statements.   Brazil  has  a  highly
     inflationary  economy.  Accounting  principles  generally  accepted  in the
     United  States of America  require that  financial  statements of a company
     denominated in the currency of a country with a highly inflationary economy
     be remeasured in a more stable currency unit for purposes of consolidation.
     Accordingly, the accounts of Cabodinamica TV Cabo Sao Paulo S.A., which are
     maintained in reais, were remeasured and adjusted into U.S. dollars for the
     financial  statements  prepared in accordance  with  accounting  principles
     generally  accepted in the United  States of America on the bases stated in
     Note 2.

4.   In our opinion,  the financial statements expressed in U.S. dollars audited
     by us are presented fairly, in all material  respects,  on the bases stated
     in Note 2 and discussed in the preceding paragraph.

5.   The accompanying  financial statements have been prepared assuming that the
     Company  will  continue as a going  concern.  As discussed in Note 1 to the
     financial  statements,  the Company has incurred losses from operations and
     has an excess of current  liabilities over current assets,  and its ability
     to continue as a going  concern is  dependent  on further  capital from the
     stockholders and/or continued  guarantees.  The financial statements do not
     include  any  adjustments  that  might  result  from  the  outcome  of this
     uncertainty.

                                                Price Waterhouse
Auditores-Independentes
Sao Paulo, Brazil
CRC-SP-160

                                                Carlos Roberto Asciutti
Partner
Contador CRC-SP-145.670

                                       55
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the shareholders of TELEFENUA SA:

We have audited the  accompanying  balance  sheet of TELEFENUA SA as of December
31,  1993,  1994 and 1995 and the  related  statement  of income and  changes in
financial position for the years 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 audits.

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  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 TELEFENUA SA as of December
31,  1993,  1994 and 1995 and the results of its  operations  and changes in its
financial  position  for the years 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 to
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

Jean-Pierre GOSSE
Papeete, February 16, 1996


                                       56
<PAGE>
<TABLE>
<CAPTION>
                                  UNITED INTERNATIONAL HOLDINGS, INC.
                                      CONSOLIDATED BALANCE SHEETS
                       (Stated in thousands, except share and per share amounts)
                                                                                                     As of
                                                                                                  February 28,
                                                                                          ---------------------------
                                                                                             1998             1997
                                                                                          ----------       ----------
<S>                                                                                       <C>               <C>
ASSETS
Current assets
  Cash and cash equivalents.............................................................  $  303,441        $ 68,784
  Restricted cash and short-term investments............................................      20,950           1,600
  Short-term investments................................................................      33,731          70,359
  Subscriber receivables, net...........................................................       7,311           2,939
  Management fee receivables from related parties.......................................       2,439           1,616
  Notes receivable......................................................................       2,575           8,175
  Costs to be reimbursed by affiliated companies, net...................................      15,157           4,884
  Other current assets, net, including $1,728 and $1,958 of related party receivables,
    respectively........................................................................      25,395          11,320
                                                                                          ----------        --------
      Total current assets..............................................................     410,999         169,677
Investments in and advances to affiliated companies, accounted for
  under the equity method, net..........................................................     318,437         253,108
Property, plant and equipment, net of accumulated depreciation of $84,633 and $29,378,
  respectively..........................................................................     440,735         219,342
Goodwill and other intangible assets, net of accumulated amortization of $14,532
  and $7,198, respectively..............................................................     432,005         132,636
Deferred financing costs, net of accumulated amortization of $1,634 and $4,501,
  respectively..........................................................................      44,943          27,881
Non-current restricted cash and other assets, net.......................................      32,716          17,292
                                                                                          ----------        --------
      Total assets......................................................................  $1,679,835        $819,936
                                                                                          ==========        ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities
  Accounts payable, including $86 and $620 of related party payables, respectively......  $   61,878      $   22,908
  Construction payables.................................................................       6,008          38,407
  Accrued liabilities...................................................................      46,419          12,548
  Purchase money notes payable to sellers, current......................................          --           5,722
  Current portion of long-term debt.....................................................     163,325           5,177
  Other current liabilities.............................................................      13,760           4,179
                                                                                          ----------        --------
      Total current liabilities.........................................................     291,390          88,941
Purchase money notes payable to sellers.................................................          --          12,966
Senior secured notes and other debt.....................................................   1,702,771         662,217
Deferred taxes and other long-term liabilities..........................................      30,204           9,116
                                                                                          ----------        --------
      Total liabilities.................................................................   2,024,365         773,240
                                                                                          ----------        --------
Minority interest in subsidiaries.......................................................      15,186             307
                                                                                          ----------        --------
Preferred  stock,  $0.01 par value,  3,000,000  shares  authorized,  170,513 and
  170,513  shares  of  Convertible   Preferred  Stock,   Series  A  issued  and
  outstanding, respectively, stated at liquidation value................................      32,564          31,293
                                                                                          ----------        --------
Stockholders' (deficit) equity:
  Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 26,381,093
    and 26,097,263 shares issued and outstanding, respectively..........................         264             261
  Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 12,863,323
    and 12,971,775 shares issued and outstanding, respectively..........................         128             129
  Additional paid-in capital............................................................     352,253         340,753
  Deferred compensation.................................................................         (42)           (624)
  Unrealized gain (loss) on investments in marketable equity securities.................         351          (6,069)
  Cumulative translation adjustments....................................................     (66,075)        (15,801)
  Accumulated deficit...................................................................    (646,085)       (303,553)
  Treasury stock, at cost, 3,169,151 shares of Class A Common Stock.....................     (33,074)             --
                                                                                          ----------        --------
      Total stockholders' (deficit) equity..............................................    (392,280)         15,096
                                                                                          ----------        --------
Commitments and Contingencies (Notes 11 and 12)

      Total liabilities and stockholders' (deficit) equity.............................   $1,679,835        $819,936
                                                                                          ==========        ========

                 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                       57
<PAGE>
<TABLE>
<CAPTION>
                                            UNITED INTERNATIONAL HOLDINGS, INC.
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Stated in thousands, except share and per share amounts)

                                                                                        For the Years Ended
                                                                           -----------------------------------------------
                                                                           February 28,      February 28,     February 29,
                                                                               1998              1997             1996
                                                                           ------------      ------------     ------------
<S>                                                                        <C>               <C>               <C>
Service and other revenue..............................................    $  98,047         $  30,244         $  2,363
Management fee income from related parties.............................          575             1,311              507
                                                                           ---------         ---------         --------
       Total revenue...................................................       98,622            31,555            2,870

System operating expense...............................................      (65,631)          (26,251)          (4,224)
System selling, general and administrative expense.....................      (62,803)          (33,655)          (3,524)
Corporate general and administrative expense...........................      (28,553)          (20,365)         (18,959)
Depreciation and amortization..........................................      (91,656)          (38,961)          (2,331)
                                                                           ---------         ---------         --------
       Net operating loss..............................................     (150,021)          (87,677)         (26,168)

Equity in losses of affiliated companies, net..........................      (68,645)          (47,575)         (48,635)
Gain on sale of investments in affiliated companies....................       90,020            65,249           16,013
Interest income, net, including related party income of $302, $197 and
  $374, respectively...................................................        7,806            13,329            8,417
Interest expense.......................................................     (124,288)          (79,659)         (36,045)
Provision for loss on marketable equity securities and investment
  related costs........................................................      (14,793)           (5,859)          (6,055)
Other (expense) income, net............................................       (5,088)             (991)              81
                                                                           ---------         ---------         --------
       Net loss before minority interest...............................     (265,009)         (143,183)         (92,392)

Minority interest in subsidiaries......................................        1,568             4,358            1,081
                                                                           ---------         ---------         --------
       Net loss before extraordinary charge............................     (263,441)         (138,825)         (91,311)

Extraordinary charge for early retirement of debt......................      (79,091)               --               --
                                                                           ---------         ---------         --------
       Net loss........................................................    $(342,532)        $(138,825)        $(91,311)
                                                                           =========         =========         ========
Net loss per common share:
  Basic and diluted loss before extraordinary charge...................    $   (6.75)        $   (3.59)        $  (2.69)
  Extraordinary charge.................................................        (2.02)               --               --
                                                                           ---------         ---------         --------
  Basic and diluted net loss...........................................    $   (8.77)        $   (3.59)        $  (2.69)
                                                                           =========         =========         ========

Weighted-average number of common shares outstanding...................   39,211,501        39,035,776       34,017,660
                                                                          ==========        ==========       ==========

                 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                       58
<PAGE>
<TABLE>
<CAPTION>
                                            UNITED INTERNATIONAL HOLDINGS, INC.
                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
                                         (Stated in thousands, except share amounts)

                          Class A           Class B                                Unrealized
                        Common Stock      Common Stock    Additional               Gain (Loss) Cumulative               
                     ------------------  ----------------   Paid-In    Deferred        on      Translation  Accumulated
                     Shares     Amount   Shares    Amount   Capital  Compensation  Investments Adjustments    Deficit     Total
                     ------     ------   ------    ------  --------- ------------  ----------- ------------ ----------- --------
<S>                 <C>          <C>   <C>           <C>    <C>        <C>           <C>         <C>         <C>        <C>
Balances, February 
 28, 1995.......... 16,517,648   $165  14,071,341    $141   $211,740   $(1,520)      $1,566      $   195     $(73,417)  $138,870

Issuance of Class A
 Common Stock in
 connection with
 public offering,
 net of offering
 expense...........  5,175,000     52          --      --     61,883        --           --           --           --     61,935
Issuance of Class A
 Common Stock in 
 connection with
 Company's 401(k)
 plan..............     15,832     --          --      --        260        --           --           --           --        260
Issuance of Class A
 Common Stock in
 connection with
 Company's stock
 option plans......     59,991     --      (2,124)     --        522        --           --           --           --        522
Issuance of Class A
 Common Stock in
 connection with the
 formation of UPC..  3,169,151     32          --      --     49,968        --           --           --           --     50,000
Compensation
 expense related 
 to stock options..         --     --          --      --      1,575        --           --           --           --      1,575
Accrual of dividends
 on convertible 
 preferred stock...         --     --          --      --       (232)       --           --           --           --       (232)
Amortization of
 deferred 
 compensation......         --     --          --      --         --       678           --           --           --        678
Exchange of Class B
 Common Stock for
 Class A Common
 Stock.............    794,532      8    (794,532)     (8)        --        --           --           --           --         --
Unrealized loss on 
 investment........         --     --          --      --         --        --       (2,755)          --           --     (2,755)
Change in cumulative
 translation
 adjustments.......         --     --          --      --         --        --           --       (7,566)          --     (7,566)
Net loss...........         --     --          --      --         --        --           --           --      (91,311)   (91,311)
                    ----------   ----  ----------    ----   --------   -------      -------      -------     --------   --------
Balances, February 
 29, 1996.......... 25,732,154    257  13,274,685     133    325,716      (842)      (1,189)      (7,371)    (164,728)   151,976

Issuance of Class A
 Common Stock in 
 connection with
 Company's stock
 option plan ......     39,750     --          --      --        349        --           --           --           --        349
Issuance of Class A
 Common Stock in 
 connection with
 Company's 401(k)
 plan..............     22,449     --          --      --        309        --           --           --           --        309
Exchange of Class B
 Common Stock for
 Class A Common
 Stock.............    302,910      4    (302,910)     (4)        --        --           --           --           --         --
Accrual of dividends 
 on convertible
 preferred stock...         --     --          --      --     (1,221)       --           --           --           --     (1,221)
Expiration of put
 option of warrants
 not tendered to
 the Company.......         --     --          --      --      9,011        --           --           --           --      9,011
Gain on sale of
 stock by            
 subsidiary........         --     --          --      --      5,898        --           --           --           --      5,898
Repricing of stock 
 options...........         --     --          --      --        691      (691)          --           --           --         --

                                                       59
<PAGE>
                                            UNITED INTERNATIONAL HOLDINGS, INC.
                             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)
                                         (Stated in thousands, except share amounts)

                          Class A           Class B                                Unrealized
                        Common Stock      Common Stock     Additional              Gain (Loss) Cumulative               
                     ------------------  ----------------   Paid-In    Deferred        on      Translation  Accumulated
                     Shares     Amount   Shares    Amount   Capital  Compensation  Investments Adjustments    Deficit      Total
                     ------     ------   ------    ------  --------- ------------  ----------- ------------ -----------  --------
Amortization of
 deferred             
 compensation......         --      --          --      --         --       909           --          --           --        909
Unrealized loss on 
 investments.......         --      --          --      --         --        --       (4,880)         --           --     (4,880)
Change in cumulative  
 translation
 adjustments.......         --      --          --      --         --        --           --      (8,430)          --     (8,430)
Net loss...........         --      --          --      --         --        --           --          --     (138,825)  (138,825)
                    ----------    ----  ----------    ----   --------   -------      -------     -------     --------   --------
Balances, February  
28, 1997........... 26,097,263     261  12,971,775     129    340,753     (624)      (6,069)     (15,801)    (303,553)    15,096


                         Class A         Class B                              Unrealized
                      Common Stock    Common Stock    Additional             Gain (Loss) Cumulative               
                     ---------------  ---------------  Paid-In    Deferred    on Invest- Translation  Accumulated Treasury
                     Shares   Amount  Shares   Amount  Capital  Compensation    ments    Adjustments    Deficit     Stock    Total
                     ------   ------  ------   ------ --------- ------------ ----------- ------------ ----------- -------- --------
Balances, February
 28, 1997.......... 26,097,263  $261 12,971,775 $129   $340,753    $(624)     $(6,069)    $(15,801)  $(303,553) $     --  $  15,096

Issuance of Class A
 Common Stock in
 connection with
 Company's stock
 option plans......    151,894     2         --   --        794       --           --           --          --        --        796
Issuance of Class A
 Common Stock in
 connection with
 Company's 401(k)
 plan..............     23,484    --         --   --        334       --           --           --          --        --        334
Exchange of Class B
 Common Stock for
 Class A Common
 Stock.............    108,452     1   (108,452)  (1)        --       --           --           --          --        --         --
Accrual of dividends
 on convertible
 preferred stock...         --    --         --   --     (1,271)      --           --           --          --        --     (1,271)
Compensation expense
 related to stock
 options...........         --    --         --   --        351       --           --           --          --        --        351
Issuance of warrants
 to purchase common
 stock of
 subsidiary........         --    --         --   --      3,678       --           --           --          --        --      3,678
Gain on sale of
 stock by
 subsidiaries......         --    --         --   --      7,614       --           --           --          --        --      7,614
Amortization of
 deferred
 compensation......         --    --         --   --         --      582           --           --          --        --        582
Change in unrealized
 gain (loss) on
 investments, net...        --    --         --   --         --       --       (1,593)          --          --        --     (1,593)
Provision for loss
 on marketable
 equity securities..        --    --         --   --         --       --        8,013           --          --        --      8,013
Change in cumulative
  translation
  adjustments.......        --    --         --   --         --       --           --      (50,274)         --        --    (50,274)
Net loss............        --    --         --   --         --       --           --           --    (342,532)       --   (342,532)
Purchase of Class A
 Common Stock by
 subsidiary.........        --    --         --   --         --       --           --           --          --   (33,074)   (33,074)
                    ----------  ----  --------- ----   --------    -----      -------     --------   ---------  --------  --------- 
Balances, February
 28, 1998.......... 26,381,093  $264 12,863,323 $128   $352,253    $ (42)     $   351     $(66,075)  $(646,085) $(33,074) $(392,280)
                    ==========  ==== ========== ====   ========    =====      =======     ========   =========  ========  =========

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

                                                       60
<PAGE>
<TABLE>
<CAPTION>
                       UNITED INTERNATIONAL HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Stated in thousands)

                                                                                                      For the Years Ended
                                                                                        --------------------------------------------
                                                                                        February 28,    February 28,    February 29,
                                                                                            1998            1997            1996
                                                                                        ------------    ------------    ------------
<S>                                                                                     <C>              <C>              <C>
Cash flows from operating activities:
Net loss ........................................................................       $(342,532)       $(138,825)       $(91,311)
Adjustments to reconcile net loss to net cash flows from operating activities:
   Extraordinary charge for early retirement of debt ............................          79,091               --              --
   Equity in losses of affiliated companies, net ................................          70,291           47,575          48,920
   Gain on sale of investments in affiliated companies ..........................         (90,020)         (65,249)        (16,013)
   Minority interest share of losses ............................................          (1,568)          (4,358)         (1,081)
   Depreciation and amortization ................................................          91,656           38,961           2,331
   Amortization of deferred compensation ........................................             582              909             678
   Accretion of interest on senior notes and amortization of deferred
     financing costs ............................................................         110,633           73,695          35,158
   Issuance of common stock in connection with Company's 401(k) plan ............             334              309             260
   Compensation expense related to stock options ................................             351               --           1,575
   Provision for losses on marketable equity securities and investment
     related costs ..............................................................          14,793            5,859           6,055
   Increase in subscriber receivables, net ......................................          (3,222)          (2,801)             --
   Increase in management fee receivables from related parties ..................            (944)            (166)           (689)
   Decrease (increase) in other assets ..........................................           6,993          (13,409)         (6,439)
   Increase in accounts payable, accrued liabilities and other ..................           2,910           22,006             499
                                                                                        ---------         --------        --------
Net cash flows from operating activities ........................................         (60,652)         (35,494)        (20,057)
                                                                                        ---------         --------        --------
Cash flows from investing activities:
Purchase of short-term investments ..............................................         (94,656)        (359,534)       (122,424)
Proceeds from sale of short-term investments ....................................         131,284          324,867         186,117
Restricted cash and short-term investments (deposited) released .................          (8,350)          12,473          71,780
Investments in and advances to affiliated companies and other investments .......        (177,632)        (100,247)       (204,725)
Proceeds from sale of investments in affiliated companies .......................         211,125           43,098          12,823
Distribution received from affiliated company ...................................           1,248               --              --
Purchase of property, plant and equipment .......................................        (115,033)        (204,407)        (10,168)
Proceeds from sale of property, plant and equipment .............................           5,332               --              --
(Decrease) increase in construction payables ....................................         (29,621)          38,331              --
(Increase) decrease in costs to be reimbursed by affiliated companies, net ......          (4,671)           3,088          (1,594)
Increase in notes receivable ....................................................              --           (5,557)         (7,126)
Repayments on notes receivable ..................................................          12,238           45,264              --
Reimbursement of advance to affiliate ...........................................              --               --             364
Acquisition, transaction and development costs incurred .........................          (4,360)          (7,154)         (6,155)
                                                                                        ---------         --------        --------
Net cash flows from investing activities ........................................         (73,096)        (209,778)        (81,108)
                                                                                        ---------         --------        --------
Cash flows from financing activities:
Proceeds from offerings of senior discount notes ................................         842,125          225,115         125,000
Retirement of existing senior notes .............................................        (531,800)              --              --
Deferred financing costs ........................................................         (30,868)         (10,670)        (13,753)
Issuance of common stock in connection with public offerings, net of
  financing costs ...............................................................              --               --          61,935
Issuance of common stock in connection with Company's stock option plans ........             796              349             522
Payment of sellers notes ........................................................         (46,351)         (11,856)             --
Cash contribution from minority interest partners ...............................          22,042               --              --
Payment of warrants tendered to the Company .....................................              --           (2,156)             --
Borrowings of other debt ........................................................         233,715               --           9,820
Payment on capital leases and other debt ........................................        (120,570)              --          (1,000)
                                                                                        ---------         --------        --------
Net cash flows from financing activities ........................................         369,089          200,782         182,524
                                                                                        ---------         --------        --------
</TABLE>
                                                                    61
<PAGE>
<TABLE>
<CAPTION>
                                         UNITED INTERNATIONAL HOLDINGS, INC.
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                                (Stated in thousands)
                                                                                                    For the Years Ended
                                                                                     -----------------------------------------------
                                                                                     February 28,      February 28,     February 29,
                                                                                         1998              1997             1996
                                                                                     ------------      ------------     ------------
<S>                                                                                   <C>                <C>              <C>
Effect of exchange rates on cash .............................................        $    (684)         $  1,056         $    142
                                                                                      ---------          --------         --------
Increase (decrease) in cash and cash equivalents .............................          234,657           (43,434)          81,501
Cash and cash equivalents, beginning of period ...............................           68,784           112,218           30,717
                                                                                      ---------          --------         --------
Cash and cash equivalents, end of period .....................................        $ 303,441          $ 68,784         $112,218
                                                                                      =========          ========         ========
Non-cash investing and financing activities:
   Purchase money notes payable to sellers ...................................        $  52,061          $ 33,401         $     --
                                                                                      =========          ========         ========
   Note received upon sale of investment in affiliated company ...............        $      --          $ 35,000         $     --
                                                                                      =========          ========         ========
   Gain on issuance of shares by subsidiaries ................................        $   7,614          $     --         $     --
                                                                                      =========          ========         ========
   Note received upon sale of assets .........................................        $   6,500          $     --         $     --
                                                                                      =========          ========         ========
   Non-cash issuance of warrants by subsidiary to purchase
     subsidiary stock ........................................................        $   3,678          $     --         $     --
                                                                                      =========          ========         ========
   Conversion of note receivable to equity investment ........................        $   1,909          $     --         $     --
                                                                                      =========          ========         ========
   Change in unrealized loss on investment ...................................        $  (1,593)         $ (4,880)        $ (2,755)
                                                                                      =========          ========         ========
   Non-cash stock issuance for purchase of 50% interest in Saturn ............        $      --          $  7,800         $     --
                                                                                      =========          ========         ========
   Assets acquired with capital leases .......................................        $     548          $  3,632         $     --
                                                                                      =========          ========         ========
   Issuance of preferred stock utilized in purchase of additional
     40% interest in Austar ..................................................        $      --          $     --         $ 29,840
                                                                                      =========          ========         ========
Supplemental cash flow disclosures:
   Cash paid for interest ....................................................        $   7,513          $    870         $  1,018
                                                                                      =========          ========         ========
   Cash received for interest ................................................        $   7,694          $ 11,900         $  9,278
                                                                                      =========          ========         ========
Sale of Argentine systems:
   Working capital, net of cash relinquished of $2,133 .......................        $  (3,319)         $     --         $     --
   Investments in affiliated companies .......................................           83,535                --               --
   Property, plant and equipment and other long-term assets ..................            4,560                --               --
   Goodwill and other intangible assets ......................................           60,727                --               --
   Purchase money notes (assumed by the buyers) ..............................          (24,398)               --               --
   Gain on sale ..............................................................           90,020                --               --
                                                                                      ---------          --------         --------
Cash received from sale.......................................................        $ 211,125          $     --         $     --
                                                                                      =========          ========         ========
Acquisition of additional 50% interest in European subsidiary:
   Working capital, including cash acquired of $50,872 .......................        $  (7,158)         $     --         $     --
   Investment in UIH Class A Common Stock ....................................          (33,074)               --               --
   Investments in affiliated companies .......................................         (167,945)               --               --
   Property, plant and equipment and other long-term assets ..................         (273,988)               --               --
   Goodwill and other intangible assets ......................................         (383,503)               --               --
   Elimination of UIH equity investment ......................................           46,319                --               --
   Long-term debt ............................................................          624,633                --               --
   Other liabilities .........................................................           32,216                --               --
                                                                                      ---------          --------         --------
Total cash paid ..............................................................        $(162,500)         $     --         $     --
                                                                                      =========          ========         ========
Acquisition of Bahia Blanca system:
   Working capital, including cash acquired of $97 ...........................        $      --          $ 14,752         $     --
   Property, plant and equipment and other long-term assets ..................               --            (4,051)              --
   Goodwill and other intangible assets ......................................               --           (63,464)              --
   Purchase money notes and other debt .......................................               --            26,381               --
                                                                                      ---------          --------         --------
Total cash paid ..............................................................        $      --          $(26,382)        $     --
                                                                                      =========          ========         ========

                 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                       62
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF FEBRUARY 28, 1998 AND 1997
          (Monetary amounts stated in thousands, except per share data)

1.   ORGANIZATION AND NATURE OF OPERATIONS

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

     The  following  chart  presents  a  summary  of the  Company's  significant
investments in multi-channel  television and telephony operations as of February
28, 1998.
<TABLE>
<CAPTION>
<S>                              <C>   
************************************************************************************************************************************
*                                                               UIH                                                                *
************************************************************************************************************************************
              100%  *                                                        100%  *                        
************************************* **********************************************************************************************
*        UIH Europe, Inc. ("UIHE")  * *                    United International Properties, Inc. ("UIPI")                          *
************************************* **********************************************************************************************
                    *                                                              *
                    *                                   ***************************************************************
              100%  *                              98%  *                                   * 100%                    *         
************************************* *************************************** ************************** ***************************
* United Pan-Europe Communications  * *UIH Asia/Pacific Communications, Inc.* * UIH Latin America, Inc.* *        Other UIPI       *
*          N.V. ("UPC")(1)          * *              ("UAP")*               * *        ("UIH LA")      * *                         *
************************************* *************************************** ************************** *Hungary:                 *
                    *                                    *                                  *            * Monor Communications    *
                    *                              100%  *                                  *            *  Group, Inc.            *
************************************* *************************************** ************************** *  ("Monor")         48.6%*
*Austria:                           * *     UIH Australia/Pacific, Inc.     * *Brazil:                 * *Ireland:                 *
* Telekabel Group                   * *             ("UIH A/P")             * * TV Cabo e Comunicacoes ** Tara Television         *
*  ("Telekabel")               95.0%* *************************************** *  de Jundiai, S.A.      * *  Limited ("Tara")  75.0%*
*Belgium:                           *                    *                    *  ("Jundiai")      46.3%* *Spain/Portugal:          *
* Radio Public S.A.                 *                    *                    * TV Show Brasil,        * * Ibercom, Inc.           *
*  ("Radio Public")           100.0%* *************************************** *  S.A. ("TVSB")(7) 45.0%* *  ("IPS")           33.5%*
*Czech Republic:                    * *Australia:                           * *Chile:                  * ***************************
* Kabel Net Group                   * * CTV Pty Limited ("CTV") and         * * VTR Hipercable S.A.    *
*  ("Kabel Net")              100.0%* *  STV Pty Limited ("STV")            * *  ("VTRH")         34.0%*
* Ceska Programova                  * *  (collectively, "Austar")(5)  100.0%* *Mexico:                 *
*  Spolecnost SRO ("TV Max")  100.0%* * Austar Satellite Pty Limited        * * Tele Cable de Morelos, *          
*France:                            * *  ("Austar Satellite")         100.0%* *  S.A. de C.V.          *
* Mediareseaux Marne S.A.           * * United Wireless Pty Limited         * *  ("Megapo")       49.0%* 
*  ("Mediareseaux")            99.6%* *  ("United Wireless")          100.0%* *Peru:                   * ***************************
*Hungary:                           * * XYZ Entertainment Pty Limited       * * TV Cable, S.R. Ltda    * *      * Other UAP        *
* Kabelkom Holding Company          * *  ("XYZ Entertainment")         25.0%* *  ("Tacna")       100.0%* *                         *
*  ("Kabelkom")(2)             50.0%* *Tahiti:                              * * Cable Star S.A.        * *China:                   *
*Ireland:(through UII               * * Telefenua S.A.                      * *  ("Cable Star")   99.2%* * Hunan International TV  *
*partnership(3)                     * *  ("Telefenua")(6)              90.0%* *Latin America           * *  Communications Company *
* Princes Holdings Ltd.             * *New Zealand:                         * *Programming:            * *  Limited ("HITV")  49.0%*
*  ("Princes Holdings")             * * Saturn Communications Limited       * * United Family          * *Philippines:             *
*Israel:(through UII                * *  ("Saturn")                    65.0%* *  Communications LLC    * * Sun Cable Systems       *
*partnership(3)                     * *                                     * *  ("UFC")          50.0%* *  ("Sun Cable")(8)  40.0%*
* Tevel Israel International        * *************************************** ************************** ***************************
*  Communications Ltd.("Tevel")23.3%*
*Malta:(through UII                 *
*partnership(3))                    *
* Melita Cable TV PLC               *
* ("Melita")                   25.0%*
*Netherlands:                       *
* A2000 Holding NV (Amsterdam)      *
*  ("A2000")                   50.0%*
* Kabeltelevisie Group              *
*  (Eindhoven)("KTE")         100.0%*
*Norway:                            *
* Janco Multicom AS                 *
*  ("Janco")(4)                87.3%*
*Romania:                           *
* Multicanal Holdings SRL           *
*  ("Multicanal")              90.0%*
* Control Cable Ventures SRL        *
*  ("Control Cable")          100.0%*
*Slovak Republic:                   *
* Trnavatel SRO ("Trnavatel")  75.0%*
* Slovatel SRO ("Kabel Tel")  100.0%*
*************************************
</TABLE>                                                          63
<PAGE>
                      UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1)  On December 11, 1997,  UIH through UIHE acquired the remaining 50% interest
     in  UPC  owned  by  several   subsidiaries  of  Philips   Electronics  N.V.
     (collectively,  "Philips"),  thereby making UPC an effectively wholly-owned
     subsidiary  (subject  to certain  employee  equity  incentive  compensation
     arrangements) (see Note 3).
(2)  UPC  has  a  50%  legal  ownership  in  Kabelkom,  which  is  reduced  by a
     preferential  claim by Time  Warner  Entertainment  Company  ("TWE")  to an
     economic ownership of 47.2%.
(3)  United  International  Investments  ("UII")  is  a  United  States  general
     partnership  between  UPC  and  Tele-Communications   International,   Inc.
     ("TINTA").  In April and May 1998, UPC signed  memorandums of understanding
     to acquire TINTA's  interests in Tevel and Melita,  and sell UPC's interest
     in Princes Holdings to TINTA (see Note 15).
(4)  In  November  1997,  UPC's  wholly-owned   subsidiary   Norkabelgruppen  AS
     ("Norkabel") merged with and into UPC's approximately 70%-owned subsidiary,
     Janco Kabel TV to form Janco, in which UPC holds an 87.3% interest. From an
     economic  perspective,  however,  UPC has all the rights and obligations of
     full ownership of Janco and UPC consolidates 100% of its financial results.
     UPC has the right to acquire,  and Janco's other  shareholder has the right
     to put to UPC,  the  remaining  interest  in Janco for a purchase  price of
     approximately $21,890.
(5)  UIH A/P holds an  effective  100%  economic  interest  in Austar  through a
     combination of ordinary and convertible debentures.
(6)  UIH A/P owns an effective  90% economic  interest in  Telefenua.  UIH A/P's
     economic  interest will decrease to 75% and 64% once UIH A/P has received a
     20%  and  40%  internal  rate  of  return  on  its  investment  in  Tahiti,
     respectively.
(7)  In January 1998,  UIH increased its ownership  interest in TVSB to 45%, and
     on April 15,  1998  exercised  its option to  purchase  the  remaining  55%
     interest in TVSB for approximately $12,000,  subject to receipt of required
     regulatory approvals.
(8)  UAP currently holds a convertible  loan,  which upon full conversion  would
     provide  UAP  with a 40%  equity  ownership  interest  in  the  Philippines
     operating  company.  In April 1998, Sun Cable and SkyCable ("Sky") formed a
     joint venture, which has become the second largest multiple system operator
     ("MSO") in the Philippines and the largest MSO outside Manila.  The Company
     holds an effective 19.6% interest in this joint venture, which is owned 49%
     by Sun Cable and 51% by Sky.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

PRINCIPLES OF CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
the Company and all subsidiaries  where it exercises majority control and owns a
majority  economic  interest,  except when the Company  has  temporary  majority
control.  The Company began  consolidating  UPC upon acquisition on December 11,
1997.  Prior to December 11, 1997,  the Company  accounted for its investment in
UPC under the equity method.  The Company began  consolidating  United  Wireless
effective  September 1, 1995.  Due to the Company's  acquisition of the majority
economic   interest  in  Austar  in  late  December   1995,  the  Company  began
consolidating  Austar's  balance  sheet  effective  December  31,  1995  and its
operations  effective January 1, 1996. The Company recognized equity losses from
its investment in Austar through  December 31, 1995. For the first six months of
the year ended  February 28, 1997,  the Company  accounted  for Saturn under the
equity  method.  The  Company  began  consolidating  the  operations  of  Saturn
effective July 1, 1996. In September 1996, UIH LA contributed  its  wholly-owned
subsidiaries  in Chile in  exchange  for a 34%  interest  in VTRH.  Prior to the
formation  of the  joint  venture,  the  Company  accounted  for  these  Chilean
investments under the equity method. For the first nine months of the year ended
February 28, 1998, the Company accounted for its investments in Comodoro, Trelew
and Santa Fe,  Argentina  under the  equity  method,  due to an  expected  joint
venture in Argentina.  This joint venture was abandoned due to the sale of these
interests  in  October  1997.   All   significant   intercompany   accounts  and
transactions  have been eliminated in  consolidation.  All affiliated  companies
have calendar  year-ends,  compared to the Company which has fiscal year-ends of


                                       64
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

February  28,  1998  ("Fiscal  1998"),  February  28, 1997  ("Fiscal  1997") and
February 29, 1996 ("Fiscal  1996").  The Company  records its share of equity in
income (losses) of affiliated companies or consolidates the affiliated companies
based on the affiliated companies' calendar year-end results.

CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

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

RESTRICTED CASH AND SHORT-TERM INVESTMENTS

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

COSTS TO BE REIMBURSED BY AFFILIATED COMPANIES

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

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

     For  those  investments  in  companies  in which  the  Company's  ownership
interest is 20% to 50%, its investments are held through a combination of voting
common stock, preferred stock, debentures or convertible debt and/or the Company
exerts  significant   influence  through  board  representation  and  management
authority,  or in which majority  control is deemed to be temporary,  the equity
method of  accounting is used.  Under this method,  the  investment,  originally
recorded at 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 contractual funding commitments.  The Company's proportionate share of net
earnings or losses of affiliates  includes the amortization of the excess of its
cost over its percentage interest in each affiliate's net tangible assets.

MARKETABLE  EQUITY   SECURITIES,   INCLUDING  OTHER  INVESTMENTS  IN  AFFILIATED
COMPANIES

     The cost method of accounting is used for the Company's  other  investments
in affiliated  companies in which the Company's  ownership interest is less than
20% and where the Company does not exert significant influence, except for those
investments  in  marketable  equity  securities.   The  Company  classifies  its
investments in marketable  equity  securities in which its interest is less than
20%  and  where  the   Company   does  not  exert   significant   influence   as
available-for-sale and reports such investments at fair market value. Unrealized
gains and losses are  charged or  credited  to equity,  and  realized  gains and
losses  and other  than  temporary  declines  in market  value are  included  in
operations.

PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment is stated at cost.  Additions,  replacements
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 are  depreciated
using the straight-line method over estimated useful lives of three years.  Upon
disconnection  of a  subscriber,  the  remaining  book  value of the  subscriber
equipment, excluding converters which are recovered upon disconnection,  and the
capitalized  labor are written off and accounted for as additional  depreciation
expense.  Multi-channel  multi-point  distribution systems ("MMDS") distribution
facilities and cable  distribution  networks are depreciated using the straight-
line method over estimated useful lives of five to ten years.  Office equipment,
furniture and fixtures,  buildings and leasehold  improvements  are  depreciated
using the  straight-line  method  over  estimated  useful  lives of three to ten
years.

     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.

                                       65
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

GOODWILL AND OTHER INTANGIBLE ASSETS

     The  excess  of  investments  in  consolidated  subsidiaries  over  the net
tangible asset value at acquisition is amortized on a  straight-line  basis over
15 to 20 years.  The  acquisition  of licenses  has been  recorded at cost,  and
amortization expense is computed using the straight-line method over the term of
the license.

RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS

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

DEFERRED FINANCING COSTS

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

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,  with
the remainder  deferred and amortized over the average subscriber period. To the
extent  installation  fees exceed  direct  selling  costs,  the excess  would be
deferred and amortized over the average contract period.

CONCENTRATION OF CREDIT RISK

     Financial   instruments   which   potentially   subject   the   Company  to
concentrations of credit risk consist  principally of temporary cash investments
and trade  receivables.  The Company places its temporary cash  investments with
high credit  quality  financial  institutions  which  invest  primarily  in U.S.
government  instruments,  commercial  paper of prime  quality,  certificates  of
deposit  and  bankers  acceptances  guaranteed  by  banks  or  savings  and loan
associations  which are members of the FDIC.  Concentrations of credit risk with
respect to trade  receivables  are limited due to the Company's  large number of
customers and their dispersion across many different countries worldwide.

STOCK-BASED COMPENSATION

     Stock-based  compensation  is recognized  using the intrinsic value method.
For disclosure  purposes,  pro-forma net loss and loss per share are provided as
if the fair value method had been applied.

INCOME TAXES

     The Company  accounts for income taxes under the asset and liability method
which  requires  recognition  of  deferred  tax assets and  liabilities  for the
expected future income tax consequences of transactions which have been included
in the  financial  statements  or tax returns.  Under this method,  deferred tax
assets and  liabilities  are  determined  based on the  difference  between  the
financial  statement  and  income  tax  basis of  assets,  liabilities  and loss
carryforwards  using  enacted  tax  rates in  effect  for the year in which  the
differences are expected to reverse. Net deferred tax assets are then reduced by
a valuation  allowance if management  believes it more likely than not they will
not be realized.

STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY

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

BASIC AND DILUTED LOSS PER SHARE

     The Company has adopted  Statement of Financial  Accounting  Standards  No.
128,  "Earnings Per Share" ("SFAS 128").  The adoption of SFAS 128 had no effect
on the  Company's  previously-reported  primary loss per share.  "Basic loss per
share" is determined by dividing net loss  available to common  shareholders  by
the weighted-average number of common shares outstanding during each period. Net
loss  available  to common  shareholders  includes  the accrual of  dividends on
convertible  preferred  stock which are charged  directly to additional  paid-in
capital.  "Diluted  earnings  per share"  includes  the  effects of  potentially

                                       66
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

issuable common stock, but only if dilutive.  Because of reported losses,  there
are no  differences  between  basic and diluted  loss per share  amounts for the
Company for any of the years presented.

FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK

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

     Cash  flows  from  the  Company's   operations  in  foreign  countries  are
translated 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.

     Certain of the Company's foreign operating companies have notes payable and
notes  receivable that are denominated in, and loans payable that are linked to,
a currency other than their own functional currency. 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  and
equity  with  respect to its  holdings  solely as a result of  foreign  currency
exchange rate fluctuations,  which include foreign currency devaluations against
the dollar.

NEW ACCOUNTING PRINCIPLES

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
130"),  which is required to be adopted by affected  companies  for fiscal years
beginning  after  December 15, 1997.  SFAS 130 requires that an  enterprise  (i)
classify  items of other  comprehensive  income by their  nature in a  financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained  earnings and additional  paid-in capital in the equity
section  of a  statement  of  financial  position.  Other  comprehensive  income
includes cumulative  translation  adjustments and unrealized gains and losses on
available-for-sale securities.

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information"  ("SFAS 131"), which requires that a public
business  enterprise report certain financial and descriptive  information about
its reportable segments.  The Company plans to adopt SFAS 131 for the year ended
February 28, 1999.

     The American  Institute of Certified  Public  Accountants  recently  issued
Statement  of Position  98-5,  "Reporting  on the Costs of Start-Up  Activities"
("SOP 98-5"),  which is required to be adopted by affected  companies for fiscal
years  beginning  after  December  15,  1998.  SOP  98-5  defines  start-up  and
organization  costs,  which must be  expensed  as  incurred.  In  addition,  all
deferred start-up and organization  costs existing as of January 1, 1999 must be
written-off and accounted for as a cumulative effect of an accounting change.

RECLASSIFICATIONS

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

3.   ACQUISITIONS AND DISPOSITIONS

UPC

     In  July  1995,  the  Company  and  Philips  contributed  their  respective
ownership interests in European and Israeli multi-channel  television systems to
UPC. Philips  contributed to UPC its 95% interest in cable television systems in

                                       67
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Austria,  its 100% interest in cable television systems in Belgium, its minority
interests  in  multi-channel  television  systems in  Germany,  the  Netherlands
(Eindhoven) and France.  The Company  contributed its interests in multi-channel
television  systems in  Israel,  Ireland,  the Czech  Republic,  Malta,  Norway,
Hungary,  Sweden and Spain. The Company also contributed  $78,200 in cash to UPC
and issued to Philips 3.17  million  shares of its Class A Common Stock having a
value of  $50,000  (at date of  closing).  In  addition,  UPC  issued to Philips
$133,600 of convertible  subordinated  pay-in-kind notes (the "PIK Notes"). As a
result of this  transaction,  the Company and Philips  each owned a 50% economic
and voting interest in UPC.

     On December 11, 1997, the Company acquired  Philips' entire interest in UPC
(the "UPC Transaction").  As part of the UPC Transaction, (i) UPC purchased 3.17
million shares of Class A Common Stock of the Company held by Philips,  (ii) UIH
purchased  part of the accreted  amount of UPC's PIK Notes and redeemed them for
shares of UPC, (iii) UPC repaid to Philips the remaining  accreted amount of the
PIK Notes,  (iv) UPC  repurchased  Philips'  interest in UPC and (v) the Company
made a payment to UPC,  with UPC in turn  making a payment to Philips in lieu of
the issuance of a stock appreciation right by UPC. The Company  effectively owns
100% of UPC as a result of the UPC  Transaction,  except  for  shares  held by a
foundation  benefiting  UPC employees and  management,  pursuant to UPC's equity
incentive plans. The final purchase price (excluding  transaction-related costs)
was  $425,200,  comprised  of  $168,700  for the  purchase  by the  Company  and
repayment by UPC of UPC's PIK Notes, $33,200 allocated to the purchase by UPC of
3.17 million shares of the Company's Class A Common Stock and $223,300 allocated
to the purchase of Philips' interest in UPC. The UPC Transaction was funded by a
long-term  revolving  credit facility through UPC with a syndicate of banks (the
"Tranche A Facility") ($151,500), a bridge bank facility through a subsidiary of
UPC (the "Tranche B Facility")  ($111,200) and a cash  investment by the Company
of  $162,500.  The  maximum  amount  available  under the  Tranche A Facility is
approximately  Dutch  guilders  ("NLG")1,100,000  ($544,600  as of December  31,
1997), of which approximately  NLG479,000 ($237,100 as of December 31, 1997) was
used to repay existing debt of UPC in conjunction with the UPC Transaction.

     Details of the net assets  acquired,  based on a preliminary  allocation of
the purchase price,  which were  denominated in Dutch guilders and translated to
U.S.  dollars  using  the  exchange  rate on the  date of  acquisition,  were as
follows:
<TABLE>
<CAPTION>
     <S>                                                                                          <C>   
     Working capital, including cash acquired of $50,872......................................... $  (7,158)
     Investment in UIH Class A Common Stock......................................................   (33,074)
     Investments in affiliated companies.........................................................  (167,945)
     Property, plant and equipment and other long-term assets....................................  (273,988)
     Goodwill and other intangible assets........................................................  (383,503)
     Elimination of UIH equity investment........................................................    46,319 
     Long-term debt..............................................................................   624,633 
     Other liabilities...........................................................................    32,216 
                                                                                                   --------
         Total cash paid......................................................................... $(162,500)
                                                                                                  =========
</TABLE>

     The Company  invested  approximately  $163,254,  $0 and  $151,693  into UPC
during fiscal 1998,  1997 and 1996,  respectively.  As of February 28, 1998, the
Company's cumulative investment in UPC totaled approximately $314,947.

JANCO

     UPC deposited  NLG47,000 with a bank as collateral  against the purchase of
the minority  shareholding in Janco in 2001.  Including  accrued  interest,  the
deposit totaled $23,978 as of December 31, 1997, and is classified as restricted
cash in other non-current assets.


                                       68
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ARGENTINA

     In October 1996, the Company  acquired 100% of two cable systems and 80% of
a third  system,  serving  the  cities  of Bahia  Blanca  and  Punta  Alta,  for
approximately $52,520. Under terms of the agreements, the Company had the option
to acquire,  or could have been  required to purchase,  the remaining 20% of the
third  system  between  April 24,  1998 and October  31,  1998.  The Company had
accrued $4,406  related to this option.  The Company paid $26,382 in cash at the
date of acquisition, with the remaining $26,138 to be paid over the following 18
months. Details of the net assets acquired,  which were denominated in Argentine
pesos and  translated  to U.S.  dollars  using the exchange  rate on the date of
acquisition, were as follows:

     Tangible assets................................................   $ (4,051)
     Goodwill.......................................................    (63,464)
     Cash...........................................................        (97)
     Other..........................................................     (5,958)
     Accounts payable and accrued liabilities.......................     20,807
     Notes payable..................................................        243
                                                                       --------
                                                                        (52,520)
     Less purchase money notes......................................     26,138
                                                                       --------
         Total cash paid............................................   $(26,382)
                                                                       ========

     In April 1997, UIH LA acquired 100% of multi-channel  television systems in
Comodoro and Trelew,  Argentina for a total purchase price of $27,900,  of which
$13,900  was paid at closing  and the  remaining  $14,000  was due in 18 monthly
installments beginning May 1997. Also in April 1997, UIH LA agreed to acquire up
to an 80% equity  interest in the  multi-channel  television  systems located in
Santa Fe, Parana and Galvez, Argentina for a total purchase price of $59,000. In
April 1997, UIH LA closed the acquisition of the first 31% equity interest for a
total  purchase  price of  $23,000  and paid a $2,000  deposit  to  acquire  the
additional  38% equity  interest by July 15, 1997 and the  additional 11% equity
interest  by the end of July  1997.  The  total  purchase  price was paid 50% at
closing  and the  balance was to be paid in monthly  installments  through  June
2000.

     In  October  1997,  the  Company  completed  the  sale of all of its  cable
television assets in Argentina, including the regions of Bahia Blanca, Comodoro,
Trelew  and Santa Fe (the  "Argentina  Transaction").  The sale  price for Bahia
Blanca,  Comodoro,  Trelew  and Santa Fe  collectively  was  $268,200,  of which
$25,300  consisted of remaining  purchase  money notes  payable to sellers which
were  assumed by the buyers from the  Company's  original  acquisition  of Bahia
Blanca in October  1996 and  Comodoro,  Trelew and Santa Fe in April 1997.  From
this net sales price of  $242,900,  $29,600  was paid  directly by the buyers to
other minority interest  shareholders,  resulting in net proceeds to the Company
of approximately  $211,125. The payment was received in full in cash, except for
an amount placed in escrow, subject to finalization of post-closing adjustments.
The Company recognized a gain on the transaction of $90,020.  Under the terms of
its lending  arrangements  with a group of banks,  the  Company  repaid from the
proceeds of the sale all of its outstanding  indebtedness  under its bridge loan
facility totaling $110,000 plus accrued interest.

TARA

     In October  1997,  Tara  issued  shares to third  parties in  exchange  for
consideration  totaling $2,476,  thereby diluting the Company's interest in Tara
from 100% to 75%. A gain of $1,629 recognized on the transaction was credited to
additional paid-in capital in accordance with SAB 51.

NET SAO PAULO

     During  the year  ended  February  28,  1994,  the  Company  acquired a 20%
interest in  Cabodinamica  TV Cabo Sao Paulo S.A. ("Net Sao Paulo").  During the
year ended  February 28,  1995,  through a series of  transactions,  the Company
increased  its  ownership  to 34%.  In August  1996,  the  Company  sold its 34%
interest  in Net Sao Paulo for  $43,098  in cash and a $35,000  note  receivable
which was collected during Fiscal 1997. The Company recognized a gain of $65,249
on the transaction.

                                       69
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STX, CABLEVISION AND VTRH

     In June 1995, UIH LA completed an acquisition of 65% of Red de Television y
Servicios  por Cable S.A.  ("STX"),  a Chilean  company which owned and operated
eight  cable  television  systems in  Northern  Chile.  The  purchase  price was
$25,918. In June 1996, UIH LA acquired the remaining 35% of STX for $24,000. The
Company acquired an initial 50% interest in Cablevision S.A.  ("Cablevision") in
January 1994 for $3,900.  In January  1996,  UIH LA increased  its  ownership in
Cablevision to 100% for approximately  $22,100. UIH LA contributed its interests
in STX and Cablevision in exchange for a 34% interest in VTRH in September 1996.
Prior to the formation of VTRH,  the Company  accounted for its  investments  in
Cablevision and STX under the equity method.

     UIH LA is currently involved in a revaluation of the properties contributed
to VTRH,  which may result in a reallocation of interests.  Management  believes
its  interest  in VTRH will  increase  as a result of the  revaluation  process.
Pursuant  to the  terms of a loan  agreement,  VTRH is  prohibited  from  paying
dividends or otherwise disposing of its shares.

AUSTAR

     The Company  acquired,  through directly and indirectly held interests,  an
effective  50% economic  interest in the two companies  that comprise  Austar in
1994. In December 1995, the Company increased its effective economic interest in
Austar to 90%. The Company paid $15,240 in cash and issued 170,513 shares of its
convertible  preferred stock having an initial  liquidation 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, were 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)
                                                                        -------
         Net assets.................................................        290
     Goodwill.......................................................     44,790
                                                                        -------
         Total consideration........................................    $45,080
                                                                        =======

     In May 1996, the Company  increased its economic  interest in Austar to 94%
which was  subsequently  increased to 96%. In October 1996, the Company acquired
the remaining 4% economic interest in Austar for $7,920. The Company's ownership
interests  are  comprised  of  direct  and  indirect   holdings  of  convertible
debentures and ordinary  shares of CTV and STV. The Company began  consolidating
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.

     The Company  invested  approximately  $53,009,  $161,375  and $50,848  into
Austar during Fiscal 1998, 1997 and 1996, respectively. As of February 28, 1998,
the Company's cumulative investment in Austar, including amounts paid to acquire
interests from other shareholders, totaled approximately $284,935.

SATURN

     In July 1994,  the Company  acquired a 50% interest in Kiwi  Communications
Limited, which subsequently 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 UIH A/P which was valued
at  approximately   $7,800.  The  holder  of  this  2.6%  interest  in  UIH  A/P
subsequently  exchanged  it for a 2% interest in UAP.  Details of the net assets

                                       70
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

acquired,  which were  determined in New Zealand  dollars and translated to U.S.
dollars using the exchange rate on the day of the acquisition, were 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)
                                                                         ------
         Net assets...................................................     (973)
     Goodwill.........................................................    8,773
                                                                         ------
         Total consideration..........................................   $7,800
                                                                         ======

     In July 1997, SaskTel Holdings (New Zealand),  Inc. ("SaskTel") purchased a
35% equity  interest in Saturn by investing  approximately  New Zealand  $29,900
($19,566) directly into Saturn for its newly-issued shares, thereby reducing the
Company's  equity interest in Saturn to 65%. A gain of $5,985  recognized on the
transaction  was credited to additional  paid-in  capital in accordance with SAB
51. As of February 28,  1998,  the  Company's  cumulative  investment  in Saturn
totaled approximately $42,161.

TELEFENUA

     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 to the  Company  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 acquisition, were as follows:

     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 consolidated  revenues,  expenses and
net loss after intercompany eliminations related to Telefenua for the year ended
December 31, 1995 totaled $1,882, $5,438 and $3,556, respectively.

     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.  Since March 1995,  Telefenua  has  operated  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 Societe Francaise
des  Communications  et du Cable  S.A.  ("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.

     As of February 28, 1998, the Company's  cumulative  investment in Telefenua
totaled approximately $16,738. The Company is currently evaluating the potential
sale of its interest in Telefenua.

     The  territorial  government  of Tahiti (in French  Polynesia)  has legally
challenged  the decree and authority of the Conseil  Superieur de  l'Audiovisuel
("CSA") to award  Telefenua  the  authorizations  to operate an MMDS  service 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. There can be no assurance that if the existing authorization is nullified
a new  authorization  will be  obtained.  If  Telefenua  does  not  obtain a new
authorization,   there  is  no  assurance   that   Telefenua  will  receive  any
restitution.  In addition,  any available restitution could be limited and could
take years to obtain.

                                       71
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

XYZ ENTERTAINMENT

     In  October  1994,  the  Company  and  Century  Communications  Corporation
("Century")  formed  XYZ  Entertainment,   an  Australian   proprietary  company
incorporated  in New South Wales.  In June 1995,  the Company and Century formed
the  50/50  joint  venture  Century  United  Programming  Ventures  Pty  Limited
("CUPV"),  an  Australian   corporation,   to  hold  their  investments  in  XYZ
Entertainment.  In September 1995, a 50% interest in XYZ  Entertainment was sold
to a third  party,  thereby  diluting  the  Company's  indirect  interest in XYZ
Entertainment to 25%. UIH A/P recognized a gain on the sale of $4,132.

TV-CABO RIO TELECOMUNICACOES, S.A.

     In January  1996,  the Company  completed the sale of its 25% interest in a
company that held multi-channel  television licenses for Rio de Janeiro,  Brazil
for  approximately  $13,500.  The Company had invested a total of  approximately
$1,619  in  this  company  prior  to the  sale,  resulting  in a gain on sale of
approximately $11,881.

MEGAPO

     In June 1995, the Company completed its acquisition of Megapo.  The Company
advanced  Megapo $12,000 as of February 28, 1995,  which was converted to equity
at  closing  and  paid an  additional  $19,600  (for a total  purchase  price of
$31,600) for a 49% interest in four operating  subsidiaries and a 39.2% interest
in a fifth operating subsidiary of Megapo.

PRO FORMA FINANCIAL INFORMATION, FISCAL 1998, FISCAL 1997 AND FISCAL 1996

     The following unaudited pro forma condensed  consolidated operating results
for  the  years  ended  February  28,  1998  and  1997  give  effect  to the UPC
Transaction  and the  Argentina  Transaction  as if  each  had  occurred  at the
beginning  of the  periods  presented.  This pro  forma  condensed  consolidated
financial  information  and notes  thereto do not purport to represent  what the
Company's  results of operations  would actually have been if such  transactions
had in fact  occurred on such dates.  The pro forma  adjustments  are based upon
currently  available  information and upon certain  assumptions  that management
believes are reasonable.
<TABLE>
<CAPTION>
                                                                 For the Year Ended                For the Year Ended
                                                                  February 28, 1998                 February 28, 1997
                                                             --------------------------       --------------------------
                                                             Historical    Pro Forma(1)       Historical    Pro Forma(2)
                                                             ----------    ------------       ----------    ------------     
     <S>                                                     <C>            <C>               <C>            <C>
     Total revenue.........................................  $  98,622      $ 244,394         $  31,555      $ 172,246
                                                             =========      =========         =========      =========
     Net operating loss....................................  $(150,021)     $(178,902)        $ (87,677)     $(105,827)
                                                             =========      =========         =========      =========
     Net loss before extraordinary charge..................  $(263,441)     $(395,723)        $(138,825)     $(182,569)
                                                             =========      =========         =========      =========
     Net loss..............................................  $(342,532)     $(474,814)        $(138,825)     $(182,569)
                                                             =========      =========         =========      =========
     Net loss per common share:
       Basic and diluted loss before extraordinary charge..  $   (6.75)     $  (11.02)        $   (3.59)     $   (5.12)
       Extraordinary charge................................      (2.02)         (2.19)               --             --
                                                             ---------      ---------         ---------      ---------
       Basic and diluted net loss..........................  $   (8.77)     $  (13.21)        $   (3.59)     $   (5.12)
                                                             =========      =========         =========      =========
     Weighted-average number of shares outstanding.........  39,211,501     36,042,350        39,035,776     35,866,625
                                                             ==========     ==========        ==========     ==========
</TABLE>
     (1) Represents  elimination of historical  statement of operations balances
         for the Argentina  systems and  elimination of the gain recorded on the
         Argentina  Transaction,  as well as inclusion of the historical amounts
         included in UPC's  consolidated  statement of operations for the period
         from January 1, 1997 to December 10, 1997, additional  depreciation and
         amortization  related to the  step-up in basis in  tangible  assets and
         additional goodwill, the net decrease in equity in losses of affiliated
         companies,  and the net increase in interest expense as a result of the
         UPC Transaction.
     (2) Represents  elimination of historical  statement of operations balances
         for Bahia Blanca for the year ended December 31, 1996, and inclusion of
         the  historical  amounts  included in UPC's  consolidated  statement of
         operations   for  the  year  ended   December  31,   1996,   additional
         depreciation  and  amortization  related  to the  step-up  in  basis in
         tangible assets and additional goodwill,  the net decrease in equity in
         losses  of  affiliated  companies,  and the net  increase  in  interest
         expense as a result of the UPC Transaction.

     The following unaudited pro forma condensed  consolidated operating results
for the years ended  February  28, 1997 and February 29, 1996 give effect to the

                                       72
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

disposition  of the 34% interest in Net Sao Paulo,  as if it had occurred at the
beginning  of the  periods  presented.  This pro  forma  condensed  consolidated
financial  information  and notes  thereto do not purport to represent  what the
Company's results of operations would actually have been if such transaction had
in fact  occurred  on such  dates.  The pro forma  adjustments  are  based  upon
currently  available  information and upon certain  assumptions  that management
believes are reasonable.
<TABLE>
<CAPTION>
                                                                 For the Year Ended               For the Year Ended
                                                                  February 28, 1997                February 29, 1996
                                                             ---------------------------       ---------------------------
                                                             Historical     Pro Forma(1)       Historical     Pro Forma(2)
                                                             ----------     ------------       ----------     ------------
     <S>                                                     <C>             <C>               <C>              <C>
     Total revenue.........................................  $  31,555       $  31,555         $  2,870         $  2,870
                                                             =========       =========         ========         ========
     Net operating loss....................................  $ (87,677)      $ (87,677)        $(26,168)        $(26,168)
                                                             =========       =========         ========         ========
     Net loss..............................................  $(138,825)      $(202,285)        $(91,311)        $(85,474)
                                                             =========       =========         ========         ========
     Basic and diluted net loss per common share...........  $   (3.59)      $   (5.21)        $  (2.69)        $  (2.52)
                                                             =========       =========         ========         ========
     Weighted-average number of shares outstanding.........  39,035,776      39,035,776        34,017,660       34,017,660
                                                             ==========      ==========        ==========       ==========
</TABLE>
     (1)  Represents  elimination of historical statement of operations balances
          related to Net Sao Paulo and elimination of the gain recorded on sale.
     (2)  Represents  elimination of historical statement of operations balances
          related to Net Sao Paulo.
     
     The following  unaudited pro forma  information for the year ended February
29, 1996 gives effect to the acquisition of the additional 40% economic interest
in Austar,  the  acquisition of the additional 50% economic  interest in Saturn,
the acquisition of United  Wireless,  the disposition of the 25% interest in XYZ
Entertainment,  the  acquisition of the 65% interest in STX, the  acquisition of
the 49% interest in Megapo and the  formation of UPC and UPC's  acquisitions  of
interests  in systems in  Amsterdam  and  Eindhoven  as if each had  occurred on
January 1, 1995. The pro forma condensed consolidated financial information does
not purport to represent what the Company's results of operations would actually
have been if such  transactions had in fact occurred on such date. The pro forma
adjustments  are based upon  currently  available  information  and upon certain
assumptions that management believes are reasonable.
<TABLE>
<CAPTION>
                                                                                                  For the Year Ended
                                                                                                   February 29, 1996
                                                                                              -------------------------
                                                                                              Historical      Pro Forma
                                                                                              ----------      ---------
     <S>                                                                                      <C>             <C> 
     Total revenue..........................................................................  $  2,870        $   2,770
                                                                                              ========        =========
     Net operating loss.....................................................................  $(26,168)       $ (41,753)
                                                                                              ========        =========
     Net loss...............................................................................  $(91,311)       $(104,338)
                                                                                              ========        =========
     Basic and diluted net loss per common share............................................  $  (2.69)       $   (2.97)
                                                                                              ========        =========
     Weighted-average number of shares outstanding..........................................  34,017,660      35,181,129
                                                                                              ==========      ==========
</TABLE>

4.   CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
                                                                  As of February 28, 1998
                                              ----------------------------------------------------------------
                                                                    Restricted
                                                                     Cash and
                                              Cash and Cash         Short-Term       Short-Term
                                               Equivalents          Investments      Investments      Total
                                              -------------         -----------      -----------     --------
     <S>                                        <C>                   <C>              <C>           <C> 
     Cash...............................        $ 72,054              $16,524          $    --       $ 88,578
     Certificates of deposit............              --                   --            8,399          8,399
     Commercial paper...................         214,609                   --            3,926        218,535
     Corporate bonds....................          16,778                   --           16,506         33,284
     Government securities..............              --                4,426            4,900          9,326
                                                --------              -------          -------       --------
         Total..........................        $303,441              $20,950          $33,731       $358,122
                                                ========              =======          =======       ========
</TABLE>
                                       73
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
                                                                 As of  February 28, 1997
                                               ---------------------------------------------------------------
                                                                    Restricted
                                                                     Cash and
                                               Cash and Cash        Short-Term       Short-Term
                                                Equivalents         Investments     Investments       Total
                                               -------------        -----------     -----------      --------
     <S>                                         <C>                  <C>             <C>            <C>
     Cash...............................         $13,860              $   --          $    --        $ 13,860
     Commercial paper...................          43,365                  --            2,000          45,365
     Corporate bonds....................           5,151                  --           40,080          45,231
     Government securities..............           6,408               1,600           28,279          36,287
                                                 -------              ------          -------        --------
         Total..........................         $68,784              $1,600          $70,359        $140,743
                                                 =======              ======          =======        ========
</TABLE>

5.  INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
    EQUITY METHOD
<TABLE>
<CAPTION>

                                                                  As of February 28, 1998
                                   --------------------------------------------- ---------------------------------------------
                                      Investments in           Cumulative Equity       Cumulative
                                      and Advances to        in Income (Losses) of     Translation    Valuation
                                   Affiliated Companies      Affiliated Companies      Adjustments    Allowance        Total
                                   --------------------      ---------------------     -----------    ---------       --------
<S>                                      <C>                     <C>                     <C>            <C>           <C>
Europe
------
   UII(1).......................         $ 50,069                $    (32)              $     --        $ --          $ 50,037
   Kabelkom(1)..................           30,221                     124                     --          --            30,345
   Kabel Net(1).................              619                      --                     --          --               619
   A2000(1).....................           85,898                    (287)                    --          --            85,611
   Other, net(1)................            1,138                      --                     --          --             1,138
   Monor........................           27,682                 (13,161)                (6,256)         --             8,265
   IPS.........................            13,920                  (7,261)                   (95)         --             6,564

Asia/Pacific
------------
   XYZ Entertainment(2).........           18,610                 (18,720)                   110          --                --
   Sun Cable....................           12,336                  (1,023)                (2,783)         --             8,530
   HITV.........................            6,073                    (236)                     7          --             5,844
  
Latin America
-------------
   VTRH.........................           92,754                 (10,327)                (4,262)         --            78,165
   Megapo.......................           31,248                  (1,313)                (1,604)         --            28,331
   UFC..........................           12,099                  (7,487)                    --          --             4,612
   TVSB.........................            8,100                  (3,770)                    --          --             4,330
   Jundiai......................            6,652                    (788)                    --          --             5,864

Other...........................              182                      --                     --          --               182
-----                                    --------                --------               --------        ----          --------
                                         $397,601                $(64,281)              $(14,883)       $ --          $318,437
                                         ========                ========               ========        ====          ========
</TABLE>

(1)  Represents the net amount  acquired in the UPC  Transaction on December 11,
     1997.
(2)  Includes an accrued  funding  obligation of $406 at December 31, 1997.  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 requested fundings.

                                       74
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
                                                                   As of February 28, 1997
                                    -------------------------------------------------------------------------------------------
                                       Investments in           Cumulative Equity       Cumulative
                                       and Advances to        in Income (Losses) of     Translation    Valuation
                                    Affiliated Companies      Affiliated Companies      Adjustments    Allowance         Total
                                    --------------------      ---------------------     -----------    ---------       --------
<S>                                       <C>                       <C>                  <C>            <C>            <C>
Europe
------
   UPC..........................          $150,442                  $(40,224)            $(11,044)      $    --        $ 99,174
   Monor........................            27,182                    (8,221)              (4,575)           --          14,386
   IPS..........................            11,187                    (4,734)                  --            --           6,453

Asia/Pacific
------------
   XYZ Entertainment(1).........            16,202                   (16,312)                 110            --              --
   Sun Cable....................             9,748                      (366)                 155            --           9,537
   HITV.........................             6,073                       (16)                  --            --           6,057

Latin America
-------------
   VTRH.........................            82,010                    (2,122)              (1,502)           --          78,386
   Megapo.......................            32,491                      (727)              (1,420)           --          30,344
   TVSB.........................             6,132                    (2,860)                  --            --           3,272
   Jundiai......................             4,984                    (1,214)                  --            --           3,770
   UFC..........................             1,739                       (10)                  --            --           1,729

Other............................            3,119                    (1,051)                  --        (2,068)             --
-----                                     --------                  --------             --------       -------        --------
                                          $351,309                  $(77,857)            $(18,276)      $(2,068)       $253,108
                                          ========                  ========             ========       =======        ========
</TABLE>

(1)  Includes an accrued funding  obligation of $1,270 at December 31, 1996. 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 requested fundings.

     As of February 28, 1998 and 1997, the Company had the following differences
related to the excess of cost over the net tangible assets acquired  included in
the above table. Such differences are being amortized over 15 years.
<TABLE>
<CAPTION>
                                                     As of February 28, 1998             As of February 28, 1997
                                                  ----------------------------        -----------------------------
                                                    Basis         Accumulated           Basis          Accumulated
                                                  Difference      Amortization        Difference       Amortization
                                                  ----------      ------------        ----------       ------------
<S>                                                <C>             <C>                 <C>               <C> 
Europe
------
   A2000....................................       $ 90,898        $    --             $    --           $    --
   UII......................................         31,054             --                  --                --
   Kabelkom.................................         20,509             --                  --                --
   UPC......................................             --             --              25,588            (3,218)
   Monor....................................          3,838         (1,125)              3,959              (837)
   IPS......................................            651            (53)                115               (10)

Latin America
-------------
   VTRH.....................................         11,368         (1,211)             17,505              (363)
   Megapo...................................         21,528         (4,307)             23,661            (2,583)
   TVSB.....................................          2,361           (895)              2,953              (680)
   Jundiai..................................            540           (172)                393               (87)
   UFC......................................            439            (63)                439               (10)
                                                   --------        -------             -------           -------
     Total..................................       $183,186        $(7,826)            $74,613           $(7,788)
                                                   ========        =======             =======           =======
</TABLE>

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

                                       75
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

UPC

     In July 1995,  the  Company and  affiliates  of Philips  contributed  their
respective ownership interests in European and Israeli multi-channel  television
systems,  related programming services and European multi-channel television and
programming  development  opportunities  to form UPC. On December 11, 1997,  the
Company acquired Philips'  remaining 50% interest in UPC (see Note 3). Condensed
financial information for UPC, stated in U.S. dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                         As of
                                                                                                   December 31, 1996
                                                                                                   -----------------
     <S>                                                                                               <C> 
     Cash........................................................................................      $ 24,487
     Property, plant and equipment, net..........................................................       238,179
     Intangible assets, net......................................................................       267,029
     Other assets................................................................................       123,261
                                                                                                       --------
         Total assets............................................................................      $652,956
                                                                                                       ========

     Accounts payable and accrued liabilities....................................................      $356,421
     Notes payable...............................................................................       147,234
     Minority interest...........................................................................         2,616
     Shareholders' equity........................................................................       146,685
                                                                                                       --------
         Total liabilities and shareholders' equity..............................................      $652,956
                                                                                                       ========
</TABLE>
<TABLE>
<CAPTION>
                                                         For the Period from                                    From Inception
                                                       January 1, 1997 through      For the Year Ended     (July 13, 1995) through
                                                          December 10, 1997          December 31, 1996        December 31, 1995
                                                       -----------------------      ------------------     -----------------------
     <S>                                                      <C>                       <C>                       <C>
     Revenue.........................................         $163,399                  $140,827                  $ 62,300
     Operating, selling, general and administrative
       expense.......................................         (109,993)                  (91,501)                  (41,308)
     Depreciation and amortization...................          (72,383)                  (53,211)                  (26,259)
                                                              --------                  --------                  --------
         Net operating loss..........................          (18,977)                   (3,885)                   (5,267)
     Interest, net...................................          (53,176)                  (32,655)                  (10,476)
     Equity in income (losses) of investee companies,
       net...........................................           1,643                     (5,458)                  (10,062)
     Other...........................................          (10,226)                   (1,560)                      (23)
                                                              --------                  --------                  --------
         Net loss....................................         $(80,736)                 $(43,558)                 $(25,828)
                                                              ========                  ========                  ========
</TABLE>

MONOR

     In September  1994,  the Company  acquired a 47.6% (which was  subsequently
increased  to 48.6%)  net  equity  interest  in Monor  which  indirectly  owns a
controlling  interest in a  local-loop  telephony  concession  for the region of
Monor,  Hungary.  Condensed  consolidated  income  statement data,  derived from
audited  consolidated  financial statements for Monor and its subsidiaries which
were audited by Coopers & Lybrand LLP, stated in U.S. dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                              <C> 
     Revenue.................................................................................         $ 5,508
     Operating, selling, general and administrative expense..................................          (6,179)
     Depreciation and amortization...........................................................          (2,851)
                                                                                                      -------
         Net operating loss..................................................................          (3,522)
     Interest, net...........................................................................            (835)
     Foreign currency loss...................................................................          (5,408)
     Other...................................................................................             463
                                                                                                      -------
         Net loss............................................................................         $(9,302)
                                                                                                      =======
</TABLE>
                                       76

<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

CTV

     In September  1994, the Company began to fund its 40% economic  interest in
CTV, an Australian  company that holds MMDS  licenses in Australia.  The Company
then  acquired  an  additional  10%  economic   interest  in  CTV  from  another
shareholder  for $5,613.  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 CTV since December 31, 1995 (see Note
3).  Condensed  consolidated  income  statement  data  for CTV,  stated  in U.S.
dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------ 
     <S>                                                                                              <C> 
     Revenue.................................................................................         $   433
     Operating, selling, general and administrative expense..................................          (4,804)
     Depreciation and amortization...........................................................          (1,113)
                                                                                                      -------
         Net operating loss..................................................................          (5,484)
     Interest, net...........................................................................             914
     Other...................................................................................             245
                                                                                                      -------
         Net loss............................................................................         $(4,325)
                                                                                                      =======
</TABLE>

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  STV since December 31, 1995 (see Note 3).  Condensed  consolidated
income statement data for STV, stated in U.S. dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                              <C>
     Revenue.................................................................................         $    10
     Operating, selling, general and administrative expense..................................          (2,670)
     Depreciation and amortization...........................................................            (158)
                                                                                                      -------
         Net operating loss..................................................................          (2,818)
     Interest, net...........................................................................             315
                                                                                                      -------
         Net loss............................................................................         $(2,503)
                                                                                                      =======
</TABLE>

XYZ ENTERTAINMENT

     In October  1994,  the  Company and Century  formed XYZ  Entertainment,  an
Australian  proprietary  company  incorporated in New South Wales. In June 1995,
the Company and Century  formed a 50/50 joint venture to hold their  investments
in XYZ Entertainment. In September 1995, a 50% interest in XYZ Entertainment was
sold to a third party,  thereby diluting the Company's  indirect interest in XYZ
Entertainment  to 25%.  Condensed  consolidated  income  statement  data for XYZ
Entertainment stated in U.S. dollars, which is derived from financial statements
audited by Deloitte Touche Tohmatsu, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                             <C>
     Revenue.................................................................................        $  1,266
     Operating, selling, general and administrative expense..................................         (27,511)
     Depreciation and amortization...........................................................          (2,662)
                                                                                                     --------
         Net operating loss..................................................................         (28,907)
     Interest, net...........................................................................             145
                                                                                                     --------
         Net loss............................................................................        $(28,762)
                                                                                                     ========
</TABLE>
                                       77
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NET SAO PAULO

     During fiscal 1994,  the Company  acquired a 20% interest in Net Sao Paulo.
During fiscal 1995, through a series of transactions,  the Company increased its
ownership to 34%. Condensed consolidated income statement data for Net Sao Paulo
derived from audited financial statements which were audited by Price Waterhouse
stated in U.S. dollars, was as follows (the report of other auditors referred to
above with respect to Net Sao Paulo indicates  there is substantial  doubt about
Net Sao Paulo's ability to continue as a going concern):
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                             <C>
     Revenue.................................................................................        $ 12,016
     Operating expense.......................................................................         (10,786)
     Selling, general and administrative expense.............................................          (9,753)
     Depreciation and amortization...........................................................          (2,957)
                                                                                                     --------
         Net operating loss..................................................................         (11,480)
     Interest, net...........................................................................          (2,625)
     Foreign currency loss...................................................................              (6)
                                                                                                     --------
         Net loss............................................................................        $(14,111)
                                                                                                     ========
</TABLE>

MEGAPO

     In June 1995,  UIH LA  completed  its  acquisition  of  Megapo.  UIH LA had
advanced  Megapo $12,000 as of February 28, 1995,  which was converted to equity
at  closing  and  paid an  additional  $19,600  (for a total  purchase  price of
$31,600) for a 49% interest in four operating  subsidiaries and a 39.2% interest
in a fifth operating  subsidiary of Megapo.  Condensed combined income statement
data, derived from audited financial statements for Megapo which were audited by
Galaz, Gomez Morfin, Chavero, Yamazaki, stated in U.S. dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                              <C>
     Revenue.................................................................................         $11,672
     Operating, selling, general and administrative expense..................................          (6,814)
     Depreciation and amortization...........................................................          (1,558)
                                                                                                      -------
         Net operating income................................................................           3,300
     Interest, net...........................................................................             243
     Foreign currency gain...................................................................           1,848
     Other...................................................................................          (1,809)
                                                                                                      -------
         Net income..........................................................................         $ 3,582
                                                                                                      =======
</TABLE>

6.   PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                                                 As of
                                                                                              February 28,
                                                                                       --------------------------
                                                                                         1998              1997
                                                                                       --------          --------
     <S>                                                                               <C>               <C>
     Subscriber premises equipment and converters...............................       $200,990          $126,007
     MMDS distribution facilities...............................................         61,509            57,074
     Cable distribution networks................................................        203,015            22,795
     Office equipment, furniture and fixtures...................................         19,622            11,489
     Buildings and leasehold improvements.......................................          9,070             7,180
     Other......................................................................         31,162            24,175
                                                                                       --------          --------
                                                                                        525,368           248,720
         Accumulated depreciation...............................................        (84,633)          (29,378)
                                                                                       --------          --------
         Net property, plant and equipment......................................       $440,735          $219,342
                                                                                       ========          ========
</TABLE>

                                       78

<PAGE>

                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.   GOODWILL AND OTHER INTANGIBLE ASSETS
<TABLE>
<CAPTION>

                                                                                                 As of
                                                                                              February 28,
                                                                                       --------------------------
                                                                                         1998              1997
                                                                                       --------          --------
     <S>                                                                               <C>               <C>
     UPC........................................................................       $384,387          $     --
     Bahia Blanca...............................................................             --            63,464
     Austar.....................................................................         51,552            63,244
     Saturn.....................................................................          6,100             8,723
     Other......................................................................          4,498             4,403
                                                                                       --------          --------
                                                                                        446,537           139,834
           Accumulated amortization.............................................        (14,532)           (7,198)
                                                                                       --------          --------
           Net goodwill and other intangible assets.............................       $432,005          $132,636
                                                                                       ========          ========
</TABLE>

8.   SENIOR SECURED NOTES AND OTHER DEBT
<TABLE>
<CAPTION>
                                                                                                      As of
                                                                                                   February 28,
                                                                                            -------------------------
                                                                                               1998            1997
                                                                                            ----------      ---------
     <S>                                                                                    <C>              <C>
     February 1998 10.75% senior secured discount notes, net of unamortized discount......  $  818,272       $     --
     November 1994 14% senior secured discount notes, net of unamortized discount.........         179        264,985
     November 1995 14% senior secured discount  notes, net of unamortized discount........         129         90,161
     February 1996 14% senior secured discount notes, net of unamortized discount.........          60         55,193
     UPC Tranche A Facility...............................................................     437,598             --
     UPC Tranche B Facility...............................................................     125,000             --
     Bank and other loans at UPC..........................................................      60,888             --
     May 1996 14% UIH A/P senior discount notes, net of unamortized discount..............     278,662        245,182
     September 1997 14% UIH A/P senior discount notes, net of unamortized discount........      30,461             --
     Austar Bank Facility (as defined below)..............................................      71,531             --
     UIH LA Revolving Credit Facility (as defined below)..................................      33,000             --
     Vendor financed equipment at Saturn..................................................       3,730             --
     Note payable to a company, interest at 1.5% above the rate published by a certain
       Chilean bank, principal and interest due quarterly until June 1998, secured by
       shares of STX......................................................................       1,857          5,447
     Capitalized lease obligations........................................................       3,635          4,959
     Mortgage note, interest at 7.548%, 7-year term.......................................       1,094          1,467
                                                                                            ----------       --------
                                                                                             1,866,096        667,394
       Less current portion...............................................................    (163,325)        (5,177)
                                                                                            ----------       --------
       Total senior secured notes and other debt..........................................  $1,702,771       $662,217
                                                                                            ==========       ========
</TABLE>

FEBRUARY 1998 10.75% SENIOR SECURED DISCOUNT NOTES

     On  February 5, 1998,  the  Company  sold  $1,375,000  principal  amount at
maturity of 10.75% senior  secured  discount  notes due 2008 (the "1998 Notes").
The 1998 Notes were issued at a discount from the principal  amount at maturity,
resulting in gross proceeds to the Company of approximately $812,200.

     The Company used approximately $531,800 of the proceeds from the 1998 Notes
to  complete  a tender  offer for the  Company's  existing  14%  senior  secured
discount  notes  due  1999  (collectively,  the  "Old  Notes")  and the  consent
solicitation  that the Company  conducted  concurrently  therewith.  The Company
commenced  the tender offer on January 7, 1998,  and the tender offer expired on
February 4, 1998, with over 99.8% of the Old Notes being validly  tendered.  The
Company  subsequently  purchased  $500  principal  amount at maturity of the Old
Notes on the  open  market,  leaving  approximately  $465  principal  amount  at
maturity  outstanding  as of February  28, 1998.  The Old Notes  redeemed had an

                                       79
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

aggregate accreted value of approximately  $466,200 as of February 5, 1998. This
tender  premium  of  approximately  $65,600,  combined  with  the  write-off  of
unamortized  deferred  financing  costs  and  other   transaction-related  costs
totaling  approximately   $13,500,   resulted  in  an  extraordinary  charge  of
approximately $79,100.

     The 1998 Notes will accrete at 10.75% per annum,  compounded  semi-annually
to an aggregate  principal  amount of  $1,375,000 on February 15, 2003, at which
time cash  interest will commence to accrue.  Commencing  August 15, 2003,  cash
interest  on the 1998 Notes will be payable on February 15 and August 15 of each
year until maturity at a rate of 10.75% per annum. The 1998 Notes will mature on
February 15,  2008,  and will be  redeemable  at the option of the Company on or
after February 15, 2003.

     The  remaining  Old Notes will mature on November 15, 1999.  Holders of the
1998  Notes  and the  remaining  outstanding  Old Notes  share a  first-priority
security  interest in the stock and  intercompany  notes to the Company of UIPI;
however, only holders of the 1998 Notes have a first-priority  security interest
in the stock and intercompany notes to the Company of UIHE.

     The 1998 Notes are senior  secured  obligations  of the  Company  that rank
senior  in right of  payment  to all  future  subordinated  indebtedness  of the
Company  and rank pari  passu in right of payment  with the Old Notes.  The 1998
Notes  are  effectively  subordinated  to  all  future  indebtedness  and  other
liabilities  and commitments of the Company's  subsidiaries.  Under the terms of
the  indenture  governing  the  1998  Notes  (the  "Indenture"),  the  Company's
subsidiaries are generally  prohibited and/or restricted from incurring any lien
against  their  assets  other  than liens  incurred  in the  ordinary  course of
business,  from paying dividends,  and from making  investments in entities that
are not  "restricted" by the terms of the Indenture.  The Company has the option
to invest in "unrestricted  entities" in an aggregate amount equal to the sum of
$100,000  plus the  aggregate  amount of net cash proceeds from sales of equity,
net of payments  made on its  preferred  stock plus net  proceeds  from  certain
litigation  settlements.  The  Indenture  generally  prohibits  the Company from
incurring  additional  indebtedness with the exception of a general allowance of
$75,000 for debt  maturing on or after  February  15, 2008,  certain  guarantees
totaling $15,000,  refinancing  indebtedness,  normal indebtedness to restricted
affiliates and other letters of credit in the ordinary course of business.

NOVEMBER 1994 14% SENIOR SECURED DISCOUNT NOTES

     In November 1994, the Company sold 394,000 units consisting of $394,000 14%
senior  secured  discount  notes due  November  15, 1999 (the "1994  Notes") and
394,000  warrants,  including  related put rights (the "Warrants") to purchase a
total of  1,786,699  shares of Class A Common  Stock at a price of $15 per share
for net proceeds of $192,771.  At any time between January 31, 1996 and March 1,
1996, the Warrant holders had the right to require the Company to repurchase all
or a part of the  Warrants  for $28.34  per  Warrant.  Holders  of the  Warrants
required the Company to purchase 76,070  Warrants to purchase  344,932 shares of
Class A Common Stock for a cost of $2,156 on March 1, 1996. The remaining  value
assigned  to the  Warrants  of $9,011 was  reclassified  to  additional  paid-in
capital  on  March  1,  1996.  The  remaining   317,930   outstanding   Warrants
(representing  1,441,739  shares of Class A Common Stock) are exercisable at any
time  before  November  15,  1999.  The 1994 Notes are  deemed,  for  accounting
purposes,  to accrete interest at a rate of 15.24% compounded  semi-annually and
no cash  interest  payments will be made prior to maturity on November 15, 1999.
On February 5, 1998 all but $230  principal  amount at maturity  1994 Notes were
redeemed in connection with the issuance of the 1998 Notes.

NOVEMBER 1995 14% SENIOR SECURED DISCOUNT NOTES

     In November  1995,  the Company sold 130,000 14% senior  secured notes (the
"1995  Notes").  The 1995 Notes were issued at a discount  from their  principal
amount of $130,000,  resulting  in net  proceeds to the Company of $63,886.  The
1995 Notes accrete interest at a rate of 14.0% compounded semi-annually. No cash
interest  payments  will be made prior to  maturity  on November  15,  1999.  On
February 5, 1998,  all but $162  principal  amount at  maturity  1995 Notes were
redeemed in connection with the issuance of the 1998 Notes.

                                       80
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FEBRUARY 1996 14% SENIOR SECURED DISCOUNT NOTES

     In February  1996,  the Company sold 75,350 14% senior  secured  notes (the
"1996  Notes").  The 1996 Notes were issued at a discount  from their  principal
amount of $75,350, resulting in net proceeds to the Company of $47,356. The 1996
Notes are deemed,  for  accounting  purposes,  to accrete  interest at a rate of
11.875% compounded  semi-annually.  No cash interest payments will be made prior
to maturity on November 15,  1999.  On February 5, 1998,  all but $73  principal
amount at maturity 1996 Notes were  redeemed in connection  with the issuance of
the 1998 Notes.

UPC TRANCHE A FACILITY

     In October 1997, UPC and Norkabel as borrowers entered into an NLG1,100,000
($544,554 at December 31, 1997) multi-currency  revolving credit facility with a
syndication  of  banks.  Norkabel  was  succeeded  as a  borrower  by  Janco  in
connection  with the merger of Janco Kabel TV and  Norkabel.  In December  1997,
Telekabel became a borrower under the Tranche A Facility. Amounts advanced under
the Tranche A Facility  generally are available for a term of one, two, three or
six months through  September 30, 2006 and bear interest at the London interbank
offered  rate  ("LIBOR") on the  respective  currencies  borrowed  plus a margin
ranging  from 0.50% to 2.0% per annum.  The  Tranche A  Facility  requires  that
interest rate  protection  arrangements be maintained in respect of at least 50%
of the  Tranche A  Facility.  The  Tranche A  Facility  is  secured  by  various
guarantees  from,  negative  pledges over and, in some cases,  share pledges of,
certain UPC subsidiaries in Austria, Belgium and Norway. Following the repayment
of the Tranche B Facility,  Belmarken  Holdings B.V.  ("Belmarken") and other of
UPC's  wholly-owned  subsidiaries  must accede as guarantors under the Tranche A
Facility.  The  Tranche  A  Facility  generally  prohibits  dividends  and other
distributions prior to repayment of the facility. The aggregate amount available
for borrowing  under the facility is reduced  automatically  by 5.0% per quarter
beginning December 31, 2001. The Tranche A Facility also limits total borrowings
by UPC and certain of its  subsidiaries,  which  together  before  September 30,
2001,  may not exceed  NLG1,100,000  ($544,554  at  December  31,  1997)  (after
September 30, 2001, the limit is based on a debt to cash flow financial  ratio),
and generally limits UPC's investments in, loans to and guarantees for Belmarken
and its subsidiaries and downstream affiliates to NLG80,000 ($39,604 at December
31, 1997).

UPC TRANCHE B FACILITY

     In connection with the UPC Transaction, Belmarken entered into the $125,000
(U.S.  dollar-denominated) Tranche B Facility. The Tranche B Facility matures on
December 5, 1998, and bears interest at LIBOR plus a margin ranging from 4.5% to
5.5% per  annum.  The  Tranche B  Facility  generally  prohibits  dividends  and
distributions  and is secured  by various  upstream  guarantees  from,  negative
pledges  over and, in some cases,  share  pledges of,  certain  Belmarken  share
holdings or partnership  interests of Belmarken and UPC in The Netherlands,  the
Czech Republic,  France,  Romania, the Slovak Republic and Hungary multi-channel
television  systems and in UII, as well as a first lien over  approximately 3.17
million UIH Class A Common shares which UPC acquired from Philips as part of the
UPC  Transaction.  Belmarken must apply proceeds from disposals,  if any, of its
share  holdings and  partnership  interest to prepayment of the facility,  which
restricts  the manner and terms on which  Belmarken may dispose of these assets.
In addition,  Belmarken  must  maintain on deposit with the bank a  compensating
balance, restricted as to use, of $11,000 until the facility matures. UPC repaid
$63,000 of the Tranche B Facility subsequent to February 28, 1998 (see Note 15).

BANK AND OTHER LOANS AT UPC

     In February 1997, a bank granted a NLG65,000 nine-year term facility to KTE
(the  "KTE  Facility").  The  KTE  Facility  bears  interest  at the  applicable
Amsterdam  interbank offered rate ("AIBOR") plus 0.45%, and is secured by, among
other things, an encumbrance over KTE's assets and a pledge by UPC of its shares
of  KTE.  The  facility  generally   restricts  the  payment  of  dividends  and
distributions.  As of December  31, 1997 an amount of  NLG65,000  ($32,178)  was
outstanding under this facility.

     Bank loans and other  loans  includes a payable of $19,015 to the  minority
shareholder  of Janco,  which  accretes  interest  at 5% per annum.  The payable
relates to the contemplated  exercise price of the call option for the remaining
12.7% of Janco not owned by UPC. The amount, including accrued interest, will be
payable in 2001.  Bank loans of $3,762 and other loans of $5,933 are  guaranteed
by the local Eindhoven municipality.

                                       81
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

MAY 1996 14% UIH A/P SENIOR DISCOUNT NOTES

     On May 14, 1996, UIH A/P received total gross proceeds of $225,115 from the
private  placement  of  $443,000  aggregate  principal  amount of the 14% senior
discount  notes  (the "UIH A/P 1996  Notes").  On and after May 15,  2001,  cash
interest  will  accrue  and  will be  payable  semi-annually  on each May 15 and
November 15,  commencing  November 15, 2001.  The UIH A/P 1996 Notes are due May
15, 2006.  Effective May 16, 1997, the interest rate on these notes increased by
an additional 0.75% per annum to 14.75%,  until such time as UIH A/P consummates
an issuance of its capital  stock  resulting in gross  proceeds to UIH A/P of at
least $70,000 (an "Equity  Sale").  Due to this increase in the interest  rates,
the UIH A/P 1996 Notes will  accrete to a  principal  amount of  $455,574  if an
Equity Sale is not  consummated  prior to May 15, 2001,  the date cash  interest
begins to accrue.

SEPTEMBER 1997 14% UIH A/P SENIOR DISCOUNT NOTES

     On September 23, 1997, the Company received total gross proceeds of $29,925
from the private placement of $45,000  aggregate  principal amount of 14% senior
discount  notes,  which were issued at a premium (the "UIH A/P 1997 Notes").  On
and  after  May 15,  2001,  cash  interest  will  accrue  and  will  be  payable
semi-annually on each May 15 and November 15, commencing  November 15, 2001. The
September  1997 Notes are due May 15, 2006.  Effective  September 23, 1997,  the
interest  rate on these  notes  increased  by an  additional  0.75% per annum to
14.75%,  until  such time as UIH A/P  consummates  an Equity  Sale.  Due to this
increase in interest  rates,  the UIH A/P 1997 Notes will accrete to a principal
amount of $46,277 if an Equity Sale is not  consummated  prior to May 15,  2001,
the date cash interest begins to accrue.

     On November 17, 1997, pursuant to the terms of the indentures governing the
UIH A/P  1996  Notes  and the UIH A/P  1997  Notes  (collectively,  the "UIH A/P
Notes"), UIH A/P issued warrants to purchase 488,000 shares of its common stock,
which  represented  3.4% of its common stock.  The warrants are exercisable at a
price of $10.45 per share which would result in gross proceeds of  approximately
$5,100 upon  exercise.  The warrants are  exercisable  through May 15, 2006. The
warrants were valued at $3,678 and have been reflected as an additional discount
to the UIH A/P  Notes on a  pro-rata  basis  and as an  increase  in  additional
paid-in capital.

AUSTAR BANK FACILITY

     In July 1997, Austar secured a financing  facility from a bank for a senior
syndicated  term debt facility in the amount of Australian  $("A$")200,000  (the
"Austar Bank Facility").  The proceeds of the Austar Bank Facility have been and
will be used to fund Austar's subscriber  acquisition and working capital needs.
The  Austar  Bank  Facility  consists  of  three  sub-facilities:  (i)  A$50,000
revolving  working  capital  facility,  (ii) A$60,000 cash advance  facility and
(iii) A$90,000 term loan facility.  This term loan facility will be available to
the extent that any  drawdown,  if added to the existing  aggregate  outstanding
balance  under  sub-facilities  (i)  and  (ii),  would  not  exceed  five  times
annualized  cash flows,  and upon Austar having  achieved and  maintained  total
subscribers  of at  least  200,000.  All  of  Austar's  assets  are  pledged  as
collateral  for the Austar Bank  Facility.  In addition,  pursuant to the Austar
Bank  Facility,  Austar  cannot pay any  dividends,  interest  or fees under its
technical  assistance  agreements  prior to December  31,  2000.  Subsequent  to
December  31,  2000,  Austar will be  permitted to make these types of payments,
subject to certain debt to cash flow  ratios.  The working  capital  facility is
fully  repayable on June 30, 2000. The cash advance  facility is fully repayable
pursuant to an amortization schedule beginning December 31, 2000 and ending June
30, 2004.  As of December 31,  1997,  Austar had drawn the entire  amount of the
working  capital  facility  and the cash  advance  facility  totaling  A$110,000
($71,531  converted  using  the  December  31,  1997  exchange  rate).  Although
management  does not expect to meet the  requirements  for drawing down the term
loan  facility  during 1998,  they have engaged the lender under the Austar Bank
Facility in a discussion regarding an amendment to the Austar Bank Facility.  If
approved,  such an amendment  would allow Austar to draw all or a portion of the
A$90,000 term loan facility in advance of the time period currently  envisioned.
There can be no assurance,  however,  that such an amendment will  ultimately be
approved.

UIH LA REVOLVING CREDIT FACILITY

     On April 24, 1997, UIH LA entered into a credit agreement with a bank for a
loan of up to $125,000 for a term of nine months,  extendible up to a maximum of
18 months at an interest rate of LIBOR plus 6% (the "UIH LA Credit  Agreement").

                                       82
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     In October 1997,  UIH LA repaid the  outstanding  balance of $110,000 under
this credit agreement with the proceeds from the Argentina Transaction (see Note
3). In  November  1997,  UIH LA entered  into an  amended  and  restated  credit
agreement with a bank for a revolving credit facility of up to $40,000 (the "UIH
LA Revolving  Credit  Facility").  Borrowings under this facility must be repaid
within 12 months and bear interest at a rate of LIBOR plus 3.5%. The facility is
extendable up to 18 months with (i) an increase in the interest rate of 50 basis
points for each  three-month  period it is extended beyond the initial  12-month
term and  (ii)  cash  fees of 0.75%  and  1.50% if it is  extended  to 15 and 18
months, respectively.  The borrowings under the UIH LA Revolving Credit Facility
are  secured  by all of UIH LA's  capital  stock  and  substantially  all of its
assets.  In  addition,  UIH  LA  must  maintain  on  deposit  with  the  bank  a
compensating  balance,  restricted  as to  use,  of 8% of the  outstanding  loan
balance.  As of February 28, 1998, UIH LA had an outstanding  balance of $33,000
under this facility and a restricted cash balance of $3,591.  Under the terms of
the UIH LA Revolving Credit Facility, UIH LA must use any proceeds from the sale
of Latin American assets to repay this note. Proceeds from the loan were paid as
a dividend by UIH LA to the Company  and were  primarily  used by the Company to
fund the UPC  Transaction  (see  Note 3).  UIH LA repaid  $25,000  of the UIH LA
Revolving Credit Facility subsequent to February 28, 1998 (see Note 15).

FAIR VALUE OF SENIOR SECURED NOTES AND OTHER DEBT

     Fair  value is based  on  market  prices  for the same or  similar  issues.
Carrying value is used when a market price is unavailable.
<TABLE>
<CAPTION>
                                                                                                             Fair
                                                                                       Book Value        Market Value
                                                                                       ----------        ------------
<S>                                                                                    <C>                <C>
As of February 28, 1998:
   1998 Notes...................................................................       $  818,272         $  831,875
   1994 Notes...................................................................              179                179
   1995 Notes...................................................................              129                129
   1996 Notes...................................................................               60                 60
   UPC Tranche A Facility.......................................................          437,598            437,598
   UPC Tranche B Facility.......................................................          125,000            125,000
   Bank and other loans at UPC..................................................           60,888             60,888
   UIH A/P 1996 Notes...........................................................          278,662            292,380
   UIH A/P 1997 Notes...........................................................           30,461             29,700
   Austar Bank Facility.........................................................           71,531             71,531
   UIH LA Revolving Credit Facility.............................................           33,000             33,000
   Other debt...................................................................           10,316             10,316
                                                                                       ----------         ----------
        Total...................................................................       $1,866,096         $1,892,656
                                                                                       ==========         ==========

As of February 28, 1997:
   1994 Notes...................................................................         $264,985           $289,590
   1995 Notes...................................................................           90,161             95,550
   1996 Notes...................................................................           55,193             55,382
   UIH A/P 1996 Notes...........................................................          245,182            230,360
   Other debt...................................................................           11,873             11,873
                                                                                         --------           --------
        Total...................................................................         $667,394           $682,755
                                                                                         ========           ========
</TABLE>

DEBT MATURITIES
<TABLE>
<CAPTION>
     The maturities of the Company's debt are as follows:
         <S>                                                                                      <C>
         Fiscal 1999............................................................................. $  163,626
         Fiscal 2000.............................................................................      4,989
         Fiscal 2001.............................................................................     40,458
         Fiscal 2002.............................................................................     37,032
         Fiscal 2003 and thereafter..............................................................  1,620,429
                                                                                                  ----------
                                                                                                   1,866,534
                Future finance charges for capitalized lease obligations.........................       (438)
                                                                                                  ----------
                Total............................................................................ $1,866,096
                                                                                                  ==========
</TABLE>

                                       83
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.   CONVERTIBLE PREFERRED STOCK

     In connection with the Company's  acquisition of an additional 40% economic
interest in CTV and STV,  the  Company  designated  a new series of  Convertible
Preferred  Stock,  Series A, par value  $0.01 per  share  ("Series  A  Preferred
Stock"),  and issued  170,513  shares of Series A Preferred  Stock to one of the
sellers from whom it purchased the CTV and STV interests. The Series A Preferred
Stock had an initial liquidation value of $175 per share (approximately $29,840)
and accrues  dividends  at a rate of 4% per annum,  compounded  quarterly.  Each
share of Series A Preferred  Stock is  convertible  into the number of shares of
the Company's Class A Common Stock equal to the liquidation value at the time of
conversion  divided by $17.50.  The  Company is  required to redeem the Series A
Preferred  Stock  on June  19,  2000 at a  redemption  price  equal  to its then
liquidation  value  plus  accrued  dividends.  Assuming  none  of the  Series  A
Preferred Stock is converted prior to redemption,  the total cost to the Company
upon redemption would be approximately  $35,700. The Company has granted certain
rights  to  holders  of the  Series A  Preferred  Stock to  register  under  the
Securities Act of 1933 the sale of shares of Class A Common Stock into which the
Series A Preferred Stock may be converted.

10.  STOCKHOLDERS' (DEFICIT) EQUITY

COMMON STOCK

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

CUMULATIVE TRANSLATION ADJUSTMENTS

     During the year ended February 28, 1998,  the Company  recorded a change in
cumulative  translation  adjustments  of  $50,274,  primarily  due  to  (i)  the
strengthening  of the U.S. dollar compared to the Dutch guilder of approximately
16%,  resulting in a translation  adjustment  during the period of approximately
$11,872 and (ii) the strengthening of the U.S. dollar compared to the Australian
dollar of approximately  22%,  resulting in a translation  adjustment during the
period of approximately $25,876.

TREASURY STOCK

     As a result of the UPC Transaction, UPC acquired 3.17 million shares of the
Company's Class A Common Stock, valued at cost on December 11, 1997 at NLG66,809
($33,074 as of February 28, 1998).

EMPLOYEE STOCK OPTION PLAN

     In May 1993,  the  Company  adopted a stock  option plan for certain of its
employees (the "Employee Plan"). The Employee Plan is construed, interpreted and
administered by the compensation committee (the "Committee"),  consisting of all
members of the Board of Directors who are not employees of the Company.  Members
of the  Company's  Board of Directors  who are not employees are not eligible to
receive  option grants under the Employee Plan. The Committee has the discretion
to determine  the  employees and  consultants  to whom options are granted,  the
number of shares subject to the options,  the exercise price of the options, the
period  over  which the  options  become  exercisable,  the term of the  options
(including the period after termination of employment during which an option may
be exercised) and certain other provisions  relating to the option.  The maximum
number of shares  subject to options that may be granted to any one  participant
under the Employee Plan during any calendar year is 500,000 shares.  The maximum
term of options  granted under the Employee Plan is ten years.  Options  granted
may be either  incentive stock options under the Internal  Revenue Code of 1986,
as amended,  or non-qualified  stock options.  The options vest in equal monthly
increments over the four-year period following the date of grant.  Vesting would
be  accelerated  upon a change of  control  in the  Company  as  defined  in the
Employee Plan. Under the Employee Plan, options to purchase a total of 3,800,000
shares of Class A Common  Stock  have been  authorized,  of which  621,380  were
available for grant as of February 28, 1998.

                                       84
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

     The Company  adopted a stock option plan for  non-employee  directors  (the
"Director  Plan")  effective  June 1, 1993.  The Director  Plan provides for the
grant of an option to  acquire  20,000  shares of the  Company's  Class A Common
Stock to each member of the Board of  Directors  who was not also an employee of
the Company (a "non-employee  director") on June 1, 1993, and to each person who
is newly elected to the Board of Directors as a non-employee director after June
1, 1993,  on the date of their  election.  The maximum  term of options  granted
under  the  Director  Plan is ten  years.  The  options  vest in  equal  monthly
increments over the four-year period following the date of grant.  Vesting would
be  accelerated  upon a change in  control  of the  Company  as  defined  in the
Director Plan.  Under the Director Plan,  options to purchase a total of 480,000
shares of Class A Common  Stock  have been  authorized,  of which  197,500  were
available for grant as of February 28, 1998.

FAIR VALUE OF STOCK OPTIONS

     For purposes of the pro forma disclosures  presented below, the Company has
computed  the fair values of all  options  granted  during  Fiscal 1998 and 1997
using  the   Black-Scholes   single-option   pricing  model  and  the  following
weighted-average assumptions:
<TABLE>
<CAPTION>
                                                                                             For the Years Ended
                                                                                                February 28,
                                                                                          -------------------------
                                                                                           1998              1997
                                                                                          -------           -------
         <S>                                                                              <C>               <C>
         Risk-free interest rate....................................................        5.91%             6.38%
         Expected lives.............................................................      7 years           7 years
         Expected volatility........................................................       53.46%            54.72%
         Expected dividend yield....................................................           0%                0%
</TABLE>

     The total fair value of options granted was approximately $2,929 and $5,376
for the years ended February 28, 1998 and 1997, respectively.  These amounts are
amortized using the straight-line method over the vesting period of the options.
Cumulative compensation expense recognized in pro forma net income, with respect
to options that are  forfeited  prior to vesting,  is adjusted as a reduction of
pro forma compensation expense in the period of forfeiture.  For the years ended
February  28,  1998 and 1997,  pro forma  stock-based  compensation,  net of the
effect of the forfeitures, was $2,773 and $2,002, respectively, as follows:
<TABLE>
<CAPTION>
                                                                           For the Years Ended February 28,
                                                                  -------------------------------------------------
                                                                           1998                       1997
                                                                  ----------------------     ----------------------
                                                                     Net       Net Loss         Net       Net Loss
                                                                     Loss      Per Share        Loss      Per Share
                                                                  ----------   ---------     ----------   ---------
         <S>                                                      <C>           <C>          <C>           <C>
         As reported............................................  $(342,532)    $(8.77)      $(138,825)    $(3.59)
         Pro forma..............................................  $(345,305)    $(8.84)      $(140,827)    $(3.64)
</TABLE>

     The fair value method of  accounting  for  stock-based  compensation  plans
recognizes  the  value of  options  granted  as  compensation  expense  over the
option's  vesting  period and has not been applied to options  granted  prior to
March 1, 1995. Accordingly,  the resulting pro forma compensation expense is not
necessarily representative of what compensation expense will be in future years.

                                       85
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     A summary of stock option activity for the Employee Plan is as follows:
<TABLE>
<CAPTION>
                                                                          For the Years Ended February 28,
                                                            -----------------------------------------------------------
                                                                        1998                           1997
                                                            ---------------------------     ---------------------------
                                                              Number       Weighted-         Number        Weighted-
                                                                of          Average            of           Average
                                                              Shares     Exercise Price      Shares      Exercise Price
                                                            ---------    --------------     ---------    --------------
        <S>                                                 <C>             <C>             <C>             <C>
        Outstanding at beginning of year...............     2,793,851       $11.7458        2,315,122       $11.5673
        Granted during the year........................       435,625       $10.9943          655,000       $13.0011
        Cancelled during the year......................      (130,106)      $14.8130         (136,521)      $15.6011
        Exercised during the year......................      (151,894)      $ 5.2366          (39,750)      $ 8.7925
                                                            ---------                       ---------

        Outstanding at end of year.....................     2,947,476       $11.8348        2,793,851       $11.7458
                                                            =========       ========        =========       ========

        Exercisable at end of year.....................     2,014,070                       1,661,936
                                                            =========                       =========
</TABLE>

     A summary of stock option activity for the Director Plan is as follows:
<TABLE>
<CAPTION>
                                                                          For the Years Ended February 28,
                                                            -----------------------------------------------------------
                                                                        1998                           1997
                                                            ---------------------------     ---------------------------
                                                              Number       Weighted-         Number        Weighted-
                                                                of          Average            of           Average
                                                              Shares     Exercise Price      Shares      Exercise Price
                                                            ---------    --------------     ---------    --------------
        <S>                                                  <C>           <C>               <C>            <C>
        Outstanding at beginning of year...............      280,000       $12.5358          280,000        $12.5358
        Granted during the year........................       20,000       $11.1250               --        $     --
        Cancelled during the year......................      (40,000)      $14.2500               --        $     --
        Exercised during the year......................           --       $     --               --        $     --
                                                             -------                         -------

        Outstanding at end of year.....................      260,000       $12.1636          280,000        $12.5358
                                                             =======       ========          =======        ========

        Exercisable at end of year.....................      243,333                         219,445
                                                             =======                         =======
</TABLE>

     The combined  weighted-average  fair values and  weighted-average  exercise
prices of options granted are as follows:
<TABLE>
<CAPTION>
                                                                For the Years Ended February 28,
                                             ----------------------------------------------------------------------
                                                           1998                                 1997
                                             --------------------------------      --------------------------------
                                               Number       Fair     Exercise        Number       Fair     Exercise
                                             of Options     Value      Price       of Options     Value      Price
                                             ----------    -------   --------      ----------   --------   --------
<S>                                            <C>         <C>       <C>             <C>        <C>        <C>
Exercise price less than market price.....       3,125     $4.2937   $ 9.5000          5,000    $10.2382   $ 5.0000
Exercise price equal to market price......     432,500     $6.6316   $10.7912        550,000    $ 8.2285   $13.0968
Exercise price greater than market price..      20,000     $2.3484   $15.7500        100,000    $ 7.9957   $12.8750
                                               -------                               -------
                                               455,625                               655,000
                                               =======                               =======
</TABLE>
                                       86
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The following  table  summarizes  information  about  employee and director
stock options outstanding and exercisable at February 28, 1998:
<TABLE>
<CAPTION>
                                                         Options Outstanding                      Options Exercisable
                                              --------------------------------------------      -------------------------
                                                             Weighted-Average    Weighted-                     Weighted-
                                               Number of        Remaining         Average         Number        Average
                                                Options      Contractual Life    Exercise       of Options     Exercise
         Exercise Price Range                 Outstanding        (Years)          Price         Exercisable      Price
         --------------------                 -----------    ----------------    ---------      -----------    ---------
         <S>                                   <C>                 <C>           <C>            <C>            <C>
         $ 4.5000 - $ 5.0000..............       115,167           4.94          $ 4.5217         115,167      $ 4.5217
         $ 9.3750 - $10.2500..............     1,274,083           5.15          $ 9.5353       1,215,750      $ 9.5062
         $10.8750 - $15.5000..............     1,057,300           8.63          $12.4105         306,873      $13.4807
         $15.7500 - $17.7500..............       760,926           6.23          $16.1045         619,613      $16.1776
                                               ---------                                        ---------
              Total.......................     3,207,476           6.55          $11.8615       2,257,403      $11.6233
                                               =========                                        =========
</TABLE>

SUBSIDIARY STOCK OPTION PLAN

     On June 18,  1996,  UPC  adopted a stock  option  plan (the "UPC Plan") for
certain of its employees and those of its  subsidiaries.  The shareholders  have
transferred  4.0  million   ordinary  shares  of  UPC  into  a  foundation  (the
"Foundation"),  which administers the UPC Plan. Until such time as the shares of
UPC have been  listed at a stock  exchange,  the  Foundation  will  issue  under
certain circumstances  certificates  convertible into the shares of UPC owned by
the Foundation. The options are granted at fair market value to be determined by
the  supervisory  board.  The maximum  term that the options can be exercised is
five  years  from the date of the  grant.  The  options  vest over a three  year
period.  During  the year  ended  December  31,  1997,  compensation  expense of
NLG4,817 ($2,477) was recognized.

     Data concerning the stock option plan is as follows :
<TABLE>
<CAPTION>
                                                                                         For the Years Ended
                                                                                             December 31,
                                                                                      ---------------------------
                                                                                         1997            1996
                                                                                      ---------       -----------
         <S>                                                                          <C>              <C>
         Outstanding at the beginning of the year...............................      1,533,611                --
         Granted during the year................................................             --         2,660,000
         Exercised during the year..............................................             --        (1,120,000)
         Cancelled during the year..............................................        (39,243)           (6,389)
                                                                                      ---------        ----------
         Outstanding at the end of the year.....................................      1,494,368         1,533,611
                                                                                      =========        ==========
         Option price per share granted: NLG....................................            N/A             15.74
                                         U.S....................................            N/A              9.31
         Vested portion:   Exercised options ...................................        965,466           520,278
                           Outstanding options..................................      1,166,088           670,987
</TABLE>

     The UPC Plan was amended in March 1998 to provide  that options vest over a
four year period.

     Upon  termination  of an employee,  any unvested  options shall expire.  An
employee has the right at any time to put his certificates from exercised vested
options  to the  Foundation  at a price  equal to the  fair  market  value.  The
employee  must sell his  certificates  to the  Company for a cash  payment  upon
termination.

                                       87
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.  COMMITMENTS

     The Company has entered into various  operating lease agreements for office
space, office furniture and equipment, and vehicles.  Rental expense under these
lease  agreements  totaled $4,125,  $3,481 and $794 for the years ended February
28, 1998, February 28, 1997, and February 29, 1996, respectively.

     The  Company  has  operating  lease  obligations  and other  non-cancelable
commitments as follows:
<TABLE>
<CAPTION>
         <S>                                                                                           <C>
         Fiscal 1999.............................................................................      $10,371
         Fiscal 2000.............................................................................        8,240
         Fiscal 2001.............................................................................        6,783
         Fiscal 2002.............................................................................        3,076
         Fiscal 2003 and thereafter..............................................................        2,863
                                                                                                       -------
                Total............................................................................      $31,333
                                                                                                       =======
</TABLE>

     The Company has MMDS  license  fees and  programming  license  fees payable
annually as follows:
<TABLE>
<CAPTION>
         <S>                                                                                            <C>
         Fiscal 1999.............................................................................       $2,212
         Fiscal 2000.............................................................................        1,686
         Fiscal 2001.............................................................................        1,444
         Fiscal 2002.............................................................................          153
         Fiscal 2003 and thereafter..............................................................           --
                                                                                                        ------
                Total............................................................................       $5,495
                                                                                                        ======
</TABLE>
     As of December 31, 1997,  Saturn had contractual  arrangements with certain
vendors committing it to make capital expenditures of $2,613, primarily relating
to network  distribution  equipment.  The majority of this amount will be vendor
financed.

     UPC has guaranteed debt of its affiliate, Princes Holdings, totaling $3,050
as of December 31, 1997.

     Austar Satellite has a five-year  agreement with Optus Networks Pty Limited
("Optus  Networks") to lease a 54 MHz transponder,  including the  eight-channel
programming package which is the most widely-distributed  programming package in
Australia  (the "Core  Package").  Pursuant to the  agreement,  which  commenced
September 1, 1997,  Austar  Satellite will pay  approximately  $393 per month in
satellite  service fees to Optus Networks.  Satellite fees payable  annually are
approximately as follows:
<TABLE>
<CAPTION>
         <S>                                                                                           <C>
         Fiscal 1999.............................................................................      $ 4,716
         Fiscal 2000.............................................................................        4,716
         Fiscal 2001.............................................................................        4,716
         Fiscal 2002.............................................................................        4,716
         Fiscal 2003.............................................................................        3,144
                                                                                                       -------
                Total............................................................................      $22,008
                                                                                                       =======
</TABLE>

     UIH and  certain  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. The bonus is based on the performance of the respective company and
the  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 the years ended  February 28, 1998 and 1997.  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.

                                       88
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.  CONTINGENCIES

     The Company is not a party to any material legal  proceedings other than as
described  below,  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.

     In April 1997,  following a trial in the United States  District  Court for
the District of Colorado,  the Company obtained a jury verdict against The Wharf
(Holdings)  Limited  ("Wharf  Holdings"),  its  wholly-owned  subsidiary,  Wharf
Communications  Investments Limited and Wharf Holdings' deputy chairman, Stephen
Ng, on claims of securities  fraud,  fraud,  breach of fiduciary duty, breach of
contract  and   negligent   misrepresentation,   and  was  awarded   $67,000  in
compensatory  damages and $58,500 in exemplary  damages.  In May 1997, the Court
awarded prejudgment  interest of $28,200,  and entered judgment on the verdicts.
In October 1997, the Court denied the defendants'  motion for a reduction in the
amount of damages, for a new trial, and/or for a judgment as a matter of law. On
November 4, 1997,  the  defendants  appealed the  judgment to the United  States
Court of Appeals for the Tenth  Circuit.  On December 31, 1997,  Wharf  Holdings
filed a separate appeal to the Tenth Circuit  related to the contempt  sanctions
that the District Court imposed as a result of Wharf  Holdings'  refusal to turn
over certain assets in satisfaction of the judgment.  On January 29, 1998, Wharf
Holdings posted a $173,500  supersedeas  bond to secure the judgment  entered in
favor of the Company.  Although  the Company  intends to  vigorously  defend the
appeals,  there can be no assurance  that the judgment  will be affirmed or that
the damages will be collected.

13.  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 United  States and foreign  activities.  Accordingly,  to the extent  United
States  borrowings  are used to  finance  equity  contributions  to its  foreign
subsidiaries,  the  Company's  ability  to claim a  foreign  tax  credit  may be
significantly  reduced.  These  limitations  and the inability of the Company to
offset  losses in one  foreign  jurisdiction  against  income  earned in another
foreign  jurisdiction could result in a high effective tax rate on the Company's
earnings.  The Company has an  ownership  interest in  Telefenua  and Cable Star
which are located in Tahiti and Peru, with which the United States does not have
income tax  treaties.  As a result,  the  Company  may be  subject to  increased
withholding  taxes on  dividend  distributions  and other  payments  from  those
entities  and also may be  subject  to double  taxation  with  respect to income
generated by those entities.

     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  United   States  tax   purposes  and  the  current
non-deductibility  of  interest  expense on UIH A/P's  senior  notes.  Since the
Company holds the majority of its foreign  investments  through affiliates which
hold investments  accounted for under the equity method in foreign corporations,
taxable  income (loss)  generated by these  affiliated  companies  does not flow
through to the Company for United States  federal and state tax  purposes,  even
though the Company records its allocable share of affiliate  income (losses) for
financial  reporting  purposes.  Accordingly,  due to the indefinite reversal of
such amounts in future periods,  no deferred tax asset has been  established for
tax basis in excess of the  Company's  book basis  (approximately  $141,000  and
$98,000  at  February  28,  1998  and  1997,  respectively)  in  investments  in
affiliated companies, which in turn have investments in foreign corporations.

                                       89
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The   Company's   United  States  tax  net   operating   losses,   totaling
approximately  $177,000 at February 28, 1998,  expire  beginning in 2004 through
2013.  February 28, 1998  amounts  include  deferred tax assets and  liabilities
acquired in connection with the UPC Transaction.  The significant  components of
the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
                                                                                                  As of
                                                                                               February 28,
                                                                                        -------------------------
                                                                                          1998              1997
                                                                                        -------           -------
     <S>                                                                               <C>                <C>
     Deferred Tax Assets:
     -------------------
         Tax net operating loss carryforward of consolidated foreign
           subsidiaries(1)......................................................       $144,356           $25,539
         Company's U.S. tax net operating loss carryforward.....................         67,141            29,693
         Accrued interest expense on the UIH A/P Notes..........................         18,856             7,826
         Acquisition, transaction and development costs.........................             --             2,131
         Investment valuation allowance and other...............................          3,302             3,662
         Basis difference in marketable equity securities.......................          3,192             2,367
         Deferred compensation and severance....................................          1,260             1,548
         Other..................................................................            149               271
                                                                                       --------           -------
                Total deferred tax assets.......................................        238,256            73,037
         Valuation allowance....................................................       (231,710)          (72,977)
                                                                                       --------           -------
                Deferred tax assets, net of valuation allowance.................          6,546                60

     Deferred Tax Liabilities:
     ------------------------
         Intangible assets......................................................        (23,800)               --
         Property, plant and equipment, net.....................................         (5,046)               --
         Other..................................................................            268               (60)
                                                                                       --------           -------
                Total deferred tax liabilities..................................        (28,578)              (60)
                                                                                       --------           -------
                Deferred tax liabilities, net...................................       $(22,032)          $    --
                                                                                       ========           =======
</TABLE>

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

     Of  the  Company's  consolidated  net  loss  before  extraordinary  charge,
$127,599  is derived  from the  Company's  foreign  operations.  The  difference
between income tax expense provided in the financial statements and the expected
income tax benefit at statutory rates is reconciled as follows:
<TABLE>
<CAPTION>
                                                                                         For the Years Ended
                                                                           ----------------------------------------------
                                                                           February 28,      February 28,    February 29,
                                                                               1998              1997            1996
                                                                           ------------      ------------    ------------
     <S>                                                                    <C>               <C>              <C>
     Expected income tax benefit at the U.S. statutory rate of 35%          $(92,204)         $(48,589)        $(31,959)
     Tax effect of permanent and other differences:
       Change in valuation allowance..............................            67,565            33,472           16,179
       Book/tax basis differences associated with foreign
         investments..............................................            28,344            18,554           18,968
       State tax, net of federal benefit..........................            (7,903)           (5,553)          (3,652)
       International rate differences.............................              (515)             (181)              --
       Non-deductible interest accretion on the UIH A/P Notes.....             2,145               973               --
       Amortization of licenses...................................             1,312               625              214
       Non-deductible expenses and other..........................             1,256               699              250
                                                                            --------          --------         --------
              Total income tax benefit............................          $     --          $     --         $     --
                                                                            ========          ========         ========
</TABLE>

                                       90
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.  Segment Information

     The Company's  reportable  segments are the various  geographic  regions in
which  it  operates  multi-channel  television,   programming  and/or  telephony
operations.  These  reportable  segments  are managed  separately  because  each
geographic region presents different marketing  strategies and technology issues
as well as distinct  economic climates and regulatory  constraints.  The Company
has  selected  the  following  reportable  segments:  Europe,  UAP,  UIH  LA and
Corporate and Other,  including  various  holding  companies  and  consolidating
eliminations.

     The Company's segment information is as follows:
<TABLE>
<CAPTION>

                                                                        As of and for the Year Ended
                                                                              February 28, 1998
                                                    ----------------------------------------------------------------------
                                                                                                Corporate
                                                      Europe            UAP        UIH LA       and Other         Total
                                                    ---------       ----------    ---------     ----------     -----------
<S>                                                 <C>             <C>           <C>           <C>            <C>
Service and other revenue .......................   $  9,996        $  68,961     $ 19,090      $    --        $   98,047
Management fee income from related parties ......   $     --        $      --     $    154      $     421      $      575
System operating expense ........................   $ (6,133)       $ (50,006)    $ (9,208)     $    (284)     $  (65,631)
Selling, general and administrative expense .....   $(13,067)       $ (56,917)    $(18,314)     $  (3,058)     $  (91,356)
Depreciation and amortization ...................   $ (6,343)       $ (80,802)    $ (3,503)     $  (1,008)     $  (91,656)
Equity in losses of affiliated companies, net ...   $(49,898)       $  (3,285)    $(16,203)     $     741      $  (68,645)
Gain on sale of investments in affiliated
   companies ....................................   $     --        $      --     $ 90,020      $    --        $   90,020
Interest income, including related party income .   $      6        $   1,725     $  1,341      $   4,734      $    7,806
Interest expense, including related party expense   $ (2,045)       $ (44,016)    $(16,563)     $ (61,664)     $ (124,288)
Extraordinary charge for early retirement of debt   $     --        $     --      $   --        $ (79,091)     $  (79,091)
Net (loss) income ...............................   $(60,016)       $(170,735)    $ 19,404      $(131,185)     $ (342,532)
Cash and cash equivalents .......................   $ 49,576        $  12,355     $  5,227      $ 236,283      $  303,441
Investments in and advances to affiliated
   companies, accounted for under the equity
   method, net ..................................   $167,750        $  14,556     $120,334      $  15,797      $  318,437
Property, plant and equipment, net ..............   $240,090        $ 183,101     $  6,541      $  11,003      $  440,735
Total assets ....................................   $951,498        $ 294,545     $147,267      $ 286,525      $1,679,835
</TABLE>
                                       91
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                            As of and for the Year Ended
                                                                                  February 28, 1997
                                                        ----------------------------------------------------------------------
                                                                                                    Corporate
                                                          Europe            UAP        UIH LA       and Other         Total
                                                        ---------       ----------    ---------     ----------     -----------
<S>                                                     <C>             <C>           <C>           <C>            <C>
Service and other revenue.............................  $     --        $ 24,977      $  5,267      $     --       $  30,244
Management fee income from related parties............  $     --        $     35      $    527      $    749       $   1,311
System operating expense..............................  $ (1,160)       $(22,357)     $ (2,578)     $   (156)      $ (26,251)
Selling, general and administrative expense...........  $ (6,733)       $(36,877)     $ (6,533)     $ (3,877)      $ (54,020)
Depreciation and amortization.........................  $    (80)       $(36,269)     $ (1,789)     $   (823)      $ (38,961)
Equity in losses of affiliated companies, net.........  $(31,629)       $ (5,665)     $ (8,794)     $ (1,487)      $ (47,575)
Gain on sale of investments in affiliated
   companies..........................................  $     --        $     --      $ 65,249      $     --       $  65,249
Interest income, including related party income.......  $     --        $  4,635      $  1,940      $  6,754       $  13,329
Interest expense, including related party expense.....  $     --        $(20,756)     $ (2,953)     $(55,950)      $ (79,659)
Net (loss) income.....................................  $(32,606)       $(88,549)     $ 29,315      $(46,985)      $(138,825)
Cash and cash equivalents.............................  $    585        $ 19,259      $  1,024      $ 47,916       $  68,784
Investments in and advances to affiliated
   companies, accounted for under the equity
   method, net........................................  $ 99,174        $ 15,594      $117,501      $ 20,839       $ 253,108
Property, plant and equipment, net....................  $    759        $193,170      $ 13,718      $ 11,695       $ 219,342
Total assets..........................................  $102,004        $338,761      $206,941      $172,230       $ 819,936
</TABLE>
<TABLE>
<CAPTION>
                                                                                 For the Year Ended
                                                                                 February 29, 1996
                                                        ----------------------------------------------------------------------
                                                                                                    Corporate
                                                          UIHE              UAP        UIH LA       and Other         Total
                                                        ---------       ----------    ---------     ----------     -----------
<S>                                                     <C>             <C>           <C>           <C>            <C>
Service and other revenue............................   $     --        $  1,883      $     --      $    480       $  2,363
Management fee income from related parties...........   $    658        $     20      $     --      $   (171)      $    507
System operating expense.............................   $   (574)       $ (3,145)     $     --      $   (505)      $ (4,224)
Selling, general and administrative expense..........   $ (3,739)       $ (5,356)     $ (3,255)     $(10,133)      $(22,483)
Depreciation and amortization........................   $   (407)       $ (1,003)     $     (4)     $   (917)      $ (2,331)
Equity in losses of affiliated companies, net........   $(19,348)       $(16,498)     $(10,354)     $ (2,435)      $(48,635)
Gain on sale of investments in affiliated
   companies.........................................   $     --        $  4,132      $ 11,881      $     --       $ 16,013
Interest income, including related party income......   $     --        $    298      $    455      $  7,664       $  8,417
Interest expense, including related party expense....   $     --        $    (30)     $   (793)     $(35,222)      $(36,045)
Net loss.............................................   $(19,760)       $(19,060)     $ (4,865)     $(47,626)      $(91,311)
</TABLE>

15.  SUBSEQUENT EVENTS

COMBIVISIE AND CNBH

     Effective January 1, 1998, UPC acquired certain assets, including the cable
systems of Combivisie for $89,486.  Combivisie administered the cable television
systems  on behalf of 18  municipalities  in the  region  surrounding  KTE.  The
purchase was funded with a NLG60,000  ($29,703) draw on UPC's Tranche A Facility
and NLG120,762  ($59,783) from a credit facility from a bank.  Subsequent to the
transaction,  the assets and liabilities of both KTE and Combivisie were merged,
forming The Cable Network Brabant Holding BV ("CNBH").

     On February 20, 1998,  CNBH secured a NLG250,000  ($123,762 at December 31,
1997)  nine-year  term facility (the "CNBH  Facility").  The CNBH Facility bears
interest at the  applicable  AIBOR plus a margin ranging from 0.60% to 1.60% per
annum, and is secured by, among other things,  an encumbrance over CNBH's assets
and a pledge by Cable Network Netherlands Holding of its shares of CNBH. The

                                       92
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

facility  was used to  refinance  the  existing  KTE  facility,  to complete the
Combivisie  acquisition  and for the  development  and  exploitation of enhanced
cable TV services, data services and telephony services.

SKT SPOL. S.R.O. ("SKT")

     On February 25, 1998, UPC signed a letter of intent with Siemens to acquire
their 95.63% interest in SKT for $51,000 (NLG103,000). SKT is a cable television
company in the Slovak  Republic.  Closing is expected to occur  during the third
quarter of Fiscal 1999.

UIH LOANS

     On March 16, 1998, Belmarken executed a $100,000 (U.S.  dollar-denominated)
promissory  note with UIH.  The note bears  interest  at 10.75% per annum on the
outstanding balance and is due on demand. The note is convertible into UPC stock
at fair  market  value  at the  election  of UIH.  Payments  under  the note are
subordinate to UPC's Tranche B Facility. On March 23, 1998, UPC borrowed $63,000
under the note to reduce UPC's Tranche B Facility.

     On March 25, 1998, UIH LA executed a $50,000  promissory note with UIH. The
note bears interest at 10.75% per annum on the outstanding balance and is due on
demand.  The note is convertible  into shares of common stock of UIH LA at $8.48
per share and is  subordinate  to the UIH LA Revolving  Credit  Facility.  As of
March 31, 1998,  UIH LA had  borrowed  $31,721  under the note,  the proceeds of
which were used to reduce the UIH LA  Revolving  Credit  Facility by $25,000 and
for general corporate use.

SUBSIDIARY STOCK OPTION PLANS

     In March 1998,  UAP's Board of Directors  approved a stock option plan (the
"UAP Plan")  which  permits the grant of phantom  stock  options or the grant of
stock options to purchase up to 1,600,000  shares of UAP's Class A Common Stock.
The options vest in equal monthly increments over the four-year period following
the date of grant. Concurrent with approval of the UAP Plan, UAP's Board granted
a total of 918,500  phantom stock options to certain  employees  which gives the
employee  the right  with  respect to vested  options to receive a cash  payment
equal to the  difference  between the fair market  value of a share of UAP stock
and the  option  base price of $10 per share.  Vesting  of these  phantom  stock
options was retroactive to June 6, 1997.

     In April 1998,  UIH LA's Board of  Directors  approved a stock  option plan
(the "UIH LA Plan")  which  permits  the grant of phantom  stock  options or the
grant of stock  options to purchase up to  1,631,000  shares of UIH LA's Class A
Common Stock.  The options vest in equal monthly  increments  over the four-year
period following the date of grant. Concurrent with approval of the UIH LA Plan,
UIH LA's Board  granted a total of 1,475,500  phantom  stock  options to certain
employees  which gives the employee the right with respect to vested  options to
receive a cash payment equal to the difference  between the fair market value of
a share of UIH LA stock and the option base  prices in the range of  $4.26-$6.76
per share.  Vesting of these phantom stock  options was  retroactive  to June 6,
1997.

UNITED TELEKABEL HOLDING N.V. ("UTH")

     On April 2, 1998,  UPC and N.V. NUON  Energie-Onderneming  voor  Gelderland
("NUON"),  a Netherlands energy company,  signed a definitive agreement to merge
all of  their  Netherlands  broadband  cable  television  and  telecommunication
companies and activities into a newly-formed  company,  UTH. UPC will contribute
its wholly-owned  interest in CNBH, its 50% ownership  interest in A2000 and its
wholly-owned  interest in Kabeltelevisie  Son en Breugel B.V. for a 51% interest
in UTH. NUON will contribute its ownership  interests in N.V.  Telekabel  Beheer
for a 49%  interest  in UTH.  Closing of the  transaction  is subject to certain
conditions  precedent  including third party consents and shareholder  approval.
Upon closing, a correction payment will be made by either UPC or NUON to balance
the ownership interests based upon agreed valuation  methodology.  Further, both
parties will be committed to minimum  funding levels or become subject to future
dilution.  The closing  agreements provide UPC with a call option to acquire 50%
of NUON's ownership in UTH and provide NUON with a put option to sell 50% of its
ownership  interests  in UTH.  The  call and put  options  are in  effect  for a
two-year period starting one year after the closing of the transaction  expected
to occur before July 1, 1998.  The put\call price will be fixed as of closing.

                                       93
<PAGE>

                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

KABELKOM

     On April 1, 1998, UPC and TWE signed a memorandum of understanding  ("MOU")
for the purpose of restructuring the assets of Kabelkom.  Under the terms of the
MOU, UPC will acquire TWE's 50% ownership interest in Kabelkom's Hungarian cable
television  systems and TWE and other  partners will acquire UPC's 50% ownership
interest in Kabelkom's  Hungarian  programming  business.  In addition,  the MOU
provides for the sale of UPC's  ownership  interest in TV Max, a Czech  Republic
programming  business, to TWE. The MOU requires UPC to make a net payment to TWE
of $9,500  upon  closing  which is  expected  to occur in the second  quarter of
fiscal year 1999.

TVSB

     On April  15,  1998,  the  Company  exercised  its  option to  purchase  an
additional 55% interest in TVSB for  approximately  $12,000.  The purchase price
will be payable 50% upon approval by the Brazilian  National  Telecommunications
Agency  ("ANATEL"),  which is expected  prior to August 15, 1998, and 50% within
one year of the date ANATEL approval is received.

UNITED INTERNATIONAL INVESTMENTS

     In April and May, 1998, UPC signed MOUs with TINTA, its 50% partner in UII,
to acquire  TINTA's  interests  related to Tevel and  Melita,  and to sell UPC's
interest  in  Princes  Holdings  to  TINTA,  for  a  net  payment  to  TINTA  of
approximately  $71,000. The MOUs are contingent upon several factors,  including
the  completion of financing  satisfactory  to UIH, the consent of certain third
parties and regulatory bodies, and the signing of definitive documentation.

AUSTRALIS

     In May 1998,  Australis  Media Limited  ("Australis"),  a major supplier of
programming to Austar, was placed into receivership in Australia. As a result of
the receivership and of the subsequent  termination of various agreements on May
20, 21 and 22, 1998, Australis ceased to be a provider of programming and signal
to Austar.

     On May 19,  1998,  Austar  entered  into a 50/50 joint  venture  with Optus
Vision Pty Limited  ("Optus")  for the  ownership  and  operation of a satellite
distribution  platform. As of May 21, 1998, this platform was fully operational.
In addition,  Austar has signed  agreements  with Foxtel  Management Pty Limited
("Foxtel")  under  which it will be provided  with  several  channels  currently
carried by Austar,  including the Core Package.  These  developments have caused
only minor  disruptions  and  changes in service to Austar's  existing  customer
base.

     Also as of May 19, 1998, Austar was granted  additional  programming rights
by Optus which would permit the carriage of certain  channels of programming not
previously  available to Austar.  The specific packages of service to be offered
by Austar pursuant to these arrangements has not yet been concluded.

     Under the terms of the Austar Bank  Facility,  the  termination of Austar's
franchise  agreements  with  Australis  is  an  event  of  default  if  (i)  the
termination is initiated by Austar, (ii) the termination is not rectified within
seven days and (iii) the termination would likely have a material adverse effect
on Austar.  Austar  received the advance consent of the lenders under the Austar
Bank Facility to terminate  its franchise  agreement  with  Australis,  and such
banks have not given  notice  that a  termination  would  constitute  a material
adverse effect. Austar believes that, based upon its successful migration to the
signal platform and programming  agreements  described  above,  there will be no
such material adverse effect.

PROGRAMMING VENTURE:  UFC

         In 1997, UIH LA and International Family Entertainment  ("IFE") created
UFC which was owned 50% by UIH LA and 50% by IFE. In July 1997, UFC launched two
channels  of  Spanish  and  Portuguese  language   family-oriented   programming
distributed via satellite  throughout Latin America. In September 1997, Fox Kids
International  acquired IFE and UIH LA funded 100% of the cash  requirements  of
UFC until May 1998. In May 1998, UIH LA acquired the 50% ownership interest from

                                       94
<PAGE>
                     UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     IFE  and  then   entered   into  a  joint   venture   with  a  division  of
Metro-Goldwyn-Mayer,  Inc.  ("MGM") to form MGM Networks Latin America LLC ("MGM
Networks LA"). Under the terms of the joint venture, UIH LA contributed its 100%
interest in UFC for a 50%  interest in MGM  Networks  LA, and MGM acquired a 50%
interest in MGM Networks LA by contributing its Brazil channel (MGM Gold Brazil)
and  committing to fund the first $9,900 ($6,700 of which was funded at closing)
required by MGM  Networks  LA. MGM Networks LA has also entered into a trademark
license  agreement  with MGM for the use of the MGM  brand  name and also into a
program license agreement to acquire programming from MGM.


                                       95
<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

     The  directors  and  executive  officers  of the Company and their ages and
positions with the Company are set forth below:
<TABLE>
<CAPTION>
Name                      Age        Position
----                      ---        --------
<S>                       <C>        <C>
Gene W. Schneider         71         Chairman of the Board, President and Chief Executive Officer
Mark L. Schneider         42         Executive Vice President and Director of the Company,
                                     President and Chief Executive Officer of
                                       UPC  and  of  UIH  Europe/Middle  East
                                       Communications, Inc.
J. Timothy Bryan          37         Chief Financial Officer, Treasurer and Assistant Secretary
Michael T. Fries          35         Senior Vice President of the Company,
                                     President and Chief Executive Officer of UAP
Nimrod J. Kovacs          48         Senior Vice President of the Company,
                                     President of UIH Programming, Inc.
David J. Leonard          45         Senior Vice President of the Company,
                                     President and Chief Executive Officer of UIH LA
Albert M. Carollo         84         Director
John P. Cole, Jr.         68         Director
Lawrence F. DeGeorge      53         Director
Lawrence J. DeGeorge      82         Director
Antony P. Ressler         37         Director
John F. Riordan           55         Director of the Company and
                                     Executive Vice President and Managing Director of Advanced
                                       Telecommunications of UPC
Curtis W. Rochelle        82         Director
Bruce H. Spector          55         Director
</TABLE>

     The number of members of the  Company's  Board of  Directors  is  currently
fixed at ten. The Company's Restated Certificate of Incorporation provides for a
classified  Board of Directors,  which may have the effect of deterring  hostile
takeovers  or delaying  changes in control or  management  of the  Company.  For
purposes of determining  their terms,  directors are divided into three classes.
The Class I  directors,  whose  terms  expire at the 2000  annual  stockholders'
meeting,  include  Messrs.  Carollo,  Lawrence J. DeGeorge,  Ressler and Mark L.
Schneider.  The  Class II  directors,  whose  terms  expire  at the 1998  annual
stockholders'  meeting,  include Messrs.  Lawrence F. DeGeorge and Spector.  The
Class  III  directors,  whose  terms  expire  at the 1999  annual  stockholders'
meeting,  include Messrs. Rochelle and Gene W. Schneider.  Each director elected
at each  such  meeting  will  serve  for a term  ending on the date of the third
annual  stockholders'  meeting  after his  election or until his earlier  death,
resignation  or removal.  In March 1998,  the Board of Directors  appointed  Mr.
Riordan  to serve as a Class II  director  and Mr.  Cole to serve as a Class III
director until the 1998 annual shareholders' meeting.

     The Company, Apollo Cable Partners L.P. ("Apollo") and certain stockholders
of the Company (the  "Founders")  have entered  into a  stockholders'  agreement
that,  among other things,  entitles  Apollo to nominate three directors and the
Founders to nominate  nine  directors.  Apollo and the Founders are obligated to
vote to elect as directors  those  persons so  nominated.  The number of persons
Apollo and the  Founders  are  entitled to nominate for election as directors is
subject to reduction for each group if the  percentage  of the Company's  voting
securities  beneficially  owned by it is reduced below certain levels determined
without regard to shares issued after the closing of Apollo's  investment in the
Company.  These  director  nomination  rights  expire on April 12, 2003,  unless
earlier terminated by agreement of Apollo and the Founders.  Messrs. Ressler and
Spector were nominated by Apollo,  and the eight other  directors were nominated
by the  Founders.  Apollo and the  Founders  each have the right to nominate one
additional  director.  See "Certain  Relationships and Related  Transactions-The
Apollo Transaction."

     The Board of Directors  has  established  an Audit  Committee,  composed of
three  independent  directors  who are  not  affiliates  or  present  or  former
employees of the Company,  and a Compensation  Committee,  composed of the seven
members of the Board who are not employees of the Company.  The Audit  Committee
is currently comprised of Messrs. Carollo, Cole and Lawrence J. DeGeorge and the
Compensation Committee is currently comprised of Messrs. Carollo, Cole, Lawrence
F. DeGeorge, Lawrence J. DeGeorge, Ressler, Rochelle and Spector.

                                       96

<PAGE>

     GENE W. SCHNEIDER,  71, has served as Chairman of the Board of Directors of
the  Company  since  its  inception  in May 1989 and was a  director  of  United
International  Holdings, a Colorado general partnership (the "Partnership") from
September  1989 until its  dissolution in December 1993. On October 1, 1995, Mr.
Schneider became the Company's  President and Chief Executive Officer.  From May
1989  until  November  1991,  Mr.  Schneider  was  Chairman  of  United  Artists
Entertainment  Company ("United  Artists"),  the third-largest  cable television
company, and the largest theater owner, in the world. He was a founder of United
Cable  Television  Corporation  ("United  Cable") in the early 1950s and, as its
Chairman and Chief Executive Officer, built United Cable into the eighth-largest
multiple  system  operator  prior to merging  with United  Artists.  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  1950s.  He also has served on the boards of directors of
several other companies, including Turner Broadcasting Corporation. He currently
serves on the Supervisory Board of UPC.

     MARK L. SCHNEIDER, 42, has been a director of the Company since April 1993.
Mr. Schneider has been Executive Vice President of the Company and President and
Chief Executive Officer of UIH  Europe/Middle  East  Communications,  Inc. since
December  1996. In April 1997,  Mr.  Schneider  also became  President and Chief
Executive  Officer of UPC.  From May 1996 to December  1996,  Mr.  Schneider was
Chief of Strategic Planning and Operational  Oversight of the Company. He served
as  President of the Company from July 1992 until March 1995 and was Senior Vice
President  of the Company from May 1989 until July 1992.  During these  periods,
Mr. Schneider was responsible for international  multi-channel television system
and  programming  activities.  Prior to joining the  Company,  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.

     J. TIMOTHY BRYAN, 37, has been the Chief Financial  Officer,  Treasurer and
Assistant  Secretary of the Company and a Director of both UIH A/P and UAP since
January 1997. Prior to joining the Company 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. Mr. Bryan also serves on the Supervisory Board of UPC.

     MICHAEL T. FRIES, 35, has served as President of UAP since June 1995, where
he is  responsible  for all operating and  development  activities and all other
business  in the  Asia/Pacific  region.  He has also  served as Chief  Executive
Officer of UAP since  December  1996.  Prior to becoming  President  of UAP, Mr.
Fries  served as Senior Vice  President,  Development  in which  capacity he was
responsible for managing the Company's acquisitions and new business development
activities  since  March  1990,  including  the  Company's  expansion  into  the
Asia/Pacific   markets.  In  this  capacity,   he  established  and  implemented
development   strategies  for  the  Company,   managed  the  identification  and
evaluation   of   investment   opportunities   and   negotiated   and  finalized
transactions.  He retains the position of Senior Vice  President of the Company.
From 1985 to 1990,  Mr.  Fries was  employed by  PaineWebber  Incorporated  (New
York), where he spent approximately one year in the firm's 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.

     NIMROD J. KOVACS, 48, was appointed  President of UIH Programming,  Inc. in
December  1996.  Prior to that,  Mr. Kovacs served as President,  Eastern Europe
Electronic  Distribution  & Global  Programming  Group since January 1996.  From
March  1991  until   December   1995,   he  served  as  Senior  Vice   President
Central/Eastern Europe and was responsible for development and management of the
Company's  investments  in Hungary and the Czech  Republic  and the  development
opportunities  in Romania and  Bulgaria.  From  October  1989 until  joining the
Company,  Mr. Kovacs was the  president of NJK  International,  a  multi-channel
television consulting firm.

     DAVID J. LEONARD,  45,  became  President of UIH LA in June 1995 and Senior
Vice President of the Company and Chief Executive  Officer of UIH LA in December
1996.  Mr.  Leonard is responsible  for the  organization  and management of the
Company's  operating  and  development  activities  in Latin  America.  Prior to
becoming  President of UIH LA, Mr.  Leonard was Regional Vice  President,  Latin
America. Prior to that, from 1990 to 1992, Mr. Leonard was the Managing Director
for the Company's cable project in Sweden,  where he had full responsibility for
development and operations.

     ALBERT M. CAROLLO,  84, has been a director of the Company since April 1993
and was a director of the  Partnership  from December 1990 until its dissolution
in December  1993. He served as a director of United  Artists from December 1988
to November 1991 and has been President of Sweetwater  Television  Company since
1955. Mr. Carollo was a director of United Cable from 1974 until 1989.

                                       97
<PAGE>

     JOHN P. COLE JR., 68, has been a director of the Company  since March 1998.
Mr. Cole has  practiced  law in  Washington,  D.C. for the past 42 years and has
been  counsel  over the years in many  landmark  proceedings  before the Federal
Communications Commission,  reflecting the development of the cable industry. In
addition,  Mr.  Cole is the  author of  numerous  articles  on cable  regulatory
issues.  In  1966,  he  founded  the law firm of Cole,  Raywid  &  Braverman,  a
nationally-recognized  firm  of  30  lawyers  specializing  in  all  aspects  of
communications   and  media  law.  Mr.  Cole  is  also  a  director  of  Century
Communications Corporation.

     LAWRENCE F.  DEGEORGE,  53, has been a director  of the Company  since June
1997.   Since   1991,   he  has   directed   venture   capital   investment   in
telecommunications  and  biotechnology as Chief Executive  Officer of LPL Group,
Inc.,  LPL Investment  Group,  Inc.,  LPL  Management  Group,  Inc. and DeGeorge
Holding  Ltd. He served as  President of Amphenol  Corporation  ("Amphenol"),  a
major  international  manufacturer  of electrical,  electronic  and  fiber-optic
connectors,  cable and cable  assemblies,  from May 1989 to January  1991 and as
Executive Vice President and Chief Financial  Officer from September 1986 to May
1989. He was also Director of Amphenol from June 1987 until January 1991.

     LAWRENCE J.  DEGEORGE,  82, has been a director of the Company  since April
1993 and was a  director  of the  Partnership  from  September  1989  until  its
dissolution  in  December  1993.  He was also  Chairman  of the  Board and Chief
Executive  Officer of  Amphenol  from May 1987 until its sale in May 1997.  From
1985  until the sale of  Amphenol,  Mr.  DeGeorge  has been the Chief  Executive
Officer of Amphenol's subsidiary, Times Fiber Communications, Inc., a major U.S.
manufacturer of coaxial cable for the cable television industry.

     ANTONY P.  RESSLER,  37, has been a director of the Company  since  October
1993.  Since its  inception  in 1990,  Mr.  Ressler has been a partner of Apollo
Advisors,  L.P.  ("Apollo  Advisors")  and Lion  Advisors,  L.P.,  which through
several  funds  represent  institutional  investors  with  respect to  corporate
acquisitions and securities investments. From 1988 to 1990, he was a Senior Vice
President  in  the  High  Yield  Bond   Department  of  Drexel  Burnham  Lambert
Incorporated, a firm he joined in 1985. Mr. Ressler is also a director of Allied
Waste, Vail Resorts,  Inc., Dominick's  Supermarkets,  Inc., Family Restaurants,
Inc. and Packaging Resources, Inc.

     JOHN F.  RIORDAN,  55, has been a director of the Company  since March 1998
and in November 1997 was appointed  Executive Vice President of UPC and Managing
Director of Advanced  Telecommunications  and Development at UPC. Mr. Riordan is
also the Chairman of the Board and Chief Executive  Officer of Princes Holdings,
the multi-channel  television  operating company in Ireland in which UPC holds a
20% interest. Prior to his involvement with UIH, Mr. Riordan managed the Riordan
Group, a company he founded in the mid-1980s that has made several  acquisitions
in the specialist tile manufacturing  businesses.  Mr. Riordan was also Chairman
of Board of the Riordan Group.

     CURTIS W. ROCHELLE, 82, has been a director of the Company since April 1993
and was a director of the Partnership  from September 1989 until its dissolution
in December 1993. He is a rancher in Rawlins, Wyoming, and the owner of Rochelle
Livestock.  Mr.  Rochelle also is a director and Vice President of Lander Energy
Company, a real estate developer in Fort Collins,  Colorado,  and was a director
of United Artists from December 1988 to November  1991. Mr.  Rochelle also was a
director of United Cable from 1974 to 1989.

     BRUCE H.  SPECTOR,  55, has been a director  of the Company  since  October
1993. In 1995, Mr. Spector  became a partner of Apollo  Advisors,  which through
several  funds  represents  institutional  investors  with  respect to corporate
acquisitions  and  securities  investments.  From October 1992 through 1994, Mr.
Spector  served as a  consultant  to Apollo  Advisors.  Prior to joining  Apollo
Advisors,  Mr.  Spector  was a  senior  member  of the Los  Angeles  law firm of
Stutman,  Treister & Glatt  Professional  Corporation  for nearly 25 years.  Mr.
Spector  is also a  director  of Vail  Resorts,  Inc.,  Telemundo  Group,  Inc.,
Metropolis Realty Trust, Inc. and Next Health, Inc.

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

OTHER MANAGEMENT

     ELLEN P.  SPANGLER,  49, was named  Senior Vice  President  of Business and
Legal Affairs and  Secretary of the Company in December  1996.  Ms.  Spangler is
responsible  for the legal  operations  of the  Company.  Prior to assuming  her
current   positions,   she  was  a  Vice   President  of  the  Company  and  her
responsibilities included business and legal affairs,  programming and assisting
on  development  projects.  Prior to joining  the Company in January  1991,  she
served as Director of Business Affairs, Programming at Tele-Communications, Inc.
("TCI") from 1987 to 1991 and as Acquisitions Counsel at TCI from 1984 to 1987.

                                       98
<PAGE>

     CHRISTOPHER  BARNHOUSE,  40, became the Senior Vice President of Technology
and Engineering for the Company in September 1996. Prior to joining the Company,
he was employed as the Vice  President of Technology of Time Warner from 1993 to
1996 and as a general manager at US WEST Cable from 1987 to 1993. Mr.  Barnhouse
is responsible  for all cable and telephone  technology and  engineering for the
Company.

    VALERIE L. COVER,  41, has served as the  Controller  for the Company  since
October 1990 and as a Vice  President of the Company since  December  1996.  Ms.
Cover is responsible for the accounting and financial reporting functions of the
Company.  Prior to  joining  the  Company,  she was the  Director  of  Corporate
Accounting  at United  Artists  from May 1989 until  October 1990 and Manager of
Financial Reporting at United Cable from June 1986 until May 1989.

     In May 1996, the Company  established an Investment  Committee that reviews
the  various  development  opportunities  and  operations  of the  Company.  The
Investment  Committee  is  comprised of Messrs.  Gene W.  Schneider,  Barnhouse,
Bryan, Fries, Leonard, Kovacs, Mark L. Schneider and Ms. Spangler.

     During the past five years,  none of the above named  persons  have had any
involvement  in such legal  proceedings as would be material to an evaluation of
ability or integrity.

ITEM 11.  EXECUTIVE COMPENSATION
--------------------------------

     The following table sets forth the aggregate  annual  compensation  for the
Company's  chief  executive  officer  and four  other  most  highly  compensated
executive officers for services rendered during Fiscal 1998, 1997 and 1996.
<TABLE>
<CAPTION>
                                             Summary Compensation Table
                                                                                          Long-Term
                                                                                         Compensation
                                                      Annual Compensation                   Awards
                                             ---------------------------------------    --------------
                                                                            Other        Securities
                                   Fiscal                                  Annual        Underlying         All Other
Name and Principal Position         Year      Salary         Bonus      Compensation    Options (#)(1)    Compensation
---------------------------        ------    --------     ------------  ------------    --------------    ------------
<S>                                 <C>      <C>          <C>              <C>             <C>              <C>
Gene W. Schneider                   1998     $382,981     $       --       $    --              --          $5,599(2)
   Chairman of the Board,           1997     $352,212     $       --       $    --         100,000          $5,529(2)
     President and Chief            1996     $332,539     $       --       $    --          40,000          $5,411(2) 
     Executive Officer

David J. Leonard                    1998     $244,808     $  500,000(3)    $    --          20,000          $8,712(4)
   President and Chief              1997     $219,038     $       --       $    --          40,000          $5,153(4)
     Executive Officer, UIH LA      1996     $201,539     $       --       $    --          25,000          $5,139(4)


Mark L. Schneider                   1998     $318,750     $       --       $60,000(5)           --          $  486(6)
   President and Chief Executive    1997     $300,000     $       --       $    --          60,000          $  486(6)
     Officer, UPC                   1996     $301,414     $       --       $    --          36,000          $1,780(6)

Michael T. Fries                    1998     $254,269     $       --       $25,000(5)           --          $5,627(7)
   President and Chief              1997     $233,962     $       --       $    --          10,000          $5,533(7)
     Executive Officer, UAP         1996     $221,692     $       --       $    --          35,000          $5,498(7)

Nimrod J. Kovacs                    1998     $248,981     $       --       $    --              --          $5,499(9)
   President, UIH                   1997     $239,442     $1,698,747(8)    $    --          55,000          $5,467(9)
     Programming, Inc.              1996     $236,808     $       --       $    --          10,000          $5,400(9)
</TABLE>


(1)  Amounts  represent  the  number of  options  with  respect to shares of the
     Company's  Class A Common Stock granted to such  executive  officers of the
     Company under the Employee Plan.
(2)  Amounts  consist of  matching  employer  contributions  made by the Company
     under the Company's  employee 401(k) plan of $4,951,  $4,833 and $4,691 for
     Fiscal 1998, 1997 and 1996, respectively,  with the remainder consisting of
     term  life  insurance  premiums  paid by the  Company  for Mr.  Schneider's
     benefit.

                                       99
<PAGE>

(3)  Mr. Leonard  received  accelerated  vesting and payment for phantom options
     under  the UIH LA  stock  option  plan in  connection  with the sale of the
     Company's Argentine assets.
(4)  Amounts  consist of  matching  employer  contributions  made by the Company
     under the Company's  employee 401(k) plan of $8,064,  $4,457 and $4,419 for
     Fiscal 1998, 1997 and 1996, respectively,  with the remainder consisting of
     term life insurance premiums paid by the Company for Mr. Leonard's benefit.
(5)  Amounts represent additional compensation relating to foreign assignments.
(6)  Amounts  consist of  matching  employer  contributions  made by the Company
     under the  Company's  employee  401(k) plan of $0, $0 and $1,294 for Fiscal
     1998, 1997 and 1996,  respectively,  with the remainder  consisting of term
     life insurance premiums paid by the Company for Mr. Schneider's benefit.
(7)  Amounts  consist of  matching  employer  contributions  made by the Company
     under the Company's  employee 401(k) plan of $4,979,  $4,837 and $4,778 for
     Fiscal 1998, 1997 and 1996, respectively,  with the remainder consisting of
     term life insurance premiums paid by the Company for Mr. Fries' benefit.
(8)  Mr. Kovacs received this bonus from Kabelkom,  a Hungarian company in which
     the Company owned an approximate 23.5%  proportionate  interest at February
     28, 1997. Mr. Kovacs currently serves as a director of Kabelkom.
(9)  Amounts  consist of  matching  employer  contributions  made by the Company
     under the Company's  employee 401(k) plan of $4,851,  $4,771 and $4,680 for
     Fiscal 1998, 1997 and 1996, respectively,  with the remainder consisting of
     term life insurance premiums paid by the Company for Mr. Kovacs' benefit.

     The following table sets forth  information  concerning  options which were
granted by the Company to the officers named in the Summary  Compensation  Table
above during Fiscal 1998.
<TABLE>
<CAPTION>
                                         Option Grants in Last Fiscal Year(1)

                                                   Individual Grants
                             -----------------------------------------------------------      Potential Realizable Value
                              Number of        Percentage of                                   at Assumed Annual Rates    
                              Securities       Total Options                                  of Stock Price Appreciation
                              Underlying        Granted to       Exercise                         for Option Term (2)
                               Options         Employees in       Price        Expiration     ----------------------------
Name                         Granted (#)        Fiscal Year       ($/Sh)          Date          5% ($)             10% ($)
----                         -----------       -------------     ---------    -----------     -----------       ----------
<S>                             <C>                 <C>           <C>          <C>             <C>               <C>
Gene W. Schneider..........         --               --                --            --              --                --
David J. Leonard...........     20,000              4.6%          $10.875      12/19/07        $136,785          $346,639
Mark L. Schneider..........         --               --                --            --              --                --
Michael T. Fries...........         --               --                --            --              --                --
Nimrod J. Kovacs...........         --               --                --            --              --                --
</TABLE>
(1)  The  stock  options  granted  during  Fiscal  1998  vest in  equal  monthly
     increments  over the  four-year  period  following  the date of the  grant.
     Vesting  of the  options  granted  would be  accelerated  upon a change  of
     control of the Company as defined in the Employee 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  Company's  Class  A  Common  Stock,  continued
     employment  of the  optionee  through  the term of the  options  and  other
     factors.

     None  of  the  officers  named  in the  Summary  Compensation  Table  above
exercised options during Fiscal 1998. The following table sets forth information
concerning   unexercised   options  held  by  officers   named  in  the  Summary
Compensation Table above as of the end of Fiscal 1998.
<TABLE>
<CAPTION>
                                             Fiscal Year-End Option Values

                                                              Number of Securities               Value of Unexercised
                                                             Underlying Unexercised                  In-the-Money
                                                              Options at FY-End (#)              Options at FY-End ($)
                                                        ---------------------------------     ----------------------------
Name                                                    Exercisable        Unexercisable      Exercisable    Unexercisable
----                                                    -----------        -------------      -----------    -------------
<S>                                                        <C>                <C>              <C>              <C> 
Gene W. Schneider....................................      205,834            84,166           $812,240         $128,385
David J. Leonard.....................................      114,792            50,208           $374,079         $125,702
Mark L. Schneider....................................      191,500            54,500           $791,094         $ 77,031
Michael T. Fries.....................................      146,250            18,750           $712,787         $ 12,838
Nimrod J. Kovacs.....................................      125,833            39,167           $399,961         $ 50,364
</TABLE>
                                       100
<PAGE>

CONSULTING AGREEMENT

     On June 1, 1995,  the  Company  entered  into a  five-year  agreement  (the
"Agreement")  with Mark  Schneider  pursuant to which he works full time for the
Company. Under the Agreement, Mr. Schneider is entitled to receive stock options
during the term of the  Agreement in an amount to be  determined by the Board of
Directors on the  recommendation  of the  Chairman of the Board,  which shall be
equal to at least  90% of the  average  number  of shares  provided  in  options
granted to other executive officers.  The Agreement is terminable by the Company
or by Mr.  Schneider.  If the  Agreement  is  terminated  by  the  Company,  Mr.
Schneider will be entitled to annual compensation and other benefits through the
term of the  Agreement.  If it is  terminated  by Mr.  Schneider,  benefits will
terminate as of the date of termination.

COMPENSATION OF DIRECTORS

     The Company compensates its outside directors at $500 per month plus $1,000
per board and committee meeting ($500 for certain telephonic meetings) attended.
Directors  who  are  also  employees  of  the  Company   receive  no  additional
compensation  for  serving  as  directors.  The  Company  reimburses  all of its
directors  for  travel  and  out-of-pocket  expenses  in  connection  with their
attendance  at meetings of the Board of  Directors.  In  addition,  non-employee
directors  participate  in the  Company's  Stock  Option  Plan for  Non-Employee
Directors  pursuant to which each  non-employee  director was granted options to
acquire  20,000  shares of Class A Common  Stock at the fair market value of the
shares at the time of the grant.

     On March 20, 1998,  the Board of Directors  adopted a new Stock Option Plan
for non-employee directors,  subject to ratification by the shareholders,  which
the Company intends to solicit at its next shareholders'  meeting. Under the new
plan and subject to shareholder ratification, each current non-employee director
will be granted  options to acquire 15,000 shares of Class A Common Stock at the
fair market value as of March 20, 1998. See "Non-Employee  Director Stock Option
Plan."

EMPLOYEE STOCK OPTION PLAN

     In May 1993,  the  Company  adopted a stock  option plan for certain of its
employees (the "Employee Plan"). The Employee Plan is construed, interpreted and
administered  by the  Compensation  Committee  of the  Board of  Directors  (the
"Committee").  The Committee  has the  discretion to determine the employees and
consultants  to whom  options are granted,  the number of shares  subject to the
options,  the exercise  price of the options,  the period over which the options
become  exercisable,  the  term  of the  options  (including  the  period  after
termination  of employment  during which an option may be exercised) and certain
other provisions relating to the options.

     Under the Employee Plan,  options to purchase shares of the Company's Class
A Common Stock may be granted to employees  and  consultants  by the  Committee.
Members  of the  Company's  Board of  Directors  who are not  employees  are not
eligible to receive  option grants under the Employee  Plan. The maximum term of
options  granted  under the Employee Plan is ten years.  Options  granted may be
either  incentive  stock  options  under the Internal  Revenue Code of 1986,  as
amended (the "Code"), or non-qualified stock options.  The options vest in equal
monthly  increments over the four-year  period  following the date of the grant.
Vesting would be accelerated  upon a change of control in the Company as defined
in the Employee Plan.

     Under the Employee Plan,  options to purchase  3,800,000  shares of Class A
Common Stock have been  authorized.  As of February 28, 1998,  the Committee had
granted to the Company's  executive  officers and other employees  options under
the  Employee  Plan to  purchase a total of  2,947,476  shares of Class A Common
Stock at exercise prices ranging from $4.50 to $17.75 per share.

NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

     The Company  adopted a stock option plan for  non-employee  Directors  (the
"Director  Plan")  effective  June 1, 1993.  The Director  Plan provides for the
grant of an option to  acquire  20,000  shares of the  Company's  Class A Common
Stock to each member of the Board of  Directors  who was not also an employee of
the Company (a "non-employee  director") on June 1, 1993, and to each person who
is newly elected to the Board as a non-employee  director after June 1, 1993, on
the date of his election.  The total number of shares of Class A Common Stock as
to which  options  may be  granted  under the  Director  Plan is  480,000 in the
aggregate. As of February 28, 1998, options to acquire a total of 260,000 shares
were outstanding under the Director Plan at exercise prices from $9.50 to $17.75
per share.  The exercise price for options granted under the Director Plan after
the Company's  initial public offering is the fair market value of the shares on
the date of grant determined by reference to the last reported sale price of the
Class A Common Stock on the Nasdaq National Market.

                                      101
<PAGE>

     The options vest in equal  monthly  increments  over the  four-year  period
following  the date of grant.  Vesting  would be  accelerated  upon a "change of
control" of the Company.  For purposes of the Director Plan, a change of control
is generally  deemed to occur if (a) a person acquires  beneficial  ownership of
shares of the Company  having 30% or more of the total  number of votes that may
be cast for the election of directors of the Company  without the prior approval
of a majority of the directors of the Company  unaffiliated  with such person or
(b)  individuals who constitute the directors of the Company at the beginning of
a 24-month  period cease to constitute  at least  two-thirds of all directors at
any  time  during  such  period,  unless  the  election  of any new  replacement
directors  was  approved  by a vote of at least a majority of the members of the
board in office  immediately prior to such period and of the new and replacement
directors so approved.

     On March 20, 1998,  the Board of Directors  adopted a new stock option plan
for non-employee  directors ("New Director Plan") subject to ratification by the
shareholders,   which  the  Company  intends  to  solicit  at  its  next  annual
shareholders'  meeting.  The New Director Plan has  substantially the same terms
and conditions as the Director Plan. The major  difference is that the number of
shares  to be  granted  to each  director  is to be  determined  by the Board of
Directors.  Subject to shareholder approval, the Board of Directors granted each
non-employee  director  options under the New Director  Plan to purchase  15,000
shares of the  Company's  Class A Common  Stock.  The total  number of shares of
Class A Common Stock as to which  options may be granted  under the New Director
Plan  will  be  submitted  to  shareholders  for  approval  at the  next  annual
shareholders' meeting.

401(k) PLAN

     The Company adopted a defined contribution 401(k) plan (the "401(k) Plan"),
effective February 1, 1994. The 401(k) Plan is intended to qualify under Section
401(a) of the Code and will provide for employee pre-tax contributions  pursuant
to Section 401(k) of the Code and matching Company contributions. It is expected
that substantially all of the Company's  employees who have satisfied the 401(k)
Plan's age and  service  requirements  will be eligible  to  participate  in the
401(k) Plan.  Eligible  participants may contribute,  on a pre-tax basis through
payroll  deduction,  between 1% and 15% of their total pay each payroll  period.
The Company will match up to the first 6% of a participant's  contributions each
year at the rate of 50%. The Company's  contribution  may be made either in cash
or in shares of the Company's Class A Common Stock, as determined by the Company
in its sole discretion.  Company  contributions will vest at the rate of 25% per
year,  beginning  upon the  completion  of one year of service with the Company.
Participants  in the 401(k)  Plan will be  permitted  to withdraw  funds  during
employment for certain specified hardship purposes. The Company has reserved the
right to amend or terminate the 401(k) Plan at any time.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Company's  Board of Directors in April 1993  established a Compensation
Committee composed of members of the Board who are not employees of the Company.
None of the  executive  officers  of the  Company  have  served as a director or
member of a  Compensation  Committee of another  company that had any  executive
officer that was also a director or member of the Compensation  Committee of the
Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION

     The Company's Restated Certificate 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 Restated  Certificate 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
Restated  Certificate of Incorporation and Bylaws.  These agreements require the
Company,  among other things, to indemnify the Company's  directors and officers
for certain expenses (including attorneys' 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
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.

                                      102
<PAGE>

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(THE "EXCHANGE ACT")

     Under Section 16(a) of the Exchange Act, the Company's  directors,  certain
of its  officers  and persons  holding  more than 10% of the  Company's  Class A
Common Stock are required to file forms reporting their beneficial  ownership of
the Company's Class A Common Stock and subsequent changes in that ownership with
the  Securities  and  Exchange  Commission.  Such  persons are also  required to
furnish the Company with copies of forms so filed.

     Based  solely upon a review of copies of such forms filed with the Company,
the  Company  believes  that,  during  Fiscal  1998,  all Section  16(a)  filing
requirements  were complied  with,  except one Form 4 covering a disposition  of
securities  that was filed late by William J. Elsner,  a former  director of the
Company.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

     The following table sets forth certain information concerning the ownership
of common stock of all classes as of May 22, 1998, by (i) each  stockholder  who
is known by the  Company  to own  beneficially  more than 5% of the  outstanding
Class A Common Stock or Class B Common Stock at such date, (ii) each director of
the Company,  (iii) each executive officer of the Company and (iv) all directors
and  officers  of the  Company  as a group.  Shares of Class B Common  Stock are
convertible  immediately  into shares of Class A Common  Stock on a  one-for-one
basis,  and  accordingly,  holders of Class B Common Stock are deemed to own the
same number of shares of Class A Common  Stock.  The table  below also  reflects
deemed  beneficial  ownership  of Class A Common  Stock or Class B Common  Stock
resulting  from  the  voting  provisions  of the  Stockholders'  Agreement.  See
"Certain Relationships and Related Transactions-The Apollo Transaction."
<TABLE>
<CAPTION>
                                   Beneficial Ownership Other
                                     Than Deemed Beneficial                   Beneficial Ownership, including Deemed
                                  Ownership as a Result of the                     Beneficial Ownership as a
                                   UIH Stockholders' Agreement               Result of the UIH Stockholders' Agreement
                                --------------------------------   ---------------------------------------------------------------
                                      Class A Common Stock                                                      Percentage of All
                                              and                        Class A                Class B            Outstanding
                                      Class B Common Stock             Common Stock           Common Stock         Common Stock
                                --------------------------------   --------------------   --------------------  ------------------
                                                      Percent of                      
      Beneficial Owner           Number      Percent  Total Vote    Number      Percent     Number     Percent   Number      Vote
      ----------------          ---------    -------  ----------   ---------    --------   ---------   -------   ------      ----
<S>                             <C>          <C>        <C>        <C>            <C>      <C>           <C>      <C>        <C>
Gene W. Schneider(1)(2)........ 2,823,032     7.2%      17.0%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
Curtis W. Rochelle(1)(3)....... 1,190,274     3.0%       7.2%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
Mark L. Schneider(1)(4)........   487,868     1.2%       2.0%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
Lawrence F. DeGeorge(1)(5).....   398,735     1.0%       2.2%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
Lawrence J. DeGeorge(1)(6).....   394,152     1.0%       2.2%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
Albert M. Carollo(1)(7)........   151,210        *          *      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
Antony P. Ressler(8)...........    40,000        *          *          40,000         *            --        *        *          *
Bruce H. Spector(9)............    40,000        *          *          40,000         *            --        *        *          *
John P. Cole, Jr.(10)..........       833        *          *             833         *            --        *        *          *
J. Timothy Bryan(11)...........    54,167        *          *          54,167         *            --        *        *          *
Michael T. Fries(12)...........   215,219        *          *         153,263         *        61,956        *        *          *
Nimrod J. Kovacs(13)...........   189,533        *          *         153,131         *        36,402        *        *          *
David J. Leonard(14)...........   121,104        *          *         121,104         *            --        *        *          *
All directors and executive
 officers as a group
 (15 persons).................. 6,149,846    15.6%      32.4%      13,778,926     35.6%    12,282,838    95.8%    35.0%      80.3%
Apollo Cable Partners L.P.(15). 4,261,364    10.8%      27.5%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
Joseph E. Giovanini(16)........ 1,822,140     4.6%      11.5%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
William J. Elsner(17)..........   977,839     2.5%       5.2%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
Janet Schneider(18)............   192,774        *       1.2%      13,184,160     34.1%    12,173,030    94.9%    33.5%      79.3%
MacKay-Shields Financial
 Corporation(19)............... 3,519,109     8.9%       2.3%       3,519,109      9.1%            --        *     8.9%       2.3%
Everest Capital Limited(20).... 2,594,200     6.6%       1.7%       2,594,200      6.7%            --        *     6.6%       1.7%
Capital Research and
 Management Corporation(21).... 2,475,000     6.3%       1.6%       2,475,000      6.4%            --        *     6.3%       1.6%

*    Less than 1%.
</TABLE>

                                      103
<PAGE>

(1)  The address of Messrs. G. Schneider, Rochelle, M. Schneider, Carollo, L. F.
     DeGeorge and L. J.  DeGeorge is c/o United  International  Holdings,  Inc.,
     4643 South Ulster Street, Suite 1300, Denver, CO 80237.
(2)  Includes  214,583  shares  of Class A Common  Stock  that  are  subject  to
     presently  exercisable  options.  Also includes 1,531,756 shares of Class B
     Common Stock owned by G. Schneider  Holdings Co. (c/o United  International
     Holdings,  Inc., 4643 South Ulster Street,  Suite 1300,  Denver, CO 80237).
     The fourth  through  ninth columns also include  791,462  shares of Class A
     Common  Stock and  9,569,666  shares of Class B Common Stock owned by other
     parties to the Stockholders' Agreement, as to which Mr. Schneider disclaims
     beneficial ownership.
(3)  Includes  40,000  shares  of  Class A Common  Stock  that  are  subject  to
     presently  exercisable  options.  Also  includes  25,000  shares of Class A
     Common Stock and 998,470 shares of Class B Common Stock owned by the Curtis
     Rochelle Trust and 15,620 shares of Class A Common Stock and 111,184 shares
     of Class B Common  Stock owned by Marian  Rochelle  (Box 996,  Rawlins,  WY
     82301).  The fourth  through  ninth  columns also include  38,456 shares of
     Class B Common Stock owned by Kathleen Jaure (Box 321, Rawlins,  WY 82301),
     38,456  shares  of Class B Common  Stock  owned by Jim  Rochelle  (Box 967,
     Gillette, WY 82717),  930,510 shares of Class A Common Stock and 10,986,464
     shares of Class B Common Stock owned by other parties to the  Stockholders'
     Agreement, as to which Mr. Rochelle disclaims beneficial ownership.
(4)  Includes  197,500  shares  of Class A Common  Stock  that  are  subject  to
     presently  exercisable  options.  The fourth  through  ninth  columns  also
     include  813,630  shares of Class A Common Stock and  11,882,662  shares of
     Class B Common Stock owned by other parties to the Stockholders' Agreement,
     as to which Mr. Schneider disclaims beneficial ownership.
(5)  Includes 4,583 shares of Class A Common Stock that are subject to presently
     exercisable  options. The fourth through ninth columns also include 946,547
     shares  of Class A Common  Stock  and  11,838,878  shares of Class B Common
     Stock owned by other parties to the  Stockholders'  Agreement,  as to which
     Mr. DeGeorge disclaims beneficial ownership.
(6)  Includes  40,000  shares  of  Class A Common  Stock  that  are  subject  to
     presently  exercisable  options.  The fourth  through  ninth  columns  also
     include  951,130  shares of Class A Common Stock and  11,838,878  shares of
     Class B Common Stock owned by other parties to the Stockholders' Agreement,
     as to which Mr. DeGeorge disclaims beneficial ownership.
(7)  Includes  40,000  shares  of  Class A Common  Stock  that  are  subject  to
     presently  exercisable  options.  Also includes  111,210  shares of Class B
     Common Stock owned by the Carollo Company. The fourth through ninth columns
     also  include  111,206  shares  of Class B Common  Stock  owned by Albert &
     Carolyn Company,  111,206 shares of Class B Common Stock owned by the James
     R. Carollo  Living  Trust,  55,600  shares of Class B Common Stock owned by
     John B. Carollo  Living Trust,  and 971,130  shares of Class A Common Stock
     and 11,783,808 shares of Class B Common Stock owned by other parties to the
     Stockholders'  Agreement,  as to which  Mr.  Carollo  disclaims  beneficial
     ownership.  The address of Albert & Carolyn  Company,  the James R. Carollo
     Living  Trust  and the  John B.  Carollo  Living  Trust  is c/o  Sweetwater
     Television Co., P.O. Box 8, 602 Broadway, Rock Springs, WY 82901.
(8)  Includes  40,000  shares  of  Class A Common  Stock  that  are  subject  to
     presently exercisable options.
(9)  Includes  40,000  shares  of  Class A Common  Stock  that  are  subject  to
     presently exercisable options.
(10) Includes  833 shares of Class A Common  Stock that are subject to presently
     exercisable options.
(11) Includes  54,167  shares  of  Class A Common  Stock  that  are  subject  to
     presently exercisable options.
(12) Includes  149,063  shares  of Class A Common  Stock  that  are  subject  to
     presently  exercisable  options.  Also  includes  16,166  shares of Class B
     Common Stock owned by Fries Assets Media, Ltd.
(13) Includes  129,375  shares  of Class A Common  Stock  that  are  subject  to
     presently exercisable options. Also includes 4,780 shares of Class A Common
     Stock  and  30,000   shares  of  Class  B  Common  Stock  owned  by  Kovacs
     Communications, Inc.
(14) Includes  120,104  shares  of Class A Common  Stock  that  are  subject  to
     presently exercisable options.
(15) Represents  4,261,364  shares of Class B Common Stock owned by Apollo.  The
     fourth  through  ninth  columns  also include  1,011,130  shares of Class A
     Common  Stock and  7,911,666  shares of Class B Common Stock owned by other
     parties  to the  Stockholders'  Agreement,  as to  which  Apollo  disclaims
     beneficial ownership.  The address of Apollo is c/o Apollo Advisors,  L.P.,
     Two  Manhattanville  Road,  Purchase,  NY  10577.  Apollo  Advisors  is the
     managing  general  partner of AIF II, L.P., the general  partner of Apollo.
     Messrs. Ressler and Spector, directors of the Company, are also officers of
     Apollo Advisors,  and each expressly disclaims  beneficial ownership of the
     shares held by Apollo.
(16) Includes  1,383,572  shares  of Class B  Common  Stock  owned by  Giovanini
     Investments  Ltd.  and  398,568  shares  of Class B Common  Stock  owned by
     Giovanini Properties. The fourth through ninth columns also include 971,130
     shares  of Class A Common  Stock  and  10,390,890  shares of Class B Common
     Stock owned by other parties to the  Stockholders'  Agreement,  as to which
     Mr. Giovanini disclaims beneficial ownership. The address of Mr. Giovanini,
     Giovanini  Investments  Ltd. and  Giovanini  Properties is 3745 West Esther
     Way, Box 607, Teton Village, WY 83025.

                                      104
<PAGE>

(17) Includes  190,000  shares  of Class A Common  Stock  that  are  subject  to
     presently  exercisable  options.  The fourth  through  ninth  columns  also
     include  816,045  shares of Class A Common Stock and  11,390,276  shares of
     Class B Common Stock owned by other parties to the Stockholders' Agreement,
     as to which Mr. Elsner disclaims beneficial  ownership.  The address of Mr.
     Elsner is 3200 Cherry Creek Drive South, Suite 450, Denver, CO 80209.
(18) Includes  192,774  shares  of  Class B  Common  Stock  owned  by The  Janet
     Schneider  Revocable  Trust.  The fourth through ninth columns also include
     30,000  shares of Class A Common Stock and 16,174  shares of Class B Common
     Stock owned by Susan G.  Schneider,  83,673  shares of Class A Common Stock
     owned by Robert A.  Schneider,  and 897,457  shares of Class A Common Stock
     and 11,964,082 shares of Class B Common Stock owned by other parties to the
     Stockholders'  Agreement,  as to which Ms. Schneider  disclaims  beneficial
     ownership.  The  address  for The  Janet  Schneider  Revocable  Trust,  Ms.
     Schneider and Mr. Schneider is 5500 South Poplar, Casper, WY 82601.
(19) Represents 2,279,700 shares of Class A Common Stock and 1,239,409 shares of
     Class A Common Stock which may be acquired upon conversion of the Company's
     Series  A  Preferred  Stock.  The  address  of   MacKay-Shields   Financial
     Corporation is 9 West 57th Street, New York, NY 10019.
(20) The address of Everest Capital Limited is The Bank of Butterfield Building,
     65 Front Street, 6th Floor, HMJX, Bermuda.
(21) The address of Capital  Research and  Management  Corporation  is 333 South
     Hope Street, Los Angeles, CA 90071.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

THE APOLLO TRANSACTION

     The  Company  reached  agreement  with  Apollo  in  February  1993  for the
investment by Apollo of $30.0 million (before offering costs of $1.8 million) in
the  Company  in  exchange  for  4,261,364  shares of Class B Common  Stock (the
"Apollo Transaction").  The initial closing occurred on April 15, 1993, at which
time  Apollo  purchased  1,633,522  shares  of Class B Common  Stock  for  $11.5
million. Apollo purchased the remaining 2,627,842 shares of Class B Common Stock
for $18.5 million immediately prior to closing of the initial public offering.

     Apollo   entered  into  a  Standstill   Agreement  with  the  Company  (the
"Standstill  Agreement") whereby it agreed for a period ending seven years after
the date of the Company's  initial  public  offering not to purchase  additional
equity  securities of the Company that, when  aggregated with equity  securities
then held by Apollo, would exceed 32.27% of the outstanding equity securities of
the  Company  unless  such   acquisition  is  approved  by  a  majority  of  the
disinterested members of the Board of Directors of the Company.  Apollo has also
agreed not to engage in the  solicitation of proxies with respect to the Company
during such seven-year  period.  A person  purchasing  Class B Common Stock from
Apollo must become a party to the  Standstill  Agreement  unless the transfer is
made (i) in a tender offer approved by the Company's  Board of Directors or (ii)
in the open market or in an underwritten  public offering,  in either case where
the transferor  does not know the identity of the ultimate  purchaser and has no
reason to believe that a person would  acquire more than 10% of the  outstanding
shares or voting power of the Company's equity  securities.  A person purchasing
Class A Common Stock from Apollo must become a party to the Standstill Agreement
unless the transferor has no reason to believe that the ultimate purchaser would
acquire  more than the 10% of the  outstanding  shares  or  voting  power of the
Company's equity securities.

     Apollo,  the  Company  and the  Founders  are  parties  to a  Stockholders'
Agreement  (the  "Stockholders'  Agreement")  that  provides for the election as
directors by Apollo and the Founders of three persons  nominated to be directors
by Apollo and nine persons nominated to be directors by the Founders. The number
of persons  Apollo and the  Founders  are  entitled to nominate  for election as
directors  is  subject to  reduction  for each  group if the  percentage  of the
Company's voting  securities  beneficially  owned by it is reduced below certain
levels determined  without regard to shares issued after the Apollo  Transaction
is  consummated.  These  director  nomination  rights  expire on April 12, 2003,
unless  earlier  terminated by the agreement of Apollo and the Founders.  Apollo
and the Founders each has the right to nominate one  additional  director  under
the terms of the Stockholders' Agreement.

     The  Stockholders'  Agreement  provides that shares of Class B Common Stock
held by the  Founders  and Apollo will be  converted to shares of Class A Common
Stock  upon any  transfer  of the Class B Common  Stock  unless  the  transferee
becomes a party to the Stockholders'  Agreement or unless the transfer is one of
a type that would not require the purchaser to become a party to the  Standstill
Agreement if the transfer had been made by Apollo.

     The Stockholders'  Agreement also provides that Apollo and the Founders are
obligated to offer any of the Company's equity  securities or their  equivalents
to the  Company  prior to their  transfer  to  persons  other than  Apollo,  the
Founders and their  affiliates  and that the  Founders  are  obligated to permit
Apollo to participate on a pro-rata basis in any sale of Class B Common Stock by
the Founders that would result in a change of control of the Company. Apollo and
partners of the  Partnership who are affiliates of the Company have been granted
registration rights for the Company's common stock held by them.

                                      105
<PAGE>
 
                                     PART IV

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

     (a)(1) Financial Statements
<TABLE>
<CAPTION>
     Included in Item 8 of PART II of the Report:

                                                                                                                    Page
                                                                                                                    ----
         <S>                                                                                                        <C>
         UNITED INTERNATIONAL HOLDINGS, INC.
              Report of Independent Public Accountants..........................................................     51
              Independent Auditors' Report......................................................................     52
              Independent Auditors' Report......................................................................     53
              Report of Independent Accountants.................................................................     54
              Report of Independent Accountants.................................................................     55
              Report of Independent Auditors....................................................................     56
              Consolidated Balance Sheets as of February 28, 1998 and 1997......................................     57
              Consolidated Statements of Operations for the Years Ended February 28, 1998, February 28, 1997
                and February 29, 1996...........................................................................     58
              Consolidated Statements of Stockholders' (Deficit) Equity for the Years Ended February 28, 1998,
                February 28, 1997 and February 29, 1996.........................................................     59
              Consolidated Statements of Cash Flows for the Years Ended February 28, 1998, February 28, 1997
                and February 29, 1996...........................................................................     61
              Notes To Consolidated Financial Statements........................................................     63

     (a)(2) Financial Statement Schedules

     Included in PART IV of the Report:

         (i) Financial Statement Schedule required to be filed:

         UNITED INTERNATIONAL HOLDINGS, INC. (Parent Only)
              Report of Independent Public Accountants on Schedule..............................................    111
              Schedule I-Condensed Financial Information of Registrant (Parent only)............................    112
              Schedule I-Condensed Information as to the Operations of the Registrant (Parent only).............    113
              Schedule I-Condensed Information as to the Cash Flows of the Registrant (Parent only).............    114

         (ii) Separate Financial Statements and Related Schedules

         UNITED INTERNATIONAL PROPERTIES, INC.
              Report of Independent Public Accountants..........................................................    115
              Independent Auditors' Report......................................................................    116
              Independent Auditors' Report......................................................................    117
              Independent Auditors' Report......................................................................    118
              Report of Independent Accountants.................................................................    119
              Report of Independent Accountants.................................................................    120
              Report of Independent Auditors....................................................................    121
              Consolidated Balance Sheets as of February 28, 1998 and 1997......................................    122
              Consolidated Statements of Operations for the Years Ended February 28, 1998, February 28, 1997
                and February 29, 1996...........................................................................    123
              Consolidated Statements of Parent's Deficit for the Years Ended February 28, 1998,
                February 28, 1997 and February 29, 1996.........................................................    124
              Consolidated Statements of Cash Flows for the Years Ended February 28, 1998, February 28, 1997
                and February 29, 1996...........................................................................    125
              Notes To Consolidated Financial Statements........................................................    127

                                      106
<PAGE>

         UIH EUROPE, INC.
              Report of Independent Public Accountants..........................................................    151
              Consolidated Balance Sheets as of February 28, 1998 and 1997......................................    152
              Consolidated Statements of Operations for the Years Ended February 28, 1998, February 28, 1997
                and February 29, 1996...........................................................................    153
              Consolidated Statements of Parent's Equity for the Years Ended February 28, 1998, February 28,
                1997 and February 29, 1996......................................................................    154
              Consolidated Statements of Cash Flows for the Years Ended February 28, 1998, February 28, 1997
                and February 29, 1996...........................................................................    155
              Notes To Consolidated Financial Statements........................................................    156

         UNITED AND PAN-EUROPE COMMUNICATIONS N.V.
              Independent Auditors' Report......................................................................    169
              Independent Auditors' Report......................................................................    170
              Consolidated Balance Sheets as at December 31, 1997 and 1996......................................    171
              Consolidated Statements of Income for the Years Ended December 31, 1997, 1996 and 1995............    173
              Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995........    174
              Notes to Consolidated Financial Statements........................................................    175
</TABLE>

     (a)(3) Exhibits

     3.1       Second   Restated   Certificate   of   Incorporation   of  United
               International  Holdings,  Inc.  (the  "Company")  filed  June  4,
               1993.(1)

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

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

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

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

     4.2       The Second Restated Certificate of Incorporation, as amended, and
               Restated Bylaws of the Company are included as Exhibits 3.1-3.4.

     4.3       Indenture dated as of November 23, 1994,  between the Company and
               Firstar  Bank of  Minnesota,  N.A.,  as  successor in interest to
               American Bank National  Association  ("Trustee")  as Trustee (the
               "1994 Indenture").(4)

     4.4       Indenture dated as of November 22, 1995,  between the Company and
               Trustee (the "1995 Indenture").(5)

     4.5       Supplemental Indenture dated as of November 15, 1995, between the
               Company and Trustee as  implementing  certain  amendments  to the
               1994    Indenture   to   permit    additional    incurrence    of
               indebtedness.(5)

     4.6       Supplemental Indenture dated as of November 15, 1995, between the
               Company and Trustee as  regarding  the  definition  of  "accreted
               value" in the 1994 Indenture.(5)

     4.7       Supplemental  Indenture dated as of February 5, 1998, between the
               Company and Trustee with respect to the 1994 Indenture.(6)

     4.8       Supplemental  Indenture dated as of February 5, 1998, between the
               Company and Trustee with respect to the 1995 Indenture.(6)

     4.9       Warrant  Agreement  dated as of November  23,  1994,  between the
               Company and Trustee, as Warrant Agent.(4)

                                      107
<PAGE>

     4.10      Amendment  No. 1 to Warrant  Agreement  dated as of November  14,
               1995, between the Company and Trustee, as Warrant Agent.(5)

     4.11      Indenture dated as of February 27, 1996,  between the Company and
               Trustee.(7)

     4.12      Indenture  dated as of February 5, 1998,  between the Company and
               Trustee.(8)

     10.1      Stockholders'  Agreement  dated as of April 13,  1993,  among the
               Company,   United  International  Holdings  (the  "Partnership"),
               certain  partners of the  Partnership  and Apollo Cable  Partners
               L.P. ("Apollo").(9)

     10.2      Standstill  Agreement  dated as of April 13,  1993,  between  the
               Company and Apollo.(9)

     10.3      Letter  Agreement  dated April 15, 1993,  between the Company and
               Apollo.(9)

     10.4      Registration Rights Agreement dated as of April 13, 1993, between
               the Company and Apollo.(9)

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

     10.6      *1993 Stock Option Plan of the Company.(1)

     10.7      *Stock Option Plan for Non-Employee Directors.(10)

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

     10.9      Amended and Restated  Pledge  Agreement  dated as of November 22,
               1995,  by the  Company  in favor of  Morgan  Stanley  & Co.  (the
               "Collateral  Agent"),  as  Collateral  Agent  (the  "1995  Pledge
               Agreement").(11)

     10.10     First Amendment to 1995 Pledge  Agreement dated as of February 5,
               1998, between the Company and the Collateral Agent.(6)

     10.11     Pledge  Agreement  dated as of  February  5,  1998,  between  the
               Company and the Collateral Agent.(6)

     10.12     Indenture    dated   as   of   May   14,   1996,    between   UIH
               Australia/Pacific, Inc. ("UIH A/P") and Trustee.(12)

     10.13     Registration  Rights  Agreement dated December 21, 1995,  between
               the Company and Media International Holdings Limited.(3)

     10.14     Amended and Restated Securities Purchase and Conversion Agreement
               dated as of December  1, 1997,  by and among  Philip  Media B.V.,
               Philips Media Network B.V., the Company,  Joint Venture, Inc. and
               United and Philips Communications B.V. (13)

     10.15     Registration  Rights  Agreement  dated as of December 5, 1997, by
               and among the Company, Belmarken Holdings B.V. ("Belmarken"), and
               The Toronto-Dominion Bank as the Security Trustee.(13)

     10.16     Loan  Agreement  for  NLG1,100,000,000  multi-currency  Revolving
               Credit  Facility  dated as of October 8,  1997,  between  UPC and
               certain  of its  subsidiaries  and The  Toronto-Dominion  Bank as
               Agent  for the  financial  institutions  identified  therein,  as
               amended by a Supplement Agreement dated December 8, 1997.(13)

     10.17     Loan Agreement dated December 5, 1997,  between  Belmarken as the
               Borrower,   Cable  Network   Netherlands   Holding  B.V.,   Binan
               Investments B.V. and Stipdon Investments B.V. as Guarantors,  The
               Toronto-Dominion Bank and Toronto-Dominion  Capital as Arrangers,
               the  banks  and  financial   institutions  listed  therein,   The
               Toronto-Dominion  Bank as Agent and The Toronto-Dominion  Bank as
               Security Trustee, as amended by Waiver and amendment letter dated
               December 11, 1997.(13)

                                      108
<PAGE>

     10.18     Stock  Purchase  Agreement,  dated as of October 17, 1997, by and
               among  Multicanal  S.A.,  as  Buyer,  and  United   International
               Holdings  Argentina,  S.A. and UIH  Argentina,  Inc., as Sellers,
               relating  to  the  sale  of  the  companies  operating  in  Bahia
               Blanca.(14)

     10.19     Stock  Purchase  Agreement,  dated as of October 20, 1997, by and
               among Supercanal Holding S.A., as Buyer, and United International
               Holdings  Argentina,  S.A. and UIH  Argentina,  Inc., as Sellers,
               relating  to the  sale of the  companies  operating  in  Comodoro
               Rivadavia and Trelew.(14)

     10.20     Stock  Purchase  Agreement,  dated as of October 20, 1997, by and
               among Supercanal Holding S.A., as Buyer, and UIH Argentina,  Inc.
               and CV American Holdings L.L.C., as Sellers, relating to the sale
               of the companies operating in Santa Fe and Entre Rios.(14)

     10.21     Assignment and Amendment Agreement, dated as of October 29, 1997,
               by and among  Supercanal  Holding S.A.,  as Assignor,  Multicanal
               S.A. and Cablevision S.A., as Assignees, and UIH Argentina,  Inc.
               and CV American Holdings L.L.C.,  as Sellers.  This agreement was
               signed, and the transactions contemplated thereby were closed, on
               October 29, 1997.(14)

     10.22     A$200,000,000  Syndicated Senior Secured Debt Facility  Agreement
               dated July 31,  1997,  among  Austar  Entertainment  Pty Limited,
               Chase Securities  Australia Limited,  the Guarantors named herein
               and the financial institutions named herein.(15)

     12.1      Statement re: Ratio of Earnings to Fixed Charges.

     21.1      Subsidiaries and Restricted Affiliates of the Company.

     21.2      Unrestricted Subsidiaries of the Company.

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

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

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

     23.4      Consent of Independent Public Accountants--Arthur  Andersen & Co.
               (United  Pan-Europe  Communications  N.V.)  (for the years  ended
               December 31, 1997 and 1996).

     23.5      Consent of Independent Public Accountants--Arthur  Andersen & Co.
               (United Pan-Europe  Communications N.V., formerly known as United
               and Philips Communications B.V.) (for the year ended December 31,
               1995).

     23.6      Consent of Independent Public Accountants--KPMG  Accountants N.V.
               (United Pan-Europe  Communications N.V., formerly known as United
               and Philips Communications B.V.) (for the year ended December 31,
               1995).

     23.7      Consent of Independent  Auditors--Deloitte  Touche  Tohmatsu (XYZ
               Entertainment Pty Ltd.).

     23.8      Consent of Independent  Auditors--Galaz,  Gomez Morfin,  Chavero,
               Yamazaki, S.C. (Tele Cable de Morelos, S.A. de C.V.).

     23.9      Consent  of  Independent  Accountants--Coopers  & Lybrand  L.L.P.
               (Monor Communications Group, Inc.).

     23.10     Consent    of    Independent     Accountants--Price    Waterhouse
               (Cabodinamica TV Cabo Sao Paulo S.A.).

     23.11     Consent  of  Independent   Auditors--Coopers   &  Lybrand  Tahiti
               (Telefenua S.A.).

                                      109
<PAGE>

     24.1      Power of Attorney.

     27.1      Financial Data Schedule.


* Management compensation plan.

(1)  Incorporated   by  reference   from   Amendment  No.  1  to  the  Company's
     Registration  Statement  on Form S-1 (File  No.  33-61376)  filed  with the
     Commission on June 23, 1993.
(2)  Incorporated  by reference  from Form 10-K for the year ended  February 28,
     1994 (File No. 0-21974).
(3)  Incorporated  by reference  from Form 8-K dated December 21, 1995 (File No.
     0-21974).
(4)  Incorporated  by reference  from Form 10-K for the year ended  February 28,
     1995 (File No. 0-21974).
(5)  Incorporated  by reference  from the  November 30, 1995,  Form 10-Q/A dated
     January 26, 1996 (File No. 0-21974).
(6)  Incorporated  by reference  from Form 8-K dated  February 5, 1998 (File No.
     0-21974).
(7)  Incorporated by reference from the Company's Registration Statement on Form
     S-3 (File No. 333-00208) filed with the Commission on January 9, 1996.
(8)  Incorporated by reference from the Company's Registration Statement on Form
     S-4 (File No. 333-47245) filed with the Commission on March 3, 1998.
(9)  Incorporated by reference from the Company's  Registation Statement on Form
     S-1 (File No. 33-61376) filed with the Commission on April 21, 1993.
(10) Incorporated   by  reference   from   Amendment  No.  2  to  the  Company's
     Registration  Statement  on Form S-1 (File  No.  33-61376)  filed  with the
     Commission on July 19, 1993.
(11) Incorporated   by  reference   form   Amendment  No.  1  to  the  Company's
     Registration  Statement  on Form S-3 (File  No.  33-97974)  filed  with the
     Commission on October 25, 1995.
(12) Incorporated  by reference  from Form 10-K for the year ended  February 29,
     1996 (File No. 0-21974).
(13) Incorporated  by reference  from Form 8-K dated December 11, 1997 (File No.
     0-21974).
(14) Incorporated  by reference  from Form 8-K dated  October 17, 1997 (File No.
     0-21974).
(15) Incorporated  by  reference  from  Amendment  No.  1  to  the  Registration
     Statement  on Form S-4  (File  No.  333-39707)  of UIH A/P  filed  with the
     Commission on December 5, 1997.


(b) Reports on Form 8-K filed during the quarter ended February 28, 1998:
<TABLE>
<CAPTION>
Date of Report                 Item Reported                           Financial Statements Filed
--------------                 -------------                           --------------------------
<S>                            <C>                                     <C>
December 11, 1998              Item 2 - Purchase of Philips            Item 7 - Financial statements of United and Philips
                                 Electronics NV's interest in UPC        Communications B.V. and pro forma financial
                                                                         information
</TABLE>
                                      110
<PAGE>

              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE


To United International Holdings, Inc.:

       We  have  audited,   in  accordance  with  generally   accepted  auditing
standards,   the  consolidated  financial  statements  of  United  International
Holdings,  Inc.  included in this Form 10-K and have  issued our report  thereon
dated May 25, 1998.  Our audit was made for the purpose of forming an opinion on
the basic  consolidated  financial  statements  taken as a whole.  The following
schedule is the responsibility of the Company's  management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic consolidated financial statements.  This schedule has been
subjected  to the  auditing  procedures  applied  in  the  audit  of  the  basic
consolidated  financial  statements  as  indicated  in our report  with  respect
thereto  and,  in our  opinion,  based on our  audit  and the  reports  of other
auditors,  fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated  financial statements
taken as a whole.



                                                ARTHUR ANDERSEN LLP




Denver, Colorado
May 25, 1998.

                                      111
<PAGE>
<TABLE>
<CAPTION>
                                      UNITED INTERNATIONAL HOLDINGS, INC.
                                                  PARENT ONLY
                                                   SCHEDULE I
                                 Condensed Financial Information of Registrant
                            (Stated in thousands, except share and per share amounts)
                                                                                                    As of
                                                                                                 February 28,
                                                                                           ------------------------
                                                                                             1998            1997
                                                                                           --------        --------
<S>                                                                                        <C>             <C>
ASSETS
Current assets
   Cash and cash equivalents..........................................................     $236,511        $ 47,904
   Restricted cash and short-term investments.........................................          835           1,600
   Short-term investments.............................................................       21,406          51,720
   Management fee receivables from related parties....................................        1,242             260
   Notes receivable...................................................................          381              --
   Costs to be reimbursed by affiliated companies, net................................       13,223          10,647
   Other current assets...............................................................          286             460
                                                                                           --------        --------
       Total current assets...........................................................      273,884         112,591

   Note receivable including accrued interest from wholly-owned subsidiary............       38,993          76,115
   Investments in and advances to affiliated companies, accounted for under the
     equity method....................................................................      123,193         (65,103)
   Property, plant and equipment, net of accumulated depreciation of $917 and $829,
     respectively.....................................................................        2,599           1,127
   Deferred financing costs, net of accumulated amortization of $139..................       19,356              --
   Other non-current assets...........................................................        2,610           4,373
                                                                                           --------        --------
       Total assets...................................................................     $460,635        $129,103
                                                                                           ========        ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities
   Accounts payable...................................................................     $    663        $  1,633
   Accrued liabilities................................................................        1,416           2,260
   Accrued funding obligations........................................................           --           2,039
   Due to affiliate...................................................................           --          76,782
                                                                                           --------        --------
       Total current liabilities......................................................        2,079          82,714

   Senior secured discount notes......................................................      818,272              --
                                                                                           --------        --------
       Total liabilities..............................................................      820,351          82,714
                                                                                           --------        --------
Preferred  stock,  $0.01 par value,  3,000,000  shares  authorized,  170,513 and
   170,513  shares  of  Convertible   Preferred  Stock,   Series  A  issued  and
   outstanding, respectively, stated at liquidation value.............................       32,564          31,293
                                                                                           --------        --------
Stockholders' (deficit) equity:
   Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 26,381,093
     and 26,097,263 shares issued and outstanding, respectively.......................          264             261
     Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 12,863,323
     and 12,971,775 shares issued and outstanding, respectively.......................          128             129
   Additional paid-in capital.........................................................      352,253         340,753
   Deferred compensation..............................................................          (42)           (624)
   Unrealized gain (loss) on investments in marketable equity securities..............          351          (6,069)
   Cumulative translation adjustments.................................................      (66,075)        (15,801)
   Accumulated deficit................................................................     (646,085)       (303,553)
   Treasury stock, at cost, 3,169,151 shares of Class A Common Stock..................      (33,074)             --
                                                                                           --------        --------
       Total stockholders' (deficit) equity...........................................     (392,280)         15,096
                                                                                           --------        --------
       Total liabilities and stockholders' (deficit) equity...........................     $460,635        $129,103
                                                                                           ========        ========
</TABLE>

                                                         112
<PAGE>

                                    UNITED INTERNATIONAL HOLDINGS, INC.
                                              PARENT ONLY
                                              SCHEDULE I
                       Condensed Information as to the Operations of Registrant
                                         (Stated in thousands)
<TABLE>
<CAPTION>

                                                                                     For the Years Ended
                                                                          -----------------------------------------
                                                                          February 28,  February 28,   February 29,
                                                                              1998           1997          1996
                                                                          ------------  ------------   ------------
<S>                                                                       <C>           <C>             <C>
Management fee income from related parties.............................   $     452     $     801       $    373

Corporate general and administrative expense...........................        (983)       (1,069)        (1,246)
Depreciation and amortization..........................................        (366)         (395)          (287)
                                                                          ----------    ---------       --------
       Net operating loss..............................................        (897)         (663)        (1,160)

Equity in losses of affiliated companies, net..........................    (347,203)     (150,873)       (90,232)
Interest income........................................................       5,006         6,652          7,109
Interest expense.......................................................      (6,228)          (27)        (4,027)
Interest income, related parties, net..................................       7,443         5,227            834
Provision for loss on investment related costs.........................        (451)          (35)        (4,684)
Other (expense) income, net............................................        (202)          894            849 
                                                                          ---------     ---------       --------
       Net loss........................................................   $(342,532)    $(138,825)      $(91,311)
                                                                          =========     =========       ========
</TABLE>
                                                            113
<PAGE>
<TABLE>
<CAPTION>
                                            UNITED INTERNATIONAL HOLDINGS, INC.
                                                        PARENT ONLY
                                                         SCHEDULE I
                                Condensed Information as to the Cash Flows of the Registrant
                                                   (Stated in thousands)

                                                                                         For the Years Ended
                                                                              ------------------------------------------
                                                                              February 28,    February 28,  February 29,
                                                                                 1998             1997          1996
                                                                              ---------       -----------   ------------
<S>                                                                           <C>             <C>           <C>
Cash flows from operating activities:
Net loss...................................................................   $(342,532)      $(138,825)    $ (91,311)
Adjustments to reconcile net loss to net cash flows from operating
 activities:
   Equity in losses of affiliated companies, net...........................     347,203         150,873         90,232
   Depreciation and amortization...........................................         366             395            287
   Amortization of deferred compensation...................................         582             909            678
   Accretion of interest on senior secured notes and amortization
     of deferred financing costs...........................................       6,212              --          3,982
   Issuance of common stock in connection with Company's 401(k) plan.......         334             309            260
   Compensation expense recognized related to stock options................         351              --          1,575
   Provision for loss on investment related costs..........................         451              35          4,684
   (Increase) decrease in other assets.....................................        (157)          2,238         (5,962)
   (Decrease) increase in accounts payable and accrued liabilities.........      (3,849)            288           (140)
                                                                              ---------       ---------     ----------
Net cash flows from operating activities...................................       8,961          16,222          4,285 
                                                                              ---------       ---------     ----------
Cash flows from investing activities:
Purchase of short-term investments.........................................     (77,668)       (160,290)      (122,424)
Proceeds from sale of short-term investments...............................     107,982         144,262        186,117
Restricted cash and short-term investments released........................         765           2,653         75,000
Payoff of debt recorded at subsidiary level by parent - recorded
  as deemed capital contribution to subsidiary.............................    (531,800)             --             --
Investments in and advances to affiliated companies and other investments..    (192,565)        (18,041)      (103,637)
Increase in note receivable from affiliate.................................          --         (37,500)            --
Repayment on note receivable from affiliate................................      37,500              --             --
Distribution received from affiliated company..............................     123,230              --             --
(Increase) decrease in costs to be reimbursed by affiliated companies, net.      (2,676)          5,560           (782)
Acquisition, transaction and development costs incurred....................          --            (352)        (2,281)
Purchase of property and equipment.........................................      (1,841)           (127)           (42)
                                                                              ---------       ---------     ----------
Net cash flows from investing activities...................................    (537,073)        (63,835)        31,951
                                                                              ---------       ---------     ----------
Cash flows from financing activities:
Issuance of common stock in connection with public offerings, net
  of financing costs.......................................................          --              --         61,935
Issuance of common stock in connection with Company's stock option plan....         796             349            522
Proceeds from offerings of senior secured notes............................     812,200              --        125,000
Deferred financing costs...................................................     (19,495)             --             --
Cash paid for warrants.....................................................          --          (2,156)            --
Repayment of other debt....................................................          --              --         (1,000)
Payments made on payable to affiliate, net.................................     (76,782)          7,729       (160,748)
                                                                              ---------       ---------     ----------
Net cash flows from financing activities...................................     716,719           5,922         25,709
                                                                              ---------       ---------     ----------

Increase (decrease) in cash and cash equivalents...........................     188,607         (41,691)        61,945
Cash and cash equivalents, beginning of period.............................      47,904          89,595         27,650
                                                                              ---------       ---------     ----------
Cash and cash equivalents, end of period...................................   $ 236,511       $  47,904     $   89,595
                                                                              =========       =========     ==========
Non-cash investing and financing activities:
   Gain on issuance of shares by subsidiaries..............................   $   7,614       $      --     $       --
                                                                              =========       =========     ==========
   Non-cash issuance of warrants to purchase subsidiary stock..............   $   3,678       $      --     $       --
                                                                              =========       =========     ==========
   Conversion of note receivable to equity investment......................   $   1,909       $      --     $       --
                                                                              =========       =========     ==========
   Change in unrealized loss on investment.................................   $  (1,593)      $  (4,880)    $   (2,755)
                                                                              =========       =========     ==========
   Non-cash stock issuance for purchase of 50% interest in Saturn..........   $      --       $   7,800     $       --
                                                                              =========       =========     ==========
   Non-cash contribution of preferred stock utilized in additional
     40% interest in Austar................................................   $      --       $       --    $   29,840
                                                                              =========       ==========    ==========
</TABLE>
                                                             114
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To United International Holdings, Inc.:

     We have  audited the  accompanying  consolidated  balance  sheets of United
International  Properties,  Inc. (a Colorado corporation) and subsidiaries as of
February  28,  1998  and  1997,  and  the  related  consolidated  statements  of
operations,  parent's  deficit and cash flows for the years ended  February  28,
1998,  February 28, 1997 and February 29, 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.  With respect to
the years  ended  February  28,  1998 and 1997,  we did not audit the  financial
statements  of Tele Cable de Morelos S.A. de C.V.  ("Megapo")  as of and for the
years ended December 31, 1997 and 1996, an investment  which is reflected in the
accompanying  consolidated  financial  statements  using  the  equity  method of
accounting.  With respect to the year ended  February 29, 1996, we did not audit
the financial  statements of XYZ  Entertainment Pty Ltd ("XYZ"),  Megapo,  Monor
Communications Group, Inc. ("Monor"),  Cabodinamica TV Cabo Sao Paulo S.A. ("Net
Sao  Paulo")  or  Telefenua  S.A.  ("Telefenua")  as of and for the  year  ended
December  31,  1995,   investments  which  are  reflected  in  the  accompanying
consolidated  financial  statements  using the equity method of accounting (with
respect to XYZ, Megapo,  Monor and Net Sao Paulo) or consolidated  (with respect
to Telefenua). United International Properties, Inc.'s consolidated statement of
operations  for the years ended  February  28, 1998 and 1997  reflect  equity in
income (losses)  related to Megapo of $(586,000) and  $(678,000),  respectively,
and for the year ended  February  29, 1996  reflects  equity in income  (losses)
related  to XYZ,  Megapo,  Monor and Net Sao Paulo of  $(11,638,000),  $841,000,
$(4,448,000) and $(4,837,000),  respectively.  United International  Properties,
Inc.'s  consolidated  financial  statements for the year ended February 29, 1996
reflects  revenues,  expenses and a net loss related to Telefenua of $1,882,000,
$5,438,000 and $3,556,000, respectively. Those financial statements were audited
by other  auditors  whose  reports  have been  furnished  to us and our opinion,
insofar  as it  relates  to the  amounts  included  for  those  entities  in the
accompanying  consolidated  financial  statements and related footnotes for such
entities 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  and the  reports  of  other  auditors  provide  a
reasonable basis for our opinion.

     In our opinion,  based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of United International Properties, Inc. and subsidiaries
as of February 28, 1998 and 1997, and the results of their  operations and their
cash flows for the years ended February 28, 1998, February 28, 1997 and February
29, 1996, in conformity with generally accepted accounting principles.


                                                ARTHUR ANDERSEN LLP


Denver, Colorado
May 25, 1998

                                      115
<PAGE>


                            XYZ ENTERTAINMENT PTY LTD
                          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


                                      116
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of:
   Tele Cable de Morelos, S.A. de C.V.
   Tele Cable Mexicano, S.A. de C.V.
   Vision por Cable de Oaxaca, S.A. de C.V.
   Telecable de Chilpancingo, S.A. de C.V.
   Mega Com-M Servicios, S.A. de C.V.
   Grupo Telecable Mexicano, S.A. de C.V.
   Cuernamu, S.A. de C.V.

We have audited the accompanying  balance sheets of Tele Cable de Morelos,  S.A.
de C.V.  and  related  companies,  (all of  which  are  subsidiaries  of  Megapo
Comunicaciones  de Mexico,  S.A. de C.V.) as of December 31, 1996 and 1997,  and
the  related  statements  of  operations,  changes in  stockholders'  equity and
changes in financial position for the years then ended, all expressed in Mexican
pesos. The combined  financial  statements include the accounts of Tele Cable de
Morelos,  S.A. de C.V., Tele Cable Mexicano,  S.A. de C.V.,  Vision por Cable de
Oaxaca,  S.A. de C.V.,  Tele Cable de  Chilpancingo,  S.A.  de C.V.,  Mega Com-M
Servicios,  S.A. de C.V., Grupo Telecable  Mexicano,  S.A. de C.V. and Cuernamu,
S.A.  de C.V.  The  financial  statements  of  these  companies  are  under  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in Mexico,  which are  substantially  the same as those  followed  in the United
States of America. Those standards require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement  and that they are prepared in accordance with accounting
principles generally accepted in Mexico. 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.

As mentioned in Note 2 to the financial  statements,  as of January 1, 1997, the
Company  applied the  provisions of the Fifth Document of Amendments to Bulletin
B-10  (Modified)  issued by the Mexican  Institute of Public  Accountants.  As a
result, the Company changed the method from specific cost applied up to December
31, 1996, to restate the value of property and equipment and its depreciation to
that of adjustments  due to changes in general price levels.  The effect of this
change was not measured.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of Tele Cable de Morelos,  S.A. de C.V.  and
related  companies  as of December  31, 1996 and 1997,  and the results of their
operations, changes in their stockholders' equity and changes in their financial
position  for the years  then ended in  conformity  with  accounting  principles
generally accepted in Mexico.


                                 Galaz, Gomez Morfin, Chavero, Yamazaki, S.C.

Raymundo Diaz Gonzalez

Acapulco, Mexico
March 6, 1998

                                      117

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of:
   Tele Cable de Morelos, S.A. de C.V.
   Tele Cable Mexicano, S.A. de C.V.
   Vision por Cable de Oaxaca, S.A. de C.V.
   Telecable de Chilpancingo, S.A. de C.V.
   Mega-Com-M Servicios, S.A. de C.V.
   Cuernamu, S.A. de C.V.

We have  audited  the  accompanying  combined  balance  sheets of Tele  Cable de
Morelos,  S.A. de C.V. and related  companies (all of which are  subsidiaries of
Megapo Comunicaciones de Mexico, S.A. de C.V.) as of December 31, 1995 and 1996,
and the related  combined  statements of  operations,  stockholders'  equity and
changes  in  financial  position  for the years then  ended,  all  expressed  in
thousands  of Mexican  pesos.  The  combined  financial  statements  include the
accounts of Tele Cable de Morelos,  S.A. de C.V., Tele Cable  Mexicano,  S.A. de
C.V., Vision por Cable de Oaxaca, S.A. de C.V., Tele Cable de Chilpancingo, S.A.
de C.V.,  Mega-Com-M  Servicios,  S.A. de C.V. and Cuernamu,  S.A. de C.V. These
companies are under common  ownership  and common  management.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects, the combined financial position of Tele Cable de Morelos, S.A. de C.V.
and related companies as of December 31, 1995 and 1996, and the combined results
of their operations,  changes in their stockholders' equity and changes in their
financial  position  for the years  then  ended in  conformity  with  accounting
principles generally accepted in Mexico.

Accounting  principles  generally accepted in Mexico vary in certain significant
respects from accounting principles generally accepted in the United States. The
application  of the latter  would have  affected  determination  of combined net
income  (loss) for each of the two years in the period  ended  December 31, 1996
and determination of combined  stockholders' equity and combined total assets at
December 31, 1995 and 1996, to the extent summarized in Note 13.

The accompanying combined financial statements have been translated into English
for the convenience of readers in the United States of America.


                                Galaz, Gomez Morfin, Chavero, Yamazaki, S.C.

Raymundo Diaz Gonzalez

Acapulco, Mexico
March 31, 1997

                                      118
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of
Monor Communications Group, Inc. and Subsidiaries

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Monor
Communications  Group,  Inc. and  Subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of loss,  shareholders' equity, and cash
flows  for  the  years  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 audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material   respects,   the   consolidated   financial   position  of  Monor
Communications  Group,  Inc. and  Subsidiaries as of December 31, 1995 and 1994,
and the  consolidated  results of their  operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.

                                                Coopers & Lybrand L.L.P.


Lincoln, Nebraska
March 15, 1996

                                      119
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS



March 8, 1996


To the Board of Directors and Stockholders
Cabodinamica TV Cabo Sao Paulo S.A.

1.   We have audited the balance sheet of Cabodinamica TV Cabo Sao Paulo S.A. as
     of  December  31, 1995 and 1994 and the related  statements  of income,  of
     movement  in  stockholders'  equity  and of cash  flows for the years  then
     ended, expressed in U.S. dollars. Such audits were made in conjunction with
     our audits of the financial statements expressed in local currency on which
     we issued an unqualified  opinion dated January 30, 1995.  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.

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

3.   As stated in Note 2, United  International  Holdings,  Inc. has  prescribed
     that  accounting  principles  generally  accepted  in the United  States of
     America  be applied  in the  preparation  of the  financial  statements  of
     Cabodinamica TV Cabo Sao Paulo S.A. to be included in United  International
     Holding's   consolidated   financial   statements.   Brazil  has  a  highly
     inflationary  economy.  Accounting  principles  generally  accepted  in the
     United  States of America  require that  financial  statements of a company
     denominated in the currency of a country with a highly inflationary economy
     be remeasured in a more stable currency unit for purposes of consolidation.
     Accordingly, the accounts of Cabodinamica TV Cabo Sao Paulo S.A., which are
     maintained in reais, were remeasured and adjusted into U.S. dollars for the
     financial  statements  prepared in accordance  with  accounting  principles
     generally  accepted in the United  States of America on the bases stated in
     Note 2.

4.   In our opinion,  the financial statements expressed in U.S. dollars audited
     by us are presented fairly, in all material  respects,  on the bases stated
     in Note 2 and discussed in the preceding paragraph.

5.   The accompanying  financial statements have been prepared assuming that the
     Company  will  continue as a going  concern.  As discussed in Note 1 to the
     financial  statements,  the Company has incurred losses from operations and
     has an excess of current  liabilities over current assets,  and its ability
     to continue as a going  concern is  dependent  on further  capital from the
     stockholders and/or continued  guarantees.  The financial statements do not
     include  any  adjustments  that  might  result  from  the  outcome  of this
     uncertainty.

                                                Price Waterhouse
Auditores-Independentes
CRC-SP- 160

                                                Carlos Roberto Asciutti
Partner
Contador CRC-SP-145.670

                                      120
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the shareholders of TELEFENUA SA:

We have audited the  accompanying  balance  sheet of TELEFENUA SA as of December
31,  1993,  1994 and 1995 and the  related  statement  of income and  changes in
financial position for the years 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 audits.

     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  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 TELEFENUA SA as of December 31,
1993,  1994  and 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 to
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


Jean-Pierre GOSSE
Papeete, February 16, 1996

                                      121
<PAGE>
<TABLE>
<CAPTION>
                                          UNITED INTERNATIONAL PROPERTIES, INC.
                                               CONSOLIDATED BALANCE SHEETS
                                 (Stated in thousands, except share and per share amounts)

                                                                                                           As of
                                                                                                        February 28,
                                                                                                   ---------------------
                                                                                                     1998         1997
                                                                                                   --------     --------
<S>                                                                                                <C>          <C>
ASSETS
Current assets
   Cash and cash equivalents ..................................................................    $ 22,764     $ 20,880
   Restricted cash and short-term investments .................................................       9,115           --
   Short-term investments .....................................................................      12,325       18,640
   Subscriber receivables, net ................................................................       2,648        2,939
   Management fee receivables from related parties ............................................       1,495           --
   Notes receivable ...........................................................................       2,194        9,194
   Costs to be reimbursed by affiliated companies, net ........................................         211           --
   Receivable from parent .....................................................................          --       76,782
   Other current assets, net, including related party receivables of $2,113 and $1,958,
     respectively .............................................................................       7,012        9,892
                                                                                                   --------     --------
     Total current assets .....................................................................      57,764      138,327

Investments in and advances to affiliated companies accounted for under the equity method,
  net.........................................................................................      149,218      153,934
Property, plant and equipment, net of accumulated depreciation of $80,103 and $28,554,
   respectively ...............................................................................     198,684      218,210
Goodwill and other intangible assets, net of accumulated amortization of $12,121 and $7,198,
   respectively ...............................................................................      50,029      132,636
Deferred financing costs, net of accumulated amortization of $1,386 and $4,501, respectively ..      13,734       27,881
Other non-current assets, net .................................................................       5,000        9,932
                                                                                                   --------     --------
     Total assets .............................................................................    $474,429     $680,920
                                                                                                   ========     ========
LIABILITIES AND PARENT'S DEFICIT
Current liabilities
   Accounts payable, including $1,810 and $1,905 of related party payables, respectively ......    $  8,753     $ 21,255
   Construction payables ......................................................................       6,008       38,407
   Accrued liabilities ........................................................................      27,812        9,689
   Purchase money notes payable to sellers, current ...........................................          --        5,722
   Current portion of long-term debt ..........................................................      36,682        5,177
   Other current liabilities ..................................................................         743        2,144
                                                                                                   --------     --------
     Total current liabilities ................................................................      79,998       82,394

Purchase money notes payable to sellers .......................................................          --       12,966
Notes payable to parent .......................................................................      38,993       76,115
Senior secured notes and other debt ...........................................................     387,460      662,217
Other long-term liabilities, including due to parent of $3,238 and $3,858, respectively .......       4,665       14,877
                                                                                                   --------     --------
     Total liabilities ........................................................................     511,116      848,569
                                                                                                   --------     --------
Minority interest in subsidiaries .............................................................      11,830          307
                                                                                                   --------     --------
Parent's deficit:
   Common stock, $0.01 par value, 1,000 shares authorized, 100 and 100 shares issued and
     outstanding, respectively, (pledged as collateral under parent's senior secured notes) ...          --           --
   Additional paid-in capital .................................................................     509,959       65,488
   Unrealized gain (loss) on investments ......................................................         351       (6,069)
   Cumulative translation adjustments .........................................................     (43,837)      (5,436)
   Accumulated deficit ........................................................................    (514,990)    (221,939)
                                                                                                   --------     --------
     Total parent's deficit ...................................................................     (48,517)    (167,956)
                                                                                                   --------     --------
Commitments and Contingencies (Notes 10 and 11)

     Total liabilities and parent's deficit ...................................................    $474,429     $680,920
                                                                                                   ========     ========

            The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                  122
<PAGE>
<TABLE>
<CAPTION>
                                    UNITED INTERNATIONAL PROPERTIES, INC.
                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                            (Stated in thousands)


                                                                                           For the Years Ended
                                                                               ------------------------------------------
                                                                               February 28,   February 28,   February 29,
                                                                                   1998           1997            1996
                                                                               ------------   ------------   ------------
<S>                                                                             <C>             <C>            <C>
Service and other revenue ...................................................   $  88,102       $  30,244      $  1,883
Management fee income from related parties ..................................         542             527            --
                                                                                ---------       ---------      --------
       Total revenue ........................................................      88,644          30,771         1,883

System operating expense ....................................................     (62,886)        (26,799)       (3,230)
System selling, general and administrative ..................................     (59,385)        (33,655)       (2,482)
Corporate general and administrative expense ................................     (20,250)        (16,258)      (15,913)
Depreciation and amortization ...............................................     (85,204)        (38,566)       (1,117)
                                                                                ---------       ---------      --------
       Net operating loss ...................................................    (139,081)        (84,507)      (20,859)

Equity in losses of affiliated companies, net ...............................     (26,771)        (23,273)      (30,056)
Gain on sale of investments in affiliated companies .........................      90,020          65,249        16,013
Interest income, including related party income of $71, $0 and $0,
   respectively .............................................................       2,568           6,480           934
Interest expense, including related party expense of $7,063, $5,029 and $459,
   respectively .............................................................    (123,078)        (84,661)      (32,456)
Provision for loss on marketable equity securities and investment
   related costs ............................................................     (14,342)         (5,824)       (1,370)
Other (expense) income, net .................................................      (4,961)           (833)          367
                                                                                ---------       ---------      --------
       Net loss before minority interest ....................................    (215,645)       (127,369)      (67,427)

Minority interest in subsidiaries ...........................................       1,685           4,358           421
                                                                                ---------       ---------      --------
       Net loss before extraordinary charge .................................    (213,960)       (123,011)      (67,006)

Extraordinary charge for early retirement of debt ...........................     (79,091)             --            --
                                                                                ---------       ---------      --------
       Net loss .............................................................   $(293,051)      $(123,011)     $(67,006)
                                                                                =========       =========      ======== 
 
            The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                    123

<PAGE>
<TABLE>
<CAPTION>
                                        UNITED INTERNATIONAL PROPERTIES, INC.
                                     CONSOLIDATED STATEMENTS OF PARENT'S DEFICIT
                                      (Stated in thousands, except share amounts)



                                        Common Stock    Additional    Unrealized      Cumulative
                                       ---------------   Paid-In    Gain (Loss) on    Translation    Accumulated
                                       Shares   Amount   Capital      Investment      Adjustments      Deficit       Total
                                       ------   ------  ----------  --------------    -----------    -----------   ---------
<S>                                     <C>      <C>    <C>           <C>             <C>            <C>           <C>
Balances, February 28, 1995 ........    100      $--    $ 30,481      $  1,566        $    410       $ (31,922)    $    535

Capital contribution from parent ...     --       --      31,188            --              --              --       31,188
Unrealized loss on investment ......     --       --          --        (2,755)             --              --       (2,755)
Change in cumulative translation
  adjustments ......................     --       --          --            --          (4,705)             --       (4,705)
Net loss ...........................     --       --          --            --              --         (67,006)     (67,006)
                                        ---      ---    --------      --------        --------       ---------     ---------
Balances, February 29, 1996 ........    100       --      61,669        (1,189)         (4,295)        (98,928)     (42,743)

Gain on sale of stock by
  subsidiary .......................     --       --       5,898            --              --              --        5,898
Capital distribution to parent .....     --       --      (2,079)           --              --              --       (2,079)
Unrealized loss on investment ......     --       --          --        (4,880)             --              --       (4,880)
Change in cumulative translation
  adjustments ......................     --       --          --            --          (1,141)             --       (1,141)
Net loss ...........................     --       --          --            --              --        (123,011)    (123,011)
                                        ---      ---    --------      --------        --------       ---------     --------
Balances, February 28, 1997 ........    100       --      65,488        (6,069)         (5,436)       (221,939)    (167,956)

Issuance of warrants to purchase
  common stock of subsidiary .......     --       --       3,678            --              --              --        3,678
Gain on sale of stock by
  subsidiary .......................     --       --       7,614            --              --              --        7,614
Payoff of debt recorded at
  subsidiary level by parent -
  recorded as deemed capital
  contribution .....................     --       --     531,800            --              --              --      531,800
Capital distribution to parent,
  net ..............................     --       --     (98,621)           --              --              --      (98,621)
Change in unrealized gain (loss)
  on investments, net ..............     --       --          --        (1,593)             --              --       (1,593)
Provision for loss on marketable
  equity securities ................     --       --          --         8,013              --              --        8,013
Change in cumulative translation
  adjustments ......................     --       --          --            --         (38,401)             --      (38,401)
Net loss ...........................     --       --          --            --              --        (293,051)    (293,051)
                                        ---      ---    --------      --------        --------       ---------    ---------
Balances, February 28, 1998 ........    100      $--    $509,959      $    351        $(43,837)      $(514,990)   $ (48,517)
                                        ===      ===    ========      ========        ========       =========    =========

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

                                                  124





<PAGE>
<TABLE>
<CAPTION>
                                    UNITED INTERNATIONAL PROPERTIES, INC.
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (Stated in thousands)

                                                                                                     For the Years Ended
                                                                                         ------------------------------------------
                                                                                         February 28,    February 28,  February 29,
                                                                                             1998            1997          1996
                                                                                         ------------    ------------  ------------
<S>                                                                                       <C>             <C>             <C>
Cash flows from operating activities:
Net loss ...........................................................................      $(293,051)      $(123,011)      $(67,006)
Adjustments to reconcile net loss to net cash flows from operating
 activities:
   Extraordinary charge for early retirement of debt ...............................         79,091              --             --
   Equity in losses of affiliated companies ........................................         27,860          23,273         30,056
   Expenses paid by parent on behalf of the Company ................................         15,910           9,091         14,121
   Gain on sale of investments in affiliated companies .............................        (90,020)        (65,249)       (16,013)
   Minority interest share of losses ...............................................         (1,685)         (4,358)          (421)
   Depreciation and amortization ...................................................         85,204          38,566          1,117
   Accretion of interest on senior notes and amortization of deferred
     financing costs ...............................................................        104,311          73,695         31,175
   Provision for loss on marketable equity securities and investment
     related costs .................................................................         14,342           5,824          1,370
   Increase in subscriber receivables ..............................................         (2,513)           (991)            --
   Increase in management fee receivables from related parties .....................         (1,615)             --             --
   Decrease (increase) in other assets .............................................          7,471          (8,263)        (2,085)
   Increase in accounts payable, accrued liabilities and other .....................          9,905          25,595          5,150
                                                                                          ---------       ---------       --------
Net cash flows from operating activities ...........................................        (44,790)        (25,828)        (2,536)
                                                                                          ---------       ---------       --------
Cash flows from investing activities:
Purchase of short-term investments .................................................        (16,988)       (199,242)            --
Proceeds from sale of short-term investments .......................................         23,303         180,602             --
Restricted cash and short-term investments (deposited) released ....................         (9,115)          9,820         (3,220)
Investments in and advances to affiliated companies and other investments ..........        (64,540)       (100,247)      (122,207)
Proceeds from sale of investments in affiliated companies ..........................        211,125          43,098         12,823
Distribution received from affiliated company ......................................          1,248              --             --
Purchase of property, plant and equipment ..........................................       (106,776)       (204,187)        (7,658)
Proceeds from sale of property, plant and equipment ................................          5,332              --             --
(Decrease) increase in construction payables .......................................        (29,621)         38,331             --
Increase in notes receivable .......................................................             --          (5,557)        (7,000)
Repayments on notes receivable .....................................................         11,827          45,264             --
Reimbursement of advance to affiliate ..............................................             --            (698)           264
Acquisition, transaction and development costs incurred ............................         (3,322)         (6,802)        (4,621)
                                                                                          ---------       ---------       --------
Net cash flows from investing activities ...........................................         22,473        (199,618)      (131,619)
                                                                                          ---------       ---------       --------
Cash flows from financing activities:
Proceeds from offerings of senior discount notes ...................................         29,925         225,115             --
Deferred financing costs ...........................................................        (11,373)        (10,670)       (13,753)
Capital distribution to parent .....................................................       (123,230)        (11,170)            --
Payments received on receivable from parent, net ...................................         76,782              --        160,748
(Payment on) proceeds from note payable to parent ..................................        (37,500)         39,428             --
Payment of sellers note ............................................................        (46,351)        (11,856)            --
Cash contribution from minority interest partners ..................................         22,042              --             --
Borrowing of other debt ............................................................        233,210           7,263          9,820
Payments on capital leases and other debt ..........................................       (119,114)        (15,463)            --
                                                                                          ---------       ---------       --------
Net cash flows from financing activities ...........................................         24,391         222,647        156,815
                                                                                          ---------       ---------       --------

Effect of exchange rates on cash ...................................................           (190)          1,056           (140)
                                                                                          ---------       ---------       --------
Increase in cash and cash equivalents ..............................................          1,884          (1,743)        22,520
Cash and cash equivalents, beginning of period .....................................         20,880          22,623            103
                                                                                          ---------       ---------       --------
Cash and cash equivalents, end of period ...........................................      $  22,764       $  20,880       $ 22,623
                                                                                          =========       =========       ========

</TABLE>
                                                  125
<PAGE>
<TABLE>
<CAPTION>
                                    UNITED INTERNATIONAL PROPERTIES, INC.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                            (Stated in thousands)

                                                                                         For the Years Ended
                                                                              ------------------------------------------
                                                                              February 28,   February 28,   February 29,
                                                                                  1998           1997           1996
                                                                              ------------   ------------   ------------
<S>                                                                             <C>             <C>            <C>
Non-cash investing and financing activities:
   Payoff of debt recorded at subsidiary level by parent -
     recorded as deemed capital contribution to subsidiary...................   $531,800       $     --        $    --
                                                                                ========       ========        =======
   Purchase money notes payable to sellers...................................   $ 52,061       $ 33,401        $    --
                                                                                ========       ========        =======
   Note received upon sale of investment in affiliated company...............   $     --       $ 35,000        $    --
                                                                                ========       ========        =======
   Gain on issuance of shares by subsidiaries................................   $  7,614       $     --        $    --
                                                                                ========       ========        =======
   Note received upon sale of assets.........................................   $  6,500       $     --        $    --
                                                                                ========       ========        =======
   Non-cash issuance of warrants by subsidiary to purchase subsidiary stock..   $  3,678       $     --        $    --
                                                                                ========       ========        =======
   Conversion of notes receivable to equity investment.......................   $  6,908       $     --        $    --
                                                                                ========       ========        =======
   Change in unrealized loss on investment..................................    $ (1,593)      $ (4,880)       $(2,755)
                                                                                ========       ========        =======
   Non-cash stock issuance for purchase of 50% interest in Saturn............   $     --       $  7,800        $    --
                                                                                ========       ========        =======
   Assets acquired with capital leases.......................................   $     --       $  3,632        $    --
                                                                                ========       ========        =======
   Issuance of preferred stock utilized in purchase of additional 40%
     interest in Austar......................................................   $     --       $     --        $29,840
                                                                                ========       ========        =======
Supplemental cash flow disclosures:
   Cash paid for interest....................................................   $  7,497       $    870        $ 1,018
                                                                                ========       ========        =======
   Cash received for interest................................................   $  2,376       $  4,936        $ 9,278
                                                                                ========       ========        =======
Sale of Argentine systems:
Working capital, net of cash relinquished of $2,133..........................   $ (3,319)      $     --        $    --
Investments in affiliated companies..........................................     83,535             --             --
Property, plant and equipment and other long-term assets.....................      4,560             --             --
Goodwill and other intangible assets.........................................     60,727             --             --
Purchase money notes (assumed by the buyers).................................    (24,398)            --             --
Gain on sale.................................................................     90,020             --             --
                                                                                --------       --------        -------
Cash received from sale......................................................   $211,125       $     --        $    --
                                                                                ========       ========        =======
Acquisition of Bahia Blanca system:
Working capital, including cash acquired of $97..............................   $     --       $ 14,752        $    --
Property, plant and equipment and other long-term assets.....................         --         (4,051)            --
Goodwill and other intangible assets.........................................         --        (63,464)            --
Purchase money notes and other debt..........................................         --         26,381             --
                                                                                --------       --------        -------
Total cash paid..............................................................   $     --       $(26,382)       $    --
                                                                                ========       ========        =======

            The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                  126
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF FEBRUARY 28, 1998 AND 1997
                     (Monetary amounts stated in thousands)

1.   ORGANIZATION AND NATURE OF OPERATIONS

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

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

     In connection with the Senior Notes offering,  UIH pledged UIPI's stock and
intercompany receivables from UIPI as collateral to noteholders under the Senior
Notes indenture. Accordingly, UIH "pushed down" the Senior Notes indebtedness to
UIPI for  purposes  of its  standalone  financial  statements.  Initially,  UIPI
recorded  the push down of the  Senior  Notes as a  receivable  from  UIH,  as a
significant  portion of the cash proceeds from the offerings of Senior Notes was
initially retained at the parent company level. Subsequent cash contributions to
UIPI by UIH, whether  contributed for additional  equity  investments or for the
funding  of  normal  operations,  are  accounted  for  as  a  reduction  of  the
intercompany  receivable  balance.  The  receivable  from parent  totaled $0 and
$76,782 as of February 28, 1998 and 1997, respectively.

     The  following  chart  presents  a  summary  of the  Company's  significant
investments in multi-channel  television and telephony operations as of February
28, 1998.
<TABLE>
<CAPTION>
<S>                <C>
**********************************************************************************************
*                                                                                            *
*                                           UIH                                              *
*                                                                                            *
**********************************************************************************************
                                             * 
                                       100%  *                             
**********************************************************************************************
*                                                                                            *
*                          United International Properties, Inc. ("UIPI")                    *
*                                                                                            *
**********************************************************************************************
                                             *    
                  ***************************************************************
             98%  *                          *  100%                            *         
*************************************** ************************** ***************************
*UIH Asia/Pacific Communications, Inc.* * UIH Latin America, Inc.* *        Other UIPI       *
*              ("UAP")*               * *        ("UIH LA")      * *                         *
*************************************** ************************** *Hungary:                 *
                   *                         *                     * Monor Communications    *
             100%  *                         *                     *  Group, Inc.            *
*************************************** ************************** *  ("Monor")         48.6%*
*     UIH Australia/Pacific, Inc.     * *Brazil:                 * *Ireland:                 *
*             ("UIH A/P")             * * TV Cabo e Communicacoes* * Tara Television         *
*************************************** *  de Jundiai, S.A.      * *  Limited ("Tara")  75.0%*
                   *                    *  ("Jundiai")      46.3%* *Spain/Portugal:          *
                   *                    * TV Show Brasil,        * * Ibercom, Inc.           *
*************************************** *  S.A. ("TVSB")(3) 45.0%* *  ("IPS")           33.5%*
*Australia:                           * *Chile:                  * ***************************
* CTV Pty Limited ("CTV") and         * * VTR Hipercable S.A.    *
*  STV Pty Limited ("STV")            * *  ("VTRH")         34.0%*
*  (collectively, "Austar")(1)  100.0%* *Mexico:                 *
* Austar Satellite Pty Limited        * * Tele Cable de Morelos, *          
*  ("Austar Satellite")         100.0%* *  S.A. de C.V.          *
* United Wireless Pty Limited         * *  ("Megapo")       49.0%* 
*  ("United Wireless")          100.0%* *Peru:                   * ***************************
* XYZ Entertainment Pty Limited       * * TV Cable, S.R. Ltda    * *      * Other UAP        *
*  ("XYZ Entertainment")         25.0%* *  ("Tacna")       100.0%* *                         *
*Tahiti:                              * * Cable Star S.A.        * *China:                   *
* Telefenua S.A.                      * *  ("Cable Star")   99.2%* * Hunan International TV  *
*  ("Telefenua")(2)              90.0%* *Latin American          * *  Communications Company *
*New Zealand:                         * *Programming:            * *  Limited ("HITV")  49.0%*
* Saturn Communications Limited       * * United Family          * *Philippines:             *
*  ("Saturn")                    65.0%* *  Communications LLC    * * Sun Cable Systems       *
*                                     * *  ("UFC")          50.0%* *  ("Sun Cable")(4)  40.0%*
*************************************** ************************** ***************************
</TABLE>                                      127
<PAGE>
                     UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1)  UIH A/P holds an  effective  100%  economic  interest  in Austar  through a
     combination of ordinary and convertible debentures.
(2)  UIH A/P owns an effective  90% economic  interest in  Telefenua.  UIH A/P's
     economic  interest will decrease to 75% and 64% once UIH A/P has received a
     20%  and  40%  internal  rate  of  return  on  its  investment  in  Tahiti,
     respectively.
(3)  In January 1998,  UIH LA increased  its ownership  interest in TVSB to 45%,
     and on April 15, 1998  exercised  its option to purchase the  remaining 55%
     interest in TVSB for approximately $12,000,  subject to receipt of required
     regulatory approvals.
(4)  UAP currently holds a convertible  loan,  which upon full conversion  would
     provide  UAP  with a 40%  equity  ownership  interest  in  the  Philippines
     operating  company.  In April 1998, Sun Cable and SkyCable ("Sky") formed a
     joint venture, which has become the second largest multiple system operator
     in the Philippines and the largest MSO outside Manila. The Company holds an
     effective  19.6% interest in this joint venture,  which is owned 49% by Sun
     Cable and 51% by Sky.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

PRINCIPLES OF CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
the Company and all subsidiaries  where it exercises majority control and owns a
majority  economic  interest,  except when the Company  has  temporary  majority
control.  The Company began consolidating United Wireless effective September 1,
1995.  Due to the Company's  acquisition  of the majority  economic  interest in
Austar in late December 1995, the Company began  consolidating  Austar's balance
sheet effective December 31, 1995 and its operations  effective January 1, 1996.
The Company  recognized  equity  losses from its  investment  in Austar  through
December 31, 1995. For the first six months of the year ended February 28, 1997,
the Company  accounted  for Saturn under the equity  method.  The Company  began
consolidating  the  operations  of Saturn  effective  July 1, 1996. In September
1996, UIH LA contributed its wholly-owned  subsidiaries in Chile in exchange for
a 34% interest in VTRH. Prior to the formation of the joint venture, the Company
accounted for these Chilean  investments under the equity method.  For the first
nine months of the year ended February 28, 1998,  the Company  accounted for its
investments in Comodoro, Trelew and Santa Fe, Argentina under the equity method,
due to an expected joint venture in Argentina.  This joint venture was abandoned
due to the sale of these interests in October 1997. All significant intercompany
accounts and transactions have been eliminated in consolidation.  All affiliated
companies  have  calendar  year-ends,  compared to the Company  which has fiscal
year-ends  of February 28, 1998  ("Fiscal  1998"),  February  28, 1997  ("Fiscal
1997") and February 29, 1996 ("Fiscal  1996").  The Company records its share of
equity in income (losses) of affiliated companies or consolidates the affiliated
companies based on the affiliated companies' calendar year-end results.

CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

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

RESTRICTED CASH AND SHORT-TERM INVESTMENTS

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

COSTS TO BE REIMBURSED BY AFFILIATED COMPANIES

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

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

For those investments in companies in which the Company's  ownership interest is
20% to 50%, its  investments  are held through a  combination  of voting  common
stock, preferred stock, debentures or convertible debt and the Company exerts

                                      128
<PAGE>
                     UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

significant influence through board representation and management authority,  or
in which  majority  control  is deemed to be  temporary,  the  equity  method of
accounting is used. Under this method,  the investment,  originally  recorded at
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
contractual  funding  commitments.  The  Company's  proportionate  share  of net
earnings or losses of affiliates  includes the amortization of the excess of its
cost over its percentage interest in each affiliate's net tangible assets.

MARKETABLE  EQUITY   SECURITIES,   INCLUDING  OTHER  INVESTMENTS  IN  AFFILIATED
COMPANIES

     The cost method of accounting is used for the Company's  other  investments
in affiliated  companies in which the Company's  ownership interest is less than
20% and where the Company does not exert significant influence, except for those
investments  in  marketable  equity  securities.   The  Company  classifies  its
investments in marketable  equity  securities in which its interest is less than
20%  and  where  the   Company   does  not  exert   significant   influence   as
available-for-sale and reports such investments at fair market value. Unrealized
gains and losses are  charged or  credited  to equity,  and  realized  gains and
losses  and other  than  temporary  declines  in market  value are  included  in
operations.

PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment is stated at cost.  Additions,  replacements
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 are  depreciated
using the straight-line method over estimated useful lives of three years.  Upon
disconnection  of a  subscriber,  the  remaining  book  value of the  subscriber
equipment, excluding converters which are recovered upon disconnection,  and the
capitalized  labor are written off and accounted for as additional  depreciation
expense.  Multi-channel  multi-point  distribution systems ("MMDS") distribution
facilities and cable  distribution  networks are depreciated using the straight-
line method over estimated useful lives of five to ten years.  Office equipment,
furniture and fixtures,  buildings and leasehold  improvements  are  depreciated
using the  straight-line  method  over  estimated  useful  lives of three to ten
years.

     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.

GOODWILL AND OTHER INTANGIBLE ASSETS

     The  excess  of  investments  in  consolidated  subsidiaries  over  the net
tangible asset value at acquisition is amortized on a  straight-line  basis over
15 years.  The  acquisition  of MMDS  licenses  has been  recorded at cost,  and
amortization expense is computed using the straight-line method over the term of
the license.

RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS

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

DEFERRED FINANCING COSTS

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

LICENSE FEES

     The   acquisition   of  MMDS  licenses  has  been  recorded  at  cost,  and
amortization expense is computed using the straight-line method over the term of
the license.  In Australia,  the cost to acquire these  licenses for a five-year
period is being amortized over the remaining  license  period.  The licenses are
renewable every five years.  In Tahiti,  the license rights are amortized over a
10-year period.

                                      129
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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,  with
the remainder  deferred and amortized over the average subscriber period. To the
extent  installation  fees exceed  direct  selling  costs,  the excess  would be
deferred and amortized over the average contract period.

CONCENTRATION OF CREDIT RISK

     Financial   instruments   which   potentially   subject   the   Company  to
concentrations of credit risk consist  principally of temporary cash investments
and trade  receivables.  The Company places its temporary cash  investments with
high credit  quality  financial  institutions  which  invest  primarily  in U.S.
government  instruments,  commercial  paper of prime  quality,  certificates  of
deposit  and  bankers  acceptances  guaranteed  by  banks  or  savings  and loan
associations  which are members of the FDIC.  Concentrations of credit risk with
respect to trade  receivables  are limited due to the Company's  large number of
customers and their dispersion across many different countries worldwide.

INCOME TAXES

     The Company accounts for income taxes under the asset and liability method,
which  requires  recognition  of  deferred  tax assets and  liabilities  for the
expected future income tax consequences of transactions which have been included
in the  financial  statements  or tax returns.  Under this method,  deferred tax
assets and  liabilities  are  determined  based on the  difference  between  the
financial  statement  and  income  tax  basis of  assets,  liabilities  and loss
carryforwards  using  enacted  tax  rates in  effect  for the year in which  the
differences are expected to reverse. Net deferred tax assets are then reduced by
a valuation  allowance if management  believes it more likely than not they will
not be realized.

STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY

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

FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK

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

     Cash  flows  from  the  Company's   operations  in  foreign  countries  are
translated 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.

     Certain of the Company's foreign operating companies have notes payable and
notes  receivable that are denominated in, and loans payable that are linked to,
a currency other than their own functional currency. 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  and
equity  with  respect to its  holdings  solely as a result of  foreign  currency
exchange rate fluctuations,  which include foreign currency devaluations against
the dollar.

                                      130
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NEW ACCOUNTING PRINCIPLES

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
130"),  which is required to be adopted by affected  companies  for fiscal years
beginning  after  December 15, 1997.  SFAS 130 requires that an  enterprise  (i)
classify  items of other  comprehensive  income by their  nature in a  financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained  earnings and additional  paid-in capital in the equity
section  of a  statement  of  financial  position.  Other  comprehensive  income
includes cumulative  translation  adjustments and unrealized gains and losses on
available-for-sale securities.

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information"  ("SFAS 131"), which requires that a public
business  enterprise report certain financial and descriptive  information about
its reportable segments.  The Company plans to adopt SFAS 131 for the year ended
February 28, 1999.

     The American  Institute of Certified  Public  Accountants  recently  issued
Statement  of Position  98-5,  "Reporting  on the Costs of Start-Up  Activities"
("SOP 98-5"),  which is required to be adopted by affected  companies for fiscal
years  beginning  after  December  15,  1998.  SOP  98-5  defines  start-up  and
organization  costs,  which must be  expensed  as  incurred.  In  addition,  all
deferred start-up and organization  costs existing as of January 1, 1999 must be
written-off and accounted for as a cumulative effect of an accounting change.

RECLASSIFICATIONS

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

3.   ACQUISITIONS AND DISPOSITIONS

ARGENTINA

     In October 1996, the Company  acquired 100% of two cable systems and 80% of
a third  system,  serving  the  cities  of Bahia  Blanca  and  Punta  Alta,  for
approximately $52,520. Under terms of the agreements, the Company had the option
to acquire,  or could have been  required to purchase,  the remaining 20% of the
third  system  between  April 24,  1998 and October  31,  1998.  The Company had
accrued $4,406  related to this option.  The Company paid $26,382 in cash at the
date of acquisition, with the remaining $26,138 to be paid over the following 18
months. Details of the net assets acquired,  which were denominated in Argentine
pesos and  translated  to U.S.  dollars  using the exchange  rate on the date of
acquisition, were as follows:

     Tangible assets.................................................  $ (4,051)
     Goodwill........................................................   (63,464)
     Cash............................................................       (97)
     Other...........................................................    (5,958)
     Accounts payable and accrued liabilities........................    20,807
     Notes payable...................................................       243
                                                                       ---------
                                                                        (52,520)
     Less purchase money notes.......................................    26,138
                                                                       --------
         Total cash paid.............................................  $(26,382)
                                                                       ========

       In April 1997, UIH LA acquired 100% of multi-channel  television  systems
in Comodoro and Trelew,  Argentina  for a total  purchase  price of $27,900,  of
which  $13,900  was paid at  closing  and the  remaining  $14,000  was due in 18
monthly  installments  beginning May 1997.  Also in April 1997, UIH LA agreed to
acquire up to an 80% equity  interest in the  multi-channel  television  systems
located in Santa Fe, Parana and Galvez,  Argentina for a total purchase price of
$59,000.  In April 1997,  UIH LA closed the  acquisition of the first 31% equity
interest  for a total  purchase  price of $23,000  and paid a $2,000  deposit to
acquire the additional  38% equity  interest by July 15, 1997 and the additional
11% equity  interest by the end of July 1997.  The total purchase price was paid
50% at closing and the balance  was to be paid in monthly  installments  through
June 2000.

     In  October  1997,  the  Company  completed  the  sale of all of its  cable
television assets in Argentina, including the regions of Bahia Blanca, Comodoro,
Trelew  and Santa Fe (the  "Argentina  Transaction").  The sale  price for Bahia
Blanca,  Comodoro,  Trelew  and Santa Fe  collectively  was  $268,200,  of which
$25,300  consisted of remaining  purchase  money notes  payable to sellers which
were  assumed by the buyers from the  Company's  original  acquisition  of Bahia
Blanca in October  1996 and  Comodoro,  Trelew and Santa Fe in April 1997.  From

                                      131
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

this net sales price of  $242,900,  $29,600  was paid  directly by the buyers to
other minority interest  shareholders,  resulting in net proceeds to the Company
of approximately  $211,125. The payment was received in full in cash, except for
an amount placed in escrow, subject to finalization of post-closing adjustments.
The Company recognized a gain on the transaction of $90,020.  Under the terms of
its lending  arrangements  with a group of banks,  the  Company  repaid from the
proceeds of the sale all of its outstanding  indebtedness  under its bridge loan
facility totaling $110,000 plus accrued interest.  The remainder of the proceeds
were distributed to UIH to fund a European acquisition.

TARA

     In October  1997,  Tara  issued  shares to third  parties in  exchange  for
consideration  totaling $2,476,  thereby diluting the Company's interest in Tara
from 100% to 75%. A gain of $1,629 recognized on the transaction was credited to
additional paid-in capital in accordance with SAB 51.

NET SAO PAULO

     During  the year  ended  February  28,  1994,  the  Company  acquired a 20%
interest in  Cabodinamica  TV Cabo Sao Paulo S.A. ("Net Sao Paulo").  During the
year ended  February 28,  1995,  through a series of  transactions,  the Company
increased  its  ownership  to 34%.  In August  1996,  the  Company  sold its 34%
interest  in Net Sao Paulo for  $43,098  in cash and a $35,000  note  receivable
which was collected during Fiscal 1997. The Company recognized a gain of $65,249
on the transaction.

STX, CABLEVISION AND VTRH

       In June 1995, UIH LA completed an acquisition of 65% of Red de Television
y Servicios por Cable S.A.  ("STX"),  a Chilean company which owned and operated
eight  cable  television  systems in  Northern  Chile.  The  purchase  price was
$25,918. In June 1996, UIH LA acquired the remaining 35% of STX for $24,000. The
Company acquired an initial 50% interest in Cablevision S.A.  ("Cablevision") in
January 1994 for $3,900.  In January  1996,  UIH LA increased  its  ownership in
Cablevision to 100% for approximately  $22,100. UIH LA contributed its interests
in STX and Cablevision in exchange for a 34% interest in VTRH in September 1996.
Prior to the formation of VTRH,  the Company  accounted for its  investments  in
Cablevision and STX under the equity method.

       UIH  LA  is  currently  involved  in  a  revaluation  of  the  properties
contributed to VTRH, which may result in a reallocation of interests. Management
believes  its  interest  in VTRH will  increase  as a result of the  revaluation
process.  Pursuant to the terms of a loan  agreement,  VTRH is  prohibited  from
paying dividends or otherwise disposing of its shares.

AUSTAR

     The Company  acquired,  through directly and indirectly held interests,  an
effective  50% economic  interest in the two companies  that comprise  Austar in
1994. In December 1995, the Company increased its effective economic interest in
Austar to 90%. The Company paid $15,240 in cash and issued 170,513 shares of its
convertible  preferred stock having an initial  liquidation 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, were 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)
                                                                        -------
         Net assets..................................................       290
     Goodwill........................................................    44,790
                                                                        -------
         Total consideration.........................................   $45,080
                                                                        =======

                                      132
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     In May 1996, the Company  increased its economic  interest in Austar to 94%
which was  subsequently  increased to 96%. In October 1996, the Company acquired
the remaining 4% economic interest in Austar for $7,920. The Company's ownership
interests  are  comprised  of  direct  and  indirect   holdings  of  convertible
debentures and ordinary  shares of CTV and STV. The Company began  consolidating
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.

     The Company  invested  approximately  $53,009,  $161,375  and $50,848  into
Austar during Fiscal 1998, 1997 and 1996, respectively. As of February 28, 1998,
the Company's cumulative investment in Austar, including amounts paid to acquire
interests from other shareholders, totaled approximately $284,935.

SATURN

     In July 1994,  the Company  acquired a 50% interest in Kiwi  Communications
Limited, which subsequently 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 UIH A/P which was valued
at  approximately   $7,800.  The  holder  of  this  2.6%  interest  in  UIH  A/P
subsequently  exchanged  it for a 2% interest in UAP.  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, were 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)
                                                                         ------
         Net assets...................................................     (973)
     Goodwill.........................................................    8,773
                                                                         ------
         Total consideration..........................................   $7,800
                                                                         ======

     In July 1997, SaskTel Holdings (New Zealand),  Inc. ("SaskTel") purchased a
35% equity  interest in Saturn by investing  approximately  New Zealand  $29,900
($19,566) directly into Saturn for its newly-issued shares, thereby reducing the
Company's  equity interest in Saturn to 65%. A gain of $5,985  recognized on the
transaction  was credited to additional  paid-in  capital in accordance with SAB
51. As of February 28,  1998,  the  Company's  cumulative  investment  in Saturn
totaled approximately $42,161.

TELEFENUA

     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 to the  Company  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 acquisition, were as follows:

     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 consolidated  revenues,  expenses and
net loss after intercompany eliminations related to Telefenua for the year ended
December 31, 1995 totaled $1,882, $5,438 and $3,556, respectively.

     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.  Since March 1995,  Telefenua  has  operated  the only

                                      133
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 Societe Francaise
des  Communications  et du Cable  S.A.  ("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.

     As of February 28, 1998, the Company's  cumulative  investment in Telefenua
totaled approximately $16,738. The Company is currently evaluating the potential
sale of its interest in Telefenua.

     The  territorial  government  of Tahiti (in French  Polynesia)  has legally
challenged  the decree and authority of the Conseil  Superieur de  l'Audiovisuel
("CSA") to award  Telefenua  the  authorizations  to operate an MMDS  service 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. There can be no assurance that if the existing authorization is nullified
a new  authorization  will be  obtained.  If  Telefenua  does  not  obtain a new
authorization,   there  is  no  assurance   that   Telefenua  will  receive  any
restitution.  In addition,  any available restitution could be limited and could
take years to obtain.

XYZ ENTERTAINMENT

     In  October  1994,  the  Company  and  Century  Communications  Corporation
("Century")  formed  XYZ  Entertainment,   an  Australian   proprietary  company
incorporated  in New South Wales.  In June 1995,  the Company and Century formed
the  50/50  joint  venture  Century  United  Programming  Ventures  Pty  Limited
("CUPV"),  an  Australian   corporation,   to  hold  their  investments  in  XYZ
Entertainment.  In September 1995, a 50% interest in XYZ  Entertainment was sold
to a third  party,  thereby  diluting  the  Company's  indirect  interest in XYZ
Entertainment to 25%. UIH A/P recognized a gain on the sale of $4,132.

TV-CABO RIO TELECOMUNICACOES, S.A.

     In January  1996,  the Company  completed the sale of its 25% interest in a
company that held multi-channel  television licenses for Rio de Janeiro,  Brazil
for  approximately  $13,500.  The Company had invested a total of  approximately
$1,619  in  this  company  prior  to the  sale,  resulting  in a gain on sale of
approximately $11,881.

MEGAPO

     In June 1995, the Company completed its acquisition of Megapo.  The Company
advanced  Megapo $12,000 as of February 28, 1995,  which was converted to equity
at  closing  and  paid an  additional  $19,600  (for a total  purchase  price of
$31,600) for a 49% interest in four operating  subsidiaries and a 39.2% interest
in a fifth operating subsidiary of Megapo.

PRO FORMA FINANCIAL INFORMATION, FISCAL 1998, FISCAL 1997 AND FISCAL 1996

     The following unaudited pro forma condensed  consolidated operating results
for the years ended  February  28,  1998 and 1997 give  effect to the  Argentina
Transaction  as if it had occurred at the  beginning  of the periods  presented.
This pro forma condensed consolidated financial information and notes thereto do
not purport to represent what the Company's results of operations would actually
have been if such  transaction had in fact occurred on such dates. The pro forma
adjustments  are based upon  currently  available  information  and upon certain
assumptions that management believes are reasonable.
<TABLE>
<CAPTION>
                                                                 For the Year Ended               For the Year Ended
                                                                  February 28, 1998                February 28, 1997
                                                             --------------------------       --------------------------
                                                             Historical    Pro Forma(1)       Historical    Pro Forma(2)
                                                             ----------    ------------       ----------    ------------
     <S>                                                     <C>            <C>               <C>            <C>
     Total revenue.........................................  $  88,644      $  71,017         $  30,771      $  26,386
                                                             =========      =========         =========      =========
     Net operating loss....................................  $(139,081)     $(138,908)        $ (84,507)     $ (83,086)
                                                             =========      =========         =========      =========
     Net loss before extraordinary charge..................  $(213,960)     $(295,469)        $(123,011)     $(120,534)
                                                             =========      =========         =========      =========
     Net loss..............................................  $(293,051)     $(374,560)        $(123,011)     $(120,534)
                                                             =========      =========         =========      =========
</TABLE>
                                      134
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     (1)  Represents  elimination of historical statement of operations balances
          for the Argentina systems  and elimination of the gain recorded on the
          Argentina Transaction.

     (2)  Represents  elimination of historical statement of operations balances
          for Bahia Blanca.

     The following unaudited pro forma condensed  consolidated operating results
for the years ended  February  28, 1997 and February 29, 1996 give effect to the
disposition  of the 34% interest in Net Sao Paulo,  as if it had occurred at the
beginning  of the  periods  presented.  This pro  forma  condensed  consolidated
financial  information  and notes  thereto do not purport to represent  what the
Company's results of operations would actually have been if such transaction had
in fact  occurred  on such  dates.  The pro forma  adjustments  are  based  upon
currently  available  information and upon certain  assumptions  that management
believes are reasonable.
<TABLE>
<CAPTION>
                                                                For the Year Ended               For the Year Ended
                                                                 February 28, 1997                February 29, 1996
                                                            --------------------------       --------------------------
                                                            Historical    Pro Forma(1)       Historical    Pro Forma(2)
                                                            ----------    ------------       ----------    ------------
     <S>                                                    <C>            <C>                <C>            <C>
     Total revenue......................................... $  30,771      $  30,771          $  1,883       $  1,883
                                                            =========      =========          ========       ========
     Net operating loss.................................... $ (84,507)     $ (84,507)         $(20,859)      $(20,859)
                                                            =========      =========          ========       ========
     Net loss.............................................. $(123,011)     $(186,471)         $(67,006)      $(61,169)
                                                            =========      =========          ========       ========
</TABLE>

     (1)  Represents  elimination of historical statement of operations balances
          related to Net Sao Paulo and elimination of the gain recorded on sale.

     (2)  Represents  elimination of historical statement of operations balances
          related to Net Sao Paulo.

     The following  unaudited pro forma  information for the year ended February
29, 1996 gives effect to the acquisition of the additional 40% economic interest
in Austar,  the  acquisition of the additional 50% economic  interest in Saturn,
the acquisition of United  Wireless,  the disposition of the 25% interest in XYZ
Entertainment,  the  acquisition of the 65% interest in STX, and the acquisition
of the 49%  interest in Megapo as if each had  occurred on January 1, 1995.  The
pro forma  condensed  consolidated  financial  information  does not  purport to
represent what the Company's  results of operations  would actually have been if
such  transactions had in fact occurred on such date. The pro forma  adjustments
are based upon currently available information and upon certain assumptions that
management believes are reasonable.
<TABLE>
<CAPTION>
                                                                                                  For the Year Ended
                                                                                                   February 29, 1996
                                                                                              ------------------------
                                                                                              Historical     Pro Forma
                                                                                              ----------     ---------
     <S>                                                                                      <C>            <C>
     Total revenue..........................................................................  $  1,883       $  1,783
                                                                                              ========       ========
     Net operating loss.....................................................................  $(20,859)      $(36,444)
                                                                                              ========       ========
     Net loss...............................................................................  $(67,006)      $(80,033)
                                                                                              ========       ========
</TABLE>

4.   CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
                                                                 As of February 28, 1998
                                                --------------------------------------------------------------
                                                                    Restricted
                                                                     Cash and
                                                Cash and Cash       Short-Term        Short-Term
                                                 Equivalents        Investments       Investments       Total
                                                -------------       -----------       -----------      -------
     <S>                                           <C>                 <C>              <C>            <C>
     Cash...............................           $22,764             $5,524           $    --        $28,288
     Certificates of deposit............                --                 --             8,399          8,399
     Commercial paper...................                --                 --             3,926          3,926
     Government securities..............                --              3,591                --          3,591
                                                   -------             ------           -------        -------
                                                   $22,764             $9,115           $12,325        $44,204
                                                   =======             ======           =======        =======
</TABLE>
                                      135
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
                                                                As of  February 28, 1997
                                               ---------------------------------------------------------------
                                                                     Restricted
                                                                      Cash and
                                               Cash and Cash         Short-Term       Short-Term
                                                Equivalents          Investments      Investments       Total
                                               -------------         -----------      -----------      -------
     <S>                                           <C>                   <C>            <C>            <C>
     Cash...............................           $10,072               $ --           $    --        $10,072
     Commercial paper...................             4,400                 --                --          4,400
     Corporate bonds....................                --                 --             3,000          3,000
     Government securities..............             6,408                 --            15,640         22,048
                                                   -------               ----           -------        -------
                                                   $20,880               $ --           $18,640        $39,520
                                                   =======               ====           =======        =======
</TABLE>

     Generally, the Company's short-term investments mature within twelve months
from the date of purchase except for certain  short-term  investments  which are
repriced periodically to reduce interest rate risk.

5.  INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
    EQUITY METHOD
<TABLE>
<CAPTION>
                                                                   As of February 28, 1998
                                   ---------------------------------------------------------------------------------------
                                      Investments in           Cumulative Equity      Cumulative
                                      and Advances to        in Income (Losses) of    Translation     Valuation
                                   Affiliated Companies      Affiliated Companies     Adjustments     Allowance    Total
                                   --------------------      ---------------------    -----------     ---------  ---------
<S>                                      <C>                      <C>                  <C>              <C>      <C>
Europe 
------
   Monor........................         $ 27,182                 $(13,161)            $ (6,256)        $ --     $  7,765
   IPS.........................            13,920                   (7,261)                 (95)          --        6,564

Asia/Pacific
------------
   XYZ Entertainment(1).........           18,610                  (18,720)                110            --           --
   Sun Cable....................           12,336                   (1,023)             (2,783)           --        8,530
   HITV.........................            6,073                     (236)                  7            --        5,844

Latin America
-------------
   VTRH.........................           92,754                  (10,327)              (4,262)          --       78,165
   Megapo.......................           31,248                   (1,313)              (1,604)          --       28,331
   UFC..........................           12,099                   (7,487)                  --           --        4,612
   TVSB.........................            7,132                   (3,771)                  --           --        3,361
   Jundiai......................            6,652                     (788)                  --           --        5,864

Other...........................              182                       --                   --           --          182
-----                                    --------                 --------             --------         ----     --------
                                         $228,188                 $(64,087)            $(14,883)        $ --     $149,218
                                         ========                 ========             ========         ====     ========
</TABLE>

(1)  Includes an accrued  funding  obligation of $406 at December 31, 1997.  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 requested fundings.

                                      136
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
                                                                   As of February 28, 1997
                                   ----------------------------------------------------------------------------------------
                                     Investments in             Cumulative Equity      Cumulative
                                     and Advances to          in Income (Losses) of    Translation    Valuation
                                   Affiliated Companies       Affiliated Companies     Adjustments    Allowance      Total
                                   --------------------       ---------------------    -----------    ---------    --------
<S>                                      <C>                      <C>                   <C>           <C>          <C>
Europe
------
   Monor........................         $ 27,182                 $ (8,221)             $(4,575)      $    --      $ 14,386
   IPS..........................           11,187                   (4,734)                  --            --         6,453

Asia/Pacific
------------
   XYZ Entertainment(1).........           16,202                  (16,312)                 110            --            --
   Sun Cable....................            9,748                     (366)                 155            --         9,537
   HITV.........................            6,073                      (16)                  --            --         6,057

Latin America
-------------
   VTRH.........................           82,010                   (2,122)              (1,502)           --        78,386
   Megapo.......................           32,491                     (727)              (1,420)           --        30,344
   TVSB.........................            6,132                   (2,860)                  --            --         3,272
   Jundiai......................            4,984                   (1,214)                  --            --         3,770
   UFC..........................            1,739                      (10)                  --            --         1,729

Other...........................            3,119                   (1,051)                  --        (2,068)           --
-----                                    --------                 --------              -------       -------      --------
                                         $200,867                 $(37,633)             $(7,232)      $(2,068)     $153,934
                                         ========                 ========              =======       =======      ========
</TABLE>

(1)  Includes an accrued funding  obligation of $1,270 at December 31, 1996. 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 requested fundings.

     As of February 28, 1998 and 1997, the Company had the following differences
related to the excess of cost over the net tangible assets acquired  included in
the above table. Such differences are being amortized over 15 years.
<TABLE>
<CAPTION>
                                                     As of February 28, 1998              As of February 28, 1997
                                                  ----------------------------        ------------------------------
                                                     Basis        Accumulated            Basis           Accumulated
                                                  Difference      Amortization        Difference        Amortization
                                                  ----------      ------------        ----------        ------------
<S>                                                <C>             <C>                  <C>               <C>
Europe
------
Monor.......................................       $ 3,838         $(1,125)             $ 3,959           $  (837)
IPS.........................................           651             (53)                 115               (10)

Latin America
-------------
VTRH........................................        11,368          (1,211)              17,505              (363)
Megapo......................................        21,528          (4,307)              23,661            (2,583)
TVSB........................................         2,361            (895)               2,953              (680)
Jundiai.....................................           540            (172)                 393               (87)
UFC.........................................           439             (63)                 439               (10)
                                                   -------         -------              -------           -------
     Total..................................       $40,725         $(7,826)             $49,025           $(4,570)
                                                   =======         =======              =======           =======
</TABLE>
     Condensed  financial  information  for  the  Company's  significant  equity
investees is presented below.

                                      137
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

VTRH

     Condensed  financial  information  for VTRH  stated in U.S.  dollars  is as
follows:
<TABLE>
<CAPTION>
                                                                                               As of December 31,
                                                                                           --------------------------
                                                                                             1997              1996
                                                                                           --------          --------
     <S>                                                                                   <C>               <C>
     Cash..........................................................................        $ 11,788          $  3,450
     Goodwill, net.................................................................         123,278           132,834
     Property, plant and equipment, net............................................         173,264           160,184
     Other assets..................................................................          78,276            29,439
                                                                                           --------          --------
         Total assets..............................................................        $386,606          $325,907
                                                                                           ========          ========

     Accounts payable and accrued liabilities......................................        $ 24,642          $ 25,924
     Bank debt.....................................................................         165,160           100,371
     Related party debt............................................................             404            25,204
     Shareholders' equity..........................................................         196,400           174,408
                                                                                           --------          --------
         Total liabilities and shareholders' equity................................        $386,606          $325,907
                                                                                           ========          ========
</TABLE>
<TABLE>
<CAPTION>
                                                                                              For the Years Ended
                                                                                                   December 31,
                                                                                           --------------------------
                                                                                             1997              1996
                                                                                           --------          --------
     <S>                                                                                   <C>               <C>
     Revenue.......................................................................        $114,318          $ 70,717
     Operating, selling, general and administrative expense........................         (92,970)          (61,084)
     Depreciation and amortization.................................................         (22,707)          (14,192)
                                                                                           --------          --------
         Net operating loss........................................................          (1,359)           (4,559)
     Other.........................................................................         (19,252)           (8,928)
                                                                                           --------          --------
         Net loss..................................................................        $(20,611)         $(13,487)
                                                                                           ========          ========
</TABLE>
MONOR

     In September  1994,  the Company  acquired a 47.6% (which was  subsequently
increased  to 48.6%)  net  equity  interest  in Monor  which  indirectly  owns a
controlling  interest in a  local-loop  telephony  concession  for the region of
Monor,  Hungary.  Condensed  consolidated  income  statement data,  derived from
audited  consolidated  financial statements for Monor and its subsidiaries which
were audited by Coopers & Lybrand LLP, stated in U.S. dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------ 
     <S>                                                                                              <C>
     Revenue.................................................................................         $ 5,508
     Operating, selling, general and administrative expense..................................          (6,179)
     Depreciation and amortization...........................................................          (2,851)
                                                                                                      -------
         Net operating loss..................................................................          (3,522)
     Interest, net...........................................................................            (835)
     Foreign currency loss...................................................................          (5,408)
     Other...................................................................................             463
                                                                                                      -------
         Net loss............................................................................         $(9,302)
                                                                                                      =======
</TABLE>
CTV

     In September  1994, the Company began to fund its 40% economic  interest in
CTV, an Australian  company that holds MMDS  licenses in Australia.  The Company
then  acquired  an  additional  10%  economic   interest  in  CTV  from  another
shareholder  for $5,613.  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 CTV since December 31, 1995 (see Note

                                      138
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3).  Condensed  consolidated  income  statement  data  for CTV,  stated  in U.S.
dollars, was as follows:
<TABLE>
<CAPTION>

                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                              <C>
     Revenue.................................................................................         $   433
     Operating, selling, general and administrative expense..................................          (4,804)
     Depreciation and amortization...........................................................          (1,113)
                                                                                                      -------
         Net operating loss..................................................................          (5,484)
     Interest, net...........................................................................             914
     Other...................................................................................             245
                                                                                                      -------
         Net loss............................................................................         $(4,325)
                                                                                                      =======
</TABLE>

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  STV since December 31, 1995 (see Note 3).  Condensed  consolidated
income statement data for STV, stated in U.S. dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                              <C>
     Revenue.................................................................................         $     10
     Operating, selling, general and administrative expense..................................           (2,670)
     Depreciation and amortization...........................................................             (158)
                                                                                                      --------
         Net operating loss..................................................................           (2,818)
     Interest, net...........................................................................              315
                                                                                                      --------
         Net loss............................................................................         $(2,503)
                                                                                                      =======
</TABLE>

XYZ ENTERTAINMENT

     In October  1994,  the  Company and Century  formed XYZ  Entertainment,  an
Australian  proprietary  company  incorporated in New South Wales. In June 1995,
the Company and Century  formed a 50/50 joint venture to hold their  investments
in XYZ Entertainment. In September 1995, a 50% interest in XYZ Entertainment was
sold to a third party,  thereby diluting the Company's  indirect interest in XYZ
Entertainment  to 25%.  Condensed  consolidated  income  statement  data for XYZ
Entertainment stated in U.S. dollars, which is derived from financial statements
audited by Deloitte Touche Tohmatsu, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                             <C>
     Revenue.................................................................................        $  1,266
     Operating, selling, general and administrative expense..................................         (27,511)
     Depreciation and amortization...........................................................          (2,662)
                                                                                                     --------
         Net operating loss..................................................................         (28,907)
     Interest, net...........................................................................             145
                                                                                                     --------
         Net loss............................................................................        $(28,762)
                                                                                                     ========
</TABLE>

NET SAO PAULO

     During fiscal 1994,  the Company  acquired a 20% interest in Net Sao Paulo.
During fiscal 1995, through a series of transactions,  the Company increased its
ownership to 34%. Condensed consolidated income statement data for Net Sao Paulo

                                      139
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     derived  from  audited  financial  statements  which were  audited by Price
Waterhouse stated in U.S. dollars,  was as follows (the report of other auditors
referred to above with respect to Net Sao Paulo  indicates  there is substantial
doubt about Net Sao Paulo's ability to continue as a going concern):
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                             <C>
     Revenue.................................................................................        $12,016
     Operating expense.......................................................................        (10,786)
     Selling, general and administrative expense.............................................         (9,753)
     Depreciation and amortization...........................................................         (2,957)
                                                                                                     -------
         Net operating loss..................................................................        (11,480)
     Interest, net...........................................................................         (2,625)
     Foreign currency loss...................................................................             (6)
                                                                                                     --------
         Net loss............................................................................        $(14,111)
                                                                                                     ========
</TABLE>

MEGAPO

     In June 1995,  UIH LA  completed  its  acquisition  of  Megapo.  UIH LA had
advanced  Megapo $12,000 as of February 28, 1995,  which was converted to equity
at  closing  and  paid an  additional  $19,600  (for a total  purchase  price of
$31,600) for a 49% interest in four operating  subsidiaries and a 39.2% interest
in a fifth operating  subsidiary of Megapo.  Condensed combined income statement
data, derived from audited financial statements for Megapo which were audited by
Galaz, Gomez Morfin, Chavero, Yamazaki, stated in U.S. dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                 For the Year Ended
                                                                                                  December 31, 1995
                                                                                                 ------------------
     <S>                                                                                             <C>
     Revenue.................................................................................        $11,672
     Operating, selling, general and administrative expense..................................         (6,814)
     Depreciation and amortization...........................................................         (1,558)
                                                                                                     -------
         Net operating income................................................................          3,300
     Interest, net...........................................................................            243
     Foreign currency gain...................................................................          1,848
     Other...................................................................................         (1,809)
                                                                                                     -------
         Net income..........................................................................        $ 3,582
                                                                                                     =======
</TABLE>

6.   PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                                                   As of
                                                                                                February 28,
                                                                                         --------------------------
                                                                                           1998              1997
                                                                                         --------          --------
     <S>                                                                                 <C>               <C>
     Subscriber premises equipment and converters...............................         $160,728          $126,007
     MMDS distribution facilities...............................................           55,093            57,074
     Cable distribution networks................................................           22,460            22,795
     Office equipment, furniture and fixtures...................................           11,279             9,874
     Buildings and leasehold improvements.......................................            5,729             7,132
     Other......................................................................           23,498            23,882
                                                                                         --------          --------
                                                                                          278,787           246,764
         Accumulated depreciation...............................................          (80,103)          (28,554)
                                                                                         --------          --------
         Net property, plant and equipment......................................         $198,684          $218,210
                                                                                         ========          ========
</TABLE>
                                      140
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.   NOTE PAYABLE TO PARENT

     UIH provides certain administrative, financial reporting and other services
to the Company,  which has no separate  employees  of its own. In addition,  UIH
Management,  Inc. ("UIH Management"),  a wholly-owned subsidiary of the Company,
has executed  technical  assistance  agreements with various operating  systems,
pursuant to which UIH  Management  provides  various  management  and  technical
services  to these  operating  systems for a fee equal to a  percentage  of that
operating system's gross revenue.  UIH has appointed certain of its employees to
serve in senior  management  positions at the operating  systems.  The operating
systems  reimburse  UIH for certain  direct  costs  incurred  by UIH,  including
salaries and benefits relating to these senior management positions.

Included in the note payable to parent are the following:
<TABLE>
<CAPTION>
                                                                                                       As of
                                                                                                    February 28,
                                                                                              ------------------------
                                                                                                1998            1997
                                                                                              -------         --------
    <S>                                                                                       <C>             <C>
    Note payable to parent, including accrued interest of $9,155 and $4,978,
       respectively...................................................................        $38,993         $34,816
     Subordinated note payable to parent, including accrued interest of $1,173........             --          38,673
     Other bridge loans payable to parent.............................................             --           2,626
                                                                                              -------         -------
                                                                                              $38,993         $76,115
                                                                                              =======         =======
</TABLE>

     In December  1995,  UIH loaned the Company  $29,838 in connection  with the
purchase of the remaining  interest of Austar.  The loan accrues interest at 14%
per annum.  Although  the terms of the loan state that it is due on demand,  UIH
does not intend to demand  payment during the next fiscal year.  Therefore,  the
loan and related accrued interest are classified as long-term.

     In February 1997, UIH made a bridge loan to UIH LA of $37,500.  Interest on
the note accrued at LIBOR plus 6%. In November 1997, UIH LA repaid the note plus
interest with proceeds from the Argentina Transaction.

8.   SENIOR SECURED NOTES AND OTHER DEBT
<TABLE>
<CAPTION>
                                                                                                     As of
                                                                                                  February 28,
                                                                                          --------------------------
                                                                                            1998              1997
                                                                                          --------          --------
     <S>                                                                                  <C>               <C>
     November 1994 14% senior secured discount notes, net of unamortized discount.......  $    179          $264,985
     November 1995 14% senior secured discount notes, net of unamortized discount.......       129            90,161
     February 1996 14% senior secured discount notes, net of unamortized discount.......        60            55,193
     May 1996 14% UIH A/P senior discount notes, net of unamortized discount............   278,662           245,182
     September 1997 14% UIH A/P senior discount notes, net of unamortized discount......    30,461                --
     Austar Bank Facility (as defined below)............................................    71,531                --
     UIH LA Revolving Credit Facility (as defined below)................................    33,000                --
     Vendor financed equipment at Saturn................................................     3,730                --
     Note payable to a company, interest at 1.5% above the rate published by a certain
       Chilean bank, principal and interest due quarterly until June 1998, secured by
       shares of STX....................................................................     1,857             5,447
     Capitalized lease obligations......................................................     3,439             4,959
     Mortgage note, interest at 7.548%, 7-year term.....................................     1,094             1,467
                                                                                          --------          --------
                                                                                           424,142           667,394
       Less current portion.............................................................   (36,682)           (5,177)
                                                                                          --------          --------
       Total senior secured notes and other debt........................................  $387,460          $662,217
                                                                                          ========          ========
</TABLE>
                                      141
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOVEMBER 1994 14% SENIOR SECURED DISCOUNT NOTES

     In November 1994, the Company sold 394,000 units consisting of $394,000 14%
senior  secured  discount  notes due  November  15, 1999 (the "1994  Notes") and
394,000  warrants,  including  related put rights (the "Warrants") to purchase a
total of  1,786,699  shares of Class A Common  Stock at a price of $15 per share
for net proceeds of $192,771.  At any time between January 31, 1996 and March 1,
1996, the Warrant holders had the right to require the Company to repurchase all
or a part of the  Warrants  for $28.34  per  Warrant.  Holders  of the  Warrants
required the Company to purchase 76,070  Warrants to purchase  344,932 shares of
Class A Common Stock for a cost of $2,156 on March 1, 1996. The remaining  value
assigned  to the  Warrants  of $9,011 was  reclassified  to  additional  paid-in
capital  on  March  1,  1996.  The  remaining   317,930   outstanding   Warrants
(representing  1,441,739  shares of Class A Common Stock) are exercisable at any
time  before  November  15,  1999.  The 1994 Notes are  deemed,  for  accounting
purposes,  to accrete interest at a rate of 15.24% compounded  semi-annually and
no cash  interest  payments will be made prior to maturity on November 15, 1999.
On February 5, 1998 all but $230  principal  amount at maturity  1994 Notes were
redeemed in  connection  with the issuance of the 1998 Notes (as defined in Note
9).

NOVEMBER 1995 14% SENIOR SECURED DISCOUNT NOTES

     In November  1995,  the Company sold 130,000 14% senior  secured notes (the
"1995  Notes").  The 1995 Notes were issued at a discount  from their  principal
amount of $130,000,  resulting  in net  proceeds to the Company of $63,886.  The
1995 Notes accrete interest at a rate of 14.0% compounded semi-annually. No cash
interest  payments  will be made prior to  maturity  on November  15,  1999.  On
February 5, 1998,  all but $162  principal  amount at  maturity  1995 Notes were
redeemed in  connection  with the issuance of the 1998 Notes.

FEBRUARY 1996 14% SENIOR SECURED DISCOUNT NOTES

     In February  1996,  the Company sold 75,350 14% senior  secured  notes (the
"1996  Notes").  The 1996 Notes were issued at a discount  from their  principal
amount of $75,350, resulting in net proceeds to the Company of $47,356. The 1996
Notes are deemed,  for  accounting  purposes,  to accrete  interest at a rate of
11.875% compounded  semi-annually.  No cash interest payments will be made prior
to maturity on November 15,  1999.  On February 5, 1998,  all but $73  principal
amount at maturity 1996 Notes were  redeemed in connection  with the issuance of
the 1998 Notes.

MAY 1996 14% UIH A/P SENIOR DISCOUNT NOTES

     On May 14, 1996, UIH A/P received total gross proceeds of $225,115 from the
private  placement  of  $443,000  aggregate  principal  amount of the 14% senior
discount  notes  (the "UIH A/P 1996  Notes").  On and after May 15,  2001,  cash
interest  will  accrue  and  will be  payable  semi-annually  on each May 15 and
November 15,  commencing  November 15, 2001.  The UIH A/P 1996 Notes are due May
15, 2006.  Effective May 16, 1997, the interest rate on these notes increased by
an additional 0.75% per annum to 14.75%,  until such time as UIH A/P consummates
an issuance of its capital  stock  resulting in gross  proceeds to UIH A/P of at
least $70,000 (an "Equity  Sale").  Due to this increase in the interest  rates,
the UIH A/P 1996 Notes will  accrete to a  principal  amount of  $455,574  if an
Equity Sale is not  consummated  prior to May 15, 2001,  the date cash  interest
begins to accrue.

SEPTEMBER 1997 14% UIH A/P SENIOR DISCOUNT NOTES

     On September 23, 1997, the Company received total gross proceeds of $29,925
from the private placement of $45,000  aggregate  principal amount of 14% senior
discount  notes,  which were issued at a premium (the "UIH A/P 1997 Notes").  On
and  after  May 15,  2001,  cash  interest  will  accrue  and  will  be  payable
semi-annually on each May 15 and November 15, commencing  November 15, 2001. The
September  1997 Notes are due May 15, 2006.  Effective  September 23, 1997,  the
interest  rate on these  notes  increased  by an  additional  0.75% per annum to
14.75%,  until  such time as UIH A/P  consummates  an Equity  Sale.  Due to this
increase in interest  rates,  the UIH A/P 1997 Notes will accrete to a principal
amount of $46,277 if an Equity Sale is not  consummated  prior to May 15,  2001,
the date cash interest begins to accrue.

     On November 17, 1997, pursuant to the terms of the indentures governing the
UIH A/P  1996  Notes  and the UIH A/P  1997  Notes  (collectively,  the "UIH A/P
Notes"), UIH A/P issued warrants to purchase 488,000 shares of its common stock,
which  represented  3.4% of its common stock.  The warrants are exercisable at a
price of $10.45 per share which would result in gross proceeds of  approximately
$5,100 upon  exercise.  The warrants are  exercisable  through May 15, 2006. The
warrants were valued at $3,678 and have been reflected as an additional discount
to the UIH A/P  Notes on a  pro-rata  basis  and as an  increase  in  additional
paid-in capital.

                                      142
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

AUSTAR BANK FACILITY

     In July 1997, Austar secured a financing  facility from a bank for a senior
syndicated  term debt facility in the amount of Australian  $("A$")200,000  (the
"Austar Bank Facility").  The proceeds of the Austar Bank Facility have been and
will be used to fund Austar's subscriber  acquisition and working capital needs.
The  Austar  Bank  Facility  consists  of  three  sub-facilities:  (i)  A$50,000
revolving  working  capital  facility,  (ii) A$60,000 cash advance  facility and
(iii) A$90,000 term loan facility.  This term loan facility will be available to
the extent that any  drawdown,  if added to the existing  aggregate  outstanding
balance  under  sub-facilities  (i)  and  (ii),  would  not  exceed  five  times
annualized  cash flows,  and upon Austar having  achieved and  maintained  total
subscribers  of at  least  200,000.  All  of  Austar's  assets  are  pledged  as
collateral  for the Austar Bank  Facility.  In addition,  pursuant to the Austar
Bank  Facility,  Austar  cannot pay any  dividends,  interest  or fees under its
technical  assistance  agreements  prior to December  31,  2000.  Subsequent  to
December  31,  2000,  Austar will be  permitted to make these types of payments,
subject to certain debt to cash flow  ratios.  The working  capital  facility is
fully  repayable on June 30, 2000. The cash advance  facility is fully repayable
pursuant to an amortization schedule beginning December 31, 2000 and ending June
30, 2004.  As of December 31,  1997,  Austar had drawn the entire  amount of the
working  capital  facility  and the cash  advance  facility  totaling  A$110,000
($71,531  converted  using  the  December  31,  1997  exchange  rate).  Although
management  does not expect to meet the  requirements  for drawing down the term
loan  facility  during 1998,  they have engaged the lender under the Austar Bank
Facility in a discussion regarding an amendment to the Austar Bank Facility.  If
approved,  such an amendment  would allow Austar to draw all or a portion of the
A$90,000 term loan facility in advance of the time period currently  envisioned.
There can be no assurance,  however,  that such an amendment will  ultimately be
approved.

UIH LA REVOLVING CREDIT FACILITY

     On April 24, 1997, UIH LA entered into a credit agreement with a bank for a
loan of up to $125,000 for a term of nine months,  extendible up to a maximum of
18 months at an interest rate of LIBOR plus 6% (the "UIH LA Credit  Agreement").
In October 1997,  UIH LA repaid the  outstanding  balance of $110,000 under this
credit agreement with the proceeds from the Argentina  Transaction (see Note 3).
In November 1997, UIH LA entered into an amended and restated  credit  agreement
with a bank for a  revolving  credit  facility  of up to  $40,000  (the  "UIH LA
Revolving  Credit  Facility").  Borrowings  under this  facility  must be repaid
within 12 months and bear interest at a rate of LIBOR plus 3.5%. The facility is
extendable up to 18 months with (i) an increase in the interest rate of 50 basis
points for each  three-month  period it is extended beyond the initial  12-month
term and  (ii)  cash  fees of 0.75%  and  1.50% if it is  extended  to 15 and 18
months, respectively.  The borrowings under the UIH LA Revolving Credit Facility
are  secured  by all of UIH LA's  capital  stock  and  substantially  all of its
assets.  In  addition,  UIH  LA  must  maintain  on  deposit  with  the  bank  a
compensating  balance,  restricted  as to  use,  of 8% of the  outstanding  loan
balance.  As of February 28, 1998, UIH LA had an outstanding  balance of $33,000
under this facility and a restricted cash balance of $3,591.  Under the terms of
the UIH LA Revolving Credit Facility, UIH LA must use any proceeds from the sale
of Latin American assets to repay this note. Proceeds from the loan were paid as
a dividend by UIH LA to the Company and on to UIH and were primarily used by UIH
to fund an  acquisition.  UIH LA repaid  $25,000 of the UIH LA Revolving  Credit
Facility subsequent to February 28, 1998 (see Note 14).

FAIR VALUE OF SENIOR SECURED NOTES AND OTHER DEBT

     Fair  value is based  on  market  prices  for the same or  similar  issues.
Carrying value is used when a market price is unavailable.
<TABLE>
<CAPTION>
                                                                                                               Fair
                                                                                         Book Value         Market Value
                                                                                         ----------         ------------
     <S>                                                                                 <C>                 <C>
     As of February 28, 1998:
       1994 Notes...................................................................     $    179            $    179
       1995 Notes...................................................................          129                 129
       1996 Notes...................................................................           60                  60
       UIH A/P 1996 Notes...........................................................      278,662             292,380
       UIH A/P 1997 Notes...........................................................       30,461              29,700
       Austar Bank Facility.........................................................       71,531              71,531
       UIH LA Revolving Credit Facility.............................................       33,000              33,000
       Other debt...................................................................       10,120              10,120
                                                                                         --------            --------
           Total....................................................................     $424,142            $437,099
                                                                                         ========            ========
</TABLE>
                                      143
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                                                               Fair
                                                                                         Book Value         Market Value
                                                                                         ----------         ------------
     <S>                                                                                 <C>                 <C>
     As of February 28, 1997:
       1994 Notes...................................................................     $264,985            $289,590
       1995 Notes...................................................................       90,161              95,550
       1996 Notes...................................................................       55,193              55,382
       UIH A/P 1996 Notes...........................................................      245,182             230,360
       Other debt...................................................................       11,873              11,873
                                                                                         --------            --------
           Total....................................................................     $667,394            $682,755
                                                                                         ========            ========
</TABLE>

DEBT MATURITIES
<TABLE>
<CAPTION>
     The maturities of the Company's debt are as follows:
         <S>                                                                                        <C>
         Fiscal 1999.........................................................................       $ 36,982
         Fiscal 2000.........................................................................          3,352
         Fiscal 2001.........................................................................         37,560
         Fiscal 2002.........................................................................         12,671
         Fiscal 2003 and thereafter..........................................................        334,015
                                                                                                    --------
                                                                                                     324,580
                Future finance charges for capitalized lease obligations.....................           (438)
                                                                                                    --------
                Total........................................................................       $424,142
                                                                                                    ========
</TABLE>

9.   PARENT'S DEFICIT

COMMON STOCK

     Authorized  capital  consists  of 1,000  shares of Common  Stock,  $.01 par
value,  100 shares  issued and  outstanding,  held by UIH. Such shares have been
pledged as collateral under UIH's senior secured discount notes.

UIH FEBRUARY 1998 10.75% SENIOR SECURED DISCOUNT NOTES

     On February 5, 1998, UIH sold  $1,375,000  principal  amount at maturity of
10.75% senior secured discount notes due 2008 (the "1998 Notes"). The 1998 Notes
were issued at a discount  from the principal  amount at maturity,  resulting in
gross proceeds to UIH of approximately $812,200.

     UIH used  approximately  $531,800  of the  proceeds  from the 1998 Notes to
complete a tender offer for UIH's existing 14% senior secured discount notes due
1999  (collectively,  the "Old  Notes")  and the consent  solicitation  that UIH
conducted concurrently  therewith.  UIH commenced the tender offer on January 7,
1998,  and the tender offer expired on February 4, 1998,  with over 99.8% of the
Old Notes being validly  tendered.  UIH  subsequently  purchased  $500 principal
amount at maturity of the Old Notes on the open  market,  leaving  approximately
$465 principal  amount at maturity  outstanding as of February 28, 1998. The Old
Notes redeemed had an aggregate  accreted value of approximately  $466,200 as of
February 5, 1998. This tender premium of  approximately  $65,600,  combined with
the write-off of  unamortized  deferred  financing  costs and other  transaction
related  costs  totaling  approximately  $13,500,  resulted in an  extraordinary
charge of approximately $79,100.

     The  remaining  Old Notes will mature on November 15, 1999.  Holders of the
1998  Notes  and the  remaining  outstanding  Old Notes  share a  first-priority
security  interest in the stock and intercompany  notes to UIH of UIPI. The 1998
Notes are senior secured obligations of UIH that rank senior in right of payment
to all future  subordinated  indebtedness of UIH and rank pari passu in right of
payment with the Old Notes.  The 1998 Notes are effectively  subordinated to all
future indebtedness and other liabilities and commitments of UIH's subsidiaries.
Under the terms of the  indenture  governing  the 1998 Notes (the  "Indenture"),
UIH's subsidiaries are generally prohibited and/or restricted from incurring any
lien against  their assets other than liens  incurred in the ordinary  course of
business,  from paying dividends,  and from making  investments in entities that
are not "restricted" by the terms of the Indenture. UIH has the option to invest
in  "unrestricted  entities" in an aggregate amount equal to the sum of $100,000
plus the  aggregate  amount of net cash  proceeds  from sales of equity,  net of
payments made on its preferred  stock plus net proceeds from certain  litigation
settlements.  The Indenture  generally  prohibits UIH from incurring  additional
indebtedness with the exception of a general allowance of

                                      144
<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$75,000 for debt  maturing on or after  February  15, 2008,  certain  guarantees
totaling $15,000,  refinancing  indebtedness,  normal indebtedness to restricted
affiliates and other letters of credit in the ordinary course of business.

CUMULATIVE TRANSLATION ADJUSTMENTS

       During the year ended February 28, 1998, the Company recorded a change in
cumulative   translation   adjustments   of  $38,401,   primarily   due  to  the
strengthening  of  the  U.S.  dollar  compared  to  the  Australian   dollar  of
approximately  22%,  resulting in a translation  adjustment during the period of
approximately $25,876.

10.  COMMITMENTS

     The Company has entered into various  operating lease agreements for office
space, office furniture and equipment, and vehicles.  Rental expense under these
lease agreements totaled $3,494,  $2,342 and $0 for the years ended February 28,
1998, February 28, 1997, and February 29, 1996, respectively.

     The  Company  has  operating  lease  obligations  and other  non-cancelable
commitments as follows:
<TABLE>
<CAPTION>
         <S>                                                                                            <C>
         Fiscal 1999.........................................................................           $2,810
         Fiscal 2000.........................................................................            2,184
         Fiscal 2001.........................................................................            1,654
         Fiscal 2002.........................................................................            1,477
         Fiscal 2003 and thereafter..........................................................            1,451
                                                                                                        ------
                Total........................................................................           $9,576
                                                                                                        ======
</TABLE>

     The Company has MMDS  license  fees and  programming  license  fees payable
annually as follows:
<TABLE>
<CAPTION>
         <S>                                                                                            <C>
         Fiscal 1999.........................................................................           $2,212
         Fiscal 2000.........................................................................            1,686
         Fiscal 2001.........................................................................            1,444
         Fiscal 2002.........................................................................              153
         Fiscal 2003 and thereafter..........................................................               --
                                                                                                        ------
                Total........................................................................           $5,495
                                                                                                        ======
</TABLE>

     As of December 31, 1997,  Saturn had contractual  arrangements with certain
vendors committing it to make capital expenditures of $2,613, primarily relating
to network  distribution  equipment.  The majority of this amount will be vendor
financed.

     Austar Satellite has a five-year  agreement with Optus Networks Pty Limited
("Optus  Networks") to lease a 54 MHz  transponder,  including the eight channel
programming package which is the most widely-distributed  programming package in
Australia  (the "Core  Package").  Pursuant to the  agreement,  which  commenced
September 1, 1997,  Austar  Satellite will pay  approximately  $393 per month in
satellite  service fees to Optus Networks.  Satellite fees payable  annually are
approximately as follows:
<TABLE>
<CAPTION>
         <S>                                                                                           <C>
         Fiscal 1999.........................................................................          $ 4,716
         Fiscal 2000.........................................................................            4,716
         Fiscal 2001.........................................................................            4,716
         Fiscal 2002.........................................................................            4,716
         Fiscal 2003.........................................................................            3,144
                                                                                                       -------
                                                                                                       $22,008
                                                                                                       =======
</TABLE>

     UIH and  certain  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. The bonus is based on the performance of the respective company and
the  employee.  The  agreements  often  provide  for the  grant of an  incentive
interest  equal to a percentage of the residual  equity value of the  respective


                                      145

<PAGE>
                    UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 the years ended  February 28, 1998 and 1997.  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.

11.  CONTINGENCIES

     The Company is not a party to any  material  legal  proceedings  other than
described  below,  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.

     In April 1997,  following a trial in the United States  District  Court for
the District of Colorado,  the Company obtained a jury verdict against The Wharf
(Holdings)  Limited  ("Wharf  Holdings"),  its  wholly-owned  subsidiary,  Wharf
Communications  Investments Limited and Wharf Holdings' deputy chairman, Stephen
Ng, on claims of securities  fraud,  fraud,  breach of fiduciary duty, breach of
contract  and   negligent   misrepresentation,   and  was  awarded   $67,000  in
compensatory  damages and $58,500 in exemplary  damages.  In May 1997, the Court
awarded prejudgment  interest of $28,200,  and entered judgment on the verdicts.
In October 1997, the Court denied the defendants'  motion for a reduction in the
amount of damages, for a new trial, and/or for a judgment as a matter of law. On
November 4, 1997,  the  defendants  appealed the  judgment to the United  States
Court of Appeals for the Tenth  Circuit.  On December 31, 1997,  Wharf  Holdings
filed a separate appeal to the Tenth Circuit  related to the contempt  sanctions
that the District Court imposed as a result of Wharf  Holdings'  refusal to turn
over certain assets in satisfaction of the judgment.  On January 29, 1998, Wharf
Holdings posted a $173,500  supersedeas  bond to secure the judgment  entered in
favor of the Company.  Although  the Company  intends to  vigorously  defend the
appeals,  there can be no assurance  that the judgment  will be affirmed or that
the damages will be collected.

12.  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 United  States and foreign  activities.  Accordingly,  to the extent  United
States  borrowings  are used to  finance  equity  contributions  to its  foreign
subsidiaries,  the  Company's  ability  to claim a  foreign  tax  credit  may be
significantly  reduced.  These  limitations  and the inability of the Company to
offset  losses in one  foreign  jurisdiction  against  income  earned in another
foreign  jurisdiction could result in a high effective tax rate on the Company's
earnings.  The Company has an  ownership  interest in  Telefenua  and Cable Star
which are located in Tahiti and Peru, respectively, with which the United States
does not have income tax  treaties.  As a result,  the Company may be subject to
increased  withholding  taxes on dividend  distributions and other payments from
those entities and also may be subject to double taxation with respect to income
generated by those entities.

     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  United   States  tax   purposes  and  the  current
non-deductibility  of  interest  expense on UIH A/P's  senior  notes.  Since the
Company holds the majority of its foreign  investments  through affiliates which
hold investments  accounted for under the equity method in foreign corporations,
taxable  income (loss)  generated by these  affiliated  companies  does not flow
through to the Company for United States  federal and state tax  purposes,  even
though the Company records its allocable share of affiliate  income (losses) for
financial  reporting  purposes.  Accordingly,  due to the indefinite reversal of
such amounts in future periods,  no deferred tax asset has been  established for
tax basis in excess of the  Company's  book  basis  (approximately  $79,000  and
$47,000  at  February  28,  1998  and  1997,  respectively)  in  investments  in
affiliated companies which in turn have investments in foreign corporations.

                                      146
<PAGE>
                   UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The   Company's   United  States  tax  net   operating   losses,   totaling
approximately  $172,000 at February 28, 1998,  expire  beginning in 2004 through
2013. The significant components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
                                                                                               As of
                                                                                            February 28,
                                                                                     --------------------------
                                                                                       1998              1997
                                                                                     --------          --------
     <S>                                                                             <C>               <C>
     Deferred Tax Assets:
     -------------------
         Tax net operating loss carryforward of consolidated foreign
           subsidiaries(1)........................................................   $ 70,196          $25,539
         Company's U.S. tax net operating loss carryforward.......................     65,525           29,803
         Accrued interest expense on the UIH A/P Notes............................     18,856            7,826
         Acquisition, transaction and development costs...........................         --            1,044
         Investment valuation allowance and other.................................      2,605              405
         Basis difference in marketable equity securities.........................      3,192            2,367
         Deferred compensation and severance......................................        144              614
         Other....................................................................        149              469
                                                                                     --------          -------
              Total deferred tax assets...........................................    160,667           68,067
         Valuation allowance......................................................   (160,667)         (67,615)
                                                                                     --------          -------
              Deferred tax assets, net of valuation allowance.....................         --              452

     Deferred Tax Liabilities:
     ------------------------
         Other....................................................................         --             (452)
                                                                                     --------          -------
              Total deferred tax liabilities......................................         --             (452)
                                                                                     --------          -------
              Deferred tax assets, net............................................   $     --          $    --
                                                                                     ========          =======
</TABLE>

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


     Of  the  Company's  consolidated  net  loss  before  extraordinary  charge,
$123,004  is derived  from the  Company's  foreign  operations.  The  difference
between income tax expense provided in the financial statements and the expected
income tax benefit at statutory rates is reconciled as follows:
<TABLE>
<CAPTION>
                                                                                        For the Years Ended
                                                                           ----------------------------------------------
                                                                           February 28,     February 28,     February 29,
                                                                               1998             1997             1996
                                                                           ------------     ------------     ------------

     <S>                                                                    <C>               <C>              <C>
     Expected income tax benefit at the U.S. statutory rate of 35%          $(74,886)         $(43,054)        $(23,452)
     Tax effect of permanent and other differences:
       Change in valuation allowance..............................            65,257            37,453           13,931
       Book/tax basis differences associated with foreign
         investments..............................................            12,119            10,400           11,722
       State tax, net of federal benefit..........................            (6,419)           (4,920)          (2,680)
       International rate differences.............................              (515)             (181)              --
       Non-deductible interest accretion on the UIH A/P Notes.....             2,145               973               --
       Amortization of licenses...................................             1,312               625              214
       Non-deductible expenses and other..........................               987            (1,296)             265
                                                                            --------          --------         --------
       Total income tax benefit...................................          $     --          $     --         $     --
                                                                            ========          ========         ========
</TABLE>

13.  SEGMENT INFORMATION

     The Company's  reportable  segments are the various  geographic  regions in
which  it  operates  multi-channel  television,   programming  and/or  telephony
operations.  These  reportable  segments  are managed  separately  because  each
geographic region presents different marketing  strategies and technology issues


                                      147
<PAGE>
                   UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

as well as distinct  economic climates and regulatory  constraints.  The Company
has selected the following  reportable  segments:  UAP, UIH LA and Corporate and
Other, including operating systems not included in the two main regions, various
holding companies and consolidating eliminations.

     The Company's segment information is as follows:
<TABLE>
<CAPTION>
                                                                     As of and for the Year Ended
                                                                          February 28, 1998
                                                          ----------------------------------------------
                                                                                    Corporate
                                                             UAP        UIH LA      and Other     Total
                                                          --------     --------     ---------   --------
<S>                                                       <C>          <C>         <C>          <C>
Service and other revenue .............................   $  68,961    $ 19,090    $      51    $  88,102
Management fee income from related parties ............   $    --      $    154    $     388    $     542
System operating expense ..............................   $ (50,006)   $ (9,208)   $  (3,672)   $ (62,886)
Selling, general and administrative expense ...........   $ (56,917)   $(18,314)   $  (4,404)   $ (79,635)
Depreciation and amortization .........................   $ (80,802)   $ (3,503)   $    (899)   $ (85,204)
Equity in losses of affiliated companies, net .........   $  (3,285)   $(16,203)   $  (7,283)   $ (26,771)
Gain on sale of investments in affiliated companies ...   $      --    $ 90,020    $      --    $  90,020
Interest income, including related party income .......   $   1,725    $  1,341    $    (498)   $   2,568
Interest expense, including related party expense .....   $ (44,016)   $(16,563)   $ (62,499)   $(123,078)
Extraordinary charge for early retirement of debt .....   $      --    $     --    $ (79,091)   $ (79,091)
Net (loss) income .....................................   $(170,735)   $ 19,404    $(141,720)   $(293,051)
Cash and cash equivalents .............................   $  12,355    $  5,227    $   5,182    $  22,764
Investments in and advances to affiliated companies,
   accounted for under the equity method, net .........   $  14,556    $120,334    $  14,328    $ 149,218
Property, plant and equipment, net ....................   $ 183,101    $  6,541    $   9,042    $ 198,684
Total assets ..........................................   $ 294,545    $147,267    $  32,617    $ 474,429
</TABLE>
<TABLE>
<CAPTION>
                                                                     As of and for the Year Ended
                                                                          February 28, 1997
                                                          -----------------------------------------------
                                                                                    Corporate
                                                             UAP        UIH LA      and Other      Total
                                                          --------     --------     ---------    --------
<S>                                                       <C>          <C>          <C>          <C>
Service and other revenue .............................   $  24,977    $   5,267    $      --    $  30,244
Management fee income from related parties ............   $      35    $     527    $     (35)   $     527
System operating expense ..............................   $ (22,357)   $  (2,578)   $  (1,864)   $ (26,799)
Selling, general and administrative expense ...........   $ (36,877)   $  (6,533)   $  (6,503)   $ (49,913)
Depreciation and amortization .........................   $ (36,269)   $  (1,789)   $    (508)   $ (38,566)
Equity in losses of affiliated companies, net .........   $  (5,665)   $  (8,794)   $  (8,814)   $ (23,273)
Gain on sale of investments in affiliated companies ...   $      --    $  65,249    $      --    $  65,249
Interest income, including related party income .......   $   4,635    $   1,940    $     (95)   $   6,480
Interest expense, including related party expense .....   $ (20,756)   $  (2,953)   $ (60,952)   $ (84,661)
Net (loss) income .....................................   $ (88,549)   $  29,315    $ (63,777)   $(123,011)
Cash and cash equivalents .............................   $  19,259    $   1,024    $     597    $  20,880
Investments in and advances to affiliated companies,
   accounted for under the equity method, net .........   $  15,594    $ 117,501    $  20,839    $ 153,934
Property, plant and equipment, net ....................   $ 193,170    $  13,718    $  11,322    $ 218,210
Total assets ..........................................   $ 338,761    $ 206,941    $ 135,218    $ 680,920
</TABLE>
                                      148
<PAGE>
                   UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
                                                                          For the Year Ended
                                                                          February 29, 1996
                                                          ----------------------------------------------
                                                                                    Corporate
                                                             UAP        UIH LA      and Other     Total
                                                          --------    --------      ---------   --------
<S>                                                       <C>         <C>           <C>         <C>
Service and other revenue ..............................  $  1,883    $     --      $     --    $  1,883
Management fee income from related parties..............  $     20    $     --      $    (20)   $     --
System operating expense ...............................  $ (3,145)   $     --      $    (85)   $ (3,230)
Selling, general and administrative expense ............  $ (5,356)   $ (3,255)     $ (9,784)   $(18,395)
Depreciation and amortization ..........................  $ (1,003)   $     (4)     $   (110)   $ (1,117)
Equity in losses of affiliated companies, net ..........  $(16,498)   $(10,354)     $ (3,204)   $(30,056)
Gain on sale of investments in affiliated
   companies............................................  $  4,132    $ 11,881      $     --    $ 16,013
Interest income, including related party income.........  $    298    $    455      $    181    $    934
Interest expense, including related party expense ......  $    (30)   $   (793)     $(31,633)   $(32,456)
Net loss ...............................................  $(19,060)   $ (4,865)     $(43,081)   $(67,006)
</TABLE>

14.  SUBSEQUENT EVENTS

UIH LOAN

     On March 25, 1998, UIH LA executed a $50,000  promissory note with UIH. The
note bears interest at 10.75% per annum on the outstanding balance and is due on
demand.  The note is convertible  into shares of common stock of UIH LA at $8.48
per share and is  subordinate  to the UIH LA Revolving  Credit  Facility.  As of
March 31, 1998,  UIH LA had  borrowed  $31,721  under the note,  the proceeds of
which were used to reduce the UIH LA  Revolving  Credit  Facility by $25,000 and
for general corporate use.

SUBSIDIARY STOCK OPTION PLANS

     In March 1998,  UAP's Board of Directors  approved a stock option plan (the
"UAP Plan")  which  permits the grant of phantom  stock  options or the grant of
stock options to purchase up to 1,600,000  shares of UAP's Class A Common Stock.
The options vest in equal monthly increments over the four-year period following
the date of grant. Concurrent with approval of the UAP Plan, UAP's Board granted
a total of 918,500  phantom stock options to certain  employees  which gives the
employee  the right  with  respect to vested  options to receive a cash  payment
equal to the  difference  between the fair market  value of a share of UAP stock
and the  option  base price of $10 per share.  Vesting  of these  phantom  stock
options was retroactive to June 6, 1997.

     In April 1998,  UIH LA's Board of  Directors  approved a stock  option plan
(the " UIH LA Plan")  which  permits the grant of phantom  stock  options or the
grant of stock  options to purchase up to  1,631,000  shares of UIH LA's Class A
Common Stock.  The options vest in equal monthly  increments  over the four-year
period following the date of grant. Concurrent with approval of the UIH LA Plan,
UIH LA's Board  granted a total of 1,475,500  phantom  stock  options to certain
employees  which gives the employee the right with respect to vested  options to
receive a cash payment equal to the difference  between the fair market value of
a share of UIH LA stock and the option base prices in the range of $4.26 - $6.76
per share.  Vesting of these phantom stock  options was  retroactive  to June 6,
1997.

TVSB

     On April  15,  1998,  the  Company  exercised  its  option to  purchase  an
additional 55% interest in TVSB for  approximately  $12,000.  The purchase price
will be payable 50% upon approval by the Brazilian  National  Telecommunications
Agency  ("ANATEL"),  which is expected  prior to August 15, 1998, and 50% within
one year of the date ANATEL approval is received.

                                      149
<PAGE>
                   UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

AUSTRALIS

     In May 1998,  Australis  Media Limited  ("Australis"),  a major supplier of
programming to Austar, was placed into receivership in Australia. As a result of
the receivership and of the subsequent  termination of various agreements on May
20, 21 and 22, 1998, Australis ceased to be a provider of programming and signal
to Austar.

     On May 19,  1998,  Austar  entered  into a 50/50 joint  venture  with Optus
Vision Pty Limited  ("Optus")  for the  ownership  and  operation of a satellite
distribution  platform. As of May 21, 1998, this platform was fully operational.
In addition,  Austar has signed  agreements  with Foxtel  Management Pty Limited
("Foxtel")  under  which it will be provided  with  several  channels  currently
carried by Austar,  including the Core Package.  These  developments have caused
only minor  disruptions  and  changes in service to Austar's  existing  customer
base.

     Also as of May 19, 1998, Austar was granted  additional  programming rights
by Optus which would permit the carriage of certain  channels of programming not
previously  available to Austar.  The specific packages of service to be offered
by Austar pursuant to these arrangements has not yet been concluded.

     Under the terms of the Austar Bank  Facility,  the  termination of Austar's
franchise  agreements  with  Australis  is  an  event  of  default  if  (i)  the
termination is initiated by Austar, (ii) the termination is not rectified within
seven days and (iii) the termination would likely have a material adverse effect
on Austar.  Austar  received the advance consent of the lenders under the Austar
Bank Facility to terminate  its franchise  agreement  with  Australis,  and such
banks have not given  notice  that a  termination  would  constitute  a material
adverse effect. Austar believes that, based upon its successful migration to the
signal platform and programming  agreements  described  above,  there will be no
such material adverse effect.

PROGRAMMING VENTURE:  UFC

     In 1997, UIH LA and International Family Entertainment  ("IFE") created UFC
which was owned 50% by UIH LA and 50% by IFE.  In July 1997,  UFC  launched  two
channels  of  Spanish  and  Portuguese  language   family-oriented   programming
distributed via satellite  throughout Latin America. In September 1997, Fox Kids
International  acquired IFE and UIH LA funded 100% of the cash  requirements  of
UFC until May 1998. In May 1998, UIH LA acquired the 50% ownership interest from
IFE   and   then   entered   into  a   joint   venture   with  a   division   of
Metro-Goldwyn-Mayer,  Inc.  ("MGM") to form MGM Networks Latin America LLC ("MGM
Networks LA"). Under the terms of the joint venture, UIH LA contributed its 100%
interest in UFC for a 50%  interest in MGM  Networks  LA, and MGM acquired a 50%
interest in MGM Networks LA by contributing its Brazil channel (MGM Gold Brazil)
and  committing to fund the first $9,900 ($6,700 of which was funded at closing)
required by MGM  Networks  LA. MGM Networks LA has also entered into a trademark
license  agreement  with MGM for the use of the MGM  brand  name and also into a
program license agreement to acquire programming from MGM.

                                      150
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To United International Holdings, Inc.:

       We have  audited  the  accompanying  consolidated  balance  sheets of UIH
Europe,  Inc. (a Delaware  corporation) as of February 28, 1998 and 1997 and the
related  consolidated  statements of operations,  parent's equity and cash flows
for the years ended February 28, 1998,  February 28, 1997 and February 29, 1996.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

       In our  opinion,  the  financial  statements  referred  to above  present
fairly, in all material respects,  the financial position of UIH Europe, Inc. as
of February 28, 1998 and 1997,  and the results of its  operations  and its cash
flows for the years ended February 28, 1998,  February 28, 1997 and February 29,
1996 in conformity with generally accepted accounting principles.



                                                ARTHUR ANDERSEN LLP


Denver, Colorado
May 25, 1998




                                      151
<PAGE>
<TABLE>
<CAPTION>
                                                   UIH EUROPE, INC.
                                             CONSOLIDATED BALANCE SHEETS
                             (Stated in thousands, except share and per share amounts)

                                                                                                      As of
                                                                                                   February 28,
                                                                                             ------------------------
                                                                                               1998            1997
                                                                                             --------        --------
<S>                                                                                          <C>             <C>
ASSETS
Current assets
   Cash and cash equivalents............................................................     $ 49,166        $     --
   Restricted cash......................................................................       11,000              --
   Subscriber receivables, net..........................................................        4,663              --
   Costs to be reimbursed by affiliated companies, net..................................        7,411              --
   Inventory............................................................................        6,455              --
   Other current assets.................................................................       12,028              --
                                                                                             --------         -------
       Total current assets.............................................................       90,723              --
Investments in and advances to affiliated companies, accounted for under the equity
   method, net..........................................................................      167,750          99,174
Marketable equity securities, at cost...................................................       33,074              --
Property, plant and equipment, net of accumulated depreciation of $3,675................      239,452              --
Goodwill and other intangible assets, net of accumulated amortization of $2,411.........      381,976              --
Deferred financing costs, net of accumulated amortization of $109.......................       11,853              --
Non-current restricted cash and other assets, net.......................................       25,105             352
                                                                                             --------         -------
       Total assets.....................................................................     $949,933         $99,526
                                                                                             ========         =======
LIABILITIES AND PARENT'S EQUITY
Current liabilities
   Accounts payable, including $6,056 of related party payables.........................     $ 60,242         $    24
   Accrued liabilities..................................................................       17,191              --
   Current portion of long-term debt....................................................      126,643              --
   Other current liabilities............................................................       12,986              --
                                                                                             --------         -------
       Total current liabilities........................................................      217,062              24

Long-term debt..........................................................................      497,039              --
Deferred taxes and other long-term liabilities..........................................       28,776              --
                                                                                             --------         -------
       Total liabilities................................................................      742,877              24
                                                                                             --------         -------

Minority interest in subsidiaries.......................................................        3,356              --
                                                                                             --------         -------
Parent's equity:
   Common stock, $0.01 par value,  1,000 shares  authorized,  100 and 100 shares
     issued and outstanding,  respectively (pledged as collateral under parent's
     senior secured notes)..............................................................           --              --
   Additional paid-in capital...........................................................      329,463         159,241
   Cumulative translation adjustments...................................................      (22,919)        (11,047)
   Accumulated deficit..................................................................     (102,844)        (48,692)
                                                                                             --------         -------
       Total parent's equity............................................................      203,700          99,502
                                                                                             --------         -------
Commitments and Contingencies (Notes 10 and 11)

       Total liabilities and parent's equity............................................     $949,933         $99,526
                                                                                             ========         =======

             The  accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                       152
<PAGE>
<TABLE>
<CAPTION>
                                                  UIH EUROPE, INC.
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                                (Stated in thousands)

                                                                                              For the Years Ended
                                                                                  -------------------------------------------
                                                                                  February 28,    February 28,   February 29,
                                                                                      1998            1997           1996
                                                                                  -------------   ------------   ------------
<S>                                                                                <C>             <C>             <C>
Service and other revenue ..............................................           $  9,945        $     --        $     --
Management fee income from related parties .............................                 --              --             283
                                                                                   --------        --------        --------
       Total revenue ...................................................              9,945              --             283

System operating expense ...............................................             (2,754)             --              --
System selling, general and administrative expense .....................             (3,418)             --              --
Corporate general and administrative expense ...........................             (7,320)         (4,693)         (1,459)
Depreciation and amortization ..........................................             (6,086)             --              --
                                                                                   --------        --------        --------
       Net operating loss ..............................................             (9,633)         (4,693)         (1,176)

Equity in losses of affiliated company, net ............................            (42,431)        (24,662)        (15,559)
Interest expense .......................................................             (2,045)             --              --
Other income, net ......................................................                 74              --              37
                                                                                   --------        --------        --------
       Net loss before minority interest ...............................            (54,035)        (29,355)        (16,698)

Minority interest in subsidiaries ......................................               (117)             --              --
                                                                                   --------        --------        --------
       Net loss ........................................................           $(54,152)       $(29,355)       $(16,698)
                                                                                   ========        ========        ========


             The  accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                       153
<PAGE>
<TABLE>
<CAPTION>
                                                      UIH EUROPE, INC.
                                         CONSOLIDATED STATEMENTS OF PARENT'S EQUITY
                                         (Stated in thousands, except share amounts)


                                          Common Stock       Additional     Cumulative
                                        ---------------       Paid-In       Translation      Accumulated
                                        Shares   Amount       Capital       Adjustments        Deficit         Total
                                        ------   ------      ----------     ------------     -----------      --------
<S>                                      <C>     <C>         <C>             <C>              <C>             <C>
Balances, February 28, 1995.........     100     $ --        $  4,007        $     --         $  (2,639)      $  1,368

Capital contributions from parent,
  net...............................      --       --         150,190              --                --        150,190
Cumulative translation adjustments..      --       --              --          (3,758)               --         (3,758)
Net loss............................      --       --              --              --           (16,698)       (16,698)
                                         ---     ----        --------        --------         ---------       --------

Balances, February 29, 1996.........     100       --         154,197          (3,758)          (19,337)       131,102

Capital contributions from parent...      --       --           5,044              --                --          5,044
Cumulative translation adjustments..      --       --              --          (7,289)               --         (7,289)
Net loss............................      --       --              --              --           (29,355)       (29,355)
                                         ---     ----        --------        --------         ---------       --------

Balances, February 28, 1997.........     100       --         159,241         (11,047)          (48,692)        99,502

Capital contributions from parent...      --       --         170,222              --                --        170,222
Cumulative translation adjustments..      --       --              --         (11,872)               --        (11,872)
Net loss............................      --       --              --              --           (54,152)       (54,152)
                                         ---     ----        --------        --------         ---------       --------

Balances, February 28, 1998.........     100     $ --        $329,463        $(22,919)        $(102,844)      $203,700
                                         ===     ====        ========        ========         =========       ========

             The  accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                       154

<PAGE>
<TABLE>
<CAPTION>
                                                   UIH EUROPE, INC.
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (Stated in thousands)

                                                                                                  For the Years Ended
                                                                                       ------------------------------------------
                                                                                       February 28,   February 28,   February 29,
                                                                                           1998           1997           1996
                                                                                       ------------   ------------   ------------
<S>                                                                                     <C>             <C>            <C>
Cash flows from operating activities:
Net loss .........................................................................      $ (54,152)      $(29,355)      $(16,698)
Adjustments to reconcile net loss to net cash flows from operating
 activities:
   Equity in losses of affiliated company ........................................         42,431          24,662        15,559
   Minority interest share of income .............................................            117              --            --
   Depreciation and amortization .................................................          6,086              --            --
   Amortization of deferred financing costs ......................................            109              --            --
   Management fee receivables collected by parent and accounted for as a
     dividend to parent ..........................................................             --              --          (283)
   Allocation of general, administrative and other expenses accounted
     for as a net contribution of capital by parent ..............................          7,322           4,693         1,422
   Increase in subscriber receivables, net .......................................           (709)             --            --
   Decrease in other assets ......................................................            422              --            --
   Increase in accounts payable, accrued liabilities and other ...................          5,574              --            --
                                                                                        ---------       ---------      --------
Net cash flows from operating activities .........................................          7,200              --            --
                                                                                        ---------       ---------      --------
Cash flows from investing activities:
Investments in and advances to affiliated companies and other
  investments ....................................................................       (111,628)             --       (78,200)
Purchase of property, plant and equipment and other ..............................         (7,461)             --            --
                                                                                        ---------       ---------      --------
Net cash flows from investing activities .........................................       (119,089)             --       (78,200)
                                                                                        ---------       ---------      --------
Cash flows from financing activities:
Cash contribution from parent ....................................................        162,500              --        78,200
Borrowing of other debt ..........................................................            505              --            --
Payment of other debt ............................................................         (1,456)             --            --
                                                                                        ---------       ---------      --------
Net cash flows from financing activities .........................................        161,549              --        78,200
                                                                                        ---------       ---------      --------
Effect of exchange rates on cash .................................................           (494)             --            --
                                                                                        ---------       ---------      --------
Increase (decrease) in cash and cash equivalents .................................         49,166              --            --
Cash and cash equivalents, beginning of period ...................................             --              --            --
                                                                                        ---------       ---------      --------
Cash and cash equivalents, end of period .........................................      $  49,166       $      --      $     --
                                                                                        =========       =========      ========
Non-cash investing and financing activities:
   Capital contributions from parent, net ........................................      $   7,722       $   5,044      $ 71,990
                                                                                        =========       =========      ========
Supplemental cash flow disclosures:
   Cash paid for interest ........................................................      $      --       $      --      $     --
                                                                                        =========       =========      ========
   Cash received for interest ....................................................      $      --       $      --      $     --
                                                                                        =========       =========      ========
Initial investment in affiliated company:
   Cash ..........................................................................      $      --       $      --      $ 78,200
   Common stock of parent company ................................................             --              --        50,000
   Contribution of European and Israeli assets ...................................             --              --        22,242
                                                                                        ---------       ---------      --------
       Total investment ..........................................................      $      --       $      --      $150,442
                                                                                        =========       =========      ========
Acquisition of additional 50% interest in European subsidiary:
   Working capital, including cash acquired of $50,872 ...........................      $  (7,158)      $      --      $     --
   Investment in UIH Class A Common Stock ........................................        (33,074)             --            --
   Investments in affiliated companies ...........................................       (167,945)             --            --
   Property, plant and equipment and other long-term assets ......................       (273,988)             --            --
   Goodwill and other intangible assets ..........................................       (383,503)             --            --
   Elimination of UIH equity investment ..........................................         46,319              --            --
   Long-term debt ................................................................        624,633              --            --
   Other liabilities .............................................................         32,216              --            --
                                                                                        ---------       ---------      --------
   Total cash paid ...............................................................      $(162,500)      $      --      $     --
                                                                                        =========       =========      ========

             The  accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                       155

<PAGE>
                                UIH EUROPE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF FEBRUARY 28, 1998 and 1997
                     (Monetary amounts stated in thousands)


1.   ORGANIZATION AND NATURE OF OPERATIONS

     UIH Europe,  Inc., formerly known as Joint Venture,  Inc. (the "Company" or
"UIHE") was formed as a Delaware  corporation in September 1989, for the purpose
of  developing,   acquiring  and  managing  European  multi-channel  television,
programming and telephony operations.  The Company is a wholly-owned  subsidiary
of United International Holdings, Inc. ("UIH").

     The  following  chart  presents  a  summary  of the  Company's  significant
investments in multi-channel  television and telephony operations as of February
28, 1998.

          ***********************************************************
          *                                                         *
          *                           UIH                           *
          *                                                         * 
          ***********************************************************
                                 100%  *                 
          ***********************************************************
          *                                                         * 
          *                 UIH Europe, Inc. ("UIHE")               *
          *                                                         * 
          *********************************************************** 
                                       *
                                 100%  *                 
          ***********************************************************
          *                                                         *  
          *    United Pan-Europe Communications N.V. ("UPC")(1)     *
          *                                                         *  
          *********************************************************** 
                                       *                 
                                       *                 
          *********************************************************** 
          *Austria:                                                 * 
          * Telekabel Group ("Telekabel")                      95.0%* 
          *Belgium:                                                 * 
          * Radio Public S.A. ("Radio Public")                100.0%* 
          *Czech Republic:                                          * 
          * Kabel Net Group ("Kabel Net")                     100.0%* 
          * Ceska Programova Spolecnost SRO ("TV Max")        100.0%* 
          *France:                                                  * 
          * Mediareseaux Marne S.A. ("Mediareseaux")           99.6%* 
          *Hungary:                                                 * 
          * Kabelkom Holding Company ("Kabelkom")(2)           50.0%* 
          *Ireland:(through UII partnership(3))                     * 
          * Princes Holdings Ltd. ("Princes Holdings")         20.0%* 
          *Israel:(through UII partnership (3))                     *
          * Tevel Israel International Communications Ltd.          *
          *  ("Tevel")                                         23.3%*
          *Malta:(through UII partnership(3))                       *
          * Melita Cable TV PLC ("Melita")                     25.0%*
          *Netherlands:                                             *
          * A2000 Holding NV (Amsterdam) ("A2000")             50.0%*
          * Kabeltelevisie Group (Eindhoven)("KTE")           100.0%*
          *Norway:                                                  *
          * Janco Multicom AS ("Janco")(4)                     87.3%*
          *Romania:                                                 *
          * Multicanal Holdings SRL ("Multicanal")             90.0%*
          * Control Cable Ventures SRL ("Control Cable")      100.0%*
          *Slovak Republic:                                         *
          * Trnavatel SRO ("Trnavatel")                        75.0%*
          * Slovatel SRO ("Kabel Tel")                        100.0%*
          ***********************************************************

(1)  On December 11, 1997, UIHE acquired the remaining 50% interest in UPC owned
     by  several   subsidiaries  of  Philips  Electronics  N.V.   (collectively,
     "Philips"),  thereby  making  UPC an  effectively  wholly-owned  subsidiary
     (subject to certain  employee equity incentive  compensation  arrangements)
     (see Note 3).
(2)  UPC  has  a  50%  legal  ownership  in  Kabelkom,  which  is  reduced  by a
     preferential  claim by Time  Warner  Entertainment  Company  ("TWE")  to an
     economic ownership of 47.2%.

                                      156
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3)  United  International  Investments  ("UII")  is  a  United  States  general
     partnership  between  UPC  and  Tele-Communications   International,   Inc.
     ("TINTA").  In  April and May 1998, UPC signed memorandums of understanding
     to acquire TINTA's  interests in Tevel and Melita,  and sell UPC's interest
     in Princes Holdings to TINTA (see Note 13).
(4)  In  November  1997,  UPC's   wholly-owned   subsidiary   Norkabelguppen  AS
     ("Norkabel") merged with and into UPC's approximately 70%-owned subsidiary,
     Janco  Kabel  TV to form  Janco  Multicom,  in  which  UPC  holds  an 87.3%
     interest. From an economic perspective, however, UPC has all the rights and
     obligations  of full  ownership of Janco and UPC  consolidates  100% of its
     financial  results.  UPC  has the  right  to  acquire,  and  Janco's  other
     shareholder  has the right to put to UPC, the  remaining  interest in Janco
     for a purchase price of approximately $21,890.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

PRINCIPLES OF CONSOLIDATION

     The accompanying  consolidated financial statements include the accounts of
the Company and all subsidiaries  where it exercises majority control and owns a
majority  economic  interest,  except when the Company  has  temporary  majority
control.  The Company began  consolidating  UPC upon acquisition on December 11,
1997.  Prior to December 10, 1997,  the Company  accounted for its investment in
UPC  under  the  equity  method.  All  significant   intercompany  accounts  and
transactions  have been eliminated in  consolidation.  All affiliated  companies
have calendar  year-ends,  compared to the Company which has fiscal year-ends of
February 28, 1998  ("Fiscal  1998"),  February  28, 1997  ("Fiscal  1997"),  and
February 29, 1996 ("Fiscal  1996").  The Company  records its share of equity in
income (losses) of affiliated companies or consolidates the affiliated companies
based on the affiliated companies' calendar year-end results.

CASH AND CASH EQUIVALENTS

     Cash and  cash  equivalents  include  cash and  investments  with  original
maturities of less than three months.

RESTRICTED CASH

     Cash held as collateral  for debt  facilities and other loans is classified
based on the expected expiration of such facilities.

COSTS TO BE REIMBURSED BY AFFILIATED COMPANIES

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

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

     For  those  investments  in  companies  in which  the  Company's  ownership
interest is 20% to 50%, its investments are held through a combination of voting
common stock, preferred stock, debentures or convertible debt and/or the Company
exerts  significant   influence  through  board  representation  and  management
authority,  or in which majority  control is deemed to be temporary,  the equity
method of  accounting is used.  Under this method,  the  investment,  originally
recorded at 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 contractual funding commitments.  The Company's proportionate share of net
earnings or losses of affiliates  includes the amortization of the excess of its
cost over its percentage interest in each affiliate's net tangible assets.

                                      157
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment is 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 are  depreciated
using the straight-line method over estimated useful lives of three years.  Upon
disconnection  of a  subscriber,  the  remaining  book  value of the  subscriber
equipment, excluding converters which are recovered upon disconnection,  and the
capitalized  labor are written off and accounted for as additional  depreciation
expense.  Multi-channel  multi-point  distribution systems ("MMDS") distribution
facilities and cable  distribution  networks are depreciated using the straight-
line method over estimated useful lives of seven to twenty years.  Buildings and
leasehold  improvements  are  depreciated  using the  straight  line method over
estimated  useful  lives of 20 to 33  years.  Office  equipment,  furniture  and
fixtures are  depreciated  using the straight-line method over estimated  useful
lives of three to ten years.

     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.

GOODWILL AND OTHER INTANGIBLE ASSETS

     The  excess  of  investments  in  consolidated  subsidiaries  over  the net
tangible asset value at acquisition is amortized on a  straight-line  basis over
15 to 20 years.  The  acquisition  of licenses  has been  recorded at cost,  and
amortization expense is computed using the straight-line method over the term of
the license.

RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS

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

DEFERRED FINANCING COSTS

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

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,  with
the remainder  deferred and amortized over the average subscriber period. To the
extent  installation  fees exceed  direct  selling  costs,  the excess  would be
deferred and amortized over the average contract period.

CONCENTRATION OF CREDIT RISK

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

STOCK-BASED COMPENSATION

     Stock-based compensation is recognized using the intrinsic value method.

INCOME TAXES

     The Company accounts for income taxes under the asset and liability method,
which  requires  recognition  of  deferred  tax assets and  liabilities  for the
expected future income tax consequences of transactions which have been included
in the  financial  statements  or tax returns.  Under this method,  deferred tax
assets and  liabilities  are  determined  based on the  difference  between  the
financial  statement  and  income  tax  basis of  assets,  liabilities  and loss
carryforwards  using  enacted  tax  rates in  effect  for the year in which  the
differences are expected to reverse. Net deferred tax assets are then reduced by
a valuation  allowance if management  believes it more likely than not they will
not be realized.

                                      158
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOREIGN OPERATIONS AND FOREIGN EXCHANGE RATE RISK

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

     Transactions  denominated  in currencies  other than the local currency are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in  exchange  rates  result in  transaction  gains and losses  which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions.

     Cash  flows  from  the  Company's   operations  in  foreign  countries  are
translated based on their 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.

     Certain of the Company's foreign operating companies have notes payable and
notes  receivable that are denominated in, and loans payable that are linked to,
a currency other than their own functional currency. 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  and
equity  with  respect to its  holdings  solely as a result of  foreign  currency
exchange rate fluctuations,  which include foreign currency devaluations against
the dollar.

NEW ACCOUNTING PRINCIPLES

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
130"),  which is required to be adopted by affected  companies  for fiscal years
beginning  after  December 15, 1997.  SFAS 130 requires that an  enterprise  (i)
classify  items of other  comprehensive  income by their  nature in a  financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained  earnings and additional  paid-in capital in the equity
section  of a  statement  of  financial  position.  Other  comprehensive  income
includes cumulative  translation  adjustments and unrealized gains and losses on
available-for-sale securities.

     The Financial  Accounting  Standards  Board  recently  issued  Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information"  ("SFAS  131"),  which is  required to be
adopted by affected  companies  for fiscal years  beginning  after  December 15,
1997.  SFAS  131  requires  that a public  business  enterprise  report  certain
financial and descriptive information about its reportable segments. The Company
plans to adopt SFAS 131 for the year ended February 28, 1999.

     The American  Institute of Certified  Public  Accountants  recently  issued
Statement  of Position  98-5,  "Reporting  on the Costs of Start-Up  Activities"
("SOP 98-5"),  which is required to be adopted by affected  companies for fiscal
years  beginning  after  December  15,  1998.  SOP  98-5  defines  start-up  and
organization  costs,  which must be  expensed  as  incurred.  In  addition,  all
deferred start-up and organization  costs existing as of January 1, 1999 must be
written-off and accounted for as a cumulative effect of an accounting change.

3.   ACQUISITIONS

UPC

     In  July  1995,  the  Company  and  Philips  contributed  their  respective
ownership interests in European and Israeli multi-channel  television systems to
UPC. Philips  contributed to UPC its 95% interest in cable television systems in
Austria,  its 100% interest in cable television systems in Belgium, its minority
interests  in  multi-channel  television  systems in  Germany,  the  Netherlands
(Eindhoven) and France.  The Company  contributed its interests in multi-channel
television  systems in  Israel,  Ireland,  the Czech  Republic,  Malta,  Norway,
Hungary,  Sweden and Spain. The Company also contributed  $78,200 in cash to UPC
and UIH issued to Philips 3.17 million shares of UIH Class A Common Stock having


                                      159
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

a value of $50,000  (at date of  closing).  In  addition,  UPC issued to Philips
$133,600 of convertible  subordinated  pay-in-kind notes (the "PIK Notes"). As a
result of this  transaction,  the Company and Philips  each owned a 50% economic
and voting interest in UPC.

     On December 11, 1997, the Company acquired  Philips' entire interest in UPC
(the "UPC Transaction").  As part of the UPC Transaction, (i) UPC purchased 3.17
million  shares  of  Class A  Common  Stock  of UIH  held by  Philips,  (ii) UIH
purchased  part of the accreted  amount of UPC's PIK Notes and redeemed them for
shares of UPC, (iii) UPC repaid to Philips the remaining  accreted amount of the
PIK Notes, (iv) UPC purchased Philips' interest in UPC, and (v) the Company made
a payment to UPC, with UPC in turn making a payment of that amount to Philips in
lieu  of the  issuance  of a  stock  appreciation  right  by  UPC.  The  Company
effectively  owns 100% of UPC as a result  of the UPC  Transaction,  except  for
shares held by a foundation benefiting UPC employees and management, pursuant to
UPC's   equity   incentive   plans.   The  final   purchase   price   (excluding
transaction-related costs) was $425,200,  comprised of $168,700 for the purchase
by the Company and repayment by UPC of UPC's PIK Notes, $33,200 allocated to the
purchase by UPC of 3.17 million shares of the Company's Class A Common Stock and
$223,300  allocated  to the  purchase  of  Philips'  interest  in  UPC.  The UPC
Transaction was funded by a long-term revolving credit facility through UPC with
a  syndicate  of banks (the  "Tranche A  Facility")  ($151,500),  a bridge  bank
facility through a subsidiary of UPC (the "Tranche B Facility") ($111,200),  and
a cash investment by the Company of $162,500. The maximum amount available under
the  Tranche  A  Facility  is  approximately  Dutch  guilders  ("NLG") 1,100,000
($544,600 as of December 31, 1997), of which approximately  NLG479,000 ($237,100
as of December 31, 1997) was used to repay  existing debt of UPC in  conjunction
with the UPC Transaction.

     Details of the net assets  acquired,  based on a preliminary  allocation of
the purchase price,  which were  denominated in Dutch guilders and translated to
U.S.  dollars  using  the  exchange  rate on the  date of  acquisition,  were as
follows:
<TABLE>
<CAPTION>
     <S>     <C>    <C>    <C>    <C>    <C>    <C>
     Working capital, including cash acquired of $50,872......................................... $  (7,158)
     Investment in UIH Class A Common Stock......................................................   (33,074)
     Investments in affiliated companies.........................................................  (167,945)
     Property, plant and equipment and other long-term assets....................................  (273,988)
     Goodwill and other intangible assets........................................................  (383,503)
     Elimination of UIH equity investment........................................................    46,319
     Long-term debt..............................................................................   624,633
     Other liabilities...........................................................................    32,216
                                                                                                   --------
         Total cash paid......................................................................... $(162,500)
                                                                                                  =========
</TABLE>
     The Company  invested  approximately  $163,254,  $0 and  $151,693  into UPC
during fiscal 1998,  1997 and 1996,  respectively.  As of February 28, 1998, the
Company's cumulative investment in UPC totaled approximately $314,947.

PRO FORMA FINANCIAL INFORMATION, FISCAL 1998 AND FISCAL 1997

     The following unaudited pro forma condensed  consolidated operating results
for  the  years  ended  February  28,  1998  and  1997  give  effect  to the UPC
Transaction  as if it had occurred at the  beginning  of the periods  presented.
This pro forma condensed consolidated financial information and notes thereto do
not purport to represent what the Company's results of operations would actually
have been if such  transaction had in fact occurred on such dates. The pro forma
adjustments  are based upon  currently  available  information  and upon certain
assumptions that management believes are reasonable.
<TABLE>
<CAPTION>
                                                                         For the Year Ended February 28, 1998
                                                                  ---------------------------------------------------
                                                                                         The UPC
                                                                  Historical         Transaction(1)         Pro Forma
                                                                  ----------         --------------         ---------
     <S>                                                          <C>                  <C>                  <C>
     Total revenue............................................    $  9,945             $163,399             $ 173,344
                                                                  ========             ========             =========
     Net operating loss.......................................    $ (9,633)            $(29,054)            $ (38,687)
                                                                  ========             ========             =========
     Net loss.................................................    $(54,152)            $(50,773)            $(104,925)
                                                                  ========             ========             =========
</TABLE>
                                      160
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
                                                                          For the Year Ended February 28, 1997
                                                                  ---------------------------------------------------
                                                                                         The UPC
                                                                  Historical         Transaction(2)         Pro Forma
                                                                  ----------         --------------         ---------
     <S>                                                          <C>                  <C>                  <C>
     Total revenue                                                $     --             $145,076             $145,076
                                                                  ========             ========             ========
     Net operating loss.......................................    $ (4,693)            $(19,571)            $(24,264)
                                                                  ========             ========             ========
     Net loss.................................................    $(29,355)            $(46,221)            $(75,576)
                                                                  ========             ========             ========
</TABLE>
     (1) Represents  the  historical  amounts  included  in  UPC's  consolidated
         statement of operations for the period from January 1, 1997 to December
         10,  1997,  additional  depreciation  and  amortization  related to the
         step-up in basis in tangible  assets and additional  goodwill,  the net
         decrease  in  equity in losses  of  affiliated  companies,  and the net
         increase in interest expense as a result of the UPC Transaction.
     (2) Represents  the  historical  amounts  included  in  UPC's  consolidated
         statement  of  operations   for  the  year  ended  December  31,  1996,
         additional  depreciation  and  amortization  related to the  step-up in
         basis in tangible assets and additional  goodwill,  the net decrease in
         equity in losses  of  affiliated  companies,  and the net  increase  in
         interest expense as a result of the UPC Transaction.

4.  INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
    EQUITY METHOD
<TABLE>
<CAPTION>
                                                                As of February 28, 1998
                                       ------------------------------------------------------------------------------
                                          Investments in           Cumulative Equity        Cumulative
                                          and Advances to         in Income (Losses) of     Translation
                                       Affiliated Companies(1)    Affiliated Companies      Adjustments        Total
                                       -----------------------   ----------------------     -----------      --------
     <S>                                      <C>                        <C>                   <C>           <C>
     UII.........................             $ 50,069                   $ (32)                $ --          $ 50,037
     Kabelkom....................               30,221                     124                   --            30,345
     Kabel Net...................                  619                      --                   --               619
     A2000.......................               85,898                    (287)                  --            85,611
     Other, net..................                1,138                      --                   --             1,138
                                              --------                   -----                 ----          --------
                                              $167,945                   $(195)                $ --          $167,750
                                              ========                   =====                 ====          ========
</TABLE>
     (1)  Represents the net amount  acquired in the UPC Transaction on December
          11, 1997.
<TABLE>
<CAPTION>
                                                               As of February 28, 1997
                                      -----------------------------------------------------------------------------
                                          Investments in          Cumulative Equity       Cumulative
                                          and Advances to       in Income (Losses) of     Translation
                                      Affiliated Companies      Affiliated Companies      Adjustments        Total
                                      --------------------      ---------------------     -----------      --------
     <S>                                    <C>                        <C>                 <C>              <C>
     UPC.........................           $150,442                   $(40,224)           $(11,044)        $99,174
                                            ========                   ========            ========         =======
</TABLE>
     As of February 28, 1998 and 1997, the Company had the following differences
related to the unamortized  excess of cost over the net tangible assets acquired
included in the above table. Such differences are being amortized over 15 years.
<TABLE>
<CAPTION>
                                                     As of February 28, 1998             As of February 28, 1997
                                                   ---------------------------        ------------------------------
                                                     Basis        Accumulated           Basis           Accumulated
                                                   Difference     Amortization        Difference        Amortization
                                                   ----------     ------------        ----------        ------------
     <S>                                            <C>                <C>              <C>               <C>
     A2000..................................        $ 90,898           $ --             $    --           $    --
     UII....................................          31,054             --                  --                --
     Kabelkom...............................          20,509             --                  --                --
     UPC ...................................              --             --              25,588            (3,218)
                                                    --------           ----             -------           -------
         Total..............................        $142,461           $ --             $25,588           $(3,218)
                                                    ========           ====             =======           =======
</TABLE>
                                      161
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

UPC

     In July,  1995,  the Company and  affiliates of Philips  contributed  their
respective ownership interests in European and Israeli multi-channel  television
systems,  related programming services and European multi-channel television and
programming  development  opportunities  to form UPC. On December 11, 1997,  the
Company acquired Philips'  remaining 50% interest in UPC (see Note 3). Condensed
financial information for UPC, stated in U.S. dollars, was as follows:
<TABLE>
<CAPTION>
                                                                                                          As of
                                                                                                    December 31, 1996
                                                                                                    -----------------
     <S>                                                                                                <C>
     Cash........................................................................................       $ 24,487
     Property, plant and equipment, net..........................................................        238,179
     Intangible assets, net......................................................................        267,029
     Other assets ...............................................................................        123,261
                                                                                                        --------
         Total assets............................................................................       $652,956
                                                                                                        ========

     Accounts payable and accrued liabilities....................................................       $356,421
     Notes payable...............................................................................        147,234
     Minority interest...........................................................................          2,616
     Shareholders' equity........................................................................        146,685
                                                                                                        --------
         Total liabilities and shareholders' equity..............................................       $652,956
                                                                                                        ========
</TABLE>
<TABLE>
<CAPTION>
                                                          For the Period from                             From Inception
                                                            January 1, 1997                               (July 13, 1995)
                                                               through             For the Year Ended         through
                                                           December 10, 1997        December 31, 1996     December 31, 1995
                                                           ------------------    --------------------     -----------------
     <S>                                                       <C>                     <C>                    <C>
     Revenue..............................................     $163,399                $140,827               $ 62,300
     Operating, selling, general and administrative
       expense............................................     (109,993)                (91,501)               (41,308)
     Depreciation and amortization........................      (72,383)                (53,211)               (26,259)
                                                               --------                --------               --------
         Net operating loss...............................      (18,977)                 (3,885)                (5,267)
     Interest, net........................................      (53,176)                (32,655)               (10,476)
     Equity in income (losses) of investee companies, net.        1,643                  (5,458)               (10,062)
     Other................................................      (10,226)                 (1,560)                   (23)
                                                               --------                --------               --------
         Net loss.........................................     $(80,736)               $(43,558)              $(25,828)
                                                               ========                ========               ========
</TABLE>

5.   MARKETABLE EQUITY SECURITIES

     As a result of the UPC  Transaction,  UPC acquired  3.17 million  shares of
UIH's Class A Common  Stock,  valued at cost on December  11, 1997 at  NLG66,809
($33,074 at December 31, 1997).

6.   PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                                                       As of
                                                                                                  February 28, 1998
                                                                                                  -----------------
     <S>                                                                                              <C>
     Subscriber premises equipment and converters................................................     $ 40,262
     MMDS distribution facilities................................................................        6,416
     Cable distribution networks.................................................................      180,555
     Office equipment, furniture and fixtures....................................................        6,475
     Buildings and leasehold improvements........................................................        1,838
     Other.......................................................................................        7,581
                                                                                                      --------
                                                                                                       243,127
         Accumulated depreciation................................................................       (3,675)
                                                                                                      --------
         Net property, plant and equipment.......................................................     $239,452
                                                                                                      ========
</TABLE>
                                      162
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.   NON-CURRENT RESTRICTED CASH AND OTHER, NET

     UPC deposited  NLG47,000 with a bank as collateral  against the purchase of
the minority  shareholding in Janco in 2001.  Including  accrued  interest,  the
deposit totaled $23,978 as of December 31, 1997, and is classified as restricted
cash in other non-current assets.

8.   LONG-TERM DEBT
<TABLE>
<CAPTION>
                                                                                                     As of
                                                                                                February 28, 1998
                                                                                                -----------------
     <S>                                                                                            <C>
     UPC Tranche A Facility......................................................................   $437,598
     UPC Tranche B Facility......................................................................    125,000
     Bank and other loans at UPC.................................................................     60,888
     Capitalized lease obligations...............................................................        196
                                                                                                    --------
                                                                                                     623,682
         Less current portion....................................................................   (126,643)
                                                                                                    --------
         Total long-term debt....................................................................   $497,039
                                                                                                    ========
</TABLE>

UPC TRANCHE A FACILITY

     In October 1997, UPC and Norkabel as borrowers entered into an NLG1,100,000
($544,554 at December 31, 1997) multi-currency  revolving credit facility with a
syndication  of  banks.  Norkabel  was  succeeded  as a  borrower  by  Janco  in
connection  with the merger of Janco Kabel TV and  Norkabel.  In December  1997,
Telekabel became a borrower under the Tranche A Facility. Amounts advanced under
the Tranche A Facility  generally are available for a term of one, two, three or
six months through  September 30, 2006 and bear interest at the London Interbank
Offered  Rate  ("LIBOR") on the  respective  currencies  borrowed  plus a margin
ranging  from 0.50% to 2.0% per annum.  The  Tranche A  Facility  requires  that
interest rate  protection  arrangements be maintained in respect of at least 50%
of the  Tranche A  Facility.  The  Tranche A  Facility  is  secured  by  various
guarantees  from,  negative  pledges over and, in some cases,  share pledges of,
certain UPC subsidiaries in Austria, Belgium and Norway. Following the repayment
of the Tranche B Facility,  Belmarken  Holding B.V.  ("Belmarken")  and other of
UPC's  wholly-owned  subsidiaries  must accede as guarantors under the Tranche A
Facility.  The  Tranche  A  Facility  generally  prohibits  dividends  and other
distributions prior to repayment of the facility. The aggregate amount available
for borrowing  under the facility is reduced  automatically  by 5.0% per quarter
beginning December 31, 2001. The Tranche A Facility also limits total borrowings
by UPC and certain of its  subsidiaries,  which  together  before  September 30,
2001,  may not exceed  NLG1,100,000  ($544,554  at  December  31,  1997)  (after
September 30, 2001, the limit is based on a debt to cash flow financial  ratio),
and generally limits UPC's investments in, loans to and guarantees for Belmarken
and its subsidiaries and downstream affiliates to NLG80,000 ($39,604 at December
31, 1997).

UPC TRANCHE B FACILITY

     In connection with the UPC Transaction, Belmarken entered into the $125,000
(U.S.  dollar-denominated) Tranche B Facility. The Tranche B Facility matures on
December 5, 1998, and bears interest at LIBOR plus a margin ranging from 4.5% to
5.5% per  annum.  The  Tranche B  Facility  generally  prohibits  dividends  and
distributions  and is secured  by various  upstream  guarantees  from,  negative
pledges  over and, in some cases,  share  pledges of,  certain  Belmarken  share
holdings or partnership  interests of Belmarken and UPC in The Netherlands,  the
Czech Republic,  France,  Romania, the Slovak Republic and Hungary multi-channel
television  systems and in UII, as well as a first lien over  approximately 3.17
million UIH Class A Common shares which UPC acquired from Philips as part of the
UPC  Transaction.  Belmarken must apply proceeds from disposals,  if any, of its
share  holdings and  partnership  interest to prepayment of the facility,  which
restricts  the manner and terms on which  Belmarken may dispose of these assets.
In addition,  Belmarken  must  maintain on deposit with the bank a  compensating
balance, restricted as to use, of $11,000 until the facility matures. UPC repaid
$63,000 of the Tranche B Facility  subsequent to February 28, 1998 with proceeds
from a loan from UIH (see Note 13).

                                      163
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

BANK AND OTHER LOANS AT UPC

     In February 1997, a bank granted a NLG65,000 nine-year term facility to KTE
(the  "KTE  Facility").  The  KTE  Facility  bears  interest  at the  applicable
Amsterdam  Interbank Offered Rate ("AIBOR") plus 0.45%, and is secured by, among
other things, an encumbrance over KTE's assets and a pledge by UPC of its shares
of  KTE.  The  facility  generally   restricts  the  payment  of  dividends  and
distributions.  As of December 31, 1997,  an amount of NLG65,000  ($32,178)  was
outstanding under this facility (see Note 13).

     Bank loans and other  loans  includes a payable of $19,015 to the  minority
shareholder  of Janco,  which  accretes  interest  at 5% per annum.  The payable
relates to the contemplated  exercise price of the call option for the remaining
12.7% of Janco not owned by UPC. The amount, including accrued interest, will be
payable in 2001.  Bank loans of $3,762 and other loans of $5,933 are  guaranteed
by the local Eindhoven municipality.

FAIR VALUE OF LONG-TERM DEBT

     Fair  value is based  on  market  prices  for the same or  similar  issues.
Carrying value is used when a market price is unavailable.
<TABLE>
<CAPTION>
                                                                                                               Fair
                                                                                            Book Value      Market Value
                                                                                            ----------      ------------
<S>                                                                                          <C>             <C>
As of February 28, 1998:
   UPC Tranche A Facility.............................................................       $437,598        $437,598
   UPC Tranche B Facility.............................................................        125,000         125,000
   Bank and other loans at UPC........................................................         60,888          60,888
   Other debt.........................................................................            196             196
                                                                                             --------        --------
        Total.........................................................................       $623,682        $623,682
                                                                                             ========        ========
</TABLE>

DEBT MATURITIES
<TABLE>
<CAPTION>
     The maturities of the Company's debt are as follows:
         <S>                                                                                          <C> 
         Fiscal 1999.............................................................................     $126,643
         Fiscal 2000.............................................................................        1,638
         Fiscal 2001.............................................................................        2,898
         Fiscal 2002.............................................................................       24,361
         Fiscal 2003 and thereafter..............................................................      468,142
                                                                                                      --------

                Total............................................................................     $623,682
                                                                                                      ========
</TABLE>

9.   PARENT'S EQUITY

COMMON STOCK

     Authorized  capital  consists of 1,000  shares of Common  Stock,  $0.01 par
value,  100 shares  issued and  outstanding,  held by UIH. Such shares have been
pledged as collateral under UIH's senior secured discount notes.

FEBRUARY 1998 10.75% SENIOR SECURED DISCOUNT NOTES

     On February 5, 1998, UIH sold  $1,375,000  principal  amount at maturity of
10.75% senior secured discount notes due 2008 (the "1998 Notes"). The 1998 Notes
were issued at a discount  from the principal  amount at maturity,  resulting in
gross proceeds to UIH of approximately $812,200.

     UIH used  approximately  $531,800  of the  proceeds  from the 1998 Notes to
complete a tender offer for UIH's existing 14% senior secured discount notes due
1999  (collectively,  the "Old  Notes")  and the consent  solicitation  that UIH
conducted concurrently  therewith.  UIH commenced the tender offer on January 7,
1998,  and the tender offer expired on February 4, 1998,  with over 99.8% of the
Old Notes being validly  tendered.  UIH  subsequently  purchased  $500 principal
amount at maturity of the Old Notes on the open  market,  leaving  approximately
$465  principal  amount at maturity  outstanding  as of February 28,  1998.  The

                                      164

<PAGE>

                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

remaining Old Notes will mature on November 15, 1999.  Holders of the 1998 Notes
have a first-priority  security interest in the stock and intercompany  notes to
the Company of UIHE.

     The 1998 Notes are senior  secured  obligations  of UIH that rank senior in
right of payment to all future  subordinated  indebtedness  of UIH and rank pari
passu in right of  payment  with the Old Notes.  The 1998 Notes are  effectively
subordinated to all future indebtedness and other liabilities and commitments of
UIH's  subsidiaries.  Under the terms of the indenture  governing the 1998 Notes
(the "Indenture"), UIH's subsidiaries are generally prohibited and/or restricted
from  incurring any lien against  their assets other than liens  incurred in the
ordinary course of business, from paying dividends,  and from making investments
in entities that are not "restricted" by the terms of the Indenture. UIH has the
option to invest in "unrestricted  entities" in an aggregate amount equal to the
sum of $100,000  plus the  aggregate  amount of net cash  proceeds from sales of
equity,  net of payments  made on its  preferred  stock plus net  proceeds  from
certain  litigation  settlements.  The  Indenture  generally  prohibits UIH from
incurring  additional  indebtedness with the exception of a general allowance of
$75,000 for debt maturing on or after February 15, 2008,  certain  guarantees of
$15,000, refinancing indebtedness,  normal indebtedness to restricted affiliates
and other letters of credit in the ordinary course of business.

CUMULATIVE TRANSLATION ADJUSTMENTS

     During the year ended February 28, 1998,  the Company  recorded a change in
cumulative   translation   adjustments   of  $11,872,   primarily   due  to  the
strengthening  of the U.S. dollar compared to the Dutch guilder of approximately
16%.

SUBSIDIARY STOCK OPTION PLAN

     On June 18,  1996,  UPC  adopted a stock  option  plan (the "UPC Plan") for
certain of its employees and those of its  subsidiaries.  The shareholders  have
transferred  4.0  million  ordinary  shares  of  UPC  into a  foundation,  which
administers  the stock  option  plan.  Until such time as the shares of UPC have
been  listed at a stock  exchange,  the  Foundation  will  issue  under  certain
circumstances  certificates  convertible  into the  shares  of UPC  owned by the
Foundation. The options are granted at fair market value to be determined by the
supervisory  board.  The maximum  term that the options can be exercised is five
years from the date of the grant.  The  options  vest over a three year  period.
During  the year ended  December  31,  1997,  compensation  expense of  NLG4,817
($2,477) was recognized.

     Data concerning the stock option plan is as follows:
<TABLE>
<CAPTION>
                                                                                           For the Years Ended
                                                                                              December 31,
                                                                                      ---------------------------
                                                                                         1997             1996
                                                                                      ---------        ----------
         <S>                                                                          <C>              <C>
         Outstanding at the beginning of the year...............................      1,533,611                --
         Granted during the year................................................             --         2,660,000
         Exercised during the year..............................................             --        (1,120,000)
         Cancelled during the year..............................................        (39,243)           (6,389)
                                                                                      ---------        ----------
         Outstanding at the end of the year.....................................      1,494,368         1,533,611
                                                                                      =========        ==========
         Option price per share granted:  NLG...................................            N/A             15.74
                                          U.S...................................            N/A              9.31
         Vested portion:   Exercised options....................................        965,466           520,278
                           Outstanding options..................................      1,166,088           670,987
</TABLE>

     The UPC Plan was amended in March 1998 to provide  that options vest over a
four-year period.

     Upon  termination  of an employee,  any unvested  options shall expire.  An
employee has the right at any time to put his certificates from exercised vested
options  to the  Foundation  at a price  equal to the  fair  market  value.  The
employee  must sell his  certificates  to the  Company for a cash  payment  upon
termination.

                                      165
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.  COMMITMENTS

     The Company has entered into various  operating lease agreements for office
space, office furniture and equipment, and vehicles.

     The  Company  has  operating  lease  obligations  and other  non-cancelable
commitments as follows:
<TABLE>
<CAPTION>
         <S>                                                                                           <C>
         Fiscal 1999.............................................................................      $ 6,990
         Fiscal 2000.............................................................................        5,514
         Fiscal 2001.............................................................................        4,540
         Fiscal 2002.............................................................................          969
         Fiscal 2003 and thereafter..............................................................          807
                                                                                                       -------
                Total............................................................................      $18,820
                                                                                                       =======
</TABLE>

     UPC has guaranteed debt of its affiliate, Princes Holdings, totaling $3,050
as of December 31, 1997.

11.  CONTINGENCIES

     The Company is not a party to any  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.

12.  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 United  States and foreign  activities.  Accordingly,  to the extent  United
States  borrowings  are used to  finance  equity  contributions  to its  foreign
subsidiaries,  the  Company's  ability  to claim a  foreign  tax  credit  may be
significantly  reduced.  These  limitations  and the inability of the Company to
offset  losses in one  foreign  jurisdiction  against  income  earned in another
foreign  jurisdiction could result in a high effective tax rate on the Company's
earnings.

     The primary differences between taxable income (loss) and net income (loss)
for  financial  reporting  purposes  relate to  accounting  for equity in income
(losses) of affiliated  companies and the  non-consolidation of its consolidated
foreign subsidiaries for United States tax purposes. Since the Company holds the
majority of its foreign  investments  through  affiliates which hold investments
accounted for under the equity method in foreign  corporations,  taxable  income
(loss)  generated  by these  affiliated  companies  does not flow through to the
Company  for United  States  federal  and state tax  purposes,  even  though the
Company records its allocable  share of affiliate  income (losses) for financial
reporting purposes.  Accordingly, due to the indefinite reversal of such amounts
in future periods,  no deferred tax asset has been  established for tax basis in
excess of the  Company's  book  basis  (approximately  $62,000  and  $83,000  at
February 28, 1998 and 1997, respectively) in investments in affiliated companies
which in turn have investments in foreign corporations.

                                      166
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The   Company's   United  States  tax  net   operating   losses,   totaling
approximately  $15,000 at February  28, 1998,  expire  beginning in 2004 through
2013. The significant components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>

                                                                                                 As of
                                                                                              February 28,
                                                                                       --------------------------
                                                                                         1998              1997
                                                                                       --------          --------
     <S>                                                                               <C>                <C>
     Deferred Tax Assets:
     -------------------
         Tax net operating loss carryforward of consolidated foreign
           subsidiaries.........................................................       $ 74,159           $   --
         Company's U.S. tax net operating loss carryforward.....................          5,826            3,304
                                                                                       --------           ------
              Total deferred tax assets.........................................         79,985            3,304
         Valuation allowance....................................................        (73,439)          (3,304)
                                                                                       --------           ------
              Deferred tax assets, net of valuation allowance...................          6,546               --
     Deferred Tax Liabilities:
     ------------------------
         Intangible assets......................................................        (23,800)              --
         Property, plant and equipment, net.....................................         (5,046)              --
         Other..................................................................            268               --
                                                                                       --------               --
              Total deferred tax liabilities....................................        (28,578)              --
                                                                                       ---------          ------
              Deferred tax liabilities, net.....................................       $(22,032)          $   --
                                                                                       ========           ======
</TABLE>
     Of the consolidated net loss,  $4,595 is derived from the Company's foreign
operations.  The difference between income tax expense provided in the financial
statements and the expected  income tax benefit at statutory rates is reconciled
as follows:
<TABLE>
<CAPTION>
                                                                                         For the Years Ended
                                                                           ----------------------------------------------
                                                                           February 28,     February 28,     February 29,
                                                                               1998             1997             1996
                                                                           ------------     ------------     ------------
<S>                                                                         <C>               <C>               <C>
Expected income tax benefit at the U.S. statutory rate of 35%..........     $(18,953)         $(10,274)         $(5,844)
Tax effect of permanent and other differences:
   Change in valuation allowance.......................................        4,352             1,830              444
   Book/tax basis differences associated with foreign investments......       16,226             9,618            6,068
   State tax, net of federal benefit...................................       (1,625)           (1,174)            (668)
                                                                            --------          --------          -------
       Total income tax benefit........................................     $     --          $     --          $    --
                                                                            ========          ========          =======
</TABLE>
     During 1996, the Austrian tax authorities  passed legislation which had the
effect  of  eliminating  approximately  $126,733  of tax basis  associated  with
certain  amounts of goodwill  recorded at Telekabel  effective  January 1, 1997.
This change in tax law is expected to be challenged on  constitutional  grounds,
however,  there can be no assurance of a successful  repeal of such legislation.
Accordingly,  this change caused Telekabel's effective tax rate to increase from
the historical  effective tax rate recorded through December 31, 1996 due to the
non-deductibility of such goodwill amortization subsequent to January 1, 1997.

13.  SUBSEQUENT EVENTS

COMBIVISIE AND CNBH

     Effective January 1, 1998, UPC acquired certain assets, including the cable
systems of Combivisie  for NLG180,762  ($89,486).  Combivisie  administered  the
cable  television   systems  on  behalf  of  18  municipalities  in  the  region
surrounding  KTE.  The purchase  was funded with a NLG60,000  ($29,703)  draw on
UPC's Tranche A Facility and NLG120,762  ($59,783) from a credit facility from a
bank.  Subsequent to the  transaction the assets and liabilities of both KTE and
Combivisie were merged, forming The Cable Network Brabant Holding BV ("CNBH").

     On February 20, 1998,  CNBH secured a NLG250,000  ($123,762 at December 31,
1997)  nine-year  term facility (the "CNBH  Facility").  The CNBH facility bears
interest at the  applicable  AIBOR plus a margin ranging from 0.60% to 1.60% per
annum, and is secured by, among other things,  an encumbrance over CNBH's assets
and a pledge by Cable  Network  Netherlands  Holding of its shares of CNBH.  The

                                      167
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

facility  was used to  refinance  the  existing  KTE  facility,  to complete the
Combivisie  acquisition  and for the  development  and  exploitation of enhanced
cable TV  services,  data  services and  telephony  services.

SKT SPOL. S.R.O.("SKT")

     On February 25, 1998, UPC signed a letter of intent with Siemens to acquire
their 95.63% interest in SKT for $51,000 (NLG103,000). SKT is a cable television
company in the Slovak  Republic.  Closing is expected to occur  during the third
quarter of Fiscal 1999.

UIH LOAN

     On March 16, 1998,  Belmarken executed a $100,000 (U.S. dollar denominated)
promissory  note with UIH.  The note bears  interest  at 10.75% per annum on the
outstanding balance and is due on demand. The note is convertible into UPC stock
at fair  market  value  at the  election  of UIH.  Payments  under  the note are
subordinate to UPC's Tranche B Facility. On March 23, 1998, UPC borrowed $63,000
under the note to reduce UPC's Tranche B Facility.

KABELKOM

     On April 1, 1998, UPC and TWE signed a memorandum of understanding  ("MOU")
for the purpose of restructuring the assets of Kabelkom.  Under the terms of the
MOU, UPC will acquire TWE's 50% ownership interest in Kabelkom's Hungarian cable
television  systems and TWE and other  partners will acquire UPC's 50% ownership
interest in Kabelkom's  Hungarian  programming  business.  In addition,  the MOU
provides for the sale of UPC's  ownership  interest in TV Max, a Czech  Republic
programming  business, to TWE. The MOU requires UPC to make a net payment to TWE
of $9,500  upon  closing  which is  expected  to occur in the second  quarter of
fiscal year 1999.

UNITED TELEKABEL HOLDING N.V.

     On April 2, 1998,  UPC and N.V. NUON  Energie-Onderneming  voor  Gelderland
("NUON"),  a Netherlands energy company,  signed a definitive agreement to merge
all of  their  Netherlands  broadband  cable  television  and  telecommunication
companies and activities into a newly formed company,  United Telekabel  Holding
N.V.  ("UTH").  UPC will contribute its  wholly-owned  interest in CNBH, its 50%
ownership interest in A2000 and its wholly-owned  interest in Kabeltelevisie Son
en Breugel B.V. for a 51% interest in UTH.  NUON will  contribute  its ownership
interests in N.V.  Telekabel  Beheer for a 49%  interest in UTH.  Closing of the
transaction is subject to certain  conditions  precedent  including  third party
consents and shareholder  approval.  Upon closing,  a correction payment will be
made by either UPC or NUON to balance the ownership  interests based upon agreed
valuation  methodology.  Further,  both  parties  will be  committed  to minimum
funding  levels or become  subject to future  dilution.  The closing  agreements
provide  UPC with a call option to acquire  50% of NUON's  ownership  in UTH and
provide  NUON with a put option to sell 50% of its  ownership  interests in UTH.
The call and put options are in effect for a two-year  period  starting one year
after the closing of the transaction  expected to occur before July 1, 1998. The
put/call price will be fixed as of closing.

UNITED INTERNATIONAL INVESTMENTS

     In April and May, 1998, UPC signed MOUs with TINTA, its 50% partner in UII,
to acquire  TINTA's  interests  related to Tevel and  Melita,  and to sell UPC's
interest  in  Princes  Holdings  to  TINTA,  for  a  net  payment  to  TINTA  of
approximately  $71,000. The MOUs are contingent upon several factors,  including
the  completion of financing  satisfactory  to UIH, the consent of certain third
parties and regulatory bodies, and the signing of definitive documentation.

                                      168
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Supervisory Directors and the Shareholders of
United Pan-Europe Communications N.V.

     We have  audited the annual  accounts for the years 1996 and 1997 of United
Pan-Europe Communications N.V. The annual accounts are the responsibility of the
company's  management.  Our  responsibility  is to  express  an opinion on these
annual accounts based on our audits.

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

     In our  opinion,  these  annual  accounts  give a true and fair view of the
consolidated  financial position of the Company as of December 31, 1996 and 1997
and of the  result  for the  year  then  ended  in  accordance  with  accounting
principles  generally  accepted in The Netherlands and comply with the financial
reporting requirements included in Part 9, Book 2 of the Netherlands Civil Code.

     Generally accepted accounting principles in The Netherlands 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 total assets, results of operations and shareholders'
equity as at and for the years  ended  December  31, 1996 and 1997 to the extent
summarized in Note 21, to the consolidated financial statements.

                                                ARTHUR ANDERSEN & CO.

Amstelveen, The Netherlands,
April 29, 1998.

                                      169
<PAGE>

                          INDEPENDENT AUDITORS' REPORT



To the Shareholders and the Supervisory Directors of
United and Philips Communications B.V.

     We have  audited  the  consolidated  balance  sheet of United  and  Philips
Communications  B.V.  and  subsidiaries  as at December 31, 1995 and the related
consolidated statements of operations and cash flows for the year ended December
31, 1995. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in The Netherlands, which are substantially the same as those generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of matenal misstatement.  An audit includes examining,  on a
test basis, 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 present fairly, in
all  material   respects,   the   financial   position  of  United  and  Philips
Communications B.V. and subsidiaries as at December 31, 1995, and the results of
their  operations  and  cash  flows  for the year  ended  December  31,  1995 in
conformity with generally accepted accounting principles in The Netherlands.

     Generally accepted accounting principles in The Netherlands 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 results of operations and shareholders'  equity as at
and for the year ended December 31, 1995 to the extent  summarized in Note 21 to
the consolidated financial statements.


KPMG Accountants N.V.                           ARTHUR ANDERSEN & CO.

Amsterdam, The Netherlands,
May 20, 1996

                                      170
<PAGE>
<TABLE>
<CAPTION>
                                  UNITED PAN-EUROPE COMMUNICATIONS N.V.
                              CONSOLIDATED BALANCE SHEETS OF THE UPC GROUP
                             (Currency -- Thousands of Netherlands guilders)

                                                                                                As at December 31,
                                                                                             -----------------------
                                                                                Notes          1997           1996
                                                                                             --------      ---------
<S>                                                                                <C>      <C>            <C>
ASSETS

Fixed Assets:

   Intangible fixed assets.................................................        2          757,503         639,092
   Tangible fixed assets...................................................        3          483,693         434,736
   Affiliated companies....................................................        4          116,132         112,916
   Other non-current financial assets......................................        5          117,521           1,154
                                                                                            ---------       ---------
       Total fixed assets..................................................                 1,474,849       1,187,898
                                                                                            ---------       ---------

Current Assets:

   Inventories.............................................................                    13,040          12,057
   Receivables.............................................................        6           67,248          88,470
   Cash and cash equivalents...............................................        7          121,535          42,631
                                                                                            ---------       ---------
       Total current assets................................................                   201,823         143,158
                                                                                            ---------       ---------

       Total assets........................................................                 1,676,672       1,331,056
                                                                                            =========       =========


        The accompanying notes form an integral part of these consolidated financial statements.
</TABLE>
                                                 171
<PAGE>
<TABLE>
<CAPTION>
                                 UNITED PAN-EUROPE COMMUNICATIONS N.V.
                                 SHAREHOLDERS' EQUITY AND LIABILITIES


                                                                                               As at December 31,
                                                                                            ------------------------
                                                                                 Notes         1997           1996
                                                                                            ---------       --------
<S>                                                                               <C>       <C>             <C>
Shareholders' equity.......................................................        8          155,587         449,639
Minority interest..........................................................                     6,779           4,554
Subordinated convertible loan..............................................        9               --         256,335
                                                                                            ---------       ---------
                                                                                              162,366         710,528

Provisions.................................................................       10           53,308          14,895
Long-term liabilities......................................................       11        1,004,018          19,467
Current liabilities........................................................       12          456,980         586,166
                                                                                            ---------       ---------
       Total shareholders' equity and liabilities..........................                 1,676,672       1,331,056
                                                                                            =========       =========

        The accompanying notes form an integral part of these consolidated financial statements.
</TABLE>
                                                 172
<PAGE>
<TABLE>
<CAPTION>
                                UNITED PAN-EUROPE COMMUNICATIONS N.V.
                         CONSOLIDATED STATEMENTS OF INCOME OF THE UPC GROUP
                           (Currency -- Thousands of Netherlands guilders)

                                                                                          For the Years Ended
                                                                                              December 31,
                                                                                 ------------------------------------
                                                                          Notes    1997          1996          1995
                                                                                 --------      --------      --------
   <S>                                                                     <C>   <C>           <C>          <C>
   Total revenue.......................................................    13     337,155       245,179      100,179
                                                                                 --------      --------     --------

   Direct operating expenses...........................................          (111,919)      (80,479)     (32,806)
   Selling, general and administrative expenses........................          (109,207)      (78,823)     (33,617)
   Depreciation and amortization.......................................          (159,901)     (105,072)     (48,406)
                                                                                 --------      --------     --------
       Total operating expenses........................................    14    (381,027)     (264,374)    (114,829)
                                                                                 --------      --------     --------

   Operating loss......................................................           (43,872)      (19,195)     (14,650)
   Financial income and expenses.......................................    15     (63,751)      (36,309)     (13,372)
   Exchange rate loss on convertible loans.............................    15     (43,441)      (20,544)      (3,474)
   Other results.......................................................    16     (18,888)           --           --
                                                                                 --------      --------     --------
   Loss before income taxes............................................          (169,952)      (76,048)     (31,496)

   Income taxes........................................................    17       1,811        (3,697)       1,624
                                                                                 --------      --------     --------

       Loss after taxes................................................          (168,141)      (79,745)     (29,872)

   Equity in result of affiliated companies............................              (663)       (9,503)     (16,179)
                                                                                 --------      --------     --------
       Group loss......................................................          (168,804)      (89,248)     (46,051)

   Minority interests..................................................            (2,894)       (2,208)        (191)
                                                                                 --------      --------     --------
       Net loss........................................................          (171,698)      (91,456)     (46,242)
                                                                                 ========      ========     ========


        The accompanying notes form an integral part of these consolidated financial statements.
</TABLE>
                                                 173


<PAGE>
<TABLE>
<CAPTION>
                             UNITED PAN-EUROPE COMMUNICATIONS N.V.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE UPC GROUP
                         (Currency -- Thousands of Netherlands guilders)
                                                                                         For the Years Ended
                                                                                             December 31,
                                                                                 ----------------------------------
                                                                                   1997         1996         1995
                                                                                 --------     --------     --------
<S>                                                                             <C>            <C>          <C>
Cash flows from operating activities:
Net loss...............................................................         (171,698)      (91,456)     (46,242)
Adjustments to reconcile net loss to cash provided by operating
     activities:
   Depreciation and amortization.......................................          159,901       105,072       48,406
   Share in results of affiliated companies............................              663         9,503       16,179
   Minority interests..................................................            2,894         2,208          191
   Exchange differences in convertible loan............................           43,441        20,544        3,474
   Other results.......................................................           18,888            --           --
   Other...............................................................              979         1,173        1,444
Changes in assets and liabilities, net of contributed amounts:
   Increase in inventories.............................................           (2,737)       (2,091)      (6,956)
   Increase in other non-current financial assets......................           (2,544)         (309)        (789)
   Increase (decrease) in receivables..................................           21,504        82,201      (50,955)
   Increase (decrease) in provisions...................................           37,240         3,932       (1,530)
   Increase in other current liabilities...............................           61,853        25,541       75,271
                                                                               ---------      --------     --------
Net cash provided by operating activities..............................          170,384       156,318       38,493
                                                                               ---------      --------     --------
Cash flows from investing activities:
Capital expenditures...................................................         (208,015)     (106,647)    (312,241)
New acquisitions, net of cash acquired.................................         (127,882)      (46,473)    (187,865)
Deposit to acquire minority interest in Janco..........................          (47,000)           --           --
Purchase of parent company's stock.....................................          (66,809)           --           --
Loans to affiliated companies..........................................           (3,869)           --           --
Capital contributions affiliated companies.............................               --       (13,000)          --
Capital repayment......................................................               --        44,950           --
Sale of affiliated companies...........................................           11,070            --           --
                                                                               ---------      --------     --------
Net cash used in investing activities..................................         (442,505)     (121,170)    (500,106)
                                                                               ---------      --------     --------
Cash flows from financing activities:
Proceeds from borrowings long term.....................................        1,141,539        23,113           --
Proceeds from borrowings short term  ..................................          242,572       302,959      465,699
Repayments long and short term borrowings..............................         (569,941)     (440,440)          --
Dividends paid to minority shareholders................................             (171)       (2,388)        (191)
Redemption of convertible loans........................................         (170,371)           --           --
Purchase UPC-shares from Philips.......................................         (292,561)           --           --
                                                                               ---------      --------     --------
Net cash  provided by (used in) financing activities...................          351,067      (116,756)     465,508
                                                                               ---------      --------     --------
Net increase (decrease) in cash and cash equivalents...................           78,946       (81,608)       3,895
Cash and cash equivalents at beginning of period.......................           42,631       123,895           --
Cash contributed upon foundation of UPC................................               --            --      118,050
Exchange differences on cash and cash equivalents......................              (42)          344        1,950
                                                                               ---------      --------     --------
Cash and cash equivalent at end of period..............................          121,535        42,631      123,895
                                                                               =========      ========     ========

        The accompanying notes form an integral part of these consolidated financial statements.
</TABLE>
                                                 174


<PAGE>
                      UNITED PAN-EUROPE COMMUNICATIONS N.V.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                              AT DECEMBER 31, 1997
                 (Currency -- Thousands of Netherlands guilders)

1.   ACCOUNTING POLICIES

GENERAL

     Until December 11, 1997 United and Phillips Communications B.V. ("UPC") was
a joint venture  between Philips  Electronics  N.V.,  Eindhoven  ("Philips") and
United  Internaitonal  Holdings  Inc.  ("UIH"),  a  Delaware,  United  States of
America,  corporation. On December 11, 1997 UPC became a wholly owned subsidiary
of UIH. The name was changed into United Pan-Europe Communications N.V., and its
legal seat was transferred from Eindhoven to Amsterdam.

COMPARATIVE FIGURES

     The 1997 information is not comparable to the 1996 figures :

     o    Effective  January 1, 1997 Janco Kabel-TV  ("Janco") was consolidated.
          During  November  1997  Norkabelgruppen  merged  with  Janco and Janco
          changed its name to Janco Multicom AS.

     o    Effective January 1, 1997, UPC no longer consolidated Ceska Programova
          Spolecnost  ("TV Max") as agreement  has been reached with Time Warner
          Entertainment Company ("TWE") to contribute UPC's investment in TV Max
          and TWE's investment in HBO Ceska Sro into a general  partnership,  of
          which  both UPC and TWE would own 50%.  Since this  agreement  was not
          effectuated  during 1997 UPC has included its investment in TV Max for
          100% in Affiliated companies.

      o   Norkabelgruppen was consolidated effective October 1, 1996.

POLICIES OF CONSOLIDATION

     These consolidated financial statements include the accounts of UPC and its
group companies (the "UPC Group").  Group companies are companies or other legal
entities in which UPC has an  ownership  interest of more than 50% of the issued
share capital or that UPC otherwise controls. The accounts of these companies or
other  legal  entities  are  included  in  full  in the  consolidated  financial
statements;  any minority  interests are disclosed  separately.  All significant
intercompany accounts and transactions have been eliminated in consolidation.

                                      175
<PAGE>
                      UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The consolidated  financial  statements include the financial statements of
United Pan-Europe  Communications N.V. and the following subsidiaries,  directly
or indirectly held by UPC:
<TABLE>
<CAPTION>
                                                                                                Percentage
       Name                                                 Country                             Ownership
       ----                                                 -------                             ----------
       <S>                                                  <C>                                   <C>
       Radio Public SA                                      Belgium                               100.0%
       Telekabel Group                                      Austria                                95.0%
       Kabeltelevisie Eindhoven NV                          The Netherlands                       100.0%
       Kabel Net Holding AS                                 Czech Republic                        100.0%
       Kabel Net Brno AS                                    Czech Republic                        100.0%
       Slovatel SRO                                         Slovak Republic                       100.0%
       Trnavatel SRO                                        Slovak Republic                        75.0%
       Multicanal Holdings SRL                              Romania                                90.0%
       Control Cable Ventures SRL                           Romania                               100.0%
       Mediareseaux SA                                      France                                100.0%
       Mediareseaux Marne SA                                France                                100.0%
       Intercabo TeleviSao por Cabo SGPS Lda                Portugal                              100.0%
       Janco Multicom AS                                    Norway                                 87.3%
       Cable Network Austria Holdings BV                    The Netherlands                       100.0%
       Kabeltelevisie Son & Breugel BV                      The Netherlands                       100.0%
       UPC Services Ltd.                                    England                               100.0%
       Belmarken Holding BV                                 The Netherlands                       100.0%
       Binan Investments BV                                 The Netherlands                       100.0%
       Stipdon Investments BV                               The Netherlands                       100.0%
       Cable Network Brabant Holding BV                     The Netherlands                       100.0%
       Cable Network Netherlands Holding BV                 The Netherlands                       100.0%
       Cable Network Zuid-Oost Brabant Holding BV           The Netherlands                       100.0%
</TABLE>

     UPC has the right to acquire,  and  Janco's  minority  shareholder  has the
right to put to UPC, the remaining  12.7% interest in Janco for a purchase price
of  approximately  $21,890.  UPC has  all the  rights  and  obligations  of full
ownership of Janco and therefore consolidated 100% of its financial results.

POLICIES FOLLOWED IN VALUATION AND INCOME DETERMINATION.

Foreign Currencies
------------------

     The financial  information of foreign companies and other legal entities is
prepared in local currencies.  All foreign currency amounts in the balance sheet
have been translated into Netherlands guilders at the official exchange rates on
the respective balance sheet dates.  Exchange differences due to transactions in
foreign  currencies  are  reflected in the  consolidated  statements  of income.
Exchange  differences  resulting from the  translation of the net investments in
foreign   subsidiaries  into  Netherlands   guilders  are  accounted  for  under
Shareholders' equity.

     In the  consolidated  statements of income the translation into Netherlands
guilders is based on the average rates of exchange for the periods involved. The
resulting  difference  between the  application  of these  average rates and the
balance sheet exchange rates is accounted for directly in Shareholders' equity.

     Cash  flows  from  the  Company's   operations  in  foreign  countries  are
translated  based upon average exchange rates for the period while balance sheet
amounts  are  translated  at period end  exchange  rates.  As a result,  amounts
related to assets and  liabilities  reported on the  Consolidated  Statements of
Cash Flow will not agree to the  changes in the  corresponding  balances  on the
Consolidated  Balance  Sheets.  The  effect of  exchange  rate  changes  on cash
balances  held in foreign  currencies  is reported as a separate line below cash
flows from financing activities.

                                      176
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Exchange rates of major currencies in Netherlands guilders :
<TABLE>
<CAPTION>
                                      Balance Sheet                         Balance Sheet
                                    Rate per Dec. 31,     Average Rate     Rate per Dec. 31,     Average Rate     Average Rate
                                          1997                1997              1996                1996              1995
                                    -----------------     ------------     -----------------     ------------     ------------
       <S>                                <C>               <C>                 <C>                 <C>              <C>
       Belgian Franc per 100........       5.46              5.452               5.45                5.44             5.44
       Austrian Schilling per 100...      16.02             15.989              15.95               15.93            15.92
       Czech Koruna per 100.........       5.85              6.215               6.37                6.26             6.06
       US Dollar per unit...........       2.02              1.948               1.74                1.69             1.61
       Norwegian Crown per 100......      27.45             27.553              27.11               26.45               --
       Portuguese Escudo per 100....       1.10              1.115               1.12                1.09               --
       French Franc per 100.........      33.69             32.428              33.30               32.95               --
       Romanian Lei per 10,000.....        2.50              2.773                 --                  --               --
       Slovak Crown per 100.........       5.79              5.787                 --                  --               --
</TABLE>

Balance Sheet
-------------

(a)  General

     Assets and  liabilities  are stated at  historical  cost  unless  indicated
otherwise.

(b)  Fixed Assets

     INTANGIBLE FIXED ASSETS

          Intangible  fixed assets  include the value of licences,  goodwill and
     deferred financing costs.

          Licences in newly acquired companies are recognized at the fair market
     value  of  those  licences  at the  date of  acquisition  and  include  the
     development  costs  incurred  prior to or after the date a new  licence was
     acquired.  The licence value is amortized on a straight line basis over the
     licence period, but with a maximum of 20 years.

          Goodwill  represents the difference between acquisition price paid for
     a  participation  and  the  fair  value  of the  identifiable  net  assets,
     including the value of any licences of such a  participation.  Amortization
     is on a straight line basis based on the useful lives over a maximum period
     of 20 years.

          Deferred   financing  costs  are  amounts  spent  in  connection  with
     financing the UPC Group. The amortization  period is the period relating to
     the term of the financing.

          When   assets  are  fully   amortized,   the  costs  and   accumulated
     amortization are removed from the accounts.

     TANGIBLE FIXED ASSETS

          Tangible  fixed  assets are  presented  at  purchase  price or cost to
     construct less accumulated  straight line depreciation.  Assets constructed
     within the UPC group  incorporate  overheads and interest  charges incurred
     during the period of construction; investment subsidies are deducted.

          For newly acquired participations the cost of tangible fixed assets is
     determined at fair value at the date such participations are acquired.

          Depreciation  is  calculated  using the straight  line method over the
     economic  life of the asset,  taking into account the residual  value.  The
     economic lives are:

           Buildings.............................      20-33 years
           Networks..............................       7-20 years
           Machinery & other.....................       3-10 years

                                      177
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     AFFILIATED COMPANIES

          Companies in which UPC exerts significant  influence over the business
     and financial  policies are recorded  using the equity  method.  Under this
     method  the  investment,  originally  recorded  at  cost,  is  adjusted  to
     recognize  UPC's  share  of net  earnings  or  losses  of  the  affiliates,
     including the  amortization of basis  differences  related to the excess of
     cost over net tangible assets acquired.

          When no significant  influence is exercised,  the investment is stated
     at cost or in case of  permanent  impairment,  at the lower net  realizable
     value.

     NON-CURRENT FINANCIAL ASSETS

          Valuation is at the lower of cost or in case of permanent  impairment,
     net realizable  value.  In March 1995, the Financial  Accounting  Standards
     Board  ("FASB")  issued a Statement of Financial  Accounting  Standards No.
     121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to be Disposed of." This statement establishes  accounting standards
     for the impairment of long-lived assets,  certain identifiable  intangibles
     and  goodwill  related  to  those  assets  to be  held  and  used,  and for
     long-lived  assets and certain  identifiable  assets to be disposed of. The
     Company has adopted the  principles of this  statement in the  accompanying
     financial  statements.  The  provisions of SFAS 121 did not have a material
     effect  on  the  Company's  reported  result  of  operations  or  financial
     condition.

(c)  Receivables

          Receivables  are stated at face value less an  allowance  for doubtful
     accounts.

(d)  Cash and Cash Equivalents

          Cash and cash  equivalents  are stated at face value and  include  all
     cash and bank balances.

(e)  Provisions

          Deferred tax liabilities  arising from temporary  differences  between
     the financial and tax bases of assets and  liabilities  are included in the
     provisions.  The principal  difference  arises in connection with valuation
     differences  of intangible and tangible  fixed assets.  In calculating  the
     provision, current tax rates are applied.

(f)  Fair Value of Financial Instruments

          SFAS  Statement No. 107,  "Disclosures  about Fair Values of Financial
     Instruments"  requires  the  disclosure  of  estimated  fair values for all
     financial  instruments,  both on- and  off-balance  sheet,  for which it is
     practicable to estimate fair value.

          For  certain   instruments,   including  cash  and  cash  equivalents,
     receivables,  current  liabilities and certain  provisions,  it was assumed
     that the carrying amount  approximated fair value due to the short maturity
     of those  instruments.  For short and long term debt,  the  carrying  value
     approximates  the fair value  since all debt  instruments  carry a variable
     interest rate component  except for the  convertible  loans which carried a
     fixed  interest rate. For  investments in affiliated  companies  carried at
     cost,  quoted market prices for the same or similar  financial  instruments
     were used to estimate the fair values.  UPC has adopted the  principles  of
     this statement in its financial  statements.  UPC did not have any material
     off-balance-sheet financial instruments as of December 31, 1997.

Income Statement
----------------

     Revenue  is  derived  from  the  sale  of  cable  television   services  to
subscribers  and from  the  construction  and  management  of  cable  television
systems.  The cable television service revenues are recognized as revenue in the
period in which the related services are provided to the subscriber.

                                      178
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Initial installation fees ("first connection") are recognized as revenue in
the period in which the  installation  occurs,  to the extent of direct  selling
costs, with the remainder deferred.  Deferred  installation revenue is amortized
over the average subscriber period in the respective companies.

     Initial   subscriber   installation   expenditures   are   capitalized  and
depreciated over a period no longer than the depreciation  period used for cable
television plant and/or license agreement.

     All installation  fees and related costs with respect to reconnections  are
recognized in the period in which the reconnection occurs.

     Expenses  and other  revenues  are  recorded  in the  period in which  they
originate.

     Income taxes are accounted  for in the income  statement in the same period
as the income and  expenses to which they  relate.  Withholding  taxes are taken
into  consideration in situations where the income of subsidiaries is to be paid
out as  dividends  in the near  future.  Such  withholding  taxes are  generally
charged to income in the year in which the dividend income is generated.

2.   INTANGIBLE FIXED ASSETS

     Balance as of January 1, 1996:
<TABLE>
<CAPTION>
                                                                                                        Deferred
                                                                              Licenses and              Financing
                                                          Total                 Goodwill                  Costs
                                                        --------              ------------              ---------
     <S>                                                <C>                     <C>                       <C>
     Gross value...................................     676,365                 676,365                     --
     Amortization & provisions.....................     (19,207)                (19,207)                    --
                                                        -------                 -------                   ----
     Book value as of January 1, 1996..............     657,158                 657,158                     --
                                                        =======                 =======                   ====

     Changes :
       Investments.................................       6,605                   6,605                     --
       Reallocation of goodwill to investments in
         affiliated companies......................     (54,463)                (54,463)                    --
       Amortization................................     (39,844)                (39,844)                    --
       New consolidations..........................      66,441                  66,441                     --
       Translation differences and sundry
         movements.................................       3,195                   3,195                      --
                                                        -------                 -------                    ----
     Book value as of December 31, 1996............     639,092                 639,092                      --
                                                        =======                 =======                    ====
</TABLE>

     During  1996  the  Company  reallocated  part of  goodwill  paid on  assets
contributed  upon  information  to  its  investments  in  United   International
Investments  ("UII")  (12,754) based upon its share in its net equity value. The
Company has changed its presentation of the excess value of cost over net assets
acquired  of  affiliated  companies.  As  a  result  an  amount  of  41,709  was
transferred to Investments in Affiliated companies.

                                      179
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Balance as of January 1, 1997:
<TABLE>
<CAPTION>
                                                                                                         Deferred
                                                                              Licenses and               Financing
                                                          Total                 Goodwill                   Costs
                                                         -------              ------------               ---------
     <S>                                                 <C>                     <C>                       <C>
     Gross value...................................      698,855                 698,855                       --
     Amortization & provisions.....................      (59,763)                (59,763)                      --
                                                         -------                 -------                   ------
     Book value as of January 1, 1997..............      639,092                 639,092                       --
                                                         =======                 =======                   ======

     Changes:
       Investments.................................       70,703                  46,118                   24,585
       Amortization................................      (59,077)                (58,435)                    (642)
       New & cancelled consolidations..............      103,574                 103,574                       --
       Translation differences and sundry
         movements.................................        3,211                   3,211                       --
                                                         -------                 -------                   ------
     Book value as of December 31, 1997............      757,503                 733,560                   23,943
                                                         =======                 =======                   ======
</TABLE>

     Balance as of December 31, 1997:
<TABLE>
<CAPTION>
                                                                                                         Deferred
                                                                              Licenses and               Financing
                                                          Total                 Goodwill                   Costs
                                                         -------              ------------               ---------
     <S>                                                 <C>                   <C>                       <C> 

     Gross value...................................      871,945                847,360                  24,585
     Amortization & provisions.....................     (114,442)              (113,800)                   (642)
                                                        --------               --------                  ------
     Book value as of December 31, 1997............      757,503                733,560                  23,943
                                                        ========               ========                  ======
</TABLE>

3.   TANGIBLE FIXED ASSETS

     Balance as of January 1, 1996:
<TABLE>
<CAPTION>
                                                                     Land and                           Machinery
                                                     Total           Buildings         Network           & Other
                                                    -------          ---------         -------          ---------
     <S>                                            <C>               <C>              <C>               <C> 
     Cost.......................................    328,959           1,135            316,878           10,946
     Depreciation & write downs.................    (29,199)            (47)           (27,670)          (1,482)
                                                    -------           -----            -------           ------
     Book value as of January 1, 1996...........    299,760           1,088            289,208            9,464
                                                    =======           =====            =======           ======

     Changes :
       Additions................................    100,042           3,226             86,974            9,842
       New and cancelled consolidations.........     95,867           1,193             83,971           10,703
       Depreciation.............................    (65,228)           (510)           (59,392)          (5,326)
       Translation differences and sundry
         movements..............................      4,295             485              4,679             (869)
                                                    -------           -----            -------           ------
     Book value as of December 31, 1996.........    434,736           5,482            405,440           23,814
                                                    =======           =====            =======           ======
</TABLE>
                                      180
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Balance as of January 1, 1997:
<TABLE>
<CAPTION>
                                                                     Land and                           Machinery
                                                     Total           Buildings         Network           & Other
                                                    -------          ---------         -------          ---------
     <S>                                           <C>                <C>              <C>               <C> 
     Cost.......................................    529,416             6,080          492,398           30,938
     Depreciation & write downs.................    (94,680)             (598)         (86,958)          (7,124)
                                                   --------           -------          --------         -------
     Book value as of January 1, 1997...........    434,736             5,482          405,440           23,814
                                                   ========           =======          =======          =======

     Changes :
       Additions................................    137,312             2,828          115,900           18,584
       New and cancelled consolidations.........     12,940            (3,816)          13,430            3,326
       Depreciation.............................   (100,824)             (628)         (81,747)         (18,449)
       Translation differences and sundry
         movements..............................       (471)             (187)            (293)               9
                                                   --------           -------          -------          -------
     Book value as of December 31, 1997.........    483,693             3,679          452,730           27,284
                                                   ========           =======          =======          =======
</TABLE>

     Balance as of December 31, 1997:
<TABLE>
<CAPTION>
                                                                     Land and                           Machinery
                                                     Total           Buildings         Network           & Other
                                                    -------          ---------         -------          ---------
     <S>                                            <C>               <C>              <C>               <C>

     Cost  .....................................    680,947           4,328            624,841            51,778
     Depreciation & write downs.................   (197,254)           (649)          (172,111)          (24,494)
                                                   --------           -----           --------           -------
     Book value as of  December 31, 1997........    483,693           3,679            452,730            27,284
                                                   ========           =====            =======           =======
</TABLE>

     Depreciation  is calculated  on a straight line basis,  taking into account
the expected  working life of the asset and the residual value.  The Company has
no reason to believe that the current  value of tangible  fixed  assets  differs
significantly from its stated value.

4.   AFFILIATED COMPANIES
<TABLE>
<CAPTION>
                                                                             Total       Investments        Advances
                                                                            -------      -----------        --------
<S>                                                                        <C>            <C>                <C>
     Balance as of January 1, 1996.....................................     62,250         62,050             200
     Changes:
       New consolidations..............................................        325            325              --
       To consolidated companies.......................................     (3,090)        (2,898)           (192)
       Reallocation of goodwill to investment in affiliated companies..     54,463         54,463              --
       Acquisitions/additions..........................................     42,250         42,250              --
       Capital contributions...........................................     13,000         13,000              --
       Capital repayment...............................................    (44,950)       (44,950)             --
       Equity in result................................................     (9,503)        (9,503)             --
       Translation differences and sundry movements....................     (1,829)        (1,909)             80
                                                                           -------        -------            ----
     Balance as of December 31, 1996..................................     112,916        112,828              88
                                                                           =======        =======            ====
</TABLE>

     During  1996 the  Company  reallocated  part of  goodwill  paid upon assets
contributed upon formation to its investment in United International Investments
based upon its share in its net equity value,  and change in the presentation of
the excess values of cost over net assets acquired.

     The  acquisitions/additions  represent the increase in the participation in
Kabelkom.

                                      181
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The investments in affiliated companies as of December 31, 1996 are:
<TABLE>
<CAPTION>
                                                 %                                                  Valuation        Share in
                                             Ownership    Total      Investments     Loans          Allowance       Result 1996
                                             ---------   -------     -----------    -------         ---------       -----------
       <S>                                       <C>     <C>           <C>           <C>              <C>              <C>
       A2000..............................       50        1,325         1,325          --                --           (7,965)
       United International Investments...       50       61,528        61,528          --                --           (1,796)
       Kabelkom ..........................       50       41,623        41,623          --                --             (262)
       Spain..............................                    --         3,197          --            (3,197)           1,070
       Germany............................                 7,993         7,993          --                --             (585)
       Other (net)........................                   447           359       1,077              (989)              35
                                                         -------       -------       -----            ------           ------
           Total..........................               112,916       116,025       1,077            (4,186)          (9,503)
                                                         =======       =======       =====            ======           ======
</TABLE>
<TABLE>
<CAPTION>
                                                          Total       Investments     Loans
                                                         -------      -----------    -------
     <S>                                                 <C>            <C>           <C>
     Balance as of January 1, 1997.....................  112,916        112,828           88

     Changes:
       New consolidations..............................       45             45           --
       From consolidated companies.....................    2,947        (11,307)      14,254
       Acquisitions/additions..........................    4,974          1,105        3,869
       Sales ..........................................  (11,070)       (11,070)          --
       Equity in result................................     (663)          (663)          --
       Translation differences and sundry movements....    6,983          4,258        2,725
                                                         -------        -------       ------
       Balance as of December 31, 1997.................  116,132         95,196       20,936
                                                         =======        =======       ======
</TABLE>

     The acquisitions/additions  represent mainly the acquisition of Eurosat and
loans granted to Kabelkom and Ceska Programova Spolecnost.  Sold were the German
investments.

     The investments in affiliated companies as of December 31, 1997 are:
<TABLE>
<CAPTION>
                                                 %                                                  Valuation       Share in
                                             Ownership    Total      Investments     Loans          Allowance      Result 1997
                                             ---------   -------     -----------    -------         ---------      -----------
       <S>                                       <C>     <C>           <C>           <C>             <C>              <C>
       A2000..............................       50       (10,679)     (10,679)          --              --          (12,004)
       United International Investments...       50        72,929       72,929           --              --            7,109
       Kabelkom ...........................      50        50,443       47,715        2,728              --            4,431
       Germany............................      ---            --           --           --              --            2,815
       Czech Republic.....................      100         1,250      (16,857)      18,107              --           (5,417)
       Other (net)........................                  2,189        2,088        1,249          (1,148)           2,403
                                                          -------      -------       ------          ------          -------
           Total..........................                116,132       95,196       22,084          (1,148)            (663)
                                                          =======      ========      ======          ======          =======
</TABLE>
                                      182
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The excess values of cost over net assets acquired  included in the amounts
stated above, are as follows:
<TABLE>
<CAPTION>

                                                                                           UII            Kabelkom
                                                                                         -------          --------
       <S>                                                                               <C>               <C>
       Gross....................................................................         42,069            33,353
       Amortization.............................................................         (7,487)           (2,779)
                                                                                         ------            ------
       Book Value...............................................................         34,582            30,574
                                                                                         ======            ======
</TABLE>

     The amortization charge (UII 2,804, Kabelkom 2,223) is included in Share in
result 1997.

     United International Investments ("UII") is a partnership through which UPC
holds a 20% interest in Princes  Holdings  (Ireland),  a 23.3% interest in Tevel
(Israel) and a 25% interest in Melita  (Malta).  In July 1997,  UPC through UII,
sold 17.5% of its  ownership  interest  in Melita  Cable TV Ltd.  to an existing
Maltese  shareholder,  reducing  its  ownership  interest  from 42.5% to 25% and
increasing the ownership held by Maltese  citizens to 50% in accordance with the
terms of the franchise.

     For summary financial information about A2000 reference is made to note 22.

5.   OTHER NON-CURRENT FINANCIAL ASSETS

     As a result of the buy-out of Philips, the UPC-group acquired 3,169,159 UIH
shares,  valued (at cost) at 66,809.  The Company deposited 47,000 with ING Bank
as a  collateral  against the  purchase of the  minority  shareholding  in Janco
Multicom AS in 2001.  Including  capitalized  interest,  the deposit amounted to
48,435 per the end of 1997.

6.   RECEIVABLES

     Receivables as presented under current assets mature within one year.
<TABLE>
<CAPTION>
                                                                                     1997               1996
                                                                                   --------           --------
     <S>                                                                            <C>               <C>
     Trade accounts receivable...............................................        9,419             9,581
     Receivables from affiliated companies...................................       14,970            14,351
     Prepaid expenses and accrued income.....................................        6,140             2,903
     Other receivables.......................................................       36,719            61,635
                                                                                    ------            ------

       Total.................................................................       67,248            88,470
                                                                                    ======            ======
</TABLE>

     Receivables from affiliated  companies  represent amounts receivable due to
funding of local cash needs,  and to expenses  charged  for UPC  personnel.  The
amount receivable from affiliated companies is after deduction of a provision of
2,210  (1996:  4,620).  A  major  item  under  `Other  receivables'  is  current
reclaimable VAT 6,946 (1996: 7,979).

7.   CASH AND CASH EQUIVALENTS

     Apart from an interest reserve account of 22,220, cash and cash equivalents
include  demand  accounts  and  short  term  investments  held in a bank  with a
maturity of less than three  months.  Included are short term deposits of 19,009
(1996:  18,959),  which  deposits are renewed on a daily  basis.  Other than the
interest reserve account, the cash and cash equivalents are freely available.

                                      183
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.   STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                             Share        Capital         Other         Portfolio
                                               Total        Capital       Reserves       Reserves       UPC-shares
                                              -------       -------       --------       --------       ----------
     <S>                                      <C>           <C>           <C>            <C>              <C>
     Balance as of January 1, 1996..........  537,633          200        582,180         (44,747)          --
     Issuance of new shares.................       --       53,800        (53,800)             --           --
     Net group loss.........................  (91,456)          --             --         (91,456)          --
     Translation differences................    3,462           --             --           3,462           --
                                              -------       ------        -------        --------         ----
     Balance as of December 31, 1996........  449,639       54,000        528,380        (132,741)          --
                                              =======       ======        =======        ========         ====
</TABLE>

     On June 18, 1996, the general meeting of shareholders of UPC has decided to
issue  53,800,000  shares,  which  issuance  of shares  has been  embodied  in a
notarial deed dated July 26, 1996.
<TABLE>
<CAPTION>
                                                             Share        Capital         Other         Portfolio
                                               Total        Capital       Reserves       Reserves       UPC-shares
                                              -------       -------       --------       --------       ----------
     <S>                                      <C>           <C>           <C>            <C>             <C>

     Balance as of January 1, 1997..........   449,639      54,000         528,380       (132,741)            --
     Buy-out Philips........................  (292,561)         --        (276,309)            --        (16,252)
     Reissuance of shares...................   169,899          --         159,779             --         10,120
     Net group loss.........................  (171,698)         --              --       (171,698)            --
     Translation differences ...............       308          --              --            308             --
                                              --------     -------        --------       --------        -------
     Balance as of December 31, 1997........   155,587      54,000         411,850       (304,131)        (6,132)
                                              ========     =======        ========       ========        =======
</TABLE>

     On June 18,  1996,  UPC  adopted a stock  option  plan for  certain  of its
employees and those of its  subsidiaries.  The  shareholders  have transferred 4
million  ordinary  shares of UPC into the "Stichting  Administratiekantoor  UPC"
(the "Foundation"),  which administers the stock option plan. Until such time as
the shares of UPC have been  listed at a stock  exchange,  the  Foundation  will
issue under certain  circumstances  certificates  convertible into the shares of
UPC owned by the Foundation.

     The  options  are  granted at fair  market  value to be  determined  by the
Supervisory  Board.  The maximum  term that the options can be exercised is five
years from the date of the grant.  The  options  vest over a three year  period.
During the year ended December 31, 1997, no compensation  expense was recognized
in connection with the plan for Netherlands  accounting  purposes.  Compensation
expense of 4,817 was recognized for US GAAP purposes.

     Data concerning the stock option plan is as follows:
<TABLE>
<CAPTION>
                                                                                        1997             1996
                                                                                      --------         --------
     <S>                                                                              <C>             <C>
     Outstanding at the beginning of the year...................................      1,533,611               --
     Granted during the year....................................................             --        2,660,000
     Exercised during the year..................................................             --       (1,120,000)
     Cancelled during the year..................................................        (39,243)          (6,389)
                                                                                      ---------       ----------
     Outstanding at the end of the year ........................................      1,494,368        1,533,611
                                                                                      =========       ==========
     Option price per share NLG15.74

     Vested portion:  on exercised options......................................        965,466          520,278
                      on outstanding options....................................      1,166,088          670,987
</TABLE>

     Upon  termination  of an employee,  any unvested  options shall expire.  An
employee has the right at any time to put his certificates from exercised vested
options  to the  Foundation  at a price  equal to the  fair  market  value.  The
employee  must sell his  certificates  to the  Company for a cash  payment  upon
termination.

                                      184
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.   SUBORDINATED CONVERTIBLE LOAN

     The convertible loan was repaid in December 1997,  partly by UPC (170,371),
partly  by UIH  (169,899).  UPC  issued  shares  to UIH in order to  redeem  the
remaining convertible loan.

10.  PROVISIONS

     Provisions relate mainly to deferred taxation.

11.  LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
                                                                       Average         Amount            Amount
                                                     Range of           Rate of      Outstanding       Outstanding
                                                     Interest          Interest     Dec. 31, 1997     Dec. 31, 1996
                                                  --------------       --------     -------------     -------------
     <S>                                          <C>                  <C>            <C>                 <C>
     Bank loans................................      3.61-7.375%         3.9%            73,128            8,950
     Senior Facility, Tranche A................   5.5625-5.6925%         5.6%           883,948               --
     Bridge Facility, Tranche B................            10.5%        10.5%           252,500               --
     Capital leases............................         2.8%-25%         6.0%               394              723
     Other loans...............................         5-7.625%         5.6%            49,867           13,157
                                                                                      ---------           ------
           Total...............................                                       1,259,837           22,830
                                                                                      =========           ======
</TABLE>

     Long-term liabilities at December 31, 1997 will be payable as follows:
<TABLE>
<CAPTION>
                                   Bank        Senior Facility   Bridge Facility      Capital      Other
                                   Loans          Tranche A         Tranche B         Leases       Loans      Total
                                   -----       ---------------   ---------------      -------      -----    ---------
     <S>                          <C>              <C>               <C>                <C>       <C>       <C>
     1998....................      1,468                --           252,500            143        1,708      255,819
     1999....................      1,477                --                --             86        1,743        3,306
     2000....................      3,986                --                --             86        1,781        5,853
     2001....................      9,497                --                --             79       39,635       49,211
     2002....................      9,350                --                --             --        1,250       10,600
     Thereafter..............     47,350           883,948                --             --        3,750      935,048
                                  ------           -------           -------            ---       ------    ---------
           Total.............     73,128           883,948           252,500            394       49,867    1,259,837
                                  ======           =======           =======            ===       ======    =========
</TABLE>

BANK LOANS

     In  February  1997,  Cooperatieve  Centrale  Raiffeisenboerenleenbank  B.A.
granted a NLG65 million nine-year term facility to KTE (the "KTE Facility"). The
KTE Facility bears interest at the applicable  Amsterdam  interbank offered rate
("AIBOR") plus 0.45%, and is secured by, among other things, an encumbrance over
KTE's assets and a pledge by UPC of its shares of KTE.  The  facility  generally
restricts  the payment of dividends  and  distributions.  The  facility  will be
repaid from  proceeds of the CNBH  Facility  (see Note 25). As per  December 31,
1997 an amount of NLG65 million was  outstanding  under this  facility  which is
classified as bank loans.

     Senior  Facility  Tranche A. In October 1997, UPC and Norkabel as borrowers
entered into an NLG1.1 billion Multi-Currency Revolving Credit Facility with The
Toronto-Dominion  Bank, among other banks.  Norkabel was succeeded as a borrower
by Janco  Multicom  in  connection  with the  merger of Janco and  Norkabel.  In
December  1997,  Telekabel  Wien became a borrower under the Tranche A Facility.
Amounts advanced under the Tranche A Facility generally are available for a term
of one, two, three,  or six months through  September 30, 2006 and bear interest
at the London  interbank  offered rate  ("LIBOR") on the  respective  currencies
borrowed  plus a margin  ranging  from  0.50% to 2.0% per annum.  The  Tranche A
Facility  requires that interest rate  protection  arrangements be maintained in
respect of at least 50% of the  Tranche A  Facility.  The  Tranche A Facility is
secured by various  guarantees  from,  negative pledges over and, in some cases,
share  pledges of,  certain  UPC  subsidiaries  in Austria,  Belgium and Norway.

                                      185
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Following  the  repayment  of the Tranche B  Facility,  Belmarken  Holding  B.V.
("Belmarken")  and  other of UPC's  wholly  owned  subsidiaries  must  accede as
guarantors  under the  Tranche A  Facility.  The  Tranche A  Facility  generally
prohibits  dividends and other distributions prior to repayment of the facility.
The  aggregate  amount  available  for  borrowing  under the facility is reduced
automatically  by 5.0% per quarter  beginning  December 31, 2001.  The Tranche A
Facility also limits  borrowings by UPC, certain of its subsidiaries in Austria,
Belgium, Norway and Belmarken, which together before September 30, 2001, may not
exceed  NLG1.1  billion,  based  on a debt to cash  flow  financial  ratio,  and
generally limits UPC's investments in, loans to and guarantees for Belmarken and
its subsidiaries and downstream affiliates to NLG80.0 million.

BRIDGE FACILITY, TRANCHE B.

     In connection  with the purchase of the UPC shares from, and the redemption
of convertible  loans to Philips (UPC  Acquisition),  Belmarken entered into the
USD 125 million Tranche B Facility.  The Tranche B Facility  matures on December
5, 1998,  and bears  interest at LIBOR plus a margin ranging from 4.5% to 6% per
annum. The Tranche B Facility  generally  prohibits  dividends and distributions
and is secured by various upstream  guarantees from,  negative pledges over and,
in some cases, share pledges of, certain Belmarken share holdings or partnership
interests of Belmarken and UPC in The Netherlands,  the Czech Republic,  France,
Portugal,  Romania,  the Slovak  Republic and Hungary  multi-channel  television
systems and in UII, as well as a first charge over  approximately 3.2 million of
the  UIH  Class A Stock  which  UPC  acquired  from  Philips  as part of the UPC
Acquisition.  Belmarken must apply proceeds from disposals, if any, of its share
holdings and partnership interest to repayment of the facility,  which restricts
the manner and terms on which Belmarken may dispose of these assets.

OTHER LOANS

     The other loans as of December  31, 1997  include a  contingent  payable of
38,411 to the minority  shareholder of Janco Multicom AS, Norway, which accretes
interest of 5% per annum.  The contingent  payable  relates to the  contemplated
exercise  price of the call c.q.  put  option for the  remaining  12.7% of Janco
Multicom AS. The amount, including accrued interest, will be payable in 2001.

GUARANTEES

     Bank loans of 7,600 and other loans of 11,482 are  guaranteed  by the local
Eindhoven municipality.

12.  CURRENT LIABILITIES

     The  current  liabilities  relate to short term debt and other  liabilities
which are specified below.
<TABLE>
<CAPTION>
                                                                       1997                1996
                                                                     --------            --------
     <S>                                                              <C>                 <C>
     Short-term debt
           Long term debt repayable within one year............       255,819               3,363
           Short term bank loans................................        1,696             424,449
           Short term loans Philips.............................           --              22,080
                                                                      -------             -------
                Total...........................................      257,515             449,892
                                                                      -------             -------

     Other liabilities
           Accounts payable to trade creditors..................       37,294              31,408
           Accounts payable to affiliated companies.............       23,626               2,140
           Deposits by customers................................        9,927               8,537
           Other short term liabilities.........................       85,858              46,149
           Deferred income and accrued expenses.................       42,760              48,040
                                                                      -------             -------
                Total...........................................      199,465             136,274
                                                                      -------             -------

         Total current liabilities..............................      456,980             586,166
                                                                      =======             =======
</TABLE>

                                      186

<PAGE>

                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Included  under other  short term  liabilities  are amounts  payable to the
parent company of 12,233 (1996: 12,319), relating to services supplied.

13.  Information per Geographical Area
<TABLE>
<CAPTION>
                                                                       Operating
                                       Revenue                       Income (Loss)                    Total Assets
                             ------------------------------  ------------------------------   ------------------------------
                               1997       1996       1995      1997       1996       1995       1997       1996       1995
                             --------   --------   --------  --------   --------   --------   --------   --------   --------
<S>                           <C>        <C>       <C>       <C>        <C>       <C>       <C>        <C>        <C>
Netherlands:
   corporate...............     3,088      4,433     1,242   (11,395)   (12,872)   (6,631)    415,150    339,803    548,781
   operating companies.....    26,712     21,633     4,297     7,313      4,828       282     125,070    120,626    120,094
Austria....................   162,783    156,964    72,802    16,928     16,430     7,117     545,870    528,409    510,903
Belgium....................    38,737     37,704    19,752    (3,869)    (4,287)   (4,646)     69,832    100,762     96,951
Czech Republic.............     7,492      7,746     2,086   (13,116)   (12,307)  (10,772)     24,847     35,149     39,810
Norway ....................    91,529     14,541        --   (27,885)      (767)       --     445,160    168,574         --
France.....................     2,526        179        --    (5,933)    (4,701)       --      36,769     13,283         --
Other......................     4,288      1,979        --    (5,915)    (5,519)       --      13,974     24,450         --
                              -------    -------   -------   -------    -------   -------   ---------  ---------  ---------
       Total...............   337,155    245,179   100,179   (43,872)   (19,195)  (14,650)  1,676,672  1,331,056  1,316,539
                              =======    =======   =======   =======    =======   =======   =========  =========  =========
</TABLE>

     The total  assets of  Netherlands  - corporate  include  UPC's share in the
licence of Kabeltelevisie Amsterdam (a subsidiary of A2000) and the investments,
advances and current accounts with Affiliated companies.

14.  PERSONNEL
<TABLE>
<CAPTION>
     Labor cost is specified as follows:                                         1997              1996             1995
                                                                               --------          --------         --------
       <S>                                                                      <C>               <C>              <C>
       Salaries and wages................................................       58,296            39,022           13,565
       Pension costs.....................................................        1,391             1,050            1,311
       Social securities.................................................       13,748            10,135            3,435
                                                                                ------            ------           ------
           Total.........................................................       73,435            50,207           18,311
                                                                                ======            ======           ======
</TABLE>

     The information about employees by category is as follows:
<TABLE>
<CAPTION>
                                           As of December 31,                                     Average
                                  ----------------------------------------        ------------------------------------------
                                    1997           1996             1995            1997             1996             1995
                                  --------       --------         --------        --------         --------         --------
     <S>                            <C>             <C>              <C>            <C>               <C>             <C>
     Operating.............         374             314              N/A            381               260             N/A
     Other.................         441             390              N/A            437               317             N/A
                                    ---             ---              ---            ---               ---             ---
           Total...........         815             704              407            818               577             380
                                    ===             ===              ===            ===               ===             ===
</TABLE>

15.  FINANCIAL INCOME AND EXPENSES
<TABLE>
<CAPTION>
                                                                           1997              1996                1995
                                                                         --------          --------            --------
<S>                                                                      <C>               <C>                 <C>
     Interest income.................................................       6,512            2,757               6,403
     Interest expense................................................     (72,544)         (38,475)            (19,873)
     Exchange loss & other...........................................     (41,160)         (21,135)             (3,376)
                                                                         --------          -------             -------
           Total.....................................................    (107,192)         (56,853)            (16,846)
                                                                         ========          =======             =======
</TABLE>

16.  OTHER

     The assets of Intercabo, Portugal were sold in January 1998. The closure of
the Portuguese  activities  will result in an expected loss of 18,888,  which is
provided for in 1997.

                                      187
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17.  INCOME TAXES

     The consolidated  financial  statements have been prepared assuming partial
tax basis  for  licence  fees  capitalized  relating  to  certain  acquisitions.
Deferred  taxes  have been  provided  for that  portion  of the  licenses  which
management believes no tax basis will be allowed.

     The  difference  between the income tax  benefit and the actual  income tax
benefit are as follows:
<TABLE>
<CAPTION>
                                                                           1997             1996              1995
                                                                         --------         --------          --------
     <S>                                                                <C>               <C>               <C>
     "Expected" income tax benefit...................................    (59,483)         (26,616)          (11,023)
     Expenses and write downs not deductible.........................     23,352            3,872             4,000
     Differences in foreign tax rates................................      3,232            1,105               797
     Temporary differences for which no deferred tax benefits has
       been provided for.............................................     31,251           26,019             3,471
     Other...........................................................       (163)            (683)            1,131
                                                                        --------          -------           -------
     Income tax loss (benefit).......................................     (1,811)           3,697            (1,624)
                                                                        ========          =======           =======

     The net deferred tax liability of UPC consists of the following:

     Deferred tax liabilities:
     ------------------------
         Intangible fixed assets.....................................     48,077           31,688             5,552
         Tangible fixed assets.......................................     10,193            8,453             3,096
         Other.......................................................      (540)           (3,746)               --
                                                                        --------          -------           -------
                Total deferred tax liabilities.......................     57,730           36,395             8,648
                                                                        --------          -------           -------

     Deferred tax assets:
     -------------------
         Tax loss carry forwards.....................................    149,802          103,635             2,476
         Other.......................................................         --               --               331
         Tax loss carry forwards not recognized......................   (136,580)         (75,630)           (1,913)
                                                                        --------          -------           -------
                Net deferred tax assets..............................     13,222           28,005               894
                                                                        --------          -------           -------

                Net deferred tax liabilities.........................     44,508            8,390             7,754
                                                                        ========          =======           =======
</TABLE>

     Tax loss carry forwards arise primarily in Norway,  The Netherlands,  Czech
Republic  and Austria.  The tax loss carry  forwards of Norway,  aggregating  to
336,767  (1996:  249,818) will expire during the years 1998 - 2007. The tax loss
carry forwards of The Netherlands, Belgium and Austria of 114,661 (1996: 77,855;
1995:  7,922) have no expiration  date. The tax loss carry forwards of the Czech
Republic of 26,223 (1996:  15,688;  1995:14,489) will expire in the years 2001 -
2004.

     During 1996, the Austrian tax authorities  passed legislation which had the
effect of  eliminating  approximately  NLG256,000 of tax basis  associated  with
certain  amounts of goodwill  recorded at Telekabel  effective  January 1, 1997.
This change in tax law is expected to be challenged on  constitutional  grounds.
However,  there can be no assurance of a successful  repeal of such legislation.
Accordingly,  this change caused Telekabel's effective tax rate to increase from
the  historical  effective  tax  rate  through  December  31,  1996,  due to the
non-deductibility of such goodwill amortization subsequent to January 1, 1997.

18.  PARENT COMPANIES RELATED TRANSACTIONS

     The Company is charged by the parent  companies  for services  supplied and
for  interest.  In 1997,  UIH  charged  an amount of 12,958  (1996:  9,004)  for
salaries and related  costs for employees  seconded to UPC group and  affiliated
companies.  The charges from Philips relate to interest on the convertible notes
28,743  (1996:  24,212).  These figures do not include the purchase of equipment
from Philips companies, which purchase is done at normal commercial conditions.

                                      188
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19.  Commitments and Guarantees

     The UPC Group has entered into various rent and lease agreements for office
space, cars etc. The terms of the agreements call for future minimum payments as
follows:

         1998.....................................................        14,119
         1999.....................................................        11,139
         2000.....................................................         9,171
         2001.....................................................         1,957
         2002.....................................................         1,630

     Per December 31, 1996 the Company had guaranteed affiliated company debt in
the  amount of 6,161 with  respect to Princes  Holdings  Ltd.  in  Ireland;  per
December 31, 1997 the guarantee risk is nil.

20.  FOREIGN EXCHANGE RISK EXPOSURE

     The Company did not enter into foreign forward exchange  contracts,  or use
other financial  instruments,  to hedge against foreign exchange  exposure.  The
currency  risk  is  primarily   applicable  to  the  US  dollar,  in  total  for
approximately  USD 125 million  (1996:  USD 185 million).  The main item of this
exposure per December 31, 1997 relates to the B-facility of the Toronto Dominion
financing. Per December 31, 1996 the main risk related to the convertible loans.
The risk exposures for other foreign currencies are not material.

21.  US GAAP RECONCILIATION

     The accounting  policies  followed in the preparation for the  consolidated
financial  statements differ in some respects to those generally accepted in the
United States of America (US GAAP).

     The   differences   which  have  a  material  effect  on  net  loss  and/or
shareholders' equity and/or total assets are as follows:

     o    The fair market value of licences,  goodwill,  land and  buildings and
          networks  for US GAAP  purposes  prior to the  acquisition  of Philips
          ownership interests was limited to a partial step-up. Consequently, no
          step-up  in  asset  value  was  allowed  for  the  difference  between
          historical cost and the fair market value of the assets contributed by
          UIH.  Effective with the  acquisition  by UIH of Philips  interests on
          December  11,  1997,  UPC  applied  pushdown  accounting  for US  GAAP
          purposes. US GAAP reflects the full fair market value of UPC including
          new goodwill created in connection with the purchase and the push down
          of goodwill recorded on UIH's financial  statements existing as of the
          acquisition date.

      o   Deferred taxes have been  established for the difference  between book
          and tax basis of contributed assets.

STOCK OPTION PLAN

     The FASB  issued  Statement  of  Financial  Accounting  Standards  No. 123,
"Accounting for Stock-Based  Compensation".  This statement defines a fair value
based  method of  accounting  for  employee  stock  options  or  similar  equity
instruments.  The  Company  has  adopted  the  disclosure  requirements  of this
statement in the accompanying financial statements, as the Company complies with
the provisions of APB No. 25 for US GAAP accounting purposes.

INCOME TAXES

     The Company  accounts for income taxes under the provisions of Statement of
Financial  Accounting  Standards  No. 109,  "Accounting  for Income Taxes" which
requires  recognition  of deferred tax assets and  liabilities  for the expected
future income tax  consequences of transactions  which have been included in the
financial statements or tax returns. Under this method,  deferred tax assets and
liabilities are determined  based upon the difference  between the financial and
tax bases of assets and liabilities and carryforwards using enacted tax rates in
effect for the year in which the  differences  are expected to reverse.  UPC has
adopted the principles of this statement in its financial statements.

                                      189
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

US GAAP INFORMATION

     The  calculation  of net  loss,  shareholders'  equity  and  total  assets,
substantially in accordance with US GAAP, is as follows:
<TABLE>
<CAPTION>
                                                                           1997             1996             1995
                                                                         --------         --------         --------
<S>                                                                    <C>              <C>               <C>
Net loss as per consolidated statements of income.....................  (171,698)         (91,456)          (46,242)

     Adjustments to reported income (loss):
     Amortization of licences, goodwill and basis differences related
       to investments in affiliated companies.........................     5,435            6,832             5,229
     Depreciation of fixed assets.....................................     1,796            1,908               953
     Amortization goodwill affiliated companies.......................     3,480            3,692                --
     Tax effect of US GAAP adjustments................................      (162)           3,188            (1,469)
     Compensation expense related to options..........................    (4,817)              --                --
                                                                       ---------        ---------         ---------
     Approximate net loss in accordance with US GAAP..................  (165,966)         (75,836)          (41,529)
                                                                       =========        =========         =========

Shareholders' equity as per consolidated balance sheets...............   155,587          449,639           537,633

     Adjustments to reported equity:
     Licences, goodwill and basis differences related to investments
       in affiliated companies........................................   260,761         (123,423)         (186,122)
     Tangible fixed assets............................................        --          (20,067)          (21,975)
     Goodwill affiliated companies....................................        --          (50,771)               --
     Deferred taxes ..................................................        --            3,188                --
     Provision for option compensation................................    (4,817)              --                --
                                                                        --------        ---------         ---------
     Approximate shareholders' equity in accordance with US GAAP......   411,531          258,566           329,536
                                                                        ========        =========         =========

Total assets as per consolidated balance sheets....................... 1,676,672        1,331,056         1,316,539

     Adjustments to reported assets:
     Licences, goodwill and basis differences related to investments in
       affiliated companies...........................................   260,761         (123,423)         (186,122)
     Tangible fixed assets............................................        --          (20,067)          (21,975)
     Goodwill affiliated companies....................................        --          (50,771)               --
                                                                       ---------        ---------         ---------
     Approximate total assets in accordance with US GAAP.............. 1,937,433        1,136,795         1,108,442
                                                                       =========        =========         =========
</TABLE>

22.   SUMMARY  FINANCIAL INFORMATION  ABOUT A2000 HOLDING  N.V.,  BASED ON DUTCH
      GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
<TABLE>
<CAPTION>
     Balance sheet per December 31                                                        1997              1996
                                                                                        --------          --------
     <S>                                                                                <C>               <C>
     Intangible fixed assets....................................................        122,189           132,018
     Tangible fixed assets......................................................        309,291           230,304
     Financial fixed assets.....................................................            543               543
     Liquid assets..............................................................          6,868            33,389
     Other current assets.......................................................         35,557            24,997
                                                                                        -------           -------
         Total assets...........................................................        474,448           421,251
                                                                                        =======           =======
     Provisions.................................................................          2,154            11,693
     Long term debt.............................................................        426,000           366,000
     Current liabilities........................................................         67,652            40,908
                                                                                        -------           -------
         Total liabilities......................................................        495,806           418,601
                                                                                        =======           =======
         Total shareholders' value..............................................        (21,358)            2,650
                                                                                        =======           =======
</TABLE>
                                      190
<PAGE>
                     UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
     Statement of income                                                                  1997              1996
                                                                                        --------          --------
     <S>                                                                                <C>              <C> 
     Revenue....................................................................         101,450           89,893
     Costs......................................................................        (67,687)          (49,064)
     Depreciation and amortization..............................................        (50,846)          (43,789)
     Financial income / charges.................................................        (16,751)          (12,969)
     Release of tax provision...................................................          9,826                --
                                                                                        -------           -------
         Net loss...............................................................        (24,008)          (15,929)
                                                                                        =======           =======
</TABLE>

 23. USE OF ESTIMATES

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

24.  PRO FORMA INFORMATION (UNAUDITED)

     The  acquisition of the additional  91.7% in  Norkabelgruppen  AS effective
September 30, 1996, and the  acquisition of Janco Kabel TV effective  January 1,
1997, (subsequently merged into Janco Multicom AS) have a material effect on the
figures  reported in the statements of income.  Based upon  currently  available
information and upon certain  assumptions that management  believes  reasonable,
proforma results of UPC assuming these  transaction  occurred on January 1, 1996
are as follows:

                                                                         1996
                                                                       --------

         Revenues ..................................................    316,791
         Net loss...................................................   (113,537)

25.  SUBSEQUENT EVENTS

INTERCABO

     In  January  1998  the  assets  of   Intercabo,   Portugal  were  sold  for
approximately  NLG4,000.  The  expected  loss  relating  to the  closure  of the
Portuguese activities is provided for per December 31, 1997.

COMBIVISIE

     Effective January 1, 1998, UPC acquired certain assets, including the cable
systems of Combivisie with  approximately  143,000  subscribers for an amount of
NLG180,762. Combivisie administered the cable television systems on behalf of 18
municipalities in the region  surrounding  Kabeltelevisie  Eindhoven NV ("KTE").
The purchase was funded with a NLG60,000 draw on UPC's Senior Facility Tranche A
and   NLG120,762   from   a   credit   facility   from   Cooperative    Centrale
Raiffeisen-Boerenleenbank B.A. ("Rabobank").  Subsequent to the transaction, the
assets and  liabilities  of both KTE and Combivisie  were merged.  The resulting
entity is named The Cable Network Brabant Holding BV ("CNBH").

     On  February  20,  1998 CNBH has secured a NLG250  million  nine-year  term
facility to CNBH. The CNBH facility  bears interest at the applicable  Amsterdam
interbank  offered rate  ("AIBOR") plus a margin ranging from 0.60% to 1.60% per
annum, and is secured by, among other things,  an encumbrance over CNBH's assets
and a pledge by Cable  Network  Netherlands  Holding of its shares of CNBH.  The
facility is used to  refinance  the  existing  KTE  facility and to complete the
Combivisie   acquisition.   Furthermore  the  facility  will  be  used  for  the
development and  exploitation  of enhanced cable TV services,  data services and
telephony services.

                                      191
<PAGE>
                    UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SKT SPOL. S.R.O. ("SKT")

     On February 25, 1998, UPC signed a letter of intent with Siemens to acquire
their 95.63% interest in SKT for $51,000 (NLG103,000). SKT is a cable television
company in the Slovak Republic with approximately  156,000  subscribers of which
approximately 136,000 subscribers are located in Bratislava. Closing is expected
to occur during the third quarter of 1998.

UNITED TELEKABEL HOLDING N.V.

     On April 2, 1998,  UPC and N.V. NUON  Energie-Onderneming  voor  Gelderland
("NUON"),  a Netherlands energy company,  signed a definitive agreement to merge
all of  their  Netherlands  broadband  cable  television  and  telecommunication
companies and activities into a newly formed company,  United Telekabel  Holding
N.V.  ("UTH").  UPC will  contribute  its wholly owned interest in CNBH, its 50%
ownership  interest in A2000 Holding N.V. including its interest in the license,
and its wholly owned  interest in  Kabeltelevisie  Son en Breugel B.V. for a 51%
interest in UTH. NUON will contribute its ownership  interests in N.V. Telekabel
Beheer (totalling  approximately  485,000 equity subscribers) for a 49% interest
in UTH.  Closing of the transaction is subject to certain  conditions  precedent
including  third party  consents  and  shareholder  approval.  Upon  closing,  a
correction  payment will be made by either UPC or NUON to balance the  ownership
interests based upon agreed valuation methodology. Further, both parties will be
committed to minimum  funding levels or become subject to future  dilution.  The
closing  agreements  provide  UPC with a call  option to  acquire  50% of NUON's
ownership in UTH and provide NUON with a put option to sell 50% of its ownership
interests  UTH.  The call and put  options  are in effect for a two-year  period
starting one year after the closing of the transaction  expected to occur before
July 1, 1998.  The put/call price will be fixed as of closing.

UIH LOAN

     On March 16, 1998,  Belmarken executed a $100,000 promissory note with UIH.
The note bears  interest at 10.75% per annum on the  outstanding  balance and is
due on demand.  The note is  convertible  into UPC stock at fair market value at
the election of UIH.  Payments  under the note are  subordinate  to UPC's Bridge
Facility  Tranche B. On March 23,  1998,  UPC borrowed  $63,000  under the note,
proceeds from the draw were used to reduce UPC's Bridge Facility Tranche B.

KABELKOM HOLDING COMPANY  ("KABELKOM") AND CESKA PROGRAMOVA  SPOLECNOST SRO ("TV
MAX")

     On April 1, 1998, UPC and Time Warner Entertainment  Company ("TWE") signed
a  Memorandum  of  Understanding  ("MOU") for the purpose of  restructuring  the
assets  of  Kabelkom.  Under the terms of the MOU,  UPC will  acquire  TWE's 50%
ownership   interest  in   Kabelkom's   Hungarian   cable   television   systems
(approximately  266,000  subscribers)  and TWE and other  partners  will acquire
UPC's 50% ownership interest in Kabelkom's Hungarian  programming  business.  In
addition, the MOU provides for the sale of UPC's ownership interest in TV Max, a
Czech Republic programming  business, to TWE. The MOU requires UPC to make a net
payment to TWE of $9,500 upon  closing  which is expected to occur in the second
quarter of 1998.

UNITED INTERNATIONAL INVESTMENTS

     In April and May, 1998, UPC signed MOUs with TINTA, its 50% partner in UII,
to acquire  TINTA's  interests  related to Tevel and  Melita,  and to sell UPC's
interest  in  Princes  Holdings  to  TINTA,  for  a  net  payment  to  TINTA  of
approximately  $71,000. The MOUs are contingent upon several factors,  including
the  completion of financing  satisfactory  to UIH, the consent of certain third
parties and regulatory bodies, and the signing of definitive documentation.

                                      192
<PAGE>
                    UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


SUMMARY OF MAJOR GROUP AND AFFILIATED COMPANIES
-----------------------------------------------

     AUSTRIA:
       Telekabel Wien GmbH                                                 95.0%
       Telekabel Graz GmbH                                                 95.0%
       Telekabel Klagenfurt GmbH                                           95.0%
       Telekabel - Fernsehnetz Region Baden
       Betriebsgesellschaft mbH                                            95.0%
       Telekabel - Fernsehnetz Wr. Neustadt / Neunkirchen
       Betriebsgesellschaft mbH                                            95.0%

     BELGIUM:
       Radio Public SA                                                    100.0%

     CZECH REPUBLIC:
       Kabel Net Holding AS                                               100.0%
       Kabel Net Brno AS                                                  100.0%
       Ceska Programova Spolecnost SRO                                    100.0%

     ENGLAND:
       UPC Services Limited                                               100.0%

     FRANCE:
       Mediareseaux S.A.                                                  100.0%
       Mediareseaux Marne SA                                               99.6%

     HUNGARY:
       Kabelkom Holding Company (1)                                        50.0%

     IRELAND:
       Through UII partnership (2):
       Princes Holdings Ltd                                                20.0%

     ISRAEL:
       Through UII partnership (2):
       Tevel Israel International Communications Ltd                       23.3%

     MALTA:
       Through UII partnership (2):
       Melita Cable TV Ltd                                                 25.0%

     NETHERLANDS:
       A2000 Holding NV (Amsterdam)                                        50.0%
       Kabeltelevisie Eindhoven NV                                        100.0%
       Kabeltelevisie Son & Breugel                                       100.0%
       Belmarken Holding BV                                               100.0%
       Binan Investments BV                                               100.0%
       Stipdon Investments BV                                             100.0%
       Cable Network Brabant Holding BV                                   100.0%
       Cable Network Netherlands Holding BV                               100.0%
       Cable Network Zuid-Oost Brabant Holding BV                         100.0%
       Cable Network Austria Holding BV                                   100.0%

     NORWAY:
       Janco Multicom AS (3)                                               87.3%

                                      193
<PAGE>
                    UNITED PAN-EUROPE COMMUNICATIONS N.V.
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     PORTUGAL:
       Intercabo Televisao por Cabo SGPS Lda                              100.0%

     ROMANIA:
       Multicanal Holdings SRL                                             90.0%
       Control Cable Ventures SRL                                         100.0%

     SLOVAK REPUBLIC:
       Trnavatel SRO                                                       75.0%
       Slovatel SRO                                                       100.0%

   (1)    UPC NV has a 50% legal ownership in Kabelkom Holding Company, which is
          reduced  by a  preferential  claim  by  Time  Warner  to  an  economic
          ownership of 47.2%.

   (2)    UII (United  International  Investments)  is a US general  partnership
          between UPC NV and TeleCommunications, Inc. With respect to the Israel
          system, UPC NV's interest in UII is 50 % (corresponding  with a 23.3 %
          beneficial  interest  in  Tevel  Israel  International  Communications
          Ltd).With  respect to the Irish  system,  UPC NV's  interest in UII is
          44.4 %  (corresponding  with a 20 %  beneficial  interest of UPC NV in
          Princes  Holding  Ltd).  With  respect to the Malta  system,  UPC NV's
          interest  in  UII  is  effectively  50 %  (corresponding  with  a 25 %
          beneficial interest of UPC NV in Melita Cable TV Ltd). UPC NV provides
          the management  services to UII Management,  a US general  partnership
          between  UPC  NV (50 %) and  Tele-Communications,  Inc.  (50 %)  which
          provides  management and  consulting  services to UII's Israel (Tevel)
          and Malta (Melita) cable television interests.

   (3)    UPC NV has a 87.3% legal ownership in Janco Multicom AS, together with
          a call  option  on the  remaining  12.7%  for the same  amount  as the
          minority  shareholder has a put option. The call and put option expire
          in 2001. As from an economic perspective UPC fully owns Janco Multicom
          AS, 100% is consolidated.

                                      194
<PAGE>
                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the  undersigned,  thereunto duly  authorized,  in the City of Denver,
State of Colorado, on this 29th day of May 1998.

                                             United International Holdings, Inc.
                                             a Delaware 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                                    Chairman of the Board, President and
                                                       Chief Executive Officer                   May 29, 1998
/s/ J. Timothy Bryan
---------------------------------
J. Timothy Bryan                                     Chief Financial Officer, Treasurer          May 29, 1998
                                                       and Assistant Secretary
     *
---------------------------------
Albert M. Carollo                                    Director                                    May 29, 1998

     *
---------------------------------
John P. Cole, Jr.                                    Director                                    May 29, 1998

/s/ Valerie L. Cover
---------------------------------
Valerie L. Cover                                     Controller (Principal Accounting Officer)
                                                       and Vice President                        May 29, 1998
     *
---------------------------------
Lawrence F. DeGeorge                                 Director                                    May 29, 1998

     *
---------------------------------
Lawrence J. DeGeorge                                 Director                                    May 29, 1998

     *
---------------------------------
Antony P. Ressler                                    Director                                    May 29, 1998

     *
---------------------------------
John F. Riordan                                      Director                                    May 29, 1998

     *
--------------------------------
Curtis W. Rochelle                                   Director                                    May 29, 1998

     *
--------------------------------
Mark L. Schneider                                    Director and Executive Vice President       May 29, 1998

     *
--------------------------------
Bruce H. Spector                                     Director                                    May 29, 1998

*  By:   /s/ J. Timothy Bryan
      --------------------------
         J. Timothy Bryan
         Attorney-in-fact
</TABLE>
                                                         195