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

                                    FORM 10-K

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

                   For the ten months ended December 31, 1998
                                       or
          [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the transition period from 3/1/98 to 12/31/98

                           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 10 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 3, 1999 was $2,515,083,956.

The number of shares  outstanding of the Registrant's  common stock as of May 3,
1999 was:

          Class A Common Stock - 33,351,410 shares
          Class B Common Stock - 9,733,540  shares
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<PAGE>
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                                           UNITED INTERNATIONAL HOLDINGS, INC.
                                                ANNUAL REPORT ON FORM 10-K
                                        FOR THE TEN MONTHS ENDED DECEMBER 31, 1998

                                                    Table of Contents

                                                                                                                     Page
                                                                                                                    Number
                                                                                                                    ------

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

Item 2.       Properties........................................................................................      29

Item 3.       Legal Proceedings.................................................................................      29

Item 4.       Submission of Matters to a Vote of Security Holders...............................................      30

                                                         PART II

Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters.............................      31

Item 6.       Selected Financial Data...........................................................................      31

Item 7.       Management's Discussion and Analysis of Financial Condition and Results of Operations.............      33

Item 7A.      Quantitative and Qualitative Disclosures About Market Risk........................................      55

Item 8.       Financial Statements and Supplementary Data.......................................................      59

Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..............      59

                                                        PART III

Item 10.      Directors and Executive Officers of the Registrant................................................     110

Item 11.      Executive Compensation............................................................................     110

Item 12.      Security Ownership of Certain Beneficial Owners and Management....................................     110

Item 13.      Certain Relationships and Related Transactions....................................................     110



                                                         PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K...................................     111
</TABLE>
<PAGE>

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

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

United  International  Holdings,  Inc.  ("UIH"  or the  "Company")  is a leading
broadband   communications  provider  outside  the  United  States.  We  provide
multi-channel  television  services in 20 countries  worldwide and telephone and
Internet/data  services in selected  international  markets.  Our operations are
grouped into three major  geographic  regions:  Europe,  Asia/Pacific  and Latin
America.  Our European  operations are held through our approximately 60% owned,
publicly traded subsidiary, United Pan-Europe Communications N.V. ("UPC"), which
is the largest pan-European  broadband  communications  provider  (multi-channel
television, telephone and Internet/data) in terms of numbers of subscribers. Our
primary  Asia/Pacific  operations  are CTV  Pty  Limited  and  STV  Pty  Limited
(collectively,  "Austar"),  which  is  the  largest  provider  of  multi-channel
television services in regional Australia.  Our primary Latin American operation
is VTR  Hipercable  S.A.  ("VTRH"),  Chile's  largest  multi-channel  television
provider and a growing provider of telephone services.  As of December 31, 1998,
our  systems  passed  9.4  million  homes and  served 4.4  million  basic  video
subscribers.

We were 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, we have,
since our formation, focused on and invested in multi-channel television systems
outside the United States.  In our early years, we acquired  primarily  minority
ownership interests in systems, which we, nonetheless,  actively managed. Having
successfully  built and developed many  multi-channel  television systems around
the world,  in 1996 we began  focusing our  operations on large,  majority-owned
systems,  with the goal of  significantly  expanding the scale of our operations
and increasing our financial flexibility.  Through a series of transactions,  we
acquired  controlling  interests in all of our large,  primary  systems,  and we
believe we are well-positioned to capitalize on the growth  opportunities of our
operating companies.  Since 1994, we have increased our total subscriber base at
an average annual rate of approximately  53% from 0.8 million  subscribers as of
December 31, 1994 to 4.4 million subscribers as of December 31, 1998.

Our operating companies are currently a combination of highly penetrated, mature
systems that generate stable cash flow and earlier stage businesses. Our primary
goal in the majority of these  markets is to capitalize  on the  opportunity  to
increase  revenues and cash flows through the  introduction of new services such
as tiered programming,  pay-per-view,  telephone and Internet/data services over
our broadband communications networks.  Today, we are a full service provider of
these video,  voice and  Internet/data  services in most of our Western European
markets and New Zealand. We also provide video and voice services, and expect to
provide  Internet/data  services in the near future, in Chile.  Summarized below
are our key accomplishments in this regard:

o    over the last three years, we have rebuilt or constructed  two-way networks
     for  approximately  2.2 million homes which are capable of delivering cable
     television,  telephone and  Internet/data  services  over single  broadband
     networks,

o    we have launched  telephone  services in a total of seven markets:  four in
     Western  Europe,  in  Hungary,  in  New  Zealand  and  in  Chile  and  have
     over 138,000 lines in service as of December 31, 1998, and

o    we have launched  Internet/data  services in five markets in Western Europe
     and New Zealand and are currently testing Internet service in Chile.

For  strategic  purposes  and,  in some  cases,  because  of  foreign  ownership
restrictions, we have often initially  invested in operating  systems with local
strategic  partners.  In  some  cases,  such  as in  many  of our  European  and
Australian  systems,  we subsequently  acquired our partners' interests in these
systems.  Below is a summary of the  ownership  structure of our three  regional
holding  companies  as well as our  interests in our  operating  companies as of
December  31,  1998.  Our  interests  in such  systems are often held by various
holding companies and our voting rights and rights to participate in earnings of
such entities may differ from the interests indicated in the chart below.

                                       2
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<S>               <C>
************************************************************************************************************************************
*                                                               UIH                                                                *
*                                                                                                                                  *
************************************************************************************************************************************
            100%  *                                                             100%  *
***************************************  *******************************************************************************************
*          UIH Europe, Inc.           *  *                       United International Properties, Inc.                             *
*             ("UIHE")                *  *                                     ("UIPI")                                            *
***************************************  *******************************************************************************************
                  *                                                                   *
                  *                                           **********************************************
          100%(1) *                                    98.0%  *                                            *  100%
***************************************  ********************************************* *********************************************
*                UPC                  *  *   UIH Asia/Pacific Communications, Inc.   * *         UIH Latin America, Inc.           *
*                                     *  *                 ("UAP")                   * *                 ("ULA")                   *
***************************************  ********************************************* *********************************************
                  *                                           *                                             *
                  *                                           *                                             *
***************************************  ********************************************* *********************************************
*Austria:                             *  *Australia:                                 * *Brazil:                                    *
* Telekabel Group            95.0%    *  * Austar                          100.0%    * * TV Show Brazil, S.A. ("TVSB")   100.0%    *
*Belgium:                             *  * United Wireless Pty Limited               * * TV Cabo e Comunicacoes de                 *
* Radio Public N.V./S.A.              *  *  ("United Wireless")            100.0%    * *  Jundiai, S.A. ("Jundiai")       46.3%    *
*  ("TVD")                  100.0%    *  * XYZ Entertainment Pty Limited             * *Chile:                                     *
*Czech Republic:                      *  *  ("XYZ Entertainment")           50.0%    * * VTRH                             40.0% (7)*
* Kabel Net Group                     *  *China:                                     * *Mexico:                                    *
*  ("KabelNet")             100.0%    *  * Hunan International TV                    * * Tele Cable de Morelos, S.A.               *
* Ceska Programova                    *  *  Communications Company Limited           * *  de C.V. ("Megapo")              49.0%    *
*  Spolecnost SRO                     *  *  ("HITV")                        49.0% (5)* *Peru:                                      *
*  ("TV Max")               100.0%    *  *New Zealand:                               * * Cable Star S.A. ("Cable Star")   60.0%    *
*France:                              *  * Saturn Communications Limited             * *Latin American Programming:                *
* Mediareseaux Marne S.A.             *  *  ("Saturn")                      65.0%    * * MGM Networks Latin America                *
*  ("Mediareseaux")          99.6%    *  *Philippines:                               * *  LLC ("MGM Networks LA")         50.0%    *
*Hungary:                             *  * Philipino Cable Corporation               * *********************************************
* Telekabel Hungary BV                *  *  ("PCC")                         19.6% (6)*
*  ("Telekabel Hungary")     79.3%    *  *Tahiti:                                    *      
* Kabelkom Kabeltelevizio             *  * Telefenua S.A. ("Telefenua")     90.0%    *
*  KFT ("Telekabel Hungary            *  ********************************************* 
*   Programming")            50.0% (2)*    
* Monor Telefon Tarsasag,             *   
*  Rt ("Monor")              44.8%    *
*Ireland:                             *
* Tara Television Limited             *
*  ("Tara")                  80.0%    *
*Israel:                              *
* Tevel Israel International          *
*  Communications Ltd.                *
*  ("Tevel")                 46.6%    *
*Malta:                               *
* Melita Cable TV PLC                 *
*  ("Melita")                50.0%    *
*The Netherlands:                     *
* United Telekabel Holding            *
*  N.V. ("UTH")              51.0% (3)*
*Norway:                              *
* Janco Multicom AS                   *
*  ("Janco")                100.0%    *
*Romania:                             *
* Control Cable Ventures SRL          *
*  ("Control Cable")        100.0%    *
* Multicanal Holdings SRL             *
*  ("Multicanal")           100.0%    *
* Eurosat CA-TV SRL                   *
*  ("Eurosat")               51.0%    *
*Slovak Republic:                     *
* Kabeltel SRO ("Kabeltel") 100.0%    *
* Trnavatel SRO                       *
*  ("Trnavatel")             75.0%    *
*Spain/Portugal:                      *
* Ibercom, Inc. ("IPS")      33.5% (4)*
***************************************
</TABLE>
(1)  As of December  31,  1998,  UIHE held all of the voting  control of UPC and
     owned all of its issued and  outstanding  shares,  including  approximately
     7.2% of such shares,  which had been registered in the name of a foundation
     controlled by UIH to support UPC's  employee stock option plan. In February
     1999,  UPC  successfully  completed  an  initial  public  offering  selling
     approximately  44.6 million of its shares on the Amsterdam  Stock  Exchange
     and NASDAQ  National  Market  System and  completed  a sale of 1.6  million
     shares to a strategic investor,  resulting in an ownership interest by UIHE
     of approximately 64.3% subsequent to the offering.

                                       3
<PAGE>

(2)  In March,  1999, Time Warner  Entertainment  Company ("TWE")  exercised its
     option to acquire UPC's interest in Telekabel Hungary Programming (see Note
     3).
(3)  On  February  17,  1999,  UPC  acquired  the  remaining  49.0%  of UTH  for
     euro250,187 (approximately $274,508).
(4)  UIPI transferred its interest in IPS to UPC in February 1999.
(5)  Pursuant to a memorandum of understanding  with AmTec,  Inc.  ("AmTec") UAP
     and AmTec  agreed  to  exchange  UAP's  interest  in HITV for AmTec  stock.
     Closing on the transaction is expected to occur by the end of 1999, subject
     to certain conditions.
(6)  UAP currently holds a convertible  loan,  which upon full conversion  would
     provide UAP with a 40.0%  equity  ownership  interest in Sun Cable  Systems
     ("Sun  Cable").  UIH will hold an effective  19.6% interest in PCC when the
     merger  between Sun Cable  (49.0%) and Sky Cable  (51.0%) is  completed  in
     1999.
(7)  On April 29, 1999,  ULA acquired the remaining  ownership  interest in VTRH
     from  its  current  partners  for $268  million,  inceasing  its  ownership
     interest to 100%.

EUROPE.

Through  our  64.3%  owned  subsidiary,  UPC,  we are the  largest  pan-European
broadband  communications provider based on number of subscribers.  UPC owns and
operates  cable-based  communications  networks in 10 countries in Europe and in
Israel.  UPC provides cable  television  services in these  countries as well as
telephone and/or Internet/data  access services in five of these markets.  UPC's
primary Western European systems are located in Vienna (Austria); Amsterdam (The
Netherlands);  Brussels (Belgium);  Oslo (Norway);  and suburban Paris (France).
UPC also has systems in Israel, Malta and Eastern Europe.

UPC's  systems had 5.6 million  homes in their  service areas as of December 31,
1998. Of these,  4.7 million homes were passed by the cable in UPC's network and
thus are capable of receiving UPC's services. Approximately 3.4 million of these
homes,  or 73.0%,  subscribe  to UPC's basic video  services.  UPC has  majority
ownership  of  substantial  ownership  stakes  in all of  its  Western  European
systems.  These  Western  European  systems  pass  3.1  million  homes  and have
approximately 2.3 million  subscribers.  UPC also has majority ownership of most
of its systems outside Western Europe.

In UPC's Western European markets, UPC is upgrading its existing network to two-
way transmission  capability.  When we upgrade,  we replace parts of the coaxial
cable with fiber optic lines and upgrade the remaining  coaxial cable so that it
can send  signals  both to and from the  customer's  home.  This  enables UPC to
provide digital video,  telephone and  Internet/data  services.  At December 31,
1998,  approximately  51.0% of UPC's  Western  European  network was upgraded to
two-way  capability and UPC expects  approximately  75.0% to be upgraded by year
end  1999.  At  December  31,  1998,   UPC's  Western  European  systems  served
approximately 41,200 cable telephone lines and had approximately 24,300 Internet
access  subscribers.  In UPC's non-Western  European  markets,  UPC is primarily
focused on increasing its subscriber base and its revenue per subscriber chiefly
through marketing,  superior programming and, in some cases, the introduction of
new services.

UPC operated from July 1995 to December  1997 as a 50/50 joint  venture  between
UIH  and  several  subsidiaries  of  Philips  Electronics  N.V.   (collectively,
"Philips").  At the  formation  of the  joint  venture  in  July  1995,  Philips
contributed  to  us,  among  other  things,  its  majority  interests  in  cable
television  systems in Austria and Belgium,  and its minority interests in cable
television  systems in France,  called  Citecable,  Germany and The Netherlands,
called "KTE". We contributed our minority  interests in cable television systems
in Hungary,  Ireland,  Israel, Malta, Norway, Spain and Sweden, and our majority
interest in the Czech Republic and Portugese systems, and $78.2 million in cash,
including  accrued  interest.  We also  issued to Philips  $50.0  million of UIH
common stock. In addition,  Philips received  convertible  notes of UPC totaling
$133.6  million  to  make  up  the  difference  in  values  between  the  assets
contributed by us and the assets contributed by Philips.

On December 11, 1997,  we acquired  the 50.0% of UPC's  ordinary  shares held by
Philips.  As part of this  acquisition,  we purchased the 3.17 million shares of
our Class A Common  Stock and all of UPC's  convertible  notes held by  Philips.
Following this acquisition,  and until UPC's initial public offering in February
1999,  UPC  became  essentially  a  wholly-owned  subsidiary  of UIH,  including
approximately 7.2% of its stock held by a foundation controlled by us to support
UPC's stock option plans to employees.

Since  formation,  UPC has developed  largely  through  acquisitions.  Its major
acquisitions include:

      o   a 50.0%  interest in the "A2000"  system in the City of Amsterdam  and
          four surrounding municipalities in July 1995;
      o   the  remaining  96.2% of the KTE  system  located  in  Eindhoven,  The
          Netherlands, in September 1995;

                                       4
<PAGE>

      o   increasing  our  interest  in "Norkabel"  (Norway)  from 8.3% to 100%,
          Kabelkom  (Hungary)  from 3.9% to  effectively  50.0% and the  Swedish
          system from 2.1% to 25.9% in September 1996;
      o   all of the Janco cable system in Oslo in two parts in January 1997 and
          November 1998;
      o   100%  of the "Combivisie"  cable  television  systems  in  the  region
          surrounding our KTE system in The  Netherlands,  effective  January 1,
          1998;
      o   various interests in Hungarian cable television  systems in June 1998,
          resulting in a 79.25% interest in Telekabel Hungary, Hungary's largest
          cable television operator;
      o   100%  of  the "Telekabel  Beheer" cable   television   system  in  the
          Netherlands in two parts in August 1998 and February 1999;
      o   an  additional  23.3% and 25.0%  interests  in our Israeli and Maltese
          systems, respectively; and
      o   interests in various programming companies.

UPC has also sold its  unconsolidated  interests  in  certain  cable  television
systems in France  (Citecable),  Germany,  Spain,  Sweden and  Ireland,  and its
consolidated interest in Portugal.

ASIA/PACIFIC.

We are a leading provider of multi-channel  television services in Australia and
the Asia/Pacific region. We own and operate multi-channel  television systems in
Australia,   New  Zealand,   the  Philippines  and  Tahiti.   We  currently  own
approximately  98.0% of UAP. As of December 31, 1998, our  Asia/Pacific  systems
passed  an  aggregate  of 2.5  million  television  homes  and had  0.5  million
subscribers. The following provides an overview of our primary operations in the
Asia/Pacific Region:

      o   AUSTAR  (AUSTRALIA).  Through  our  effectively  100% owned  business,
          Austar,  we are  the  largest  provider  of  multi-channel  television
          services  in  regional  Australia  (outside  Australia's  six  largest
          metropolitan  areas.)  Austar markets a digital direct to home ("DTH")
          satellite service and operates  "wireless cable" ("MMDS") systems.  As
          of December 31, 1998,  we had 0.3 million  subscribers  and passed 2.1
          million homes in Australia.

      o   SATURN (NEW ZEALAND).  Through our 65% owned  subsidiary,  Saturn,  in
          which  SaskTel  Holdings  (New  Zealand),  Inc.  ("Sasktel")  owns the
          remaining  35%, we currently  operate a wireline  cable and  telephone
          system in and around  Wellington.  As of  December  31,  1998,  we had
          approximately 6,000 cable subscribers  (approximately 15% penetration)
          and  approximately  7,400  telephone  subscribers  (approximately  20%
          penetration) and passed  approximately 41,000 homes out of a potential
          approximately 141,000 homes.

      o   XYZ  Entertainment  (Australia  Programming).  Through  our 50%  owned
          affiliate,  XYZ  Entertainment,  we  are a  programming  company  that
          provides  five  channels to the  Australian  multi-channel  television
          market.  As  of December 31, 1998,  XYZ  Entertainment had 0.7 million
          programming subscribers.

Operations in our  Asia/Pacific  region have been  developed  primarily  through
acquisitions  and the  development  of the  operations  of Austar.  In 1994,  we
acquired,  through  directly and indirectly held  interests,  an effective 50.0%
economic  interest in two newly-formed  companies that constitute  Austar.  From
December  1995 through  October  1996,  we increased  our economic  ownership to
effectively  100% through  additional  equity  contributions  and purchases from
other shareholders.

In July 1994,  we acquired a 50.0%  interest in Saturn,  which at the time owned
only a small cable  television  system outside of Wellington.  Since our initial
investment,  Saturn has begun  construction  of a hybrid fiber  coaxial  ("HFC")
cable and  telephony  network in the greater  Wellington  area. In July 1996, we
acquired the remaining  50.0% interest in Saturn in exchange for a 2.0% interest
in UAP. In July 1997, Sasktel purchased a 35.0% equity interest in Saturn.

In October  1994, we and Century  Communications  Corp.  ("Century")  formed XYZ
Entertainment,  each  retaining a 50.0%  interest.  In June 1995, we and Century
formed the 50/50 joint venture Century United  Programming  Ventures Pty Limited
("CUPV") to hold our investment in XYZ Entertainment. In September 1995, a 50.0%
interest in XYZ  Entertainment  was sold to a third party,  thereby diluting our
interest in XYZ  Entertainment  to 25.0%.  In September  1998,  UAP acquired the
25.0% interest in XYZ  Entertainment  held by Century,  increasing our ownership
interest to 50.0%.

LATIN AMERICA.

We own  interests  in and  operate  multi-channel  television  distribution  and
telecommunications systems in Chile, Brazil, Mexico and Peru. As of December 31,
1998 our Latin American  systems  passed an aggregate of 2.2 million  television
homes and had 0.5 million subscribers.

                                       5
<PAGE>

Our largest operation in Latin America is our Chilean  operation,  VTRH. Through
VTRH, we are the largest provider of each of wireline cable television, MMDS and
DTH services and a growing  provider of  telephone  services in Chile.  Wireline
cable  is  VTRH's  primary  business  representing  approximately  94.4%  of our
subscribers  while MMDS and DTH represent  approximately  3.2% and approximately
2.4%,  respectively.  We  have  an  estimated  56%  market  share  of the  cable
television  services market  throughout  Chile and an estimated 38% market share
within Santiago, Chile's largest city. In 1998, we began the wide-scale roll-out
of residential  cable  telephone  service in six  communities  contained  within
Santiago and one major city outside  Santiago and are  currently  expanding  our
efforts to include additional areas throughout Chile.

In September  1996, we and VTR S.A.  formed the joint  venture  VTRH,  with each
contributing its respective Chilean multi-channel  television assets to VTRH. We
retained a 34.0%  interest in this new joint venture until April 29, 1999,  when
we  acquired  VTR S.A.'s  interest  in VTRH for $268.0  million  which  includes
repayment of advances from other shareholders, a promissory note from UIH to the
other shareholders and certain other expenses.

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

We  manage  multi-channel  television,  telephony,  Internet/data  services  and
programming  operations in various  countries  outside the United States through
our  subsidiaries  and  affiliates.  For financial  information  concerning such
business  segments,  see the footnotes to our financial  statements  included in
Item 8 "Financial Statements and Supplementary Data."

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

SUMMARY OPERATING DATA

In the following  table,  we show certain  operating and financial  data for the
systems we own for each of the last two years.  When we refer to  information as
"Proportionate  Data",  we mean that we have  multiplied  the statistic for each
operating system by our percentage ownership of that system.

                                       6

<PAGE>
<TABLE>
<CAPTION> 
                                                                  As of December 31, 1998
                                   -----------------------------------------------------------------------------------------------
                                   Homes in                 Basic                                   Net                     Long-
GROSS DATA                         Service      Homes    Subscribers/     Basic                   Income      Adjusted      Term
                                     Area       Passed      Lines      Penetration    Revenue     (Loss)      EBITDA(1)     Debt(2)
                                   --------   ---------  ------------  ----------- | --------    --------     ---------    --------
                                                                                   |              (In thousands)(3)
<S>                               <C>         <C>         <C>             <C>      | <C>         <C>          <C>         <C>
EUROPE                                                                             |
------                                                                             |
Multi-channel TV Subscribers :                                                     |
 The Netherlands................   1,521,527  1,487,673   1,396,867       93.9%    | $118,437    $ (60,756)   $ 32,901    $372,285
 Austria........................   1,073,297    900,350     454,957       50.5%    | $ 94,224    $  (4,958)   $ 43,089    $     --
 Hungary (Telekabel Hungary)....     901,500    510,622     442,567       86.7%    | $ 13,834    $      66    $  4,988    $     --
 Israel.........................     595,000    575,976     402,355       69.9%    | $160,966    $   4,977    $ 88,925    $280,895
 Norway.........................     529,924    463,235     323,387       69.8%    | $ 46,098    $ (33,390)   $ 16,439    $     --
 Belgium........................     133,000    133,000     127,398       95.8%    | $ 19,473    $  (8,087)   $  7,022    $     --
 Malta..........................     179,000    162,996      70,363       43.2%    | $ 15,698    $     977    $  5,930    $ 24,521
 Romania........................     180,000     98,174      61,999       63.2%    | $  1,669    $      --    $    764    $     --
 Czech Republic.................     229,531    151,716      54,153       35.7%    | $  4,779    $  (3,686)   $ (1,012)   $     --
 Hungary (Monor)................      85,000     68,339      30,623       44.8%    | $ 17,800    $   1,967    $ 11,260    $ 41,312
 France.........................     150,000     74,623      29,107       39.0%    | $  4,280    $  (6,992)   $ (2,697)   $     --
 Slovak Republic................      67,959     37,641      21,044       55.9%    | $    817    $  (1,859)   $   (726)   $     --
                                  ----------  ---------   ---------                |
    Total.......................   5,645,738  4,664,345   3,414,820                |
                                  ----------  ---------   ---------                |
Telephony Lines (4):                                                               |
 Hungary (Monor)................      85,000     84,037      69,244       82.4%    |
 The Netherlands................   1,521,527    541,613      41,180        7.6%    |
                                  ----------  ---------   ---------                |
     Total......................   1,606,527    625,650     110,424                |
                                  ----------  ---------   ---------                |
Programming Subscribers:                                                           |
 Spain/Portugal (IPS)...........         N/A        N/A     684,000         N/A    | $ 17,099    $    (295)   $  3,431    $  3,500
 Ireland (Tara).................         N/A        N/A     597,314         N/A    | $    709    $  (8,615)   $ (4,899)   $     --
                                  ----------  ---------   ---------                |
 Total..........................         N/A        N/A   1,281,314                |
                                  ----------  ---------   ---------                |
Data Subscribers:                                                                  |
 Internet.......................         N/A        N/A      24,338         N/A    | $     --    $  (8,370)   $ (8,286)   $     --
                                  ----------  ---------   ---------                | 
ASIA/PACIFIC                                                                       |
------------                                                                       |
Multi-channel TV Subscribers:                                                      |
 Australia (Austar).............   2,085,000  2,083,108     288,721       13.9%    | $ 83,316    $(129,581)   $(23,255)   $     --
 Philippines....................     600,000    401,818     151,543       37.7%    | $ 13,936    $  (7,382)   $    600    $      3
 Tahiti (5).....................      31,000     20,128       6,125       30.4%    | $  3,411    $  (1,968)   $    (49)   $     --
 New Zealand....................     141,000     40,950       6,010       14.7%    | $  1,685    $  (9,884)   $ (9,763)   $ 21,140
                                  ----------  ---------   ---------                |
     Total......................   2,857,000  2,546,004     452,399                |
                                  ----------  ---------   ---------                |
Telephony Lines (4):                                                               |
 New Zealand....................     141,000     35,935       7,360       20.5%    |
                                  ----------  ---------   ---------                |
Programming Subscribers:                                                           |
 Australia (XYZ Entertainment)..         N/A        N/A     699,867         N/A    | $ 15,893    $   1,053    $  1,337    $     --
                                  ----------  ---------   ---------                |
LATIN AMERICA                                                                      |
-------------                                                                      |
Multi-channel TV Subscribers:                                                      |
 Chile..........................   2,321,000  1,567,871     393,851       25.1%    | $119,005    $ (18,076)   $ 28,022    $122,392
 Mexico.........................     341,600    224,130      54,838       24.5%    | $ 10,073    $   3,080    $  2,824    $     --
 Brazil (Jundiai)...............      70,200     67,845      19,714       29.1%    | $  9,162    $     521    $  2,863    $    129
 Brazil (TVSB)..................     437,000    306,000      13,233        4.3%    | $  5,995    $  (2,100)   $   (539)   $     --
 Peru...........................     140,000     57,377      10,023       17.5%    | $  2,076    $  (1,666)   $ (1,248)   $     --
                                  ----------  ---------   ---------                |
     Total......................   3,309,800  2,223,223     491,659                |
                                  ----------  ---------   ---------                |
Telephony Lines (4):                                                               |
 Chile..........................   2,321,000    218,460      20,985        9.6%    |
                                  ----------  ---------   ---------                |
Programming Subscribers:                                                           |
 Latin American.................         N/A        N/A   3,449,481         N/A    | $  3,671    $ (12,228)   $(10,916)   $     --
                                  ----------  ---------   ---------                |
TOTAL COMPANY                                                                      |
-------------                                                                      |
 Multi-channel TV Subscribers...  11,812,538  9,433,572   4,358,878                |
                                  ==========  =========   =========                |
 Telephony Lines................   4,068,527    880,045     138,769                |
                                  ==========  =========   =========                |
 Programming Subscribers........         N/A        N/A   5,430,662                |
                                  ==========  =========   =========                |
 Data Subscribers...............         N/A        N/A      24,338                |
                                  ==========  =========   =========                |
</TABLE>                                                                  7
<PAGE>
<TABLE>
<CAPTION>
                                                                   As of December 31, 1997
                                   -----------------------------------------------------------------------------------------------
                                   Homes in                 Basic                                   Net                     Long-
GROSS DATA                         Service      Homes    Subscribers/     Basic                   Income      Adjusted      Term
                                     Area       Passed      Lines      Penetration    Revenue     (Loss)      EBITDA(1)     Debt(2)
                                   --------   ---------  ------------  ----------- | --------    --------     ---------    --------
                                                                                   |              (In thousands)(3)
<S>                               <C>         <C>         <C>             <C>      | <C>         <C>          <C>         <C>
EUROPE                                                                             |
------                                                                             |
Multi-channel TV Subscribers:                                                      |
 The Netherlands................    670,393     661,182     608,831       92.1%    | $ 64,933    $(18,813)    $ 24,716    $269,989
 Austria........................  1,064,000     890,305     435,859       49.0%    | $ 86,772    $ (5,713)    $ 42,915    $130,508
 Hungary (Kabelkom).............    300,000     290,690     266,775       91.8%    | $ 25,706    $  1,389     $  7,987    $     --
 Israel.........................    360,000     350,392     241,874       69.0%    | $ 83,579    $ 13,534     $ 43,223    $  5,575
 Norway.........................    529,924     457,551     319,654       69.9%    | $ 43,570    $(35,535)    $ 17,578    $ 71,167
 Belgium........................    133,000     133,000     127,529       95.9%    | $ 20,553    $ (6,083)    $  8,032    $     --
 Malta..........................    179,000     153,917      58,033       37.7%    | $ 12,535    $    402     $  5,257    $ 19,973
 Romania........................    150,000      69,620      40,188       57.7%    | $    720    $    195     $    456    $     --
 Czech Republic.................    271,100     145,650      51,571       35.4%    | $  3,991    $(11,501)    $ (3,585)   $     --
 Hungary (Monor)................     84,000      60,534      26,231       43.3%    | $    757    $   (504)    $    415    $     --
 France.........................     86,000      28,267       6,758       23.9%    | $  1,350    $ (3,807)    $ (2,476)   $     --
 Slovak Republic................     36,239      22,193      18,476       83.3%    | $    748    $   (660)    $   (390)   $     --
                                  ---------   ---------   ---------                |
    Total.......................  3,863,656   3,263,301   2,201,779                |
                                  ---------   ---------   ---------                |
Telephony Lines (4):                                                               |
 Hungary (Monor)................     85,000      84,037      62,224       74.0%    | $ 13,646    $ (9,090)    $  7,488    $ 43,614
 The Netherlands................         --          --         --          N/A    | $     --    $     --     $     --    $     --
                                  ---------   ---------   ---------                |
    Total.......................     85,000      84,037      62,224                |
                                  ---------   ---------   ---------                |
Programming Subscribers:                                                           |
 Spain/Portugal (IPS)...........        N/A         N/A     485,000         N/A    | $  9,958    $ (7,473)    $ (3,347)   $  1,098
 Ireland  (Tara)................        N/A         N/A     361,984         N/A    | $     51    $ (5,864)    $ (5,657)   $  1,691
                                  ---------   ---------   ---------                |
    Total.......................        N/A         N/A     846,984                |
                                  ---------   ---------   ---------                |
ASIA/PACIFIC                                                                       |
------------                                                                       |
Multi-channel TV Subscribers:                                                      |
 Australia (Austar).............  1,635,000   1,589,000     196,205       12.3%    | $ 52,945    $(82,077)    $(15,936)   $     --
 Philippines....................    600,000     175,414      66,112       37.7%    | $  5,697    $ (1,340)    $  1,243    $     --
 Tahiti.........................     31,000      20,128       6,304       31.3%    | $  4,118    $ (4,266)    $    229    $     --
 New Zealand....................    141,000      23,518       3,059       13.0%    | $    382    $ (5,244)    $ (5,450)   $     --
                                  ---------   ---------   ---------                |
     Total......................  2,407,000   1,808,060     271,680                |
                                  ---------   ---------   ---------                |
Programming Subscribers:                                                           |
 Australia (XYZ Entertainment)..        N/A         N/A     577,205         N/A    | $ 12,095    $ (7,493)    $ (4,116)   $     --
                                  ---------   ---------   ---------                |
LATIN AMERICA                                                                      |
-------------                                                                      |
Multi-channel TV Subscribers:                                                      |
 Chile..........................  2,321,000   1,478,851     369,187       25.0%    | $114,318    $(20,611)    $ 21,348    $122,065
 Mexico.........................    341,600     173,309      54,349       31.4%    | $ 10,483    $  1,844     $  2,965    $    206
 Brazil (Jundiai)...............     70,000      55,270      20,278       36.7%    | $  8,571    $  1,072     $  2,815    $     58
 Brazil (TVSB)..................    387,000     387,000      11,232        2.9%    | $  6,469    $ (1,753)    $    307    $     --
 Peru...........................    140,000      33,179       6,644       20.0%    | $  1,462    $ (1,738)    $ (1,154)   $     --
                                  ---------   ---------   ---------                |
     Total......................  3,259,600   2,127,609     461,690                |
                                  ---------   ---------   ---------                |
Telephony Lines (4):                                                               |
 Chile..........................     25,000      16,676       3,486       20.9%    | 
                                  ---------   ---------   ---------                |
Programming Subscribers:                                                           |
 Latin American.................        N/A         N/A   1,614,650         N/A    | $    369    $(12,490)    $(12,580)   $  1,459
                                  ---------   ---------   ---------                |
TOTAL COMPANY                                                                      |
-------------                                                                      |
 Multi-channel TV Subscribers...  9,530,256   7,198,970   2,935,149                |
                                  =========   =========   =========                |
 Telephony Lines................    110,000     100,713      65,710                |
                                  =========   =========   =========                |
 Programming Subscribers........        N/A         N/A   3,038,839                |
                                  =========   =========   =========                |
</TABLE>
                                                                         8
<PAGE>
<TABLE>
<CAPTION>
                                                                      As of December 31, 1998
                                  -------------------------------------------------------------------------------------------------
                                                Homes in                 Basic                       Net                    Long-
PROPORTIONATE DATA                 Paid-in      Service      Homes    Subscribers/                 Income     Adjusted      Term
                                  Ownership       Area       Passed      Lines       Revenue       (Loss)     EBITDA(1)     Debt(2)
                                  --------- |  ---------    --------  ------------ | -------     ---------    ---------   ---------
                                            |                                      |             (In thousands) (3)
<S>                              <C>        |  <C>         <C>         <C>         | <C>         <C>          <C>         <C>
EUROPE                                      |                                      |
-------                                     |                                      |
Multi-channel TV Subscribers:               |                                      |
 The Netherlands................ 25.5-51.0% |    628,462     612,615     577,490   | $43,641     $ (22,187)   $ 12,437    $126,488
 Austria........................   95.0%    |  1,019,632     855,333     432,209   | $89,513     $  (4,710)   $ 40,935    $     --
 Hungary (Telekabel Hungary)....   79.25%   |    714,439     404,668     350,734   | $10,964     $      52    $  3,953    $     --
 Israel.........................   46.6%    |    277,270     268,405     187,497   | $75,010     $   2,319    $ 41,439    $130,897
 Norway.........................   100.0%   |    529,924     463,235     323,387   | $46,098     $ (33,390)   $ 16,439    $     --
 Belgium........................   100.0%   |    133,000     133,000     127,398   | $19,473     $  (8,087)   $  7,022    $     --
 Malta..........................   50.0%    |     89,500      81,498      35,182   | $ 7,849     $     489    $  2,965    $ 12,261
 Romania........................ 51.0-100.0%|    165,300      84,209      51,282   | $ 1,473     $      --    $    707    $     --
 Hungary (Monor)................   44.8%    |     38,080      30,616      13,719   | $ 7,974     $     881    $  5,045    $ 18,508
 France.........................   99.6%    |    149,400      74,325      28,991   | $ 4,263     $  (6,964)   $ (2,686)   $     --
 Slovak Republic................ 75.0-100.0%|     62,499      33,380      18,209   | $   667     $  (1,779)   $   (768)   $     --
                                            |  ---------   ---------   ---------   |
     Total......................            |  4,037,037   3,193,000   2,200,251   |
                                            |  ---------   ---------   ---------   |
Telephony  Lines (4):                       |                                      |
 Hungary (Monor)................   44.8%    |     38,080      37,649      31,021   |
 The Netherlands ............... 25.5-51.0% |    628,462     177,765      15,728   |
                                            |  ---------   ---------   ---------   |
     Total......................            |    666,542     215,414      46,749   |
                                            |  ---------   ---------   ---------   |
Programming Subscribers:                    |                                      |
 Spain/Portugal (IPS)...........   33.5%    |        N/A         N/A     229,140   | $ 5,728     $     (99)   $  1,149    $  1,173
 Ireland (Tara).................   80.0%    |        N/A         N/A     477,851   | $   568     $  (6,892)   $ (3,919)   $     --
                                            |  ---------   ---------   ---------   |
     Total......................            |        N/A         N/A     706,991   |
                                            |  ---------   ---------   ---------   |
Data Subscribers:                           |                                      |
 Internet....................... 25.5-100.0%|        N/A         N/A      15,956   | $    --     $  (8,370)   $ (8,286)   $     --
                                            |  ---------   ---------   ---------   |
ASIA/PACIFIC                                |                                      |
------------                                |                                      |
Multi-channel TV Subscribers:               |                                      |
 Australia (Austar).............   98.0%    |  2,043,300   2,041,446     282,947   | $81,650     $(126,990)   $(22,790)   $     --
 Philippines....................   19.2%    |    115,200      77,149      29,096   | $ 2,676     $  (1,417)   $    115    $      1
 Tahiti (5).....................   88.2%    |     27,342      17,753       5,402   | $ 3,009     $  (1,736)   $    (43)   $     --
 New Zealand....................   63.7%    |     89,817      26,085       3,828   | $ 1,074     $  (6,296)   $ (6,219)   $ 13,466
                                            |  ---------   ---------   ---------   |
     Total......................            |  2,275,659   2,162,433     321,273   |
                                            |  ---------   ---------   ---------   |
Telephony  Lines (4):                       |                                      |
 New Zealand....................   63.7%    |     89,817      22,891       4,688   |
                                            |  ---------   ---------   ---------   |
Programming Subscribers:                    |                                      |
 Australia (XYZ Entertainment)..   49.0%    |        N/A         N/A     342,935   | $ 7,787     $     516    $    655    $     --
                                            |  ---------   ---------   ---------   |
LATIN AMERICA                               |                                      |
-------------                               |                                      |
Multi-channel TV Subscribers:               |                                      |
 Chile..........................   34.0%    |    789,140     533,076     133,909   | $40,462     $  (6,146)   $  9,527    $ 41,613
 Mexico.........................   49.0%    |    167,384     109,824      26,871   | $ 4,936     $   1,509    $  1,384    $     --
 Brazil (Jundiai)...............   46.3%    |     32,503      31,412       9,128   | $ 4,242     $     241    $  1,326    $     60
 Brazil (TVSB)..................   100.0%   |    437,000     306,000      13,233   | $ 5,995     $  (2,100)   $   (539)   $     --
 Peru...........................   60.0%    |     84,000      34,426       6,014   | $ 1,245     $  (1,000)   $   (749)   $     --
                                            |  ---------   ---------   ---------   |
     Total......................            |  1,510,027   1,014,738     189,155   |
                                            |  ---------   ---------   ---------   |
Telephony Lines (4):                        |                                      |
 Chile..........................   34.0%    |    789,140      74,276       7,134   |
                                            |  ---------   ---------   ---------   |
Programming Subscribers:                    |                                      |
 Latin American.................   50.0%    |        N/A         N/A   1,724,741   | $ 1,835     $  (6,114)   $ (5,458)   $     --
                                            |  ---------   ---------   ---------   |
TOTAL COMPANY                               |                                      |
-------------                               |                                      |
 Multi-channel TV Subscribers...            |  7,822,723   6,370,171   2,710,679   |
                                            |  =========   =========   =========   |
 Telephony Lines................            |  1,545,499     312,581      58,571   |
                                            |  =========   =========   =========   |
 Programming Subscribers........            |        N/A         N/A   2,774,667   |
                                            |  =========   =========   =========   |
 Data Subscribers...............            |        N/A         N/A      15,956   |
                                            |  =========   =========   =========   |
</TABLE>
                                                                          9
<PAGE>
<TABLE>
<CAPTION>
                                                                      As of December 31, 1997
                                  -------------------------------------------------------------------------------------------------
                                                Homes in                 Basic                       Net                    Long-
PROPORTIONATE DATA                 Paid-in      Service      Homes    Subscribers/                 Income     Adjusted      Term
                                  Ownership       Area       Passed      Lines       Revenue       (Loss)     EBITDA(1)     Debt(2)
                                  --------- |  ---------    --------  ------------ | -------     ---------    ---------   ---------
                                            |                                      |             (In thousands) (3)
<S>                              <C>        |  <C>         <C>         <C>         | <C>         <C>          <C>         <C>
EUROPE                                      |                                      |
------                                      |                                      |
Multi-channel TV Subscribers:               |                                      |
 The Netherlands................ 50.0-100%  |    384,393     378,312     349,751   | $37,961     $ (9,818)    $ 15,740    $156,734
 Austria........................    95.0%   |  1,010,800     845,790     414,066   | $82,433     $ (5,428)    $ 40,769    $123,983 
 Hungary (Kabelkom).............    50.0%   |    150,000     145,345     133,388   | $12,853     $    695     $  3,994    $     --
 Israel.........................    23.3%   |     83,880      81,641      56,357   | $19,474     $  3,153     $ 10,071    $  1,299
 Norway.........................    87.3%   |    462,624     399,442     279,058   | $38,037     $(31,022)    $ 15,346    $ 62,129
 Belgium........................    100.0%  |    133,000     133,000     127,529   | $20,553     $ (6,083)    $  8,032    $     --
 Malta..........................    25.0%   |     44,750      38,479      14,508   | $ 3,134     $    101     $  1,314    $  4,993
 Romania........................ 90.0-100.0%|    143,000      67,498      39,428   | $   909     $    247     $    575    $     --
 Czech Republic.................    100.0%  |    271,100     145,650      51,571   | $ 3,991     $(11,501)    $ (3,585)   $     --
 Hungary (Monor)................    46.3%   |     38,892      28,027      12,145   | $   351     $   (234)    $    192    $     --
 France.........................    99.6%   |     85,656      28,154       6,731   | $ 1,344     $ (3,792)    $ (2,466)   $     --
 Slovak Republic................ 75.0-100.0%|     30,779      18,030      14,987   | $   604     $   (533)    $   (455)   $     --
                                            |  ---------   ---------   ---------   |
    Total.......................            |  2,838,874   2,309,368   1,499,519   |
                                            |  ---------   ---------   ---------   |
Telephony Lines (4):                        |                                      |
 Hungary (Monor)................    46.3%   |     39,355      38,909      28,810   | $ 6,318     $ (4,209)    $  3,467    $ 20,193
 The Netherlands ............... 50.0-100%  |         --          --          --   | $    --     $     --     $     --    $     --
                                            |  ---------   ---------   ---------   |
    Total.......................            |     39,355      38,909      28,810   |
                                            |  ---------   ---------   ---------   |
Programming Subscribers:                    |                                      |
 Spain/Portugal (IPS)...........    33.5%   |        N/A         N/A     162,475   | $ 3,336     $ (2,503)    $ (1,121)   $    368
 Ireland (Tara).................    75.0%   |        N/A         N/A     271,488   | $    38     $ (4,398)    $ (4,243)   $  1,268
                                            |  ---------   ---------   ---------   |
    Total.......................            |        N/A         N/A     433,963   |
                                            |  ---------   ---------   ---------   |
ASIA/PACIFIC                                |                                      |
------------                                |                                      |
Multi-channel TV Subscribers:               |                                      |
 Australia (Austar).............    98.0%   |  1,602,300   1,557,220     192,281   | $51,886     $(80,435)    $(15,617)   $     --
 Philippines....................    39.2%   |    235,200      68,762      25,916   | $ 2,233     $   (525)    $    487    $     --
 Tahiti.........................    88.2%   |     27,342      17,753       5,560   | $ 3,632     $ (3,763)    $    202    $     --
 New Zealand....................    63.7%   |     89,817      14,981       1,949   | $   244     $ (3,340)    $ (3,471)   $     --
                                            |  ---------   ---------   ---------   |
    Total.......................            |  1,954,659   1,658,716     225,706   |
                                            |  ---------   ---------   ---------   |
Programming Subscribers:                    |                                      |
 Australia (XYZ Entertainment)..    24.5%   |        N/A         N/A     141,415   | $ 2,963     $ (1,836)    $ (1,009)   $     --
                                            |  ---------   ---------   ---------   |
LATIN AMERICA                               |                                      |
-------------                               |                                      |
Multi-channel TV Subscribers:               |                                      |
 Chile..........................    34.0%   |    789,140     502,809     125,524   | $38,868     $ (7,008)    $  7,258    $ 41,502
 Mexico.........................    49.0%   |    167,384      84,921      26,631   | $ 5,137     $    904     $  1,453    $    101
 Brazil (Jundiai)...............    46.3%   |     32,410      25,590       9,389   | $ 3,968     $    496     $  1,303    $     27
 Brazil (TVSB)..................    40.0%   |    154,800     154,800       4,493   | $ 2,588     $   (701)    $    123    $     --
 Peru........................... 99.2-100.0%|    139,120      32,962       6,602   | $ 1,452     $ (1,726)    $ (1,145)   $     --
                                            |  ---------   ---------   ---------   |
    Total.......................            |  1,282,854     801,082     172,639   |
                                            |  ---------   ---------   ---------   |
Telephony Lines (4):                        |                                      |
 Chile..........................    34.0%   |      8,500       5,670       1,185   | 
                                            |  ---------   ---------   ---------   |
Programming Subscribers:                    |                                      |
 Latin American.................    50.0%   |        N/A         N/A     807,325   | $   185     $ (6,245)    $ (6,290)   $    730
                                            |  ---------   ---------   ---------   |
TOTAL COMPANY                               |                                      |
-------------                               |                                      |
 Multi-channel TV Subscribers...            |  6,076,387   4,769,166   1,897,864   |
                                            |  =========   =========   =========   |
 Telephony Lines................            |     47,855      44,579      29,995   |
                                            |  =========   =========   =========   |
 Programming Subscribers........            |        N/A         N/A   1,382,703   |
                                            |  =========   =========   =========   |
</TABLE>
                                                               10
<PAGE>

(1)  Adjusted EBITDA represents earnings before net interest expense, income tax
     expense,  depreciation,  amortization,  stock based  compensation  charges,
     minority interest, share in results of affiliated companies (net), currency
     exchange gains (losses) and other  non-operating  income  (expense)  items.
     Industry analysts generally consider Adjusted EBITDA to be a helpful way to
     measure the performance of cable television  operations and  communications
     companies.  We believe  Adjusted  EBITDA helps investors to assess the cash
     flow  from our  operations  from  period  to  period  and thus to value our
     business.  Adjusted EBITDA should not, however, be considered a replacement
     for net  income,  cash  flows or for any other  measure of  performance  or
     liquidity  under  generally  accepted  accounting  principles,   or  as  an
     indicator of a company's operating performance. We are not entirely free to
     use  the  cash  represented  by  our  Adjusted   EBITDA.   Several  of  our
     consolidated  operating companies are restricted by the terms of their debt
     arrangements.  Each  company  has its own  operating  expenses  and capital
     expenditure requirements, which can limit our use of cash. Our presentation
     of Adjusted  EBITDA may not be comparable to statistics with a similar name
     reported by other  companies.  Not all  companies  and  analysts  calculate
     Adjusted EBITDA in the same manner.
(2)  The amounts  disclosed herein represent  unconsolidated  debt. Consolidated
     debt  is  included  in  the  consolidated   financial  statements  in  Item
     8 "Financial Statements and Supplementary Data".
(3)  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, 1998.  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, 1998 exchange
     rates for the convenience translation.
(4)  Financial  information  for  telephony  is  included  in  multi-channel  TV
     information above.
(5)  The revenue,  net loss and Adjusted EBITDA figures  are as of September 30,
     1998.  Tahiti was  deconsolidated  as of October 1, 1998.

                                       11


<PAGE>

EUROPEAN OPERATIONS

UPC owns and  operates  cable-based  communications  networks in 10 countries in
Europe and in Israel. UPC provides cable television  services in these countries
as well as telephone  and/or  Internet/data  services in five of these  markets.
UPC's  primary  Western  European  systems  are  located  in  Vienna  (Austria);
Amsterdam (The Netherlands);  Brussels  (Belgium);  Oslo (Norway);  and suburban
Paris (France"). UPC also has systems in Israel, Malta and Eastern Europe.

Since  1994,  UPC has been  upgrading  its  Western  European  cable  television
infrastructure   to  enable  UPC  to  provide   digital  video,   telephone  and
Internet/data  services.  When it upgrades,  UPC  replaces  parts of the coaxial
cable with fiber optic lines and upgrades the remaining coaxial cable so that it
can send signals both to and from the customer's home. As of September 30, 1998,
UPC's systems had approximately  4,400 Kilometers of high-capacity  active fiber
optic   infrastructure   supporting  more  than  35,340  kilometers  of  coaxial
distribution  cable.  Approximately  25,200 kilometers of this coaxial cable can
send signals both to and from the customer's  home. As of December 31, 1998, 51%
of the UPC's Western European network was upgraded to two-way capability and UPC
expects 75% to be upgraded by year end 1999.  As of  December  31,  1998,  UPC's
Western European systems served  approximately  41,200 cable telephone lines and
had  approximately  24,300 Internet  access  subscribers.  In UPC's  non-Western
European markets, UPC is primarily focused on increasing its subscriber base and
its revenue per subscriber chiefly though marketing,  superior  programming and,
in some cases, the introduction of new services.

UPC GROWTH STRATEGY.  UPC's goal is to increase the number of its subscribers to
a pan-European  basis and in Israel and to increase its revenue per  subscriber.
Key elements of its strategy to achieve this goal are:

      o   INCREASE AVERAGE MONTHLY REVENUE PER SUBSCRIBER. UPC plans to increase
          its average  revenue per video  subscriber by developing  its expanded
          basic tier service,  pay-per-view and audio-only program offerings. As
          of December 31, 1998,  UPC's average revenue per subscriber  (weighted
          by the number of  subscribers)  for its more mature  Western  European
          systems  was  $10.60  per  month  compared  to  $35.35  and  $38.25 as
          experienced in the United Kingdom for the year ended December 31, 1997
          and the United  States for the nine months ended  September  30, 1998,
          respectively.

      o   INTRODUCE  NEW  SERVICES  OVER  EXISTING  NETWORK.  UPC  has  recently
          introduced  telephone and  Internet/data  access services over most of
          its cable network in Western Europe. UPC's telephone and Internet/data
          services are  marketed  under the brand names  "Priority  Telecom" and
          "Chello  Broadband"  respectively.  Priority  Telecom is UPC's branded
          telephone  service and one of the only telephone  providers  currently
          competing with incumbent operators in Europe's  residential  telephone
          market. Chello  Broadband  is  the  largest  pan-European  high  speed
          Internet operator with the capacity to provide turnkey  infrastructure
          and content  solutions  for both UPC and non-UPC  cable  systems.  UPC
          believes that these  services will increase its revenue per subscriber
          and the operating leverage of its systems.

      o   CONTINUE TO ACQUIRE AND  INCREASE  OWNERSHIP  PERCENTAGE  IN STRATEGIC
          SYSTEMS.  UPC  plans  to  continue  to  acquire   multi-channel  cable
          television  systems near its current systems and to selectively expand
          to other European markets.

UPC VIDEO DISTRIBUTION.  We own and operate established cable television systems
and are  constructing  new systems  through  UPC. At December  31,  1998,  UPC's
operating systems had  approximately  3.4 million  subscribers to its basic tier
video services.  Video distribution  services accounted for approximately 92.7 %
of our consolidated  revenue in 1998. An average of 73.2% of the homes passed by
our systems subscribe to our basic tier video services. We offer our subscribers
some of the most  advanced  analog video  services  available  today and a large
choice  of FM  radio  programs.  In  addition,  because  many  of  our  European
operations are two-way capable, we have been able to add more services.  In many
systems,  for example, we have introduced impulse pay-per-view  services,  which
enable subscribers to our expanded basic tier to select and purchase programming
services, such as movies and special events, directly by remote control.

UPC VIDEO PROGRAMMING.  Popular programming is another key factor for increasing
UPC's video services  revenue.  We believe it will also be a potential source of
additional revenue from sales to other cable television  operators and satellite
companies  in Europe.  We have  enhanced our  existing,  and are  continuing  to
develop and acquire new ownership interests in, programming services.

                                       12
<PAGE>


We are  involved  in several  country-specific  programming  ventures  including
creating channels for Israel and Malta.  Together,  these  programming  ventures
have developed  channels in key genres including sports,  children,  documentary
and movies, which are subtitled or dubbed in the local language.

We recently transferred our 75.0% interest in Tara and our 33.5% interest in IPS
to UPC.  Tara  provides  Irish  general  entertainment  programming  to the U.K.
markets.  IPS produces a movie  channel,  a  documentary  channel,  a children's
channel  and a music  channel  for the Spanish  and  Portuguese  markets.  As of
December  31,  1998,  Tara and IPS sold  programming  content to  non-UPC  cable
operators serving an aggregate of 1.4 million subscribers.

UPC TELEPHONE SERVICES:  PRIORITY TELECOM. We believe that our existing customer
base and upgraded  network  give us a unique  opportunity  to provide  telephone
service in Europe.  We plan to offer  Priority  Telecom in our Austrian,  Dutch,
French and Norwegian systems. We also plan to develop national and international
long distance voice and data services.  Our operating  companies are licensed to
provide  telephone  services in Austria,  France,  Hungary,  The Netherlands and
Norway.

A2000 began offering cable  telephone  services in July 1997 on a trial basis in
Purmerend,  a town  outside  Amsterdam,  and since then has begun to offer these
services to its  customers  in  Hilversum,  Zaanstad and part of  Amsterdam.  In
November 1998, we launched Priority Telecom's cable telephone service on a trial
basis in Vienna and in March 1999 in our  Mediareseaux  system in suburban Paris
and in Oslo, Norway.

UPC is  negotiating  to connect  its local  fiber  networks,  primarily  through
interconnections and capacity leases with other new  telecommunications  service
providers,  to provide long-distance  telephone services across several European
markets.

A2000 has entered into an interconnect  agreement  covering all of A2000's homes
and  businesses  passed  that will be capable of  receiving  telephone  service.
Similarly,  each of Telekabel  Group's  largest  subsidiary,  "Telekabel  Wien",
Janco,  UTH and  Mediareseaux  has completed an interconnect  agreement with the
national  incumbent  telecommunications  service provider  covering all of their
homes and businesses  passed by cable in their networks.  Even with interconnect
arrangements  secured, we may still experience  difficulty operating under them.
In our A2000 system, for example,  quantity at the interconnection  have lowered
the quality of A2000's  telephone  service.  In Austria,  while  Telekabel  Wien
secured  the   interconnect   arrangement  with  the  support  of  the  Austrian
telecommunications  regulator, the Austrian incumbent telecommunication operator
is challenging the arrangement in the Austrian courts.

Cable telephone service in The Netherlands to areas outside of the A2000 systems
will be provided by UTH.  The  rollout  for these  areas is  scheduled  to begin
during the second half of 1999. Priority Telecom launched its service on a trial
basis in Vienna in November 1998, and in suburban Paris and Oslo, in March 1999.
It intends to launch service to business and residential areas in Vienna passing
approximately  100,000  homes in  early  1999.  Priority  Telecom's  service  is
scheduled to be rolled out in Vienna to an  additional  500,000 homes during the
first  half of 1999,  with  plans to offer the  service  to the  balance  of the
approximately  83,000  remaining homes passed in Vienna capable of receiving the
service by the end of 1999.

In  addition to our cable  telephone  operations,  our Monor  system has offered
traditional  telephone services since December 1994 and as of December 31, 1998,
had approximately  69,240  traditional  telephone lines.  UTH's 80.0% subsidiary
Uniport offers a carrier select telephone service and had  approximately  20,500
subscribers at December 31, 1998.

Priority   Telecom  will  face   competition   in  its  markets  from  incumbent
telecommunications   operators  and  other   competitive   operators  that  have
substantially more experience in providing,  and significantly greater resources
devoted to,  telephone  services.  In addition,  we will depend on  interconnect
arrangements  provided by incumbent  telecommunications  operators.  We believe,
however,  that our  strategy  for  Priority  Telecom  will  allow us to  compete
effectively with incumbent telecommunications operators and any other local loop
providers who subsequently enter the market.

UPC  INTERNET/DATA  SERVICES:  High Speed Access and Chello  Broadband.  We have
launched a cable  modem-based,  high speed  Internet  access service in Austria,
Belgium,  The  Netherlands  and Norway  called Chello  Broadband.  The launch of
Chello  Broadband in our upgraded Western European markets is scheduled to begin
during  early  1999.  As of  December  31,  1998,  we had  approximately  23,200
residential   and  more  than  1,140  business   cable  modem  Internet   access
subscribers.

                                       13
<PAGE>

We have  launched a  residential  and  business  cable  modem-based,  high-speed
Internet access service in Austria, Belgium, The Netherlands and Norway. We have
marketed our current  Internet  service as a high speed Internet  access product
excluding  many of the  value-added  services that Chello  Broadband  expects to
provide.  Marketing efforts for our Internet access service have been limited to
date but we intend to implement a more substantial  brand marketing program from
the launch of Chello Broadband's  service. The launch of Chello Broadband in our
upgraded Western European markets is scheduled to begin during the first quarter
of 1999.

The  Internet  services  business in Europe is highly  competitive.  We believe,
however, that our strategy for Chello Broadband,  which encompasses  competitive
pricing and superior  service  combined  with high speed  access and  compelling
content,  will mitigate the effects of competition  from other Internet  service
providers in its markets. We currently compete with traditional dial-up Internet
service    providers   and   other    providers    (including   many   incumbent
telecommunications service providers) and expect that Chello Broadband will face
competition  from other broadband cable modem service  providers,  such as @Home
and  Roadrunner as they move to the European  market.  In the future,  we expect
competition from providers using other broadband technologies.

AUSTRIA: TELEKABEL GROUP

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

In early 1992,  Telekabel Wien initiated the rebuild and upgrade of its existing
cable network in Vienna. The upgrade,  which is expected to be 75.0% complete by
the end of 1999,  was  approximately  57.0%  complete  and passed  approximately
516,700 homes as of December 31, 1998.  UPC is are expanding  Telekabel  Group's
service  offerings  as its network is upgraded to full two-way  capability.  The
upgraded  network  enabled  Telekabel  Group to launch an  expanded  basic tier,
impulse  pay-per-view  services and  Internet/data  services in 1997.  Telekabel
Group was the first  Austrian  cable  television  company  to offer  tiered  and
pay-per-view services when it launched such services in Vienna.

Telekabel  Group  launched an Internet  access service in September 1997 and had
approximately  9,050 Internet  access  subscribers as of December 31, 1998, with
current  average  additions of 1,300  customers per month. It plans to introduce
the Chello  Broadband  service in 1999. In addition,  Telekabel  Group  launched
Priority  Telecom's  cable  telephone  service  in  Vienna  on a trial  basis in
November 1998.  Following  intervention  of regulatory  authorities on behalf of
Telekabel Group,  Telekabel Group entered into an interconnect  arrangement with
"PTA", the national incumbent  telecommunications  service operator, in November
1998.

PROGRAMMING.  Telekabel  Group  offers  basic  subscribers  32 channels of cable
programming,  including substantially all of the broadcast channels from Austria
and Germany, as well as CNN, Super Channel, MTV, an informational  channel, Tips
and Hits,  Telekino  Heute and Vienna cable text.  Telekabel  Group  launched an
expanded basic tier in May 1997 by providing subscribers, whose homes are passed
by the upgraded  network,  an advanced  analog decoder box, the cost of which is
provided for in the monthly rate.  The expanded  basic tier  currently  provides
seven channels of additional programming. In conjunction with the launch of this
tier,  Telekabel Group launched an impulse  pay-per-view  service with up to ten
channels of programming.

COMPETITION.  Telekabel  Group's  cable  systems  compete  with a DTH  satellite
service that is available throughout Austria.  Currently,  DTH satellite service
penetration of the Austrian  market is  approximately  35.0% and is concentrated
primarily in the rural areas of the country.  There is less competition from DTH
satellite   service  in  Vienna  where  we  estimate  that  the  penetration  is
approximately  8.0%.  Competition  in the  Internet/data  business in Austria is
intensifying.  PTA is  promoting  its high  speed  lines  and a number  of other
companies  recently have  entered,  or are expected to enter,  the market.  Upon
launch of its telephone service in Vienna,  Telekabel Group began competing with
PTA. New  facilities-based  competitors  in Telekabel  Group's  operating  areas
include United Telekom Austria,  Tele.ring and Citykom.  In addition,  there are
three wireless telephone providers in Telekabel Group's operating areas.

BELGIUM: TVD

OVERVIEW. TVD provides cable television and communications  services in selected
areas of  Brussels  and nearby  Leuven in Belgium.  We  estimate  that there are

                                       14
<PAGE>

currently  approximately  133,000 homes under license in TVD's franchise  areas.
TVD, which currently has approximately 96.0% penetration,  plans to grow through
the  introduction  of new services  that  currently are not subject to the price
regulations applicable to basic cable services.

In late 1996, TVD began upgrading its network through fiber optic overlay of its
trunk lines and  replacement of all amplifiers.  TVD's upgraded  networks passed
approximately  91,735  homes,  or 69.0% of its total  network as of December 31,
1998. TVD expects to complete this upgrade by mid-1999.

TVD  introduced  expanded  basic tier in  October  1996 and an  Internet  access
service in September 1997. As of December 31, 1998, TVD had approximately  4,900
expanded  basic  subscribers  and 1,869  residential  and 284 business  Internet
access  subscribers.  TVD plans to launch the Chello Broadband  service in early
1999.  As TVD  upgrades  additional  portions  of its  network  to full  two-way
capability,  it plans to introduce impulse pay-per-view in the second quarter of
1999. We are exploring the possibility of providing cable telephone services.

PROGRAMMING.  TVD offers in Brussels a basic tier consisting of 32 channels,  17
expanded  basic  programs  in six  tiers,  20 FM radio  channels  and 20 premium
digital radio  channels.  Its system in Leuven offers a basic tier consisting of
37 channels,  an expanded basic tier with six channels, 20 FM radio channels and
20 premium digital radio channels.  TVD also distributes five premium  channels,
three in Brussels and two in Leuven, which are provided by Canal+.

COMPETITION.  TVD has approximately  96.0% penetration in its market.  TVD faces
competition, however, from one other cable television provider, "Iverlek", which
was granted a license for the provision of cable  television  services in Leuven
and  is  constructing  a  cable  network.  As of  December  31,  1998,  TVD  had
approximately  27,480 subscribers in Leuven. Also, we understand that in Leuven,
Telenet will offer a broadband  access and content  service using  Iverlek's new
cable network.  To date, TVD has experienced  only limited  competition from DTH
satellite service providers.  In its Internet access business, TVD competes with
traditional dial-up Internet service providers.

THE NETHERLANDS: UTH

UPC'S  Dutch  operations  are held  through  UTH of which UPC holds  51.0% as of
December 31, 1998. In February 1999, UPC acquired the remaining 49.0% of UTH and
began  consolidating   UTH's  results.   UTH  holds  three  principal  operating
companies:  100% of "CNBH", which holds the combined KTE and Combivisie systems,
100% of  Telekabel  Beheer,  and 50.0% of A2000.  UTH does not  consolidate  the
results  of A2000.  UTH owns and  operates  systems in the  regions of  Brabant,
Flevoland,  Friesland  and  Gelderland.  Because of the large  number of current
subscribers  located  in  four  large  clusters  in  The  Netherlands,   UTH  is
constructing a fiber  backbone to  interconnect  its  region-wide  networks.  In
September  1998,  UTH  acquired  80.0% of Uniport,  a carrier  select  telephone
service with approximately 20,500 subscribers at December 31, 1998.

OVERVIEW.  Both KTE and Combivisie introduced an expanded basic tier in December
1996.  KTE and Combivisie  were combined into CNBH in 1998,  which then launched
impulse  pay-per-view  services in June 1998. In 1997,  Combivisie and Telekabel
Beheer  began  upgrading  their  networks.  The  upgrade is expected to be 89.0%
completed by year-end  1999.  As of December 31,  1998,  approximately  53.0% of
UTH's homes were passed by the upgraded network.

UTH  intends to launch  Chello  Broadband's  Internet/data  services in the CNBH
systems in early 1999. In addition,  UTH plans to introduce the initial phase of
cable  telephone  services in the NV Telekabel  systems in  mid-1999.  Telekabel
Beheer  introduced an Internet  access  service in November 1997 in parts of its
networks and also delivers a business telephone  service,  including leased line
management,  on-site  services  and  telephone  equipment,  to its  former  100%
shareholder,  "NUON",  and  several  other  companies.  As part of the  purchase
agreement with NUON for the remaining  49.0% of UTH, UTH and NUON have agreed to
enter into a preferred supplier  arrangement  through December 31, 2007, whereby
UTH  will  be  the  preferred   supplier  for  NUON  and  its  subsidiaries  for
telecommunications and Internet services and NUON will be the preferred supplier
to UTH for energy and energy-related services.

In  August,  1998,  UTH  acquired  from  Nutsbedrijf  Regio  Eindhoven  a 16,700
subscriber cable  television  system in the Eindhoven  region.  This acquisition
enabled it to increase  the cluster of  operations  in and around the  Eindhoven
area.

In January 1999, UTH acquired the networks of Geldrop and St. Oedenrode and sold
the  network  of  Schijndel  to Palet  Kabelcom.  The main  reason was a further
improvement of operations through clustering.

PROGRAMMING.  UTH currently  offers its subscribers an average of 28 channels of
basic programming along with a music channel and 33 FM radio channels.  UTH also
distributes two premium channels provided by Canal+. In addition,  UTH offers an
impulse  pay-per-view  service,  consisting of four movie channels and one adult
channel.  UTH's basic service includes Dutch broadcasting channels, as well as a

                                       15
<PAGE>

variety of German,  French and  English  channels.  The eight  channels in UTH's
expanded basic tier consist of sports,  travel, news, science fiction, music and
general  entertainment.  UTH  is  discussing  with  some  of  its  higher  value
programming suppliers the migration of their channels from the basic tier to the
expanded basic tier. UTH is not certain when it will successfully conclude these
discussions.

COMPETITION.  UTH is the only cable system in its franchise  area. To date,  UTH
has maintained  approximately  94.0%  penetration.  Competition  from television
signals  received by antenna,  DTH  satellite  services and local  private cable
systems has been limited. In its Internet access business, UTH will compete with
dial-up Internet service providers such as KPN's World  Access/Planet  Internet,
NLNet and World  Online.  Upon launch of  telephone  services,  UTH will compete
primarily with KPN.

THE NETHERLANDS: A2000

OVERVIEW.  A2000 currently enjoys basic penetration rates of approximately 92.0%
in its two systems  that serve  Amsterdam  and its  surrounding  communities  of
Landsmeer, Purmerend, Zaanstad and Ouder-Amstel, and Hilversum.

A2000  launched a  nine-channel  expanded  basic tier in October  1996,  impulse
pay-per-view services in April 1997, cable telephone service on a trial basis in
July 1997 and an  Internet/data  access service in October 1997.  A2000 launched
its Nedpoint-branded  cable telephone service in August 1998. As of December 31,
1998,  A2000 had  approximately  14,250  subscribers to its expanded basic tier,
approximately  18,100  cable  telephone   subscribers  and  approximately  8,125
residential and 250 business  subscribers to its  Internet/data  access service.

As of  December  31,  1998,  approximately  386,100  homes,  or 67.0% of A2000's
systems,  were passed by the upgraded network, with total rebuild expected to be
completed by the end of 1999.

PROGRAMMING.  A2000 currently offers 26 channels of cable  programming and 39 FM
radio channels to its basic tier subscribers in the A2000 systems.  A2000 offers
programming in many languages, including Dutch, English, German, Italian, French
and Turkish.

A2000's  expanded  basic tier carries 13  channels.  Programming  includes  both
ethnic content, such as Asian, Chinese and Arabic, and thematic content, such as
science  fiction,  travel,  music,  adult and art.  A2000 has moved some popular
channels, including MBC and the National Geographic Channel, from the basic tier
service to the expanded basic tier.  A2000 also distributes two premium channels
provided by Canal+.  Canal+ has  recently  commenced  litigation  against  A2000
demanding direct access to A2000's network in order to introduce its own digital
decoder.  We do not believe A2000 will be obliged to provide the access demanded
by Canal+ and,  even if it were, we do not believe  providing  such access would
have a material effect on A2000's business.

Increases in the price of the basic tier service are  restricted  by  agreements
between A2000 and Amsterdam and the other municipalities in its franchise areas.
Because  these prices are kept at a low level,  A2000's  basic tier revenues are
limited. A2000,  therefore,  charges programming suppliers carriage fees for the
transmission of their channels.  Some of A2000's programming suppliers have been
unwilling to pay such carriage fees and Discovery,  Eurosport,  CNN and MTV have
withdrawn their channels from A2000's basic tier offering.  A2000 has offered to
include  these  channels in its expanded  basic tier or in separate  mini-tiers.
While A2000 has  experienced  typical and anticipated  customer  dissatisfaction
with the change of programs in the basic tier, it has not experienced additional
churn that can be directly attributed to these changes.

A2000 plans to continue to introduce  new channels on its tiered  services  when
such  programming  is available.  A2000's  impulse  pay-per-view  service offers
movies from all major studios on four movie channels. This service also includes
an adult  channel and one "barker"  channel that  provides  previews of upcoming
pay-per-view events.

COMPETITION.  A2000 currently has a penetration rate of  approximately  92.0% in
its  service  area.  Its  primary  competition  is from  DTH  satellite  service
providers.  To date, however,  A2000's programming rights, low basic cable fees,
restrictive  regulations  on the  installation  of dishes and high  installation
costs have limited DTH  satellite  services as a meaningful  competitor.  In its
Internet access service,  A2000 currently is the only high speed access provider
in its operating  area.  A2000  expects to compete with KPN,  which is testing a
high speed Internet access service, in the near future. A2000 also competes with
traditional  dial-up providers,  including KPN's World  Access/Planet  Internet,
NLNet and Euronet. In its telephone business, A2000 currently competes with KPN,
Telfort and  Worldcom.  A2000 is competing on the basis of price and the ability
to integrate a number of its services.

                                       16
<PAGE>

NORWAY:  JANCO

OVERVIEW. Janco is Norway's largest cable television operator with approximately
47.0% of the total  Norwegian cable  television  market as of December 31, 1998.
Janco owns and operates 16 cable television  systems in Norway located primarily
in the southeast and along the  southwestern  coast, as well as its main network
in  Oslo.  The   well-established   Norwegian   cable   television   market  has
approximately 70.0% penetration,  as of December 31, 1998, primarily due to poor
over-the-air reception in much of Norway and a significant demand for television
entertainment.

Janco  launched an Internet  access service in March 1998 and plans to introduce
the Chello Broadband  service early 1999. Janco has secured a telephony  license
agreement from the Norwegian  regulator,  and an interconnection  agreement with
"TeleNor",  the  incumbent  telecom  operator.  We  plan to  introduce  Priority
Telecom's  cable telephone  service in 1999 in the upgraded  portions of Janco's
network.

Janco is currently  upgrading  its network to full high capacity 860 MHz two-way
capability,  with the  exception  of 75,000 homes in western  rural  areas.  Its
networks  vary in capacity  from 300 MHz to 550 MHz . This varying  architecture
requires us to replace  more of the network than in our other  primary  markets,
thereby increasing the costs of this upgrade. The upgrade,  which began in April
1998, is scheduled to be completed over the next three to four years.

PROGRAMMING.  Janco currently  offers  subscribers 31 channels of programming in
four tiers:

      o   basic,  including "must carry", a limited number of broadcast channels
          required by the government to be carried,

      o   an expanded basic tier,

      o   a "mini-tier" of certain selected channels, and

      o   premium services.

Because  English  is  widely  understood  in  Norway,   Janco  is  able  to  use
English-language  programming to supplement the limited, but increasing,  supply
of available Scandinavian-language programming.

COMPETITION.  Janco experiences  limited  competition from DTH satellite service
providers.  In its  Internet  access  business,  Janco  expects to compete  with
TeleNor  which is expected to launch a broadband  Internet  access  service this
fall;  and "Tele2",  a subsidiary of NetCom  Systems,  which  operates a dial-up
Internet access service and has recently launched a high speed wireless Internet
access  service.  With  Priority  Telecom  telephone  services,  Janco will also
compete in this area with TeleNor.

ISRAEL:   TEVEL

OVERVIEW.  Tevel has exclusive cable television  broadcasting franchises for the
entire Tel Aviv metropolitan  area, the region of  Ashdod-Ashkelon,  which is 30
miles south of Tel Aviv, and the Jezreel Valley,  which is 80 miles northeast of
Tel Aviv. In April 1998, Tevel acquired 100% of Gvanim Cable Television Ltd., or
"Gvanim",  and has since  integrated  fully  Gvanim's  operations  with its own.
Gvanim and its 90.0%-owned  subsidiary  Gvanim-Krayot  operate cable  television
systems in the Rishon-Leziyon, Ramla-Lod, Modiin, Haifa Bay, Karmiel, Maalot and
Lower Galilee areas of Israel.  There are approximately  212,150 homes passed in
the Gvanim franchises and as of December 31, 1998, Gvanim and its subsidiary had
149,650 subscribers.  The Gvanim acquisition increased Tevel's total subscribers
as of December  31, 1998 to more than 402,350 in  franchise  areas  representing
over 595,000 homes, or approximately 40.0% of the total homes in Israel.

In  addition  to its  cable  operations,  Tevel  owns  50.0%  of  "Globcall",  a
telecommunications  company  that  designs,  installs  and  maintains  switching
systems for businesses.  As of December 31, 1998, Globcall served  approximately
35,000  outlets.  Tevel also owns 33.0% of  Netvision,  one of Israel's  leading
Internet  service  providers  that had over  60,000  dial-up  subscribers  as of
December 31, 1998.

Tevel  plans to  upgrade  all of its  systems to 750 MHz  hybrid  fiber  coaxial
technology  capable of providing  cable  telephone and  Internet/data  services.
Currently,  Gvanim's  network is a one-way system with a substantial  overlay of
fiber optic backbone,  but it is being upgraded to full two-way  capability with
the installation of 750 MHz hybrid fiber coaxial technology.  Tevel expects that
the upgrade of all of its systems will be substantially complete by mid-1999.

                                       17
<PAGE>

PROGRAMMING.   Tevel  offers  basic  subscribers  45  channels  of  programming,
including  a wide range of  entertainment,  news,  sports,  performing  arts and
educational  channels,  as well as five pay-per-view  channels in all of Tevel's
areas.  Currently,  over  40.0% of  Tevel's  subscribers  purchase  at least one
pay-per-view  buy  per  month.   Tevel  is  negotiating  with  the  Ministry  of
Communications   with  respect  to  the  terms  of  an  extension   for  Tevel's
pay-per-view  license  beyond  September  1999 and the  grant of a  license  for
Gvanim.

Tevel  and the  other  Israeli  cable  television  operators  own 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
shareholders of ICP are  considering  various  alternatives  for divesting their
interests in ICP, due to regulatory pressure.

COMPETITION.  Because Tevel has exclusive cable television licenses, to date, it
has experienced no competition from other  multi-channel  television  providers.
The Israeli government recently passed  legislation,  however, to grant licenses
to DTH satellite service operators.  In January 1999, a license has been granted
to a group led by "Bezeq",  the  Israeli  incumbent  telecommunications  service
provider,  and another license may be granted to a second group. These operators
are expected to begin providing DTH satellite  services by the fourth quarter of
1999.  ICP may be  required  to  sell to DTH  satellite  service  operators  its
channels that are currently offered  exclusively to cable television  operators,
and Tevel may be required to divest its ownership in ICP.

FRANCE: MEDIARESEAUX

OVERVIEW.  UPC has a 95.0% economic  interest in  Mediareseaux,  which currently
holds cable television  franchises for 150,000 homes in the Marne-la-Vallee area
east of Paris. Mediareseaux began construction of its network in September 1996,
and as of December 31, 1998,  Mediareseaux's  system passed approximately 74,620
homes and had approximately  29,100 basic  subscribers,  giving it a penetration
rate of 39.0%.  Mediareseaux began offering  pay-per-view  services in May 1998,
and to date, the pay-per-view buy rate is approximately  0.5 movies per expanded
basic tier subscriber per month.

UPC  recently  agreed to buy the French  cable  assets from Time  Warner.  These
French  systems  are  located in suburban  Paris and Lyon,  and in Limoges.  The
number of homes passed and subscribers is 210,000 and 64,000,  respectively.  We
expect to close this purchase in the third quarter of 1999.

In July 1998, Mediareseaux obtained a 15 year telephone license for an area that
includes  1.5  million  homes in the eastern  suburbs of Paris and in  September
1998,  Mediareseaux began installing a telephone switch.  Mediareseaux has begun
offering  telephone  services  in  February  1999  within  its cable  television
franchise  area  and has  obtained  frequencies  for a trial  offering  of fixed
wireless  local  loop  services.   Mediareseaux   also  plans  to  offer  Chello
Broadband's  Internet  access  services  in  1999.  To  expand  its  operations,
Mediareseaux  is  pursuing  potential  acquisition  opportunities  and  plans to
develop these  franchises as one clustered  system  offering  integrated  video,
cable telephone and Internet/data services.

The hybrid fiber  coaxial  network was started with a 750 MHz UHF-VHF  frequency
band network with a 5-65 MHz return path.  The systems'  post-1998  construction
incorporates  860 MHz  hybrid  fiber  coaxial  capacity  with a 5-65 MHz  return
providing  full two-way  capability.  As of December  31,  1998,  Mediareseaux's
network  passed  approximately  50.0% of the 150,000 homes then in its franchise
areas. We expect the network to pass all 150,000 homes in its current  franchise
areas by the end of 2000.

PROGRAMMING. Mediareseaux's current programming offers:

      o   a  basic   eight-channel   package  containing   off-air,   local  and
          promotional programs,
      o   four  extended  basic  tiers,  called News & Current  Events,  Youth &
          Discovery,  International  Channels and Sports & Leisure, with five to
          nine channels each,
      o   three premium tiers containing three children's channels, three sports
          channels and four movie channels, and
      o   ten impulse pay-per-view channels.

COMPETITION.  Mediareseaux  competes with other video  service  providers in its
license areas  including  satellite  providers such as Canal  Satellite and TPS.
Mediareseaux  expects to face  competition  mainly from  "France  Telecom",  the
French incumbent  telecommunications operator and Cegetel with the launch of its
cable  telephone  services.  Upon the  launch of its  Internet  access  service,
Mediareseaux  expects to face competition from France Telecom's Wanadoo service,
"Cegetel",  which now includes  AOL,  Compuserve  and HOL,  and  Infonie,  among
others.

                                       18
<PAGE>

HUNGARY:   TELEKABEL HUNGARY

In June 1998, we increased our interest in Kabelkom,  Hungary's largest operator
of cable television systems,  from 50.0% to 100%. Shortly  thereafter,  Kabelkom
combined  operations with Kabeltel,  Hungary's  second largest operator of cable
television  systems,  creating  Telekabel  Hungary.  As of  December  31,  1998,
Telekabel Hungary had 442,560 subscribers.  There are no current plans to launch
telephone or Internet/data services in Telekabel Hungary's systems.

We  are  upgrading  Telekabel  Hungary's  networks.  As of  December  31,  1998,
approximately  86,000 customers were already served by the rebuilt network.  The
upgraded  network  throughout  Budapest  will be 750 MHz  hybrid  fiber  coaxial
technology with 65 MHz return path. As of December 31, 1998, Telekabel Hungary's
network passed approximately 105,100 homes with hybrid fiber coaxial cable.

PROGRAMMING.  Telekabel  Hungary  offers  subscribers  four tiers of programming
comprising approximately 35 channels:

      o   basic tier, which includes a limited number of broadcast and satellite
          channels required by the government to be carried,
      o   an expanded basic tier, and
      o   a premium service, HBO-Hungary.

Approximately 15 channels, including HBO-Hungary, are available in Hungarian. In
the Telekabel Hungary systems,  75.0% of all subscribers  passed by the upgraded
network take the expanded basic tier package.

COMPETITION.  Telekabel Hungary currently averages over 86.0% penetration in its
service  area and  faces  limited  competition.  We  understand,  however,  that
potential competitors may begin to offer DTH satellite services in Budapest.

OTHER UPC SYSTEMS

UPC also owns and operates  multi-channel  television  systems in other European
countries:

       o  MALTA. 50.0% of 70,400-subscriber television network.

       o  CZECH  REPUBLIC.  100% of a cable and MMDS service in Prague and Brno,
          the Czech Republic's second largest city.

       o  SLOVAKIA.  Majority interests in three cable television systems with a
          total of 21,000  subscribers.  UPC recently agreed to acquire 95.6% of
          the 156,000  subscriber  systems based in Bratislava  and  surrounding
          cities.

       o  ROMANIA.  Majority  interests  in three cable  systems with a total of
          62,000 subscribers.

       o  MONOR,  HUNGARY.  44.75% economic interest in a traditional  telephone
          and cable television system in the Monor region of Hungary.  Monor has
          85,000 homes in its franchise area, with 84,000 traditional  telephone
          homes  passed and 68,340  cable  television  homes  passed.  It served
          69,240 traditional  telephone access lines and 30,620 cable television
          subscribers as of December 31, 1998.

ASIA/PACIFIC OPERATIONS

We are a leading provider of multi-channel television services in Australia, New
Zealand  and  the  Philippines.  We  believe  that  we  are  well-positioned  to
capitalize  on the strong  demand for  multi-channel  television,  telephone and
Internet/data  services in Australia  and New  Zealand.  While we believe that a
substantial  portion of our growth in the  region  will come from the  continued
development of our Australian  operation,  Austar,  we also anticipate growth in
our  New  Zealand  multi-channel  television  and  telephone  business,  and our
Australian  programming  business through our 50% owned programming  subsidiary,
XYZ Entertainment.  As of December 31, 1998, our Asia/Pacific  systems passed an
aggregate of 2.5 million television homes and had 0.5 million subscribers.

AUSTRALIA: AUSTAR

Austar is the only provider of  multi-channel  television  services to virtually
our entire market of approximately 2.1 million homes in regional  Australia.  We
primarily  use a digital DTH  satellite  technology to deliver our service which
has allowed us to roll out our service quickly and achieve subscriber growth. We
believe that the ability to be the first  provider of  multi-channel  television
services  in our  markets  has  allowed us to  establish  a  significant  market
presence and strong brand awareness,  factors which management  believes provide
us with a competitive advantage.  Approximately 71% of our services are provided
through DTH,  approximately  27.0% through local MMDS systems and  approximately
2.0% through wireline cable.

                                       19
<PAGE>

Another  significant  event was Austar's  purchase of East Coast  Television Pty
Limited, or "ECT", in July 1998 consisting of approximately 9,000 subscribers as
well as various transmission  equipment and MMDS licenses.  Furthermore,  Austar
was able to  access  an  additional  0.5  million  households  located  in ECT's
operating  area on the east  coast of  Australia  and in the state of  Tasmania.
Austar began sales and marketing initiatives in these regions in August 1998.

PROGRAMMING.  Throughout  1998 and early  1999,  Austar  negotiated  new program
contracts directly with the majority of our program  suppliers,  including Optus
and Foxtel.  This gave us the ability to enhance our program line-up and created
several new tiers of program  services.  We relaunched  an enhanced  programming
service in October  1998 using our new  program  contracts  with  suppliers.  We
believe that, as a result of our exclusive DTH and MMDS programming  rights with
Foxtel and our  access to Optus  channels,  we are the only major  multi-channel
television  operator in Australia with the ability to offer to its subscribers a
full suite of all premium  programming  available  in  Australia.  Austar's  DTH
service offers 20 basic channels and eight additional tiered channels.  Austar's
MMDS service  offers 15 basic  channels  and four  additional  tiered  channels.
Austar  also  offers  an  eight-channel  "Digital  Radio"  service  to  its  DTH
customers.

COMPETITION.  The  substantial  majority  of Austar's  metropolitan  markets are
either small (i.e.,  approximately  20,000  homes),  and/or have  relatively low
household  densities  (generally 25 to 75 homes per square kilometer as compared
to 100 to 130 homes per square kilometer in Australia's  largest  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 we believe household densities could potentially support wireline
cable construction in areas representing  approximately  20.0% of Austar's total
franchise  homes,  the  relatively  small  size of  these  markets  reduces  the
attractiveness of constructing a competitive cable network. In addition, Austar,
as a licensed subscription  television provider, is authorized to build wireline
cable systems in its markets and, where  appropriate,  could construct  wireline
cable systems.

With the exception of the Foxtel cable  television  system  currently  extending
into  Austar's  116,000-home  Gold Coast  metropolitan  market,  Austar does not
currently  have  any  operational  subscription  television  competitors  in its
markets.  At December 31, 1998, Austar had 23,000  subscribers in the Gold Coast
and estimates that Foxtel has 13,000 subscribers in this market.

NEW ZEALAND: SATURN

Saturn launched local and long distance  telephone  service to both  residential
and business  customers as well as enhanced services such as Centrex and a cable
modem  service.  As of December 31, 1998,  Saturn's  activated  networks  passed
approximately   41,000  homes  and  provided  service  to  approximately  13,000
subscribers,  including  cable and  telephone.  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.  As of
December 31, 1998, our average  penetration rate for our telephone  services and
for our cable television  services was approximately 20% and approximately  15%,
respectively.

We believe that New Zealand,  a market of 1.2 million homes, is attractive for a
new local operator that can provide combined video, voice and data services over
a high  bandwidth  network.  New Zealand has a  demographic  profile  similar to
Australia  including high per capita income and strong  television,  VCR, PC and
cellular  telephone  penetration  rates.  Wellington  City  has  over  50.0%  PC
penetration  and over 20.0% of homes  subscribing to the internet.  In addition,
New Zealand  imposes  virtually no pricing  regulation and only limited  program
content   regulation  and  permits  operators  to  offer  combined  and  bundled
multi-channel  television,  telephony  service  and  internet  access  over  one
network.  There is  currently  only  one  significant  multi-channel  television
provider that offers a five-channel  UHF-delivered  subscription service and one
other local phone service provider.

COMPETITION.  Saturn's major  telephony  competitor is "Telecom",  New Zealand's
largest  telecommunications  service  provider with nearly a 100% share of local
loop revenues,  75.0% of national and  international  toll revenues and 90.0% of
cellular revenues.  During 1996 and 1997, Telecom  constructed an HFC network to
70,000  homes in  various  parts of New  Zealand  and  began  offering  a pay TV
service.  In 1998, Telecom  discountinued its pay television service and Telecom
now appears to be pursuing an  asymmetrical  digital  subscriber  line  ("ADSL")
strategy for high speed internet access.

There are currently  four  broadcast  networks in New Zealand as well as several
other  free-to-air  regional  channels.  The largest  provider  of  subscription
television  services  in New  Zealand is "Sky",  which  operates a  five-channel
encrypted  UHF  subscription  television  service  and has  recently  launched a
20-channel  digital  satellite  service.  Although  Sky offers a popular  sports
channel on an exclusive basis, we believe Sky does not currently offer value and
programming diversity or television/telephony bundling that Saturn offers.

                                       20
<PAGE>

AUSTRALIAN PROGRAMMING: XYZ ENTERTAINMENT

Through our interest in XYZ  Entertainment,  we provide five  channels (the "XYZ
Channels") to a subsidiary of Austar,  which in turn supplies them to Austar and
Foxtel.   The  XYZ  Channels  are  available  to  the  majority  of  Australia's
approximately  six  million  television  households,  including  all  households
marketed  via MMDS and DTH by  Austar  and  Foxtel.  The XYZ  Channels  are also
distributed to Foxtel for cable  distribution  pursuant to a carriage  agreement
between Foxtel and Austar that has been warranted to XYZ Entertainment as having
a term through 2020.  XYZ  Entertainment's  agreement  with Austar  provides for
fixed per subscriber  prices. We understand the cable carriage agreement between
Austar and Foxtel provides for substantial minimum subscriber guarantees. Austar
also has an agreement for the  distribution of the XYZ channels to Optus Vision,
although  distribution  has yet to commence.  As of December  31, 1998,  the XYZ
Channels were  distributed to  approximately  700,000  multi-channel  television
subscribers.

OTHER UAP OPERATIONS

Through  UAP,  we  also  provide   multi-channel   television  services  in  the
Philippines  and in Tahiti,  and own a wireless data network in  Australia.  Our
operations in the  Philippines are held through our  approximately  20% economic
interest in Philipino Cable Corporation, which operates a wireline cable service
providing  service  to  151,500  subscribers  and  passing  401,800  homes as of
December 31,  1998.  Our  Tahitian  operations  are held through our up to 90.0%
economic  interest  in  Telefenua,  which  operates  a 16 channel  MMDS  service
providing service to 6,100 subscribers and passing approximately 20,000 homes as
of December 31, 1998.  We also own a 100% economic  interest in United  Wireless
which  operates a nationally  linked public  wireless data network in Australia.
United  Wireless'  target  markets  are the  transportation  industry  for fleet
management  requirements and the utility,  fire and vending industries for fixed
telemetry applications, including remote monitoring. In December 1998, we agreed
to sell our  49.0%  interest  in a joint  venture  that owns a  microwave  relay
network in Hunan province, China, and provides transmission of video channels to
cable  television  throughout  the  province  to AmTec.  The  selling  price was
approximately  $12  million  in AmTec  stock.  The  closing  is  conditioned  on
shareholder approval.

LATIN AMERICA OPERATIONS

Through  ULA,  we  own  interests  in  and  operate   multi-channel   television
distribution and  telecommunications  systems in Chile, Brazil, Mexico and Peru.
As of December  31,  1998 our Latin  American  systems  passed an  aggregate  of
approximately 2.2 million homes and had approximately 491,700 subscribers.

CHILE: VTRH

VTRH

Our largest operation in Latin America is our Chilean  operation,  VTRH. Through
VTRH we are the largest provider of multi-channel  television services including
each of  wireline  cable  television,  MMDS and DTH  technologies  and a growing
provider of telephone services in Chile.  Wireline cable is our primary business
representing approximately 94.4% of our subscribers while MMDS and DTH represent
approximately 3.2% and approximately  2.4%,  respectively.  We have an estimated
56.0%  market share of the cable  television  services  throughout  Chile and an
estimated 38.0% market share within Santiago,  Chile's largest city. In 1998, we
began the wide-scale  roll-out of  residential  cable  telephone  service in six
communities  contained  within Santiago and one major city outside  Santiago and
are  currently  expanding  our efforts to include  additional  areas  throughout
Chile.

On April 29, 1999, an indirect wholly owned  subsidiary of ours acquired a 60.0%
interest in VTRH (the "VTRH Acquisition").  This acquisition,  combined with the
40.0% interest in VTRH that is owned by another indirect wholly owned subsidiary
of ours,  gives us an indirect 100% interest in VTRH. The purchase price for the
60.0% interest in VTRH was approximately  $258.0 million in cash, which included
repayment  of advances  from the other  shareholders  of VTRH and certain  other
expenses.  In  addition,  we provided  capital for VTRH to prepay  approximately
$126.0 million of existing bank  indebtedness  and a promissory  note from us to
one of the other shareholders of VTRH.

To finance the prepayment of VTRH's  indebtedness  and a portion of the purchase
price for the VTRH Acquisition,  we concurrently  sold in a private  transaction
$208.9 million of 10.875% Senior Discount Notes due 2009 (the "1999 Notes"). The
remaining  portion  of the VTRH  Acquisition  was  funded  with cash on hand and
approximately  $145.0 million  borrowed  under a Senior Secured Credit  Facility
between VTRH and a syndicate of banks (the "VTRH Bank Facility").


                                       21
<PAGE>

The VTRH Bank  Facility  consists of two tranches - Tranche A, which is a single
term loan  facility  with an  aggregate  principal  amount  of  $140.0  million,
substantially all of which was borrowed for the VTRH Acquisition, and Tranche B,
which is a three-year term loan facility,  with an aggregate principal amount of
up to  $80.0  million.  Both  tranches  have  been  guaranteed  by VTRH  and its
subsidiaries.   The  banks  are  in  the  process  of   syndicating   the  final
approximately  $50.0  million  of the VTRH  Bank  Facility.  We have  agreed  to
participate in the syndication as necessary.

The 1999 Notes have essentially the same terms as our outstanding  10.75% Senior
Secured  Discount  Notes due 2008,  except for the  maturity and coupon rate and
that the 1999 Notes are not secured.

As of December 31, 1998,  our VTRH systems  passed 1.6 million homes  throughout
Chile and approximately 24.0%, or approximately 372,000 homes, subscribed to our
wireline cable television services.  We also serve 12,600 customers via MMDS and
9,600 customers via DTH. As of December 31, 1998,  approximately  218,000 of our
cable  homes   passed  were  capable  of  using  our   telephone   services  and
approximately 21,000 homes subscribed to these services.  Approximately 28.0% of
our telephone subscribers also subscribe to our cable services.

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

COMPETITION.  There is only one other major cable television  provider in Chile,
"Metropolis-Intercom".  Metropolis  overlaps  approximately  60.0% of our  homes
passed and we overlap  approximately 90.0% of its homes passed. Our head-to-head
competition  with  Metropolis in many areas affects our pricing and  programming
flexibility.  We believe that our churn is the result,  in part, of  Metropolis'
marketing efforts. Due to the high capital expenditures  required to build-out a
new wireline network, we believe significant barriers to entry exist. Metropolis
is the only other potential MMDS competitor,  and controls the licenses for 4 of
the 16 MMDS  analog  frequencies  available  in Chile  but  does  not  currently
transmit  any  channels.  Because  MMDS is only  capable of  providing 16 analog
channels of service in  comparison  to the wireline  cable  offering of 50 to 65
channels,  we do not believe  analog MMDS is a viable  competitor  to cable as a
whole. There is only one other major DTH, provider in Chile, Sky, which launched
service  last year.  Because  wireline  cable is  significantly  penetrated  and
offered at lower  rates than DTH, we do not believe that DTH poses an  immediate
significant threat.

VTRH TELEPHONE SERVICES

We began marketing cable telephone services to residential  customers in several
communities within Santiago in 1997. We offer basic dial tone service as well as
several value added services  including voice mail,  caller I.D., 3-way calling,
speed dial, wake up service, call waiting,  call forwarding,  local bill detail,
unlisted  number and  directory  assistance.  We  primarily  provide  service to
residential  customers who require one or two telephone  lines.  We also provide
service to small  businesses and home offices  requiring up to twelve  telephone
lines.  In general,  we have been able to achieve  approximately  20.0% to 30.0%
penetration of our new telephone markets within the first year of marketing.  By
the end of 1999, we plan to provide cable telephone  service to three additional
cities outside Santiago and four additional communities in Santiago.

                                       22
<PAGE>

As of  December  31,  1998,  approximately  14.0% of our  network was capable of
providing cable telephone service.  Since 74.0% of our network currently has 750
MHz of  capacity,  our costs to  upgrade  to two-way  capable  architecture  are
relatively low. In areas where our network has less than 750 MHz of capacity, we
either  have to retrofit  existing  network or rebuild the network to upgrade to
two-way  capability.  Our plan is to be  technologically  capable  of  providing
service to approximately 200,000 to 300,000 additional two-way homes during 1999
and to be able to provide telephone service to 1.3 million homes by 2002.

We have the necessary  interconnect  agreements  with local  carriers,  cellular
operators  and long  distance  carriers  to allow us to  provide  our  telephone
services. Interconnect agreements are mandatory for all local carriers.

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

OTHER ULA OPERATIONS

We also provide  multi-channel  television services in Brazil,  Mexico and Peru.
During 1998, our Peruvian and Brazilian systems generated  approximately 6.1% of
system-level  consolidated  revenue for our Latin  America  operations.  We have
ownership  interests in two systems in Brazil:  (i) a 46.3% interest in Jundiai,
which holds nonexclusive cable television  licenses for the city of Jundiai that
we are currently  negotiating  with our partner to sell and (ii) a 100% interest
in TVSB, an owner and operator of a 31 channel exclusive license MMDS system. We
have a  49.0%  interest  in  Megapo  in  Mexico.  We are  also  involved  in the
development  of two cable systems in Peru, in Arequipa and Tacna,  through Cable
Star in which we hold a 60.0%  interest.  We also provide  programming  in Latin
America countries through our 50.0% ownership interest in MGM Networks LA. As of
December 31, 1998, MGM Networks LA had 3.4 million subscribers.

OTHER

Since 1997 we have  provided  management  and  technical  services  to ARA Group
International,  Ltd.  ("ARA") which has built a multi-channel  MMDS Service that
will provide  multi-channel  television  service  throughout  Saudi  Arabia.  We
recently  exercised  our  option to acquire  49.0% of ARA.  The  acquisition  is
subject to a number of  conditions,  including  achievement  of certain  minimum
levels of activation and service.  We estimate the purchase price for this 49.0%
interest will be between $55 million and $75 million.  We are exploring  various
sources to finance this potential acquisition.

EMPLOYEES

As of December 31, 1998, we, together with our  consolidated  subsidiaries,  had
approximately 2,500 employees. Certain of our operating subsidiaries,  including
our Austrian,  Dutch, Norwegian and Australian systems are parties to collective
bargaining agreements with some of their respective  employees.  We believe that
our relations with our employees are good.

REGULATION

The provision of video, telephone and Internet/data services in the countries in
which we operate is regulated.  The scope of  regulation  varies from country to
country.  Below is a discussion of certain regulatory issues in the countries in
which our primary operations are located.

                                       23
<PAGE>

AUSTRIA

Each of the five  municipalities  in which the Telekabel  Group offers  services
holds, directly or indirectly,  5.0% of the local operating company. Each member
of the  Telekabel  Group has entered  into an agreement  with its  municipality.
Under the agreement  between  Telekabel  Wien and the City of Vienna,  decisions
regarding the subscriber rates and programming content of Telekabel Wien's basic
subscription package require the unanimous approval of Telekabel Wien's board of
management, of which the city appoints one member. While the board of management
in the past has always  unanimously  approved  these  decisions  there can be no
assurance  that the  municipality's  director  will  continue  to approve  these
decisions in the future and not hinder the  implementation of our strategies for
our video, telephone or Internet/data services. If the managing directors cannot
reach  agreement,  the  parties  have agreed to call a  shareholders  meeting to
decide the matter. Under Austrian law, a majority  shareholder,  such as us, may
generally  take a decision at a  shareholders  meeting  rather than  through the
board of management.  However, UPC, as the majority shareholder, has never taken
this  action and does not  anticipate  doing so in the  future.  The  agreements
between the other Telekabel Group members and their municipalities  require each
member  to  consult  with its  municipality  prior to  making  similar  business
decisions.

VIDEO  SERVICES.  The Cable  and  Satellite  Broadcast  Radio  Law  governs  the
provision of video services in Austria.  The Regional Radio and Cable  Broadcast
Authorities regulate the operation of cable television networks. Under the Cable
and  Satellite  Broadcast  Radio Law,  Telekabel  Group is required to carry two
"must carry" public Austrian  channels in its basic tier service.  In July 1997,
previous  prohibitions  on  cable  network  operators  transmitting  programming
produced  by them  were  lifted.  Pursuant  to the terms of the  agreement  with
Vienna, however, Telekabel Wien is prohibited from producing programming.

Pricing of the basic tier  service is subject to price  control by the  Austrian
Wage and Price Commission. Approval from the Wage and Price Commission generally
must be sought where the desired  increase is greater than 50.0% of the consumer
price index. Historically,  all of Telekabel Group's price increase applications
have been  approved.  Pricing  of  services  other  than the  basic  tier is not
regulated.

TELEPHONE AND INTERNET/DATA SERVICES. The Telecommunications Act which came into
force August 1, 1997, liberalized the telecommunications sector in Austria as of
January  1,  1998,  in  compliance  with "EU"  directives.  As a  result,  cable
television  networks  may  be  used  to  provide  telecommunications   services.
Telekabel Wien has received a license to provide public voice telephone services
in the entire  Republic of Austria and a license for the public  offer of leased
lines  through its cable  network.  The  licenses  are granted for an  unlimited
period of time provided that the offering of each  respective  service begins by
February 1999 at the latest.

Austria's  Telecommunications  Act  generally  implements  the  terms  of the EU
Directive  on  Interconnection  in  Telecommunications.  In November  1998,  the
Telekabel Group entered into an interconnect  agreement with PTA. Difficulty and
delay in negotiations and agreement led Telekabel Group to seek the intervention
of the Austrian  telecommunications  regulator,  which  determined the principal
terms of the  agreement.  PTA has  brought an action in the  Austrian  courts to
revise the terms of the interconnection arrangement.

Although there are no voice-telephone  pricing regulations,  the Telekom Control
Commission  must be notified of the tariff  structure  and any  subsequent  rate
increases.

Under  Austria's  Telecommunications  Act,  Telekabel  Group  does  not  require
licenses  to provide  Internet/data  services.  It need only  notify the Telekom
Control Commission of the services it intends to provide.

BELGIUM

VIDEO  SERVICES.  In Belgium,  a cable  operator  needs to obtain a governmental
authorization  from the  appropriate  Community  to  operate a cable  television
system.  During 1996, 1997 and 1998, all of TVD's  non-exclusive  authorizations
were renewed for nine years.  Special  authorizations  are also required for the
distribution  of non-EU  programs,  both in Flanders and in Brussels and we have
requested a special authorization in Brussels.

In all of the regions of Belgium,  cable  television  operators  are required to
transmit  particular  local,  national and other channels as part of their basic
tier  service.  There  are  usually  between  11  and 13 of  these  "must-carry"
channels.

                                       24
<PAGE>

Price  increases  require the approval of the  Ministry of Economic  Affairs and
must be justified by an increase in the cost of providing the service. Increases
are generally  approved as long as the increase is below the level of inflation.
Historically, all of TVD's price increases have been approved.

Since 1995, cable  regulations came into force,  which granted cable operators a
right of way for the use of public and  private  property to install and exploit
cable  networks.  Prior to the 1995  regulations,  TVD was a party to concession
agreements with the  municipalities in its franchise areas,  which obliged it to
pay certain  franchise fees. TVD has not paid franchise fees since 1995 when the
cable  regulations  went  into  effect.  In  Etterbeek,  however,  TVD  pays the
municipality  an  annual  amount.   Nonetheless,   certain  municipalities  have
requested  payment  of the  old  franchise  fees,  which  amount  to 5.0% of the
operating  system's  annual  gross  revenues.  TVD does not  believe  that it is
obliged to pay these fees  because it believes  that the 1995  regulations  have
superseded the concession agreements.

TELEPHONE  AND  INTERNET/DATA  SERVICES.  The  provision  of cable  telephone is
governed by the law of March 21, 1991,  as amended by the law of 1997,  together
with secondary regulations.  These provisions allow telecommunications  services
to be provided through cable television networks.  TVD had a provisional license
to build and operate a public  telecommunications  network and has applied for a
permanent  license to build and operate a  telecommunications  network.  TVD has
submitted an  application  for a license to offer voice  telephone  services and
expects to receive a license during the first half of 1999.

INTERNET/DATA  SERVICES.  TVD must make  certain  notifications  to the Institut
Belge des Postes et Telecommunications  regarding the Internet/data  services it
intends to provide. In addition, TVD is required to hold either a provisional or
a permanent license to build and operate a  telecommunications  network in order
to offer Internet/data services on its own infrastructure.

THE NETHERLANDS

VIDEO SERVICES.  The  liberalization of the Dutch  telecommunications  and cable
television  sector has generally  proceeded at a quicker pace than set by the EU
directives.  The new Telecommunications Act took effect, with the exception of a
few provisions,  on December 15, 1998 and further liberalizes these sectors. The
new  Dutch   Telecommunications   Act  does  not   require  a  license  for  the
installation,  maintenance  or operation of a cable  network.  Existing  network
operators   need   only   register   with  the   Dutch   Independent   Post  and
Telecommunications  Authority  within six months after  December  15, 1998.  The
registration  of a network does not give an operator any  exclusive  right.  Any
person may  install,  maintain  and operate a new network  alongside an existing
one. The new Dutch  Telecommunications  Act gives cable  network  operators  and
providers of other public  telecommunication  networks  rights of way to install
and maintain cable,  which are identical to those currently  enjoyed by KPN, our
principal competitor in The Netherlands.

PROGRAMMING.  Pursuant to the Dutch  Telecommunications  Act and the Media laws,
cable  television  network  providers must transmit to all of its subscribers at
least 15 programs for television  and at least 25 programs for radio,  including
approximately  seven television and nine radio "must carry" channels.  Our Dutch
operating  companies  originally  purchased their cable television networks from
the  local  municipalities.  Pursuant  to the terms of the  agreements  with the
municipalities,  the Dutch  operating  companies  are  obligated  to continue to
provide basic tier services of between 20 and 30 television channels,  including
the 15 required under the Media laws.

Under several of the agreements with the  municipalities  described above, for a
number of years the respective  municipality's consent is required for increases
of the price of the basic tier service which exceed certain agreed levels.  Such
consent is not  typically  required  for price  increases  resulting  from costs
beyond the control of the operating companies,  such as copyright fees, consumer
price index increases and municipal duties and levies, which can be passed on to
subscribers.  Because the base  subscription rate for the basic tier service has
been kept at a low level,  particularly  in Amsterdam,  the operating  companies
make up their revenue by charging  programming  suppliers  carriage fees for the
transmission  of  their   channels.   As  A2000's  basic  tier  price  has  been
particularly  restricted,  A2000's  carriage fees have been higher than those of
the other Dutch systems held by UTH. Some of A2000's programming  suppliers have
been unwilling to pay such carriage fees and have withdrawn  their channels from
A2000's  offering.  Some of them have  brought  legal  actions  challenging  the
carriage  fees,  arguing that A2000's  carriage  fees are an abuse of its market
strength. To date, none of A2000's programming suppliers have succeeded in their
actions against A2000.

The price of the basic tier service may also be regulated by the Dutch  Ministry
of Culture, but it has not yet intervened to stop price increases.

                                       25
<PAGE>

TELEPHONE   AND   INTERNET/DATA    SERVICES.    Until   recently,    the   fixed
telecommunications  infrastructure was a statutory monopoly of KPN. As described
above,  the Dutch  telecommunications  sector has been liberalized in advance of
and in  accordance  with  European  Union  telecommunications  policy  and cable
television networks may now be used for the provision of all  telecommunications
services.

While A2000's  telephone  service is not currently  subject to price regulation,
the prices of its competitor, KPN, are regulated. The Dutch Independent Post and
Telecommunications  Authority has recently  indicated that KPN should reduce its
end-user tariffs and substantially reduce its interconnection  prices to reflect
costs.

INTERNET/DATA  SERVICES.  Under the Dutch  Telecommunications Act, Internet/data
services  are  regulated  as  telecommunications  services.  As such,  our Dutch
operating  systems  need  only  register  with the  Dutch  Independent  Post and
Telecommunications  Authority as providers of public telecommunication  services
and/or networks.

NORWAY

VIDEO SERVICES.  Under Norway's  Telecommunications  Act, the  installation  and
operation of the cable  infrastructure  and equipment  must be authorized by and
registered with the Norwegian Post and Telecommunications Authority on the basis
of certain necessary technical  qualifications.  In Norway, the simultaneous and
unchanged  transmission of television signals over a cable television network is
not subject to any licensing or registration requirements.

Cable  television  providers  have  "must-carry"  obligations  obliging  them to
include three national  channels and typically one local  television  channel in
their  basic  tier  services.  Distribution  of any  programming  that  is not a
simultaneous and unchanged  retransmission requires a programming license issued
by the Ministry of Cultural Affairs.  Because pay-per-view  programming and some
other services are not strictly simultaneous retransmission,  Janco has obtained
a three-year programming license.

The  provision  of the basic tier service is subject to price  control.  A cable
operator is only allowed to increase the basic package  subscription fee in line
with  the  Official  Consumer  Price  Index.   There  are  no  specific  pricing
restrictions on expanded basic tier services.

TELEPHONE SERVICES.  Since January 1, 1998,  alternative networks in Norway have
been permitted to offer voice telephone services in accordance with the terms of
the  applicable EU  directives.  For telephone  operators and service  providers
without  significant  market  power,  as is  currently  the case with Janco,  no
license is required to offer voice telephone services.  Such providers need only
register with the Norwegian Post and Telecommunications Authority.

Providers of public telephone without significant market power, including Janco,
are not subject to any specific pricing regulations.

INTERNET/DATA  SERVICES.  Cable television  networks do not require a license or
notification  to provide  Internet/data  services.  They need only  register the
service with the Norwegian Post and Telecommunications Authority.

FRANCE

Mediareseaux is authorized to operate cable networks for  audio-visual  services
in the territory of Syndicat Mixte de  Videocommunication  de l'Est parisien and
the territory of the city of  Rosny-sous-Bois  pursuant to two  licenses,  valid
until  2026  and  2022  respectively,   granted  by  the  Conseil  Superieur  de
l'Audiovisuel. In order to operate its cable television infrastructure, however,
Mediareseaux  was required to enter into public  service  delegation  agreements
with local  authorities.  The terms of Mediareseaux's  agreements with these two
territories govern, among other things, Mediareseaux's channel line-up and cable
subscription  rates.  The agreements  also give the respective  territories  the
option to purchase  Mediareseaux's  network at the  expiration of the agreements
for a price equal to its usage value as estimated under the terms and conditions
of the agreements.  Mediareseaux  has also entered into public domain  occupancy
agreements  with  each  city in its  region  giving  Mediareseaux  the  right to
establish its cable network in the public domain.

Mediareseaux  holds licenses  granted by the Minister of  Telecommunications  in
June 1998 for the  establishment  and  operation of a public  telecommunications
network and for the provision of voice telephone in three French  departments of
the Paris  region.  The  licenses  were  granted  for a period of 15 years,  are
non-transferable   and  can  only  be   revoked   for  a   material   breach  of
telecommunications regulations. Pursuant to the Post and Telecommunication Code,
France  Telecom's  interconnection  rates must be  cost-oriented  and offered on
non-discriminatory   terms.   Mediareseaux  has  entered  into  an  interconnect
agreement with France Telecom.  Mediareseaux expects, however, that it will seek
to renegotiate some provisions of the interconnect agreement during 1999.

                                       26
<PAGE>

ISRAEL

VIDEO  SERVICES.  As part of the  liberalization  policy  adopted by the Israeli
Communications  Ministry,  the telecommunications and cable television market in
Israel is expected to undergo  significant reforms in 1999. We expect that these
reforms  will  include  opening  the   multi-channel   television   business  to
competition  by granting  licenses  to direct to home  satellite  operators  and
opening  the  local  telephone  and   Internet/data   transmission   markets  to
competition by granting  licenses to  independent  operators,  thereby  allowing
competition with Bezeq, the Israeli incumbent  telecommunications operator. Upon
expiration of the existing cable television licenses, franchise exclusivity will
be  eliminated  and  other  operators  will be  permitted  to  apply  for  cable
television licenses to compete in the cable television market.

The 1987 Bezeq law, which allowed the introduction of cable television, gave the
new cable  companies  exclusive  rights to download  and  rebroadcast  satellite
programming until 2003. The cable television  operators therefore challenged the
legal basis of the Ministry of  Communications  policy of introducing  direct to
home  satellite  service  before that date. In November  1998,  the Israeli High
Court  of  Justice  decided  that  direct  to home  satellite  service  could be
introduced before 2003. The cable television  operators are seeking compensation
for the loss of exclusivity  prior to 2003.  This could come in the form of some
additional right or rights with respect to the content or services they provide.

FRANCHISE   AGREEMENTS.   Tevel  holds  exclusive  cable  television   franchise
agreements that were granted for a period of 12 years and expire in 2002.  These
franchises  include a  four-year  renewal  option.  Gvanim,  which was  recently
acquired by Tevel, holds exclusive  franchises which expire in 2005 and 2002. As
with the Tevel franchises,  the Communications  Ministry is authorized to extend
both of these franchises for an additional four years.  Tevel and Gvanim pay the
government  royalties of 5.0% of their gross  revenues.  Upon the opening of the
telecommunications market to competition,  exclusive cable television franchises
are expected to be replaced with  long-term  renewable,  non-exclusive  licenses
that will permit cable operators to continue providing cable television services
and to begin  to  offer  additional  telecommunications  services  such as voice
telephone and Internet/data services.

Pursuant  to its  franchise  agreements,  Tevel  must  provide  within its basic
service five  tape-delivered  channels  subtitled in Hebrew: a movie channel,  a
general  entertainment  channel,  a  children's  channel,  a nature and  science
channel, and a sports channel.

In  addition,  pursuant  to the 1987  Bezeq Law,  cable  operators  must  obtain
authorization  to add or remove channels from their service from the Ministry of
Communications.  Further  restrictions  prohibit cable television operators from
carrying  advertisements on their  tape-delivered  channels.  Tevel currently is
required to provide three "must-carry" off-air channels. Its current arrangement
currently  prohibits  "tiering" of video  services.  In light of expected future
competition by the DTH satellite service providers,  including the fact that the
DTH satellite  service  providers will be entitled to provide "tiering" of their
video services,  Tevel and other cable television  providers have applied to the
Ministry  of  Communications  for  approval  of  "tiering"  of their  respective
services upon opening the multi-channel television business to competition.  The
Ministry of  Communications  has  indicated its plans to delay  introduction  of
"tiering"  by cable  television  operators by the earlier of 18-36 months or the
loss of 15% of cable  subscribers.  Tevel and other cable  television  operators
have  filed an appeal to the High Court of Justice  challenging  the  Ministry's
intention.

Cable television service subscription fees are subject to regulation through the
franchise  agreements and through the  arrangement  approved by the  Restrictive
Trade Practices tribunal.  Currently,  this arrangement is more restrictive than
the  franchise  agreements  and permits basic  service  subscription  fees to be
increased by a maximum of 1.9% per year above the cost of living index.

TELEPHONE AND INTERNET/DATA  SERVICES. As part of the proposed liberalization of
the  telecommunications  market in 1999, Tevel and Gvanim expect to be permitted
to supply Internet/data and local telephone services in their franchise areas.

HUNGARY

Cable  operators  in Hungary  are not  granted  franchises;  however,  all cable
operators must be properly  registered with the appropriate  government  agency.
Moreover,  although there is no rate regulation in Hungary, rates are subject to
consumer  pricing and  anti-competition  reviews by the government.  Further,  a
single  cable  operator  may not  provide  service  to  homes  exceeding  in the
aggregate one-sixth of the Hungarian population.

                                       27
<PAGE>

AUSTRALIA

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

The Australia  Broadcasting Services Act of 1992 ("BSA") regulates the ownership
and operation of all  categories of television  and radio  services in Australia
including wireline cable, DTH, MMDS or any other means of transmission.  The BSA
regulates  subscription  television  broadcasting  services  by  requiring  each
service to have an individual  license.  Companies  associated  with Austar hold
approximately  100  non-satellite  and  50  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  operating  areas.  Austar's MMDS licenses are due to expire during 1999.
Although  renewal is not automatic,  Austar may apply to a government  regulator
for  renewal and if renewal is not granted  the  decision  is  reviewable  by an
administrative appeals body.

Foreign ownership of "company interests" of subscription television broadcasting
licenses is limited to 20% by a single foreign person and an aggregate of 35% by
all foreign persons.  "Company  interests" under the BSA mean, in broad terms, a
beneficial  entitlement to, or an interest in, shares of the company, being in a
position  to  exercise  control  of votes as a poll at a  shareholders  meeting,
having a  beneficial  entitlement  to a dividend,  a share of profits  under the
company's  memorandum and articles of  association or shareholder  distributions
upon  liquidation  or  otherwise.  Currently,  our  indirect  interests  in  the
companies  that hold the licenses are in the form of debentures  and not company
interests under the BSA.

Our increase in our  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 us 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 Foreign Acquisition
and  Takeover  Act  ("FATA").  We  are  currently  considering  restructing  and
streamlining  Austar's  corporate  structure.  We plan to seek  the  Treasurer's
approval of this restructuring under FATA. We believe the Treasurer will approve
this restructuring.

CHILE

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

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


                                       28
<PAGE>

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

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

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

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

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

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

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.

The  territorial   government  of  Tahiti  (in  French  Polynesia)  had  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
then brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to  Telefenua.  On  November  25,  1998,  the Conseil d' Etat
cancelled the MMDS licenses awarded to Telefenua. Telefenua is in the process of
seeking  a  new  authorization.  We  have  no  reason  to  believe  that  a  new
authorization  will  not  be  granted.  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.

On July 14, 1998, UIH-SFCC Holdings,  L.P. ("UIH-SFCC") filed a complaint in the
United  States  District  Court for the  District of  Colorado,  for damages for
breach of contract, breach of fiduciary duty and to enforce UIH-SFCC's rights as
General  Partner in  UIH-SFCC,  a  Colorado  Limited  Partnership  which owns an
interest in SFCC,  the 100% parent of Telefenua.  The three  defendants are Loic
Brigato,  Winfred Anderson and Yoshiko Payne,  limited partners of UIH-SFCC.  On
September 27, 1998,  UIH filed a parallel  action in the District  Court for the
State of Colorado.  Specifically, the complaints allege that the defendants have
refused  to  abide by the  terms of the  Partnership  Agreement  and have  taken
actions highly  detrimental to Telefenua.  UIH-SFCC  seeks monetary  damages,  a
decree of specific performance requiring defendants to perform their obligations
and a constructive trust over defendants' partnership interest.  Defendants have
filed in the federal  court action a motion to dismiss the complaint for lack of
subject matter jurisdiction.  There has been no decision issued as of this date.
We intend to vigorously defend our position.

                                       29
<PAGE>


On April 20, 1999,  a class  action was filed in the District  Court of Tel Aviv
against  several  cable  operators in Israel,  including  Tevel.  The  complaint
alleges that the cable operators have taken advantage of their monopoly position
in the market by  charging  excessive  prices  for the  services  provided.  The
plaintiffs  are  seeking  damages  in  the  amount  of  approximately   NIS1,000
(approximately  $240) per subscriber and a judicial order  instructing  Tevel to
reduce its subscriber fee to the alleged fair market price.  The plaintiffs have
also applied for a judicial order against the Ministry of Communication to avoid
considering   the  extension  of  Tevel's  cable   franchise   term  for  unfair
exploitation and monopoly status.  Tevel's cable television service subscription
rates are subject to governmental  regulation  through franchise  agreements and
through the arrangement  approved by the Restrictive  Trade Practices  Tribunal.
Tevel intends to vigorously defend itself against these allegations.

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

On December 17, 1998, the Company held its 1998 annual meeting of  stockholders.
At this meeting, the stockholders considered and approved the following:

1.   The election of Lawrence F. DeGeorge,  Bruce H. Spector and John P. Cole as
     Class II Directors  with the term of each to continue until the 2001 annual
     meeting of stockholders;

2.   The election of John F.  Riordan as a Class III  Director  with his term to
     continue until the 1999 annual meeting of stockholders;

3.   The Company's Stock Option Plan for Non-Employee Directors; and

4.   The appointment of Arthur Andersen LLP as the independent  auditors for the
     Company for the fiscal year covered by this Annual Report on Form 10-K.


                                       30
<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
                                                              -------    -------
Ten months ended December 31, 1998:
   First Quarter..........................................   $19.2500   $14.0000
   Second Quarter.........................................   $19.4375   $10.1875
   Third Quarter..........................................   $16.8750   $ 7.7500
   December, 1998.........................................   $20.5000   $15.8750

Year ended February 28, 1998:
   First Quarter..........................................   $10.2500   $ 8.2500
   Second Quarter.........................................   $11.5000   $ 9.7500
   Third Quarter..........................................   $13.7500   $10.3125
   Fourth Quarter.........................................   $14.5625   $10.3750


As of May 3,  1999,  there  were  approximately  91 holders of record of Class A
Common Stock and 30 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".

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

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

                                       31

<PAGE>
<TABLE>
<CAPTION>
                                                UNITED INTERNATIONAL HOLDINGS, INC.

                                                                                            For the Years Ended 
                                                             For the Ten   ------------------------------------------------------- 
                                                             Months Ended        February 28,
                                                             December 31,  -----------------------     February 29,   February 28,
                                                                 1998         1998         1997           1996           1995
                                                             ------------  ----------   ----------     -----------    ------------ 
                                                                         (In thousands, except share and per share data)
<S>                                                          <C>           <C>          <C>            <C>            <C>
Statement of Operations Data:
  Revenue..................................................  $  254,068    $   98,622   $   31,555     $    2,870     $    1,613
  System operating expense.................................    (122,811)      (65,631)     (26,251)        (4,224)        (1,651)
  System selling, general and administrative expense.......    (105,226)      (62,803)     (33,655)        (3,524)        (2,103)
  Corporate general and administrative expense.............    (194,767)      (28,553)     (20,365)       (18,959)       (16,196)
  Depreciation and amortization............................    (159,045)      (91,656)     (38,961)        (2,331)        (1,701)
                                                             ----------    ----------   ----------     ----------     ----------
         Net operating loss................................    (327,781)     (150,021)     (87,677)       (26,168)       (20,038)

  Interest income..........................................      10,464         7,806       13,329          8,417          6,479
  Interest expense.........................................    (163,227)     (124,288)     (79,659)       (36,045)        (9,266)
  Provision for losses on marketable equity securities
   and investment related costs............................      (9,686)      (14,793)      (5,859)        (6,055)        (2,865)
  Gain on sale of investments in affiliated companies......          --        90,020       65,249         16,013             --
  Other (expense) income, net..............................      (2,546)       (5,088)        (991)            81            107
                                                             ----------    ----------   ----------     ----------     ----------
         Net loss before other items.......................    (492,776)     (196,364)     (95,608)       (43,757)       (25,583)
  Share in results of affiliated companies, net............     (54,166)      (68,645)     (47,575)       (48,635)        (6,106)
  Minority interests in subsidiaries.......................       1,410         1,568        4,358          1,081          1,075
  Extraordinary charge for early retirement of debt........          --       (79,091)          --             --             --
                                                             ----------    ----------   ----------     ----------     ----------
         Net loss..........................................  $ (545,532)   $ (342,532)  $ (138,825)    $  (91,311)    $  (30,614)
                                                             ==========    ==========   ==========     ==========     ==========
  Net loss per common share (1):
    Basic and diluted loss before extraordinary charge.....  $   (13.71)   $    (6.75)  $    (3.59)    $    (2.69)    $    (1.10)
    Extraordinary charge...................................          --         (2.02)          --             --             --
                                                             ----------    ----------   ----------     ----------     ----------
    Basic and diluted net loss.............................  $   (13.71)   $    (8.77)  $    (3.59)    $    (2.69)    $    (1.10)
                                                             ==========    ==========   ==========     ==========     ==========

    Weighted-average number of common shares outstanding...  39,919,887    39,211,501   39,035,776     34,017,660     27,802,250
                                                             ==========    ==========   ==========     ==========     ==========


                                                                                             As of 
                                                             --------------------------------------------------------------------- 
                                                                                February 28,
                                                             December 31,  -----------------------     February 29,   February 28,
                                                                 1998         1998         1997           1996           1995
                                                             ------------  ----------   ----------     -----------    ------------
                                                                                        (In thousands)
Balance Sheet Data:
  Cash, cash equivalents and short-term liquid
   investments.............................................  $   94,321    $  358,122     $140,743       $161,983       $215,955
  Other current assets, net................................      81,589        52,877       28,934         32,461         20,670
  Investments in and advances to affiliated companies......     429,490       341,252      253,108        272,205         85,280
  Property, plant and equipment, net.......................     464,059       440,735      219,342         31,102         13,741
  Goodwill and other intangible assets, net................     424,934       409,190      132,636         45,629             --
  Other non-current assets.................................      47,702        77,659       45,173         36,826         34,644
                                                             ----------    ----------     --------       --------       --------
         Total assets......................................  $1,542,095    $1,679,835     $819,936       $580,206       $370,290
                                                             ==========    ==========     ========       ========       ========

  Current liabilities......................................  $  326,552    $  291,390     $ 88,941       $ 13,255       $ 10,530
  Senior discount notes and other long-term debt...........   1,939,289     1,702,771      675,183        371,227        202,416
  Other non-current liabilities............................     184,928        30,204        9,116             --             --
                                                             ----------    ----------     --------       --------       --------
         Total liabilities.................................   2,450,769     2,024,365      773,240        384,482        212,946

  Minority interests in subsidiaries.......................      18,705        15,186          307          2,509          7,307
  Preferred stock and other................................      56,286        32,564       31,293         41,239         11,167
  Stockholders' (deficit) equity...........................    (983,665)     (392,280)      15,096        151,976        138,870
                                                             ----------    ----------     --------       --------       --------
         Total liabilities and stockholders'
          (deficit) equity.................................  $1,542,095    $1,679,835     $819,936       $580,206       $370,290
                                                             ==========    ==========     ========       ========       ========
</TABLE>
-----------------
 (1) Net loss per common  share  amounts  include  the accrual of  dividends  on
     convertible  preferred  stock which are  recorded  directly  to  additional
     paid-in capital.

                                       32
<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.   These
forward-looking   statements  may  include,   among  other  things,   statements
concerning our plans,  objectives and future economic  prospects,  expectations,
beliefs,  future plans and strategies,  anticipated events or trends and similar
expressions   concerning   matters  that  are  not   historical   facts.   These
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors which may cause our actual results,  performance or  achievements,
or industry results,  to be materially  different from what we say or imply with
such  forward-looking  statements.  These factors  include,  among other things,
changes in television  viewing  preferences  and habits by our  subscribers  and
potential   subscribers,   their  acceptance  of  new  technology,   programming
alternatives and new video services we may offer. They also include subscribers'
acceptance of our newer  telephone and  Internet/data  services,  our ability to
manage and grow our newer telephone and Internet/data  services,  our ability to
secure  adequate  capital to fund other  system  growth and  development,  risks
inherent  in  investment  and  operations  in  foreign  countries,   changes  in
government regulation, changes in the nature of key strategic relationships with
partners and joint venturers,  and other factors discussed in our report on Form
8-K dated September 24, 1996. These forward-looking  statements apply only as of
the time of this report,  and we have no obligation or plans to provide  updates
or revisions to these forward-looking statements or any other changes in events,
conditions or  circumstances on which these statements are based. Our statements
in  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations in this report related to the Year 2000 issues are hereby denominated
as "Year 2000  Statements"  within the meaning of the Year 2000  Information and
Readiness  Disclosure  Act. The following  discussion  and analysis of financial
condition and results of operations cover the ten months ended December 31, 1998
and the years ended February 28, 1998 and 1997, and should be read together with
our  consolidated  financial  statements  and related notes  included  elsewhere
herein. These consolidated  financial statements provide additional  information
regarding our financial activities and condition.

INTRODUCTION

UIH was formed in 1989 for the purpose of  developing,  acquiring  and  managing
foreign multi-channel  television,  programming and telephony operations outside
the United States.  Through UPC, our systems in Europe together have the largest
number of subscribers of any group of broadband communications networks operated
across  Europe.  Through  ULA  and  UAP,  we  hold  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,
as well as  interests  in  programming  companies  for the  Australia  and Latin
America markets.

For the ten months ended December 31, 1998, we consolidated the results from our
systems in  Austria,  Belgium,  Norway,  France,  Hungary,  the Czech  Republic,
Romania, the Slovak Republic,  Ireland,  Australia, Peru and Brazil (Fortaleza).
Unconsolidated  systems  included  our  interests  in  certain  Dutch,  Israeli,
Maltese, New Zealand, Chile, Mexico, Tahiti,  Philippines and China systems, and
programming  interests  in  Hungary,  the Czech  Republic,  Australia  and Latin
America. We account for these unconsolidated  systems using the equity method of
accounting.  Under this method, the investment,  originally recorded at cost, is
adjusted to recognize our  proportionate  share of net earnings or losses of the
affiliate,  limited  to the  extent of our  investment  in and  advances  to the
affiliate,   including  any  debt  guarantees  or  other   contractual   funding
commitments. Our proportionate share of net earnings or losses of each affiliate
includes  the  amortization  of the  excess of our cost  over our  proportionate
interest in each  affiliate's net tangible  assets.  During the ten months ended
December 31, 1998, we  consolidated  certain of our Dutch systems for the period
ended July 31, 1998.  Thereafter,  all of our Dutch  systems were  accounted for
using the equity method.  On February 17, 1999, UPC acquired the remaining 49.0%
interest in UTH, our Dutch holding  company,  and will begin  consolidating  the
results of UTH's  systems  other than A2000.  On December 11, 1997, we purchased
the  remaining  50.0%  of UPC we did not  already  own,  and as a  result  began
consolidating  UPC's operating  results.  We had historically  accounted for UPC
under the equity method.

Prior to the ten  months  ended  December  31,  1998,  our  fiscal  year end was
February  28,  and we  accounted  for our  share  of the  income  or loss of our
operating  companies  based  on the  calendar  year  results  of each  operating
company.  This created a two-month  delay in  reporting  the  operating  company
results in our consolidated results for our fiscal year-end.

                                       33

<PAGE>

On  February  24,  1999,  we changed  our  fiscal  year end from the last day in
February to the last day in December, effective December 31, 1998. To effect the
transition to the new fiscal year end, the combined results of operations of the
operating  companies for January and February 1998, a loss of $50,369,  has been
reported as a one-time charge to our retained deficit as of March 1, 1998 in our
consolidated  statement of stockholders'  (deficit)  equity.  Consequently,  the
consolidated  statement of operations  presents the consolidated  results of the
Company and its subsidiaries for the ten months ended December 31, 1998.

SERVICES

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

We believe that an increasing  percentage of our future  revenues will come from
telephone and  Internet/data  services.  Within a decade,  video  services could
account for half of our total revenue, as our other services increase. These are
forward-looking  statements  and will not be  fulfilled  unless our new services
grow  dramatically.   Our  capital   constraints,   technological   limitations,
competition, lack of programming, loss of personnel, adverse regulation and many
other factors could prevent our new services from growing as we expect.

PRICING

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

COSTS OF OPERATIONS

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

                                       34
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

SOURCES AND USES

We have  financed  our  acquisitions  and  funding of our video,  voice and data
systems  in the three main  regions  of the world in which we operate  primarily
through  public and private  debt and equity as well as cash  received  from the
sale of non-strategic assets by certain subsidiaries.  These resources have also
been used to refinance  certain debt  instruments  and  facilities as well as to
cover corporate  overhead.  The following table outlines the sources and uses of
cash, cash equivalents,  restricted cash and short-term liquid  investments (for
purposes of this table only,  "cash") for UIH (parent  only) from  inception  to
date:
<TABLE>
<CAPTION>
                                                                               For the Ten
                                                        Inception to          Months Ended
                                                      February 28, 1998     December 31, 1998      Total
     UIH (Parent Only)                                -----------------     -----------------     --------
     -----------------                                                        (In millions)
     <S>                                                  <C>                   <C>               <C>
     Financing Sources:
       Gross bond proceeds.....................           $ 1,138.1             $    --           $1,138.1
       Gross equity proceeds (1)...............               367.1                41.8              408.9
       Asset sales, dividends and note payments               216.1                 8.3              224.4
       Interest income and other...............                26.3                 6.4               32.7
                                                          ---------             -------           --------
            Total sources......................             1,747.6                56.5            1,804.1
                                                          ---------             -------           --------
     Application of Funds:
       Investment in:
         UPC...................................              (363.1)              (91.6)            (454.7)
         UAP (1)...............................              (160.0)              (96.4)            (256.4)
         ULA...................................              (224.2)              (68.1)            (292.3)
         Other.................................               (25.8)                 --              (25.8)
                                                          ---------             -------           --------
            Total..............................              (773.1)             (256.1)          (1,029.2)
       Repayment of bonds (2)..................              (531.8)                 --             (531.8)
       Offering costs..........................               (63.7)               (0.8)             (64.5)
       Corporate equipment and development.....               (25.6)               (0.1)             (25.7)
       Corporate overhead and other............               (94.6)              (11.9)            (106.5)
                                                          ---------             -------           --------
            Total uses.........................            (1,488.8)             (268.9)          (1,757.7)
                                                          ---------             -------           --------
       Period change in cash...................               258.8              (212.4)              46.4
       Cash, beginning of period...............                  --               258.8                 --
                                                          ---------             -------           --------
       Cash, end of period.....................           $   258.8             $  46.4               46.4
                                                          =========             =======
     UIH's Subsidiaries
     ------------------
     Cash, end of period:
       UPC.....................................                                                       31.7
       UAP.....................................                                                        3.5
       ULA.....................................                                                        9.2
       Other...................................                                                        3.5
                                                                                                  --------
     Total consolidated cash, cash equivalents,
      restricted cash and short-term liquid
      investments..............................                                                   $   94.3
                                                                                                  ========
</TABLE>
     ----------------
(1)  Includes  issuance/use  of $29.8 million and $29.5  million in  convertible
     preferred  stock in 1995 and 1998,  respectively,  to acquire  interests in
     Australia  as well as $50.0  million in common stock in 1995 to acquire the
     initial interest in UPC.
(2) Includes tender premium of $65.6 million.

UIH PARENT

We had $46.4 million of cash, cash  equivalents,  restricted cash and short-term
liquid  investments on hand as of December 31, 1998.  Subsequent to December 31,
1998 we  received  $13.9  million  from the  exercise  of  existing  warrants to
purchase  our common  stock,  as well as $89.2  million  from the  repayment  of
inter-company  loans to UPC.  Additional sources of cash in 1999 may include the
raising of additional private or public debt and/or equity and/or the receipt of

                                       35
<PAGE>

sales  proceeds  from  the  disposition  of  non-strategic   assets  by  certain
subsidiaries.  Uses of cash in the next year will include  continued  funding to
the  Asia/Pacific and Latin America regions to meet the existing growth plans of
our  systems  in those  regions  and  corporate  overhead.  We do 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 and proceeds from its initial public
offering in February 1999. We estimate approximately $42.3 million of UIH Parent
funding will be required by systems in the Asia/Pacific  region during 1999, and
approximately $26.3 million of UIH Parent funding will be required by systems in
the Latin  America  region  during 1999.  We believe  that our existing  capital
resources,  combined with potential debt or equity  financings will enable us to
assist  in  satisfying  the  operating  and  development   requirements  of  our
subsidiaries and to cover corporate overhead for the next year. To the extent we
pursue new  acquisitions  or development  opportunities,  we would need to raise
additional capital or seek strategic partners.

UPC

UPC has financed its operations and acquisitions primarily from cash contributed
by UIH upon the  formation of UPC,  debt  financed at the UPC  corporate  level,
project debt  financed at the operating  company level and operating  cash flow.
UPC has used these capital resources to fund  acquisitions,  developing  systems
and corporate overhead. UPC has financed its well-established  systems and, when
possible,  its  developing  systems with project debt and  operating  cash flow.
Also,  well-established  systems generally have stable positive cash flows that,
to the extent  permitted by applicable  credit  facilities,  may be used to fund
other  operations.   Developing   systems,   which  are  at  various  stages  of
construction  and  development,  will  generally  depend  on UPC for some of the
funding for their cash needs until project financing can be secured.

During  February 1999,  UPC  successfully  completed an initial public  offering
selling 44.6 million shares on the Amsterdam  Stock Exchange and Nasdaq National
Market  System  and  raising  gross  and  net  proceeds  from  the  offering  of
approximately  Dutch guilder  ("NLG")  2,850.3  million  ($1,508.1  million) and
NLG2,705.8 million ($1,431.6 million),  respectively (the "UPC IPO"). Concurrent
with the  offering,  a  subsidiary  of Discount  Investment  Corportion  ("DIC")
exercised one of its two option agreements  acquiring  approximately 1.6 million
shares for NLG89.6 million ($47.4 million). Proceeds from the sale of the shares
to DIC were used to repay $45.0  million of the DIC Loan and  related  interest.
Also  concurrent  with the  offering,  proceeds were used to reduce UPC's Senior
Revolving Credit Facility totaling NLG635.8 million ($336.4 million),  including
accrued interest of NLG15.8 million ($8.4 million),  repay in its entirety UPC's
Bridge Bank Facility  totaling  NLG110.0  million  ($58.2  million),  net of the
interest  reserve  account,  acquire  NUON's 49%  interest  in UTH for  NLG518.1
million ($265.7  million),  including  accrued interest of NLG15.8 million ($8.1
million),  and assume from NUON a subordinated loan,  including accrued interest
of NLG33.3 million ($17.0 million).  UPC also repaid approximately $89.2 million
of  intercompany  loans to UIH Parent.  The remaining  proceeds from the initial
public offering are expected to be used primarily for capital  expenditures  and
to fund other costs associated with UPC's network upgrade,  the build and launch
of UPC's telephone and Internet/data  services businesses as well as UPC's video
distribution and programming businesses. Some of the proceeds are expected to be
used for acquisitions of new systems and other related businesses.  UPC may need
to  raise  additional  capital  in the  future  to the  extent  it  pursues  new
acquisition  or  development  opportunities  or if cash flow from  operations is
insufficient to satisfy its liquidity requirements.

UAP

UAP has  financed  its  operations  and  acquisitions  primarily  from  cash and
preferred  stock  contributed  by UIH,  public  bonds at the UIH A/P  level  and
project debt financed at the operating company level. UAP has used these capital
resources  to fund  acquisitions,  developing  systems and  corporate  overhead.
Developing systems, which are at various stages of construction and development,
will  generally  depend on both funding  from UIH and project  financing to meet
their growth needs.

We expect the need for additional  funding for Austar 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
satellite compared to 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  fees. The average cost of a subscriber who disconnects
is reduced by the recovery of certain equipment (principally converters), and is
further  reduced if a new  subscriber is installed in a previously  disconnected
home.  Austar  plans to continue  to expand and add  subscribers;  however,  the
timing of such  expansion and the funds  required for such expansion are largely

                                       36
<PAGE>

variable.  Based upon  current  plans and  budgeted  churn,  Austar will require
approximately  $112.4  million to continue on its  current  expansion  path from
January 1, 1999 through December 31, 1999, which will be funded substantially by
the New Austar Bank Facility.  The remaining sources of funds for such expansion
may include  the  raising of private or public debt and/or  equity by UAP or its
subsidiaries  and/or  continued  investment  by us. We  believe  that  committed
financial  support  from  us  combined  with  these  potential  debt  or  equity
financings and, if necessary,  reductions in planned capital  expenditures,  are
sufficient to sustain Austar's operations through at least mid-2000.

We expect the need for  additional  funding for Saturn in the  future.  Saturn's
capital needs  include  approximately  $37.2  million for the  completion of the
network required by Saturn to offer cable television and telephony  services and
approximately  $4.8 million until Saturn has sufficient  cash flows to cover its
operations and the capital required to install customers,  although there can be
no assurance that further additional  capital will not be required.  The sources
of funds for such expansion may include the Saturn Bank Facility, the raising of
private or public debt and/or equity by UAP or its subsidiaries and/or continued
investment by us and our partner in Saturn. We believe that committed  financial
support from us combined with these potential debt or equity  financings and, if
necessary, reductions in planned capital expenditures, are sufficient to sustain
Saturn's operations through at least mid-2000.

ULA

ULA has financed its operations and acquisitions primarily from cash contributed
by us, asset sales,  ULA  corporate-level  debt and project debt financed at the
operating  company  level.  In January  1996,  ULA sold its 25.0%  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,  ULA sold its 34.0%  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, ULA sold all
of its Argentina  multi-channel  television  system  assets  (Bahia  Blanca) for
approximately  $211.1  million,  resulting  in a  gain  of  approximately  $90.0
million.  ULA's  systems,  which  are at  various  stages  of  construction  and
development,  will generally depend on funding from us and project  financing to
meet their growth needs. ULA anticipates additional funding for various projects
totaling  approximately  $26.3  million  through  1999. In addition to continued
investment  by us, other sources of funds for growth for ULA systems may include
the raising of private or public debt and/or equity or the sale of non-strategic
assets.  ULA  may or may  not be  successful  in  completing  all or any of such
financings.  We believe,  however, that financial support from us combined with,
if necessary,  reductions in planned  capital  expenditures,  are  sufficient to
sustain ULA's operations through at least the end of 1999.

On April 29, 1999, an indirect wholly owned  subsidiary of ours acquired a 60.0%
interest in VTRH (the "VTRH Acquisition").  This acquisition,  combined with the
40.0% interest in VTRH that is owned by another indirect wholly owned subsidiary
of ours,  gives us an indirect 100% interest in VTRH. The purchase price for the
60.0% interest in VTRH was approximately  $258.0 million in cash, which included
repayment  of advances  from the other  shareholders  of VTRH and certain  other
expenses.  In  addition,  we provided  capital for VTRH to prepay  approximately
$126.0 million of existing bank  indebtedness  and a promissory  note from us to
one of the other shareholders of VTRH.

To finance the prepayment of VTRH's  indebtedness  and a portion of the purchase
price for the VTRH Acquisition,  we concurrently  sold in a private  transaction
$208.9 million of 10.875% Senior Discount Notes due 2009 (the "1999 Notes"). The
remaining  portion  of the VTRH  Acquisition  was  funded  with cash on hand and
approximately  $145.0 million  borrowed  under a Senior Secured Credit  Facility
between VTRH and a syndicate of banks (the "VTRH Bank Facility").

The VTRH Bank  Facility  consists of two tranches - Tranche A, which is a single
term loan  facility  with an  aggregate  principal  amount  of  $140.0  million,
substantially all of which was borrowed for the VTRH Acquisition, and Tranche B,
which is a three-year term loan facility,  with an aggregate principal amount of
up to  $80.0  million.  Both  tranches  have  been  guaranteed  by VTRH  and its
subsidiaries.   The  banks  are  in  the  process  of   syndicating   the  final
approximately  $50.0  million  of the VTRH  Bank  Facility.  We have  agreed  to
participate in the syndication as necessary.

The 1999 Notes have essentially the same terms as our outstanding  10.75% Senior
Secured  Discount  Notes due 2008,  except for the  maturity and coupon rate and
that the 1999 Notes are not secured.

OBLIGATIONS

Our  consolidated  subsidiaries  and UIH Parent had the following  long-term and
short-term  debt  outstanding  as of December  31,  1998.  Debt  denominated  in
currencies other than United States dollars has been translated to United States
dollars for the last column using December 31, 1998 exchange rates.

                                       37

<PAGE>
<TABLE>
<CAPTION>
                                                                                                                    Outstanding
                                                                Final                                             At December 31,
Description (Borrower)             Use of Funds                Maturity         Interest Rate      Facility Size       1998
-----------------------------      --------------------        --------      --------------------  -------------  ---------------
                                                                                                   (in millions)   (in millions)
<S>                                <C>                         <C>           <C>                     <C>             <C>
Parent:

UIH Senior Discount Notes          Refinancing                 2008          10.75%                  $1,375.0        $  893.0
UIH Old Notes                      --                            --              --                        --        $    0.4

UPC:

Senior Revolving Credit Facility   UIH/Philips transaction;    2006          LIBOR + 0.5% to         NLG1,100.0      $  512.2
                                   Refinancing;                              2.0% per annum
                                   Acquisitions;
                                   Capital expenditures;
                                   Working capital

Mediareseaux Facility              Capital expenditures;       2007          FRF LIBOR + 0.75%       FRF 680.0       $   21.3
                                   Acquisitions; Working                     to 2.0%
                                   capital

DIC Loan                           To increase interests in    2000          8.0% per annum          $90.0           $   84.2
                                   Israeli and Maltese                       + 6.0% of principal
                                   operating systems                         amount at maturity

Other                              Various                     Various       Various                 Various         $    3.8

Time Warner Note                   Acquisition of Hungary      June 1999     Non-interest bearing    $18.0           $   18.0
                                   distribution assets

Bridge Bank Facility               UPC Acquisition             June 1999     LIBOR + 4.5%            $125.0          $   60.1
                                                                             to 6.0%

Telekabel Hungary Facility         Capital expenditures,       April 1999    BUBOR + 2.5%            DM 65.6         $   15.5
                                   Acquisitions; Working
                                   capital

UAP:

UIH A/P Notes                      Refinancing;                2006          14.0%                   $492.9          $  356.6
                                   Capital Expenditures

Austar Bank Facility               Capital expenditures;       2000-2004     Australian Base Rate    A$110.0         $   67.4
  (Working Capital and             Working capital                           + 1.75%
    Cash Advance Portion)

Austar Bank Facility               Capital expenditures        April 1999    Australian Base Rate    A$90.0          $   36.7
  (Term Loan Portion)                                                        + 2.25%

Other                              Various                     Various       Various                 Various         $    2.9

ULA:

VTRH Note                          Funding of VTRH             April 1999    12.95%                  $9.3            $    9.3

ULA Revolving Credit Facility      Capital expenditures        February      LIBOR +4.0%             $8.0            $    8.0
                                                               1999

TVSB Seller Note                   Acquisition of TVSB         September     10.0%                   $5.9            $    5.9
                                                               1999 
                                                                                                                     --------
Total UIH Consolidated                                                                                               $2,095.3
                                                                                                                     ========
</TABLE>
                                       38
<PAGE>

SENIOR  DISCOUNT  NOTES.  In February  1998,  we raised total gross  proceeds of
$812.2  million from a private  offering of senior  secured  discount notes (the
"1998  Notes").   We  used  $531.8  million  of  the  proceeds  (which  included
approximately  $65.6  million  for  tender  premiums  and  associated  costs) to
repurchase the Old 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 our
option,  on or after  February 15,  2003.  The 1998 Notes are secured by a first
priority  lien on the capital  stock and  intercompany  notes to UIH of UIPI and
UIHE. We will hold our future  investments in, and conduct our future operations
through, UIPI and UIHE.

PREFERRED  STOCK.  In December  1995, in connection  with our  acquisition of an
additional  40.0% economic  interest in Austar,  we issued 170,513 shares of our
Series  A  Preferred   Stock,   having  a  liquidation   value  at  issuance  of
approximately   $29.8  million   ($175.00  per   preferred   share)  as  partial
consideration  for the 40.0%  interest  we acquired  in Austar  (increasing  our
interest  at that time to 90.0%).  In June 2000,  we are  required to redeem the
Series A Preferred Stock not previously converted at the then liquidation value.
The Series A Preferred  Stock is  convertible  into Class A common shares of UIH
based upon the  accreted  liquidation  value  divided by $17.50.  During the ten
months ended December 31, 1998,  38,369 shares of Series A Preferred  Stock were
converted  into Class A common  shares.  Subsequent  to December  31,  1998,  an
additional  100,144 shares were  converted into Class A common shares.  The June
2000  redemption  value for the  remaining  32,000  shares of Series A Preferred
Stock is approximately $6.7 million.

In July 1998, in  connection  with our  acquisition  of certain  Australian  pay
television  assets of ECT,  we issued  28,965  shares of our Series B  Preferred
Stock  having a  liquidation  value at issuance of  approximately  $6.2  million
($212.50  per  preferred  share).  In September  1998,  in  connection  with our
acquisition  of an additional  25.0%  interest in XYZ  Entertainment,  we issued
110,066  shares of our Series B Preferred  Stock having a  liquidation  value at
issuance of approximately  $23.4 million ($212.50 per preferred  share). In June
of 2008, we are required to redeem the Series B Preferred  Stock not  previously
converted  at the then  liquidation  value.  Assuming  that none of the Series B
Preferred  Stock is converted  prior to redemption,  the total cost of redeeming
the Series B Preferred Stock would be approximately $55.7 million.  The Series B
Preferred Stock is convertible  into Class A common shares of UIH based upon the
accreted liquidation value divided by $21.25.

WARRANTS.  In conjunction  with the issuance of the Old Notes, we issued 394,000
warrants to purchase a total of  1,786,699  shares of Class A Common  Stock at a
price of $15.00 per share.  Holders of the  warrants  required  us to purchase a
total of 76,070 warrants during a put option period in February 1996. Subsequent
to December 31, 1998, a total of 204,840  warrants were exercised,  resulting in
proceeds of $13.9  million.  A total of 928,942  shares of Class A Common  Stock
were issued. The remaining 113,090 outstanding  warrants  (representing  512,863
shares of Class A Common Stock) are  exercisable at any time before November 15,
1999, and would result in proceeds of approximately $7.7 million, if exercised.

SENIOR REVOLVING CREDIT FACILITY. In October 1997, UPC and Norkabel as borrowers
entered into a NLG1.1 billion ($582.0 million)  multi-currency  revolving credit
facility with a syndicate of banks led by The  Toronto-Dominion  Bank.  Norkabel
was succeeded as a borrower by Janco after the merger of Janco and Norkabel.  In
December 1997,  Telekabel Wien and the other members of the Telekabel Group also
became borrowers under this facility.  Although currently not a borrower, TVD is
a guarantor under this facility. As of December 31, 1998, the amount outstanding
under this facility owed by UPC,  Telekabel Wien and Janco was NLG620.0  million
($328.0 million),  NLG213.5 million ($113.0 million) and NLG134.5 million ($71.2
million),  respectively.  This  facility is secured by a pledge of the stock and
assets of TVD, Janco and Telekabel Wien.

UPC's  borrowings and those of its  subsidiaries in Austria,  Belgium and Norway
are limited by financial covenants under this facility.  The principal amount of
all  borrowings  may not  exceed  certain  multiples  of  total  annualized  net
operating  cash flow for UPC and its  subsidiaries.  In addition,  the principal
amount  of all  borrowings  may not  exceed  certain  multiples  of UPC's  cable
television net operating cash flow. This facility generally  prohibits dividends
and other  distributions to UPC's shareholders  unless,  among other things, UPC
achieves certain  financial ratios for at least two consecutive  quarters.  This
facility also includes financial covenants relating to interest and debt service
coverage  and  application  of  proceeds  from  asset  sales  and debt or equity
offerings.

                                       39
<PAGE>

UPC agreed with its lenders to reduce this facility  amount from NLG1.1  billion
($582.0  million) to NLG1.0  billion  (%529.1  million) in February  1999.  This
amount will be further  reduced by 5% each quarter  beginning  December 31, 2001
until final  maturity.  Subsequent  to December  31, 1998,  UPC repaid  NLG620.0
million ($328.0 million),  excluding  interest,  of the amount outstanding under
this facility with proceeds from their initial public offering.

MEDIARESEAUX  FACILITY.  In July 1998,  Mediareseaux  entered  into an  FRF680.0
million  ($121.4   million)  term  facility  with  Paribas  to  finance  capital
expenditures,  working capital and acquisitions. This facility is secured by the
assets  of  Mediareseaux  and a pledge  of  UPC's  stock  of  Mediareseaux.  The
availability  of this  facility  depends  on revenue  generated  and its debt to
equity ratios. Drawings under this facility may be made until December 31, 2002.
The  repayment  period  runs from  January  1, 2003 to final  maturity  in 2007.
Mediareseaux  may not draw more than  FRF120  million  ($21.4  million)  of this
facility for acquisitions.  During the repayment period, Mediareseaux must apply
50.0% of its excess cash flow in prepaying the facility. This facility generally
restricts  the  payment of  dividends  and  distributions.  This  facility  also
restricts  Mediareseaux  from  incurring  additional  indebtedness,  subject  to
certain  exceptions.  In July 1998,  Mediareseaux  also secured a 9.5 year FRF20
million  ($3.6  million)  overdraft  facility,  subject  to the same  terms  and
conditions  as this  facility  except for the  availability  tests which are not
applicable.  Until certain  financial  covenants are met, UPC must own more than
51.0%  of   Mediareseaux.   Generally,   investments  by  Mediareseaux  and  its
subsidiaries  require  approval of the facility agent except for  investments in
cash and certain marketable securities that are pledged to support the facility.
This facility also restricts the amount of management fees that Mediareseaux may
pay to UPC.

DIC LOAN. In November  1998, a subsidiary of DIC loaned UPC $90.0  million.  The
loan  from  DIC was  subsequently  assigned  to an  Israeli  bank.  UPC used the
proceeds to acquire interests in the Israeli and Maltese systems.  The loan from
DIC matures in  November  2000 and is secured by UPC's  pledge of its  ownership
interest in the  Israeli  system.  The loan from DIC bears  interest at 8.0% per
annum.  This  interest  is  payable,  together  with an  additional  6.0% of the
principal  amount,  on  maturity.  The loan from DIC may be repaid on  quarterly
prepayment  dates with three months' prior notice by UPC. In connection with the
loan from DIC,  UPC  granted  the  Discount  Group,  its  partner in the Israeli
system,  an option to acquire  $90.0  million,  plus  accrued  interest,  of UPC
ordinary  shares at a price equal to 90.0% of the initial public offering price.
Subsequent  to December 31, 1998,  UPC  negotiated  an amendment to this option,
resulting in an option to acquire $45.0 million, plus accrued interest, of UPC's
ordinary  shares at a price equal to 90.0% of the initial public offering price,
and, if this option is exercised,  another option to acquire $45.0 million, plus
accrued  interest,  of  UPC's  ordinary  shares  at a price  equal to the 30 day
average   closing  price  of  UPC's  shares  on  the  Amsterdam  Stock  Exchange
immediately prior to the second option exercise,  or the initial public offering
price,  whichever is higher. At the UPC IPO date, DIC exercised the first option
and acquired  1,558,654  ordinary shares of UPC. The other option is exercisable
until September 30, 2000.

TIME WARNER  NOTE.  The Time Warner note matures on the earlier of June 30, 1999
or 90 days after written notice from Time Warner.  UPC may, however,  prepay the
Time Warner note in certain instances. Subsequent to December 31, 1998, the Time
Warner note was  cancelled as Time Warner  exercised its option to acquire UPC's
50.0% interest in Telekabel Hungary Programming and 100% interest in TV Max.

BRIDGE BANK  FACILITY.  In November  1997,  UPC entered into the $125.0  million
Bridge Bank Facility with a syndicate of banks led by The Toronto-Dominion Bank.
In March  1998,  UPC  repaid  $63.0  million of the Bridge  Bank  Facility  with
proceeds borrowed from UIH. In August 1998, UPC made an additional  repayment of
$1.9 million from  proceeds of the sale of its interest in Portugal.  Subsequent
to December 31, 1998, UPC repaid the remaining outstanding balance of the Bridge
Bank Facility with proceeds from the offering.

TELEKABEL  HUNGARY FACILITY.  In October 1998,  Telekabel Hungary entered into a
DM65.6 million ($39.3 million)  six-month secured bridge facility.  Availability
under this facility depends on certain financial  covenants.  The DM49.2 million
($29.5  million)  international  tranche of the  facility and half of the DM16.4
million ($9.8  million) local tranche bear interest at BUBOR plus 2.5% per annum
plus an additional cost of funding calculation.  The remaining half of the local
tranche  must be drawn in  Hungarian  forints  and bears  interest  at  Budapest
interbank  offered  rates for  Hungarian  forints,  plus 2.5% per annum  plus an
additional cost of funding calculation. Telekabel Hungary is using the facility,
among other things,  to finance  capital  expenditures  and to acquire  minority
shares in UPC's Kabelkom  systems.  UPC has pledged its indirect 79.25% interest
in Telekabel  Hungary to secure the facility.  The facility also is secured by a
pledge over certain assets of the Telekabel Hungary group and a negative pledge.
Telekabel Hungary is currently negotiating a long-term facility with the lenders
to replace this bridge  facility.  The Telekabel  Hungary Facility was repaid in
April, 1999.

                                       40
<PAGE>

UIH A/P  NOTES.  The 14.0%  senior  notes,  which UIH A/P issued in May 1996 and
September 1997 at a discount from their  principal  amount of $488.0 million had
an accreted  value of $356.6  million as of December 31, 1998.  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 Notes are due
May 15, 2006. Effective May 16, 1997, the interest rate on these notes increased
by an  additional  0.75% per annum to  14.75%.  On  October  14,  1998,  UIH A/P
consummated  an equity  sale  resulting  in gross  proceeds  to UIH A/P of $70.0
million,  reducing the interest rate from 14.75% to 14.0% per annum.  Due to the
increase in the interest rate effective May 16, 1997, until  consummation of the
equity  sale,  the UIH A/P Notes will  accrete to a  principal  amount of $492.9
million on 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 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.

AUSTAR BANK FACILITY.  In July 1997,  Austar secured the Austar Bank Facility in
the amount of A$200.0  million  ($122.5 million as of December 31, 1998) to fund
Austar's  subscriber  acquisition  and working capital needs. As of December 31,
1998, Austar had drawn a total of A$110.0 million ($67.4 million converted using
the December 31, 1998 exchange rate).

In September  1998,  Austar  received an  amendment to the Austar Bank  Facility
which allowed Austar to temporarily draw under the remaining A$90.0 million term
loan  facility at an  increased  interest  rate of 2.25% above the  professional
market rate in  Australia.  As of December  31,  1998,  Austar had drawn  A$60.0
million  ($36.7  million) for a total  outstanding  balance of A$170.0  million.
Subsequent to year-end an additional  A$30.0 million was borrowed  which,  along
with the A$60.0  million  draw,  was payable  April 30, 1999.  On April 23, 1999
(subsequently  executed and A$222.0  million  funded on April 28, 1999),  Austar
secured a new A$400.0 million  Syndicated Senior Secured Debt Facility (the "New
Austar Bank Facility") to refinance the A$200.0 million Austar Bank Facility and
to fund Austar's  subscriber  acquisition  and working  capital  needs.  The New
Austar  Bank  Facility  consists  of two  sub-facilities:  (i)  A$200.0  million
amortizing  term facility  ("Tranche  1") and (ii) A$200.0  million cash advance
facility  ("Tranche  2").  Tranche  1 was  used to  refinance  the  Austar  Bank
Facility,  and Tranche 2 is available upon the contribution of additional equity
on a 2:1 debt-to-equity  basis. All of Austar's assets are pledged as collateral
for this facility. In addition, pursuant to this facility, Austar cannot pay any
dividends,  interest or fees under its technical  assistance  agreements without
the consent of the majority  banks.  The New Austar Bank Facility bears interest
at the professional market rate in Australia plus a margin ranging from 1.75% to
2.25% based upon certain debt to cash flow ratios.  The New Austar Bank Facility
is fully repayable  pursuant to an amortization  schedule beginning December 31,
2002 and ending March 31, 2006.

VTRH  NOTE.  UIH  Chile,  Inc.  a  wholly-owned  subsidiary  of ULA  executed  a
promissory  note in the amount of $7.8 million payable to VTR S.A., the majority
shareholder  of VTRH,  in exchange for 51,993  shares of VTRH (the "VTRH Note").
The VTRH Note bears  interest at 12.95% per annum and is due April 30, 1999.  On
April  29,  1999  the  VTRH  Note  was  repaid  in  conjunction  with  the  VTRH
Acquisition.

ULA REVOLVING CREDIT FACILITY. In November 1997, ULA entered into an amended and
restated credit  agreement with a bank for a revolving  credit facility of up to
$40.0  million.  Borrowings  under this facility were due within 12 months at an
interest  rate of LIBOR plus 3.5%.  The facility was  extendable up to 18 months
under certain  conditions.  In November 1998, ULA exercised its option to extend
the maturity date until  February  1999,  increasing  the interest rate to LIBOR
plus 4.0%.  The  agreement  was also amended to reduce the  facility  from $40.0
million to $8.0 million  effective  November 20, 1998.  As of December 31, 1998,
ULA had an  outstanding  balance of $8.0 million under this  facility  which was
repaid in February 1999.

TVSB SELLER NOTE. On October 2, 1998,  ULA  increased its ownership  interest in
TVSB from  45.0% to 100.0%  for $11.4  million,  half of which was paid in cash,
with the remaining $5.7 million financed by the seller. This note bears interest
at 10.0% and is due September 14, 1999.

                                       41
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

We had cash and cash  equivalents  of $35.6  million as of December  31, 1998, a
decrease of $267.8 million from $303.4 million as of February 28, 1998. Cash and
cash  equivalents  as of  February  28, 1998  represented  an increase of $234.6
million  from  $68.8  million  as of  February  28,  1997,  and  cash  and  cash
equivalents as of February 28, 1997 represented a decrease of $43.4 million from
$112.2 million as of February 29, 1996.
<TABLE>
<CAPTION>
                                                              For the Ten          For the Years Ended
                                                              Months Ended             February 28,
                                                              December 31,       ------------------------
                                                                  1998             1998            1997
                                                              ------------       --------        --------
                                                                            (In thousands)
     <S>                                                       <C>              <C>              <C>
     Cash flows from operating activities..................    $   1,988        $(60,652)        $(35,494)
     Cash flows from investing activities..................     (433,460)        (73,096)        (209,778)
     Cash flows from financing activities..................      158,815         369,089          200,782
     Effect of exchange rates on cash......................        4,824            (684)           1,056
                                                               ---------        --------         --------
     Net (decrease) increase in cash and cash equivalents..     (267,833)        234,657          (43,434)
     Cash and cash equivalents at beginning of period......      303,441          68,784          112,218
                                                               ---------        --------         --------
     Cash and cash equivalents at end of period............    $  35,608        $303,441         $ 68,784
                                                               =========        ========         ========
</TABLE>

TEN MONTHS ENDED DECEMBER 31, 1998

Principal sources of cash during the ten months ended December 31, 1998 included
$321.2 million from long-term and  short-term  borrowings,  primarily on the UPC
Senior Revolving Credit  Facility,  CNBH's major facility,  the DIC Loan and the
Austar bank  facility,  $27.9 million from the net release of restricted  funds,
primarily the Janco  deposit,  $20.0 million from the sale of Portugal and other
systems,  $12.2  million  from the issuance of our equity  securities  and $11.1
million from operating activities and other investing and financing sources.

Principal  uses of cash during the ten months ended  December 31, 1998  included
capital  expenditures  totaling $217.1 million for system upgrades and new-build
activities, $168.4 million of debt repayments,  primarily on the UPC Bridge Bank
Facility  and KTE bank  facility,  $139.0  million of  funding to our  operating
systems  including the  acquisition  of additional  interests in Tevel,  Melita,
Janco and TVSB,  $109.9 million primarily for the new acquisitions of Combivisie
and Kabelkom and $25.8 million for other investing and financing uses.

YEAR ENDED FEBRUARY 28, 1998

Principal sources of cash during the year ended February 28, 1998 included gross
proceeds of $812.2  million from the sale of the 1998 Notes,  $211.1 million net
cash proceeds from the sale of our Argentine  cable  systems,  $110.0 million of
borrowings  by ULA to  finance  acquisitions  in  Argentina,  $85.2  million  of
borrowings  on the Austar Bank  Facility,  $38.0  million from the ULA 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
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.

Principal  uses of cash  during  the  year  ended  February  28,  1998  included
redemption of the Old Notes of $531.8  million,  investments  in our  affiliated
companies  totaling  $177.6  million,  repayment  of debt  under  the  Argentina
acquisition  financing  of $110.0  million,  purchases  of  property,  plant and
equipment  totaling  $115.0  million  to  continue  the  build-out  of  existing
projects,  primarily Austar, payments on our seller notes for Comodoro,  Trelew,
Santa Fe and Bahia Blanca,  Argentina  totaling  $46.4  million,  debt financing
costs of $30.9  million,  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.

YEAR ENDED FEBRUARY 28, 1997

Principal  sources of cash during  this period  included  $225.1  million  gross
proceeds from the issuance of the UIH A/P Notes in May 1996,  $78.1 million from
the sale of the Sao Paulo cable systems,  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.

                                       42
<PAGE>

Principal  uses of cash during the year ended  February  28, 1997  included  the
purchase of property,  plant and equipment  totaling $204.4 million to construct
Austar's and Telefenua's  systems,  investments in our affiliated  companies and
new  acquisitions  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.

RESULTS OF OPERATIONS

The  following  table  sets  forth   information  from,  or  derived  from,  our
Consolidated Statements of Operations for the ten months ended December 31, 1998
and the years ended February 28, 1998 and 1997.
<TABLE>
<CAPTION>
                                                                           For the Ten            For the Years Ended
                                                                           Months Ended               February 28,
                                                                           December 31,     --------------------------------
                                                                               1998             1998                1997
                                                                           ------------     -------------       ------------
                                                                                            (In thousands)
<S>                                                                        <C>               <C>                 <C>
Revenue...........................................................         $  254,068        $   98,622          $   31,555
System operating expense..........................................           (122,811)          (65,631)            (26,251)
System selling, general and administrative expense................           (105,226)          (62,803)            (33,655)
Corporate general and administrative expense......................           (194,767)          (28,553)            (20,365)
Depreciation and amortization.....................................           (159,045)          (91,656)            (38,961)
                                                                           ----------        ----------          ----------
        Net operating loss........................................           (327,781)         (150,021)            (87,677)

Interest income ..................................................             10,464             7,806              13,329
Interest expense..................................................           (163,227)         (124,288)            (79,659)
Provision for losses on marketable equity securities and
  investment related costs........................................             (9,686)          (14,793)             (5,859)
Gain on sale of investments in affiliated companies...............                 --            90,020              65,249
Other expense, net................................................             (2,546)           (5,088)               (991)
                                                                           ----------        ----------          ----------
        Net loss before other items...............................           (492,776)         (196,364)            (95,608)

Share in results of affiliated companies, net.....................            (54,166)          (68,645)            (47,575)
Minority interests in subsidiaries................................              1,410             1,568               4,358
                                                                           ----------        ----------          ----------
        Net loss before extraordinary charge......................           (545,532)         (263,441)           (138,825)

Extraordinary charge for early retirement of debt.................                 --           (79,091)                 --
                                                                           ----------        ----------          ----------
        Net loss..................................................         $ (545,532)       $ (342,532)         $ (138,825)
                                                                           ==========        ==========          ==========
Other information:
Adjusted EBITDA(1) 
         Net operating loss.......................................         $ (327,781)       $ (150,021)         $  (87,677)
         Depreciation and amortization............................            159,045            91,656              38,961
         Stock-based compensation expense.........................            164,793                --                  --
                                                                           ----------        ----------          ----------
         Consolidated Adjusted EBITDA.............................         $   (3,943)       $  (58,365)         $  (48,716)
                                                                           ==========        ==========          ==========
</TABLE>
---------------

(1)  "Adjusted EBITDA" represents  earnings before net interest expense,  income
     tax  expense,  depreciation  and  amortization,   stock-based  compensation
     charges, minority interest, share in results of affiliated companies (net),
     currency exchange gains (losses) and other  non-operating  income (expense)
     items. Industry analysts generally consider Adjusted EBITDA to be a helpful
     way  to  measure  the  performance  of  cable  television   operations  and
     communications  companies.  We believe  Adjusted  EBITDA helps investors to
     assess the cash flow from our operations  from period to period and thus to
     value our business.  Adjusted EBITDA should not,  however,  be considered a
     replacement  for net  income,  cash  flows  or for  any  other  measure  of
     performance or liquidity under generally accepted accounting principles, or
     as an indicator of a company's operating  performance.  We are not entirely
     free to use the cash  represented  by our Adjusted  EBITDA.  Several of our
     consolidated  operating companies are restricted by the terms of their debt
     arrangements.  Each  company  has its own  operating  expenses  and capital
     expenditure requirements, which can limit our use of cash. Our presentation
     of Adjusted  EBITDA may not be comparable to statistics with a similar name
     reported by other  companies.  Not all  companies  and  analysts  calculate
     Adjusted EBITDA in the same manner.

                                       43
<PAGE>

SELECTED SYSTEM  OPERATING  DATA. The following  table displays  selected system
operating data for our significant consolidated systems in the currency reported
to UIH:
<TABLE>
<CAPTION>
                                                    For the Years Ended December 31,
                                                  ------------------------------------
                                                    1998          1997          1996
                                                  --------      --------      --------
                                                             (In thousands)
     <S>                                          <C>           <C>            <C>
     UPC (NLG):
       Revenue..............................       408,970       337,255       245,179
       Net operating (loss) income..........      (398,838)      (33,208)        1,732
       Net loss.............................      (562,884)     (175,854)      (80,189)
       Adjusted EBITDA......................       111,435       104,498        81,564
       Capital expenditures.................       281,678       145,630       106,647

     Austar (A$):
       Revenue..............................       136,072        86,470        26,852
       Net operating income (loss)..........      (187,294)     (129,062)      (29,770)
       Net loss.............................      (211,632)     (134,048)      (66,015)
       Adjusted EBITDA......................       (37,981)      (26,027)      (29,770)
       Capital expenditures.................        96,162       100,149       157,315
</TABLE>

The following  rates were used to translate the selected  system  operating data
above into U.S. dollars for consolidation  purposes per one U.S. dollar:

                                                                  Australian
                                                  Dutch Guilder     Dollar
                                                  -------------   ----------
     Spot rate December 31, 1998............         1.8900         1.6332
     Average rate 1998......................         1.9900         1.6102
     Spot rate December 31, 1997............         2.0200         1.5378
     Average rate 1997......................         1.9500         1.3584
     Spot rate December 31, 1996............         1.7400         1.2583
     Average rate 1996......................         1.6900         1.2675

REVENUE.  Our  revenue  increased  $155.5  million  during the ten months  ended
December 31, 1998 and $67.0 million during the year ended February 28, 1998, the
detail of which is as follows:
<TABLE>
<CAPTION>
                                                For the Ten            For the Years Ended
                                                Months Ended               February 28,
                                                December 31,     --------------------------------
                                                    1998             1998                1997
                                                ------------     -------------       ------------
                                                                 (In thousands)
     <S>                                          <C>               <C>                 <C>
     Europe.................................      $172,287          $ 9,996             $    --
     Asia/Pacific...........................        77,269           68,961              25,012
     Latin America..........................         4,512           19,244               5,794
     Corporate and other....................            --              421                 749
                                                  --------          -------             -------
          Total revenue.....................      $254,068          $98,622             $31,555
                                                  ========          =======             =======
</TABLE>
                                       44
<PAGE>

EUROPE:

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

Revenue for UPC in U.S.  dollar terms  increased  $32.5  million,  or 18.8% from
$173.0  million for the year ended  December 31, 1997 to $205.5  million for the
year ended  December 31, 1998.  On a functional  currency  basis,  UPC's revenue
increased NLG71.7 million to NLG409.0 million from NLG337.3 million for the year
ended  December  31, 1997, a 21.3 % increase.  Of this  increase,  approximately
NLG57.5 million resulted from increased cable television revenue, NLG8.7 million
from  increased   internet   revenue  and  the  remainder  NLG5.5  million  from
programming  and  other  services.  The  increase  in cable  television  revenue
resulted  primarily from the  acquisition  of Combivisie  (The  Netherlands)  in
January  1998,   which  was   consolidated   through  July  31,  1998,  and  the
consolidation  of  Telekabel  Hungary  effective  July 1, 1998.  Of the  NLG57.5
million  approximately  21.6%  was  attributable  to  Combivisie  and  48.2% was
attributable  to  Telekabel  Hungary.  The  balance  of the  increase  in  cable
television   revenue  came  from  Austria  subscriber  growth  and  revenue  per
subscriber  growth,  as well as increased  revenue from subscriber growth in the
systems we are developing in France and Eastern Europe.

During the year ended December 31, 1997, UPC's revenue increased NLG92.1 million
to NLG337.3  million from NLG245.2 million for the year ended December 31, 1996,
a 37.6% increase. A substantial portion of this increase was attributable to the
acquisition of Norkabel in October 1996 and the  acquisition of Janco in January
1997,  which together  amounted to NLG77.0  million.  The remaining  increase in
revenue was attributable to subscriber growth in the Austrian systems, increases
in  subscription  fees in some systems and revenues from  developing  systems in
France,  Romania and the Slovak  Republic,  which were not  included in the 1996
operating results.

ASIA/PACIFIC:

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

Revenue at Austar in U.S. dollar terms 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.

We deconsolidated the results of operations of Saturn effective January 1, 1998.
Saturn had $0.5 million of revenue for the year ended December 31, 1997.

LATIN AMERICA:

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

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

SYSTEM OPERATING  EXPENSE.  System operating expense increased $57.2 million and
$39.3 million  during the ten months ended  December 31, 1998 and the year ended
February 28, 1998, respectively, the detail of which is as follows:

                                       45
<PAGE>

<TABLE>
<CAPTION>
                                                For the Ten             For the Years Ended
                                                Months Ended                February 28,
                                                December 31,     --------------------------------
                                                    1998             1998                1997
                                                ------------     -------------       ------------
                                                                 (In thousands)
     <S>                                          <C>               <C>                 <C>
     Europe.................................     $ 57,123           $ 6,135             $ 1,074
     Asia/Pacific...........................       61,982            50,296              22,358
     Latin America..........................        3,706             9,200               2,819
                                                 --------           -------             -------
          Total system operating expense....     $122,811           $65,631             $26,251
                                                 ========           =======             =======
</TABLE>

EUROPE:

We  began  consolidating  the  results  of  UPC  effective  December  11,  1997.
Accordingly,  we recorded  $2.8  million of system  operating  expense  from UPC
during the year ended February 28, 1998.

Operating expense for UPC in U.S. dollar terms increased $8.9 million,  or 14.7%
from $60.7 million for the year ended December 31, 1997 to $69.6 million for the
year ended December 31, 1998. On a functional  currency  basis,  UPC's operating
expense  increased NLG20.0 million to NLG138.5 million from NLG118.5 million for
the year ended December 31, 1997, a 16.9% increase. Approximately NLG9.9 million
of this increase was  attributable  to the results of Telekabel  Hungary,  which
were  consolidated  effective  July 1, 1998. In addition,  approximately  NLG2.0
million was attributable to the acquisition of Combivisie (The Netherlands). The
remaining  increase  comprised of direct costs related to subscriber  growth and
increased  operating costs related to the  introduction  of UPC's  Internet/data
services. As a percentage of revenues, operating expense declined from 35.1% for
the  comparable  period in 1997 to 33.9%,  due primarily to the lower  operating
costs in the Combivisie  system.  We expect operating expense as a percentage of
revenue to increase  as new video,  telephone  and  Internet/data  services  are
introduced.

During the year ended  December  31, 1997,  UPC's  operating  expense  increased
NLG36.1  million to NLG118.5  million from NLG82.4  million the previous year, a
43.8%  increase.  Most of this increase was  attributable  to the acquisition of
Norkabel in October 1996 and of Janco in January 1997,  which together  amounted
to NLG27.5  million,  as well as the inclusion of operating  expenses related to
developing  systems in France,  Romania  and the Slovak  Republic  that were not
included in the 1996 operating results.  In addition,  operating expenses during
1997  included  expenses  related to the  introduction  of  expanded  basic tier
programming in Austria,  Belgium and The Netherlands and Internet/data  services
in Austria and Belgium.

ASIA/PACIFIC:

Operating  expense for Austar in U.S. dollar terms  increased $22.5 million,  or
52.6%,  from $42.8 million for the year ended December 31, 1997 to $65.3 million
for the year ended December 31, 1998. On a functional  currency basis,  Austar's
operating  expense  increased  A$47.1 million,  from A$58.1 million for the year
ended December 31, 1997 to A$105.2 million for the year ended December 31, 1998,
an  81.1%  increase.  These  increases  were  primarily  due to an  increase  in
satellite  programming  costs resulting from the May 1998 agreements with Foxtel
and Optus Vision to obtain additional  programming rights in connection with the
receivership  of  Australis  as  well as  additional  satellite  platform  costs
associated  with the May 1998 joint  venture  with  Optus  Vision.  The  Company
expects that the  restructuring  of programming  costs for certain channels will
result in somewhat  higher costs in the near term for these  channels which will
be offset by lower costs in the  long-term  when  compared to Austar's  previous
agreements with Australis. The remainder of the increase between periods was due
to an increase in salaries  and  benefits  related to the  additional  personnel
necessary to support  Austar's  establishment  of local and state offices in its
markets and an increase in customer  subscriber  management  expense  related to
volume  increases in telephone,  billing and collection  costs.  The U.S. dollar
increases  were  positively  impacted  by  approximately  $12.1  million  due to
fluctuation  in exchange  rates  between the years ended  December  31, 1998 and
1997.

Operating  expense for Austar in U.S. dollar terms  increased $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.

                                       46
<PAGE>

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 certain costs related to programming and subscriber management
expense, will vary in direct proportion to the number of subscribers.

We deconsolidated the results of operations of Saturn effective January 1, 1998.
Saturn had $4.0  million of  operating  expense for the year ended  December 31,
1997.

LATIN AMERICA:

Operating expense for Cable Star in U.S. dollar terms increased $1.5 million, or
136.4% from $1.1  million for the year ended  December  31, 1997 to $2.6 million
for the year ended December 31, 1998. The remainder of Latin America's operating
expense for the year ended December 31, 1998 was  attributable  to our system in
Brazil.

We consolidated the results of Bahia Blanca  effective  November 1, 1996 through
August 31, 1997.  Bahia Blanca's system  operating  expense for the period 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  $42.4  million  during the ten months  ended
December 31, 1998 and $29.1 million during the year ended February 28, 1998, the
detail of which is as follows:
<TABLE>
<CAPTION>                                       For the Ten             For the Years Ended
                                                Months Ended                February 28,
                                                December 31,     --------------------------------
                                                    1998             1998                1997
                                                ------------     -------------       ------------
                                                                 (In thousands)
     <S>                                          <C>               <C>                 <C>
     Europe...................................    $ 56,401          $ 5,748             $   720
     Asia/Pacific.............................      45,578           50,006              31,140
     Latin America............................       3,247            7,049               1,795
                                                  --------          -------             -------
          Total system selling, general and
            administrative expense............    $105,226          $62,803             $33,655
                                                  ========          =======             =======
</TABLE>
EUROPE:

We  began  consolidating  the  results  of  UPC  effective  December  11,  1997.
Accordingly,   we  recorded  $3.4  million  of  system   selling,   general  and
administrative expense from UPC during the year ended February 28, 1998.

Selling,  general  and  administrative  expense  for  UPC in U.S.  dollar  terms
increased $21.1 million, or 45.4% from $46.5 million for the year ended December
31, 1997 to $67.6 million for the year ended  December 31, 1998. On a functional
currency basis,  UPC's selling,  general and  administrative  expense  increased
NLG43.8  million to NLG134.5  million  from  NLG90.7  million for the year ended
December 31, 1997, a 48.3% increase. UPC incurred NLG15.9 million in general and
administrative  expenses attributable to the formation and start up of chello. A
portion of this increase was also  attributable to the acquisition of Combivisie
and the acquisition of Telekabel Hungary,  with the remaining increase comprised
of  additional  selling,  general  and  administrative  expenses  related to the
development of new businesses,  including  further  development of Internet/data
services  and  preparation   for  the  launch  of  telephone   services  in  The
Netherlands,  Norway and France. We expect selling,  general and  administrative
expense as a  percentage  of  revenue  to  continue  to  increase  as new video,
telephone and Internet/data services are introduced.

During  the  year  ended  December  31,  1997,   UPC's   selling,   general  and
administrative expense increased NLG26.5 million to NLG90.7 million from NLG64.2
million during the prior year, a 41.3% increase.  A substantial  portion of this
increase was  attributable to the acquisition of Norkabel in October 1996 and of
Janco  in  January  1997,  as well  as the  inclusion  of  expenses  related  to
developing  systems in France,  Romania  and the Slovak  Republic  that were not
included in 1996.  Selling,  general and administrative  expense during the year
ended December 31, 1997 also included  expenses  related to the  introduction of
expanded basic tier  programming  in Austria,  Belgium and The  Netherlands  and
Internet/data services in Austria and Belgium.

UPC's allowance for doubtful  accounts as a percentage of trade  receivables for
the years ended  December  31,  1998,  1997 and 1996 was 41.6%,  40.6% and 37.9%

                                       47
<PAGE>

respectively.  This high allowance as a percentage of trade receivables  results
primarily from UPC's billing process,  whereby subscribers receive and generally
pay their  invoice  before the service  period  begins.  Therefore,  most of our
outstanding   receivables   generally   represent  overdue  accounts   requiring
consideration  for an  allowance.  As a percentage  of revenue,  our  receivable
balance is less than one half of one month of revenue.

ASIA/PACIFIC:

System  selling,  general and  administrative  expense for Austar in U.S. dollar
terms  increased  $4.2 million,  or 9.8%,  from $42.8 million for the year ended
December 31, 1997 to $47.0  million for the year ended  December 31, 1998.  On a
functional currency basis, Austar's selling,  general and administrative expense
increased  A$17.3  million,  from A$57.9 million for the year ended December 31,
1997 to A$75.2 million for the year ended  December 31, 1998, a 29.9%  increase.
This  increase  was  primarily  due to an  increase  in  salaries as a result of
additional  personnel  necessary to support the increase in  subscribers  and an
increase in marketing costs. The U.S. dollar increases were positively  impacted
by  approximately  $8.4 million due to fluctuation in exchange rates between the
years ended December 31, 1998 and 1997.

System  selling,  general and  administrative  expense for Austar in U.S. dollar
terms 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 Austar's
national customer service center 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 national customer service
center, 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.

We deconsolidated the results of operations of Saturn effective January 1, 1998.
Saturn had $3.6 million of selling,  general and administrative  expense for the
year ended December 31, 1997.

LATIN AMERICA:

Selling,  general and administrative expense for Cable Star in U.S. dollar terms
increased  $0.6 million,  or 46.2% from $1.3 million for the year ended December
31, 1997 to $1.9 million for the year ended  December 31, 1998. The remainder of
Latin America's selling,  general and administrative  expense for the year ended
December 31, 1998 was attributable to our system in Brazil.

We consolidated the results of Bahia Blanca  effective  November 1, 1996 through
August 31, 1997.  Bahia Blanca's system general and  administrative  expense for
the period  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 $166.2 million from $28.6 million for the year
ended  February 28, 1998 to $194.8 million for the ten months ended December 31,
1998,  and increased $8.2 million from $20.4 million for the year ended February
28, 1997 to $28.6 million for the year ended  February 28, 1998. The increase in
the ten  months  ended  December  31,  1998  was  primarily  due to  stock-based
compensation  expense  totaling  $164.8  million,  $162.1  million  of which was
attributable to UPC's stock option plans. Prior to UPC's public offering,  these
plans required  variable plan accounting.  Increases in the fair market value of
UPC's  shares  resulted in non-cash  compensation  charges to the  statement  of
operations for vested options. Following the initial public offering of UPC, UPC
has the right to settle the options in shares upon exercise;  therefore  options
issued  pursuant to the stock option plan will no longer  require  variable plan
accounting.  Only our subsidiaries'  phantom stock option plans will continue to
require variable plan accounting.  Corporate general and administrative  expense
also  increased due to the  consolidation  of UPC  effective  December 11, 1997.
These increases were offset by reporting ten months of results in the transition
period  compared to twelve in the prior year, as well as the  non-recurrence  of
certain prior year charges. The increase in the year ended February 28, 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.

                                       48
<PAGE>

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization  expense increased
$67.3  million  during the ten months ended  December 31, 1998 and $52.7 million
for the year ended February 28, 1998, the detail of which is as follows:
<TABLE>
<CAPTION>
                                                For the Ten            For the Years Ended
                                                Months Ended               February 28,
                                                December 31,     --------------------------------
                                                    1998             1998                1997
                                                ------------     -------------       ------------
                                                                 (In thousands)
     <S>                                          <C>               <C>                 <C>
     Europe....................................   $ 76,550          $ 6,343             $    80
     Asia/Pacific..............................     79,746           80,802              36,269
     Latin America.............................      1,637            3,503               1,789
     Corporate and other.......................      1,112            1,008                 823
                                                  --------          -------             -------
         Total depreciation and amortization
            expense............................   $159,045          $91,656             $38,961
                                                  ========          =======             =======
</TABLE>

EUROPE:

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

Depreciation  expense for UPC in U.S. dollar terms  increased $26.1 million,  or
38.3% from $68.2  million for the year ended  December 31, 1997 to $94.3 million
for the year ended  December 31, 1998.  On a functional  currency  basis,  UPC's
depreciation  and  amortization  expense  increased  NLG54.8 million to NLG187.7
million  from  NLG132.9  million for the year ended  December  31, 1997, a 41.2%
increase.  NLG26.3  million  of this  increase  and  much of the  increase  as a
percentage of UPC's revenue was  attributable  to the  application  of push-down
accounting, including goodwill created in connection with the acquisition of UPC
on  December  11,  1998.   The  remaining   increase   comprised  of  additional
depreciation  related  to the  acquisition  of  Combivisie  and  acquisition  of
Telekabel Hungary, additional capital expenditures to upgrade the network in our
Western European systems and new-build for developing systems.

During the year ended December 31, 1997,  UPC's  depreciation  and  amortization
expense  increased  NLG53.1 million to NLG132.9  million from NLG79.8 million in
1996, a 66.5% increase.  The majority of the increase was directly  attributable
to the  acquisition  of Norkabel in October  1996 and of Janco in January  1997,
which together amounted to NLG45.4 million.  The remaining increase comprised of
additional  depreciation  from  capital  expenditures  to upgrade the network in
UPC's primary systems and new-build for developing systems.

On January 25,  1999,  UPC and  Microsoft  Corporation  entered into a letter of
intent providing for the establishment of a technical services relationship.  In
connection with this letter of intent, UPC agreed to grant Microsoft warrants to
purchase up to 3,800,000 ADSs or ordinary shares,  at Microsoft's  option, at an
exercise  price of $28.00 per ordinary share or ADS. Half of these warrants will
be  issued  at the  earlier  of  April  25,  1999 or the  signing  of the  first
definitive  agreement.  These warrants will be  exercisable  after one year from
issuance  for a period of three years.  The other half of the  warrants  will be
issued  upon the  signing of the first  definitive  agreement.  This half of the
warrants will vest and become  exercisable  based on performance  criteria to be
established  in the  definitive  agreements,  although  they  also  will  not be
exercisable  until at least  one year  after  the date of the  closing  of UPC's
initial  public  offering.  The first half of the  warrants are for the right to
negotiate to license technology from Microsoft under definitive agreements to be
negotiated in the future.  UPC expects to record as contract  acquisition rights
approximately  NLG64.4  million  associated with the first half of the warrants.
Such  costs are  expected  to be  amortized  on a  straight-line  basis over the
expected  contract life,  which is yet to be determined.  The accounting for the
cost  associated  with the second  half of the  warrants  will  depend  upon the
ultimate nature of the performance criteria giving rise to the earn-out of these
warrants.  These  warrants  will be  recorded  as such at fair  value when it is
probable the performance criteria will be met, in accordance with EITF Issue No.
96-18.

ASIA/PACIFIC:

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

                                       49
<PAGE>

increases  were  positively  impacted  by  approximately  $14.9  million  due to
fluctuation  in exchange  rates  between the years ended  December  31, 1998 and
1997.

Depreciation and amortization expense from Austar in U.S. dollar terms 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.

We deconsolidated the results of operations of Saturn effective January 1, 1998.
Saturn had $1.7 million of depreciation  expense for the year ended December 31,
1997.

LATIN AMERICA:

Depreciation  expense for Cable Star increased $0.1 million,  or 14.3% from $0.7
million for the year ended  December 31, 1997 to $0.8 million for the year ended
December 31, 1998. The remainder of Latin America's depreciation expense for the
year ended December 31, 1998 was attributable to our system in Brazil.

We consolidated the results of Bahia Blanca  effective  November 1, 1996 through
August 31, 1997. Bahia Blanca's depreciation expense consolidated by us was $3.3
million for the period ended August 31, 1997.

INTEREST  INCOME.  Interest  income  increased  $2.7 million and decreased  $5.5
million  during  the ten  months  ended  December  31,  1998 and the year  ended
February 28, 1998,  respectively,  compared to the amounts for the corresponding
periods in the prior year.  The  increase in the ten months  ended  December 31,
1998 was due to higher cash  balances  related to the issuance of the 1998 Notes
in February 1998,  and the decrease  during the year ended February 28, 1998 was
due to reduced cash and short-term investment balances related to the funding of
our investments in affiliated operating systems.

INTEREST  EXPENSE.  Interest  expense  increased $38.9 million,  or 31.3%,  from
$124.3  million during the year ended February 28, 1998 to $163.2 million during
the ten months ended  December 31, 1998.  This increase was primarily due to the
continued  accretion of interest on our  $1,375.0  million  aggregate  principal
amount  1998  Notes and  continued  accretion  on the $492.9  million  aggregate
principal  amount UIH A/P Notes.  During the ten months ended December 31, 1998,
interest expense also included  amortization of deferred financing costs of $8.6
million compared to $10.7 million for the year ended February 28, 1998.

Interest expense  increased $44.6 million,  or 56.0%,  from $79.7 million during
the year  ended  February  28,  1997 to $124.3  million  during  the year  ended
February 28, 1998. This increase was primarily due to the continued accretion of
interest on the Company's $599.4 million  aggregate  principal amount Old Notes,
new accretion on the $45.5 million aggregate  principal amount UIH A/P September
1997 Notes and  accretion of interest  for an entire year on the $447.4  million
aggregate principal amount UIH A/P May 1996 Notes. Interest expense for the year
ended February 28, 1998 also included  amortization of deferred  financing costs
of $10.7 million compared to $3.3 million for the year ended February 28, 1997.

PROVISION FOR LOSSES ON MARKETABLE  EQUITY  SECURITIES  AND  INVESTMENT  RELATED
COSTS. The provision for losses on marketable  equity  securities and investment
related costs  totaled $9.7 million,  $14.8 million and $5.9 million for the ten
months ended  December 31, 1998,  the year ended  February 28, 1998 and the year
ended  February  28,  1997,  respectively.  In October  1998,  as a result of an
other-than-temporary loss of control of Telefenua, we recorded a reserve for the
remaining balance of our investment of $4.4 million. In addition, Tara wrote off
its deferred  development  costs in December  1998  totaling  $3.1  million.  In
December 1997, based on the financial  difficulties and potential  insolvency of
Australis,  we determined  that the loss relating to our investment in Australis
was other-than-temporary.  As a result, we recorded a provision for this loss of
$4.8 million for the year ended February 28, 1998.  Cumulative unrealized losses
on our investment in International  Broadcasting  Corporation,  Ltd. ("IBC"),  a
publicly-traded  Thailand  corporation,  totaled $2.7 million as of February 28,
1997.  During the year ended February 28, 1998, we determined these losses to be
other than  temporary,  and recorded a provision of $3.6  million,  reducing the
carrying  value of our  investment in IBC to $0.8 million.  The remainder of the
balance for the ten months ended  December 31, 1998 and the years ended February
28,  1998  and  1997,  consisted  of  our  write-off  of  various  non-strategic
investments.

GAIN ON SALE OF  INVESTMENTS IN AFFILIATED  COMPANIES.  In October 1997, we sold
all of our Argentine  multi-channel  television  system assets for approximately
$211.1 million cash, resulting in a gain of approximately $90.0. In August 1996,
we sold our 34.0%  interest  in the Sao Paulo cable  systems for $78.1  million,
resulting in a gain of $65.2 million.

                                       50
<PAGE>

EXTRAORDINARY  CHARGE  FOR EARLY  RETIREMENT  OF DEBT.  In  connection  with the
issuance of the 1998 Notes,  we paid $531.8  million to repurchase  the existing
Old Notes which had an accreted  value of $466.2 million as of February 5, 1998.

This tender premium of $65.6 million, combined with the write off of unamortized
deferred  financing  costs and other  transaction  related costs  totaling $13.5
million,  resulted in an extraordinary charge during the year ended February 28,
1998 of $79.1 million.

SHARE IN RESULTS OF AFFILIATED COMPANIES. Our share in the results of affiliated
companies  totaled  $54.2  million,  $68.6 million and $47.6 million for the ten
months ended  December 31, 1998 and the years ended  February 28, 1998 and 1997,
respectively, as follows:
<TABLE>
<CAPTION>
                                 For the Ten Months Ended             For the Year Ended                 For the Year Ended
                                    December 31, 1998                 February 28, 1998                  February 28, 1997
                            --------------------------------   --------------------------------    --------------------------------
                             Company                            Company                             Company
                            Ownership   Share in Results of    Ownership   Share in Results of     Ownership    Share in Results 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)................       --                 --            100.0%         $(42,236)            50.0%           $(24,665)
  A2000..................     50.0%           (11,515)              --                --               --                  --
  UTH (2)................     51.0%            (9,850)              --                --               --                  --
  Hungary (3)............     79.3%            (3,446)              --                --               --                  --
  Melita, Princes
   Holdings and Tevel....    various             (288)              --                --               --                  --
  Other UPC affiliates...    various             (457)           various            (195)              --                  --
  Monor..................     44.8%            (1,848)           48.6%            (4,590)            48.6%             (2,648)
  IPS....................     33.5%               (77)           33.5%            (2,348)            33.5%             (4,321)
                                             --------                           --------                             -------- 
                                              (27,481)                           (49,369)                             (31,634)
                                             --------                           --------                             --------
Asia/Pacific:
  Saturn (4).............     65.0%            (8,628)           65.0%                --             100.0               (930)
  XYZ Entertainment......     50.0%               506            25.0%            (2,408)            25.0%             (4,484)  
  Sun Cable..............     19.6%            (1,383)           40.0%              (656)            40.0%               (218)
  HITV...................     49.0%            (2,092)           49.0%              (220)            49.0%                 (6)
                                             --------                           --------                             -------- 
                                              (11,597)                            (3,284)                              (5,638)
                                             --------                           --------                             -------- 
Latin America:
  VTRH...................     34.0%            (5,427)           34.0%            (7,805)            34.0%             (2,130)
  Megapo.................     49.0%               253            49.0%              (386)            49.0%               (678)
  TVSB (5)...............    100.0%              (891)           40.0%              (616)            40.0%             (1,277)
  MGM Networks LA........     50.0%            (9,221)           50.0%            (7,477)            50.0%                (10)
  Jundiai................     46.3%               198            46.3%               426             46.3%               (458)
                                             --------                           --------                             -------- 
                                              (15,088)                           (15,858)                              (4,553)
                                             --------                           --------                             -------- 
Other....................                          --            various            (134)            various           (5,750)
                                             --------                           --------                             -------- 
Total share in results of
  affiliated companies...                    $(54,166)                          $(68,645)                            $(47,575)
                                             ========                           ========                             ======== 
</TABLE>
     (1)  We  consolidated  UPC's  balance  sheet and  statement  of  operations
          effective December 11, 1997.
     (2)  We  accounted  for our  investment  in UTH using the equity  method of
          accounting  because the UTH shareholder  agreement  provides for joint
          governance by NUON and UPC on almost all significant participating and
          protective type rights.
     (3)  Effective  July  1,  1998  we  began   consolidating  the  results  of
          operations of Telekabel Hungary.
     (4)  Effective  July  1,  1996  we  began   consolidating  the  results  of
          operations of Saturn.  In July 1997, a strategic  partner  purchased a
          35.0% equity  interest in Saturn,  reducing our ownership  interest to
          65.0%.  Effective  January 1, 1998, we discontinued  consolidating the
          results of  operations  of Saturn and returned to the equity method of
          accounting  due  to  certain   minority  partner   participating   and
          protective type rights.
     (5)  Effective October 2, 1998 we increased our ownership  interest in TVSB
          to 100% and began consolidating their results of operations.

                                       51
<PAGE>

NEW ACCOUNTING PRINCIPLES

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related  Information",  which requires that a public business  enterprise report
certain financial and descriptive  information about its reportable segments. We
have adopted this statement for the year ended December 31, 1998.

The American Institute of Certified Public Accountants recently issued Statement
of Position  98-5,  "Reporting  on the Costs of Start-Up  Activities",  which is
required to be adopted by affected  companies for fiscal years  beginning  after
December 15, 1998. This statement 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. As of December 31,
1998, our deferred start-up and organization costs were insignificant. We intend
to adopt this statement during the year ended December 31, 1999.

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities",  which requires that companies  recognize all derivatives as either
assets or liabilities in the balance sheet at fair value.  Under this statement,
accounting for changes in fair value of a derivative depends on its intended use
and  designation.  This statement is effective for fiscal years  beginning after
June 15, 1999. We currently are assessing the effect of this new standard.

In March 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of  Position  98-1  "Accounting  For the Costs of  Computer  Software
Developed or Obtained for Internal Use" ("SOP 98-1"), which provides guidance on
accounting for the costs of computer software developed or obtained for internal
use.  SOP 98-1  identifies  the  characteristics  of  internal-use  software and
provides  examples  to assist  in  determining  when  computer  software  is for
internal use. SOP 98-1 is effective for  financial  statements  for fiscal years
beginning  after December 15, 1998, for projects in progress and  prospectively,
with earlier  application  encouraged.  We believe that the adoption of SOP 98-1
will not have a material effect on the financial statements.

YEAR 2000 READINESS DISCLOSURE

Our multi-channel  television,  programming and telephony operations are heavily
dependent upon computer  systems and other  technological  devices with imbedded
chips. Such computer systems and other technological  devices may not be capable
of accurately recognizing dates beginning on January 1, 2000. This problem could
cause miscalculations,  resulting in our multi-channel  television and telephony
systems or programming services malfunctioning or failing to operate.

YEAR 2000  PROGRAM.  In response to possible  Year 2000  problems,  our Board of
Directors established a Task Force to assess the impact that potential Year 2000
problems may have on company-wide  operations and to implement necessary changes
to address such problems.  The Task Force reports  directly to the UIH Board. In
creating a program to minimize  Year 2000  problems,  the Task Force  identified
certain  critical  operations of our business.  These  critical  operations  are
service  delivery  systems,  field and  headend  devices,  customer  service and
billing systems, and corporate  management and administrative  operations (e.g.,
cash flow,  accounts  payable and  accounts  receivable,  payroll  and  building
operations).

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

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

                                       52
<PAGE>

At  March  31,  1999,   91.0%  of  our  operating   systems  had  completed  the
Identification  Phase and the Task Force is working on the Implementation  Phase
for these  systems.  The Task Force has  researched  approximately  83.0% of the
items identified during the Identification Phase as to Year 2000 compliance.  Of
the items researched,  69.0% are compliant and 9.0% are not compliant but can be
easily  remediated  without  significant cost to us. The remaining items require
further research or additional testing.  Because of several  acquisitions in the
later  part  of  1998,   such  as  UTH,  our  research  of  items  has  expanded
significantly.  As a result,  the research on 75.0% of the identified  items has
been completed and research on the remaining items is ongoing.

The Task Force commenced the Testing Phase in first quarter 1999. The Task Force
is  supervising  the  Testing  Phase of the  computer  systems  for our  headend
controllers  and our customer  service  billing  systems and  routers.  Based on
current data to date,  we expect to complete  this testing by mid-1999.  At this
time, we anticipate  that all material  aspects of the program will be completed
before January 1, 2000, and we do not  anticipate any material  remediations  or
replacements.

Certain of our operating  systems have not completed the  Identification  Phase,
including Tahiti, the Philippines and certain Australian  programming interests.
Despite our attempts to include these  systems in our Year 2000  Program,  these
systems  have  not  responded.  Therefore,  we have no  information  on which to
determine if these systems will be Year 2000  compliant by December 31, 1999. If
none of these  systems are Year 2000  compliant,  we do not  believe  that their
operation  failure,  if any, will have a material adverse effect on our business
as a whole.  The basis for  determining  the above  percentages  includes  these
systems.

Subsequent  to December  31, 1998,  we acquired or will acquire four  additional
systems,  which will be included in our Year 2000 Program.  At this time we have
not determined whether any of these systems have their own programs in place for
Year 2000  compliance.  We are undertaking such review during the second quarter
1999 and will  determine at what level their systems are at within our Year 2000
Program.

In general, we manage the program with our internal Task Force. In addition,  we
have  retained  several  independent  consultants  to assist  with the Year 2000
Program for our operations in Europe,  Eastern Europe and New Zealand.  The Task
Force will continue to evaluate the need for external  resources to complete the
Implementation  Phase and  implement  the Testing  Phase.  In the event the Task
Force elects to use  additional  external  resources,  such  resources  may not,
however, be available.

In addition to our program,  we are a member of a Year 2000 working group, which
has 12 cable  television  companies  and meets under the auspices of Cable Labs.
The dialogue with the other cable  operators  has assisted us in developing  our
Year 2000  program.  Part of the agenda of the working  group is to develop test
procedures and contingency  plans for critical  components of operating  systems
for the  benefit of all its  members.  The test  procedures  are  expected to be
available to members, including us, during second quarter 1999.

THIRD  PARTY  DEPENDENCIES.  We  believe  our  largest  Year  2000  risk  is our
dependency upon third-party products. Two significant areas on which our systems
depend upon third-party products are programming and telephony interconnects. We
do not have the  ability  to  control  such  parties  in  their  assessment  and
remediation  procedures for potential  Year 2000 problems.  Should these parties
not be prepared for Year 2000,  their  systems may fail and we would not be able
to provide our services to our customers. Notwithstanding these limitations, the
Task Force  monitors  the  websites  for all  vendors  used by us, to the extent
available,  for  information on such vendors' Year 2000 programs.  To the extent
applicable,  the Task Force uses such information to verify Year 2000 compliance
and to implement remediation procedures. We also have requested information from
various third parties on the status of their Year 2000 compliance programs in an
effort to prevent any possible  interruptions or failures. To date, responses by
programming  vendors to such  communications  have been  limited.  The responses
received  state only that the party is working on Year 2000  issues and does not
have a definitive  position at this time.  As a result,  we are unable to assess
the risk posed by our dependence upon such third parties'  systems.  Vendors for
critical equipment components,  such as the headend controllers mentioned below,
have been more responsive and we believe substantially all of our equipment will
be Year 2000  compliant.  We cannot,  however,  give any  assurances  concerning
compliance of equipment because such belief is based on information  provided by
vendors,   which  cannot  be   independently   verified,   and  because  of  the
uncertainties inherent in Year 2000 remediation.

We are  considering  certain  limited  contingency  plans,  including  preparing
back-up  programming and stand-by power  generators.  Such contingency plans may
not,  however,  resolve the problem in a  satisfactory  manner.  With respect to
other  third-party  systems,  each  UIH  operating  system  is  responsible  for
inquiring of their vendors and other entities with which they do business (e.g.,
utility  companies,  financial  institutions  and  facility  owners)  as to such
entities' Year 2000  compliance  programs.  In addition,  we have  distributed a
contingency plan to all of our operating  systems,  which sets forth preparation
procedures and recovery solutions.

                                       53
<PAGE>

The Task Force is working closely with the  manufacturers of our headend devices
to remedy any Year 2000  problems  assessed  in the  headend  equipment.  Recent
information from the two primary  manufacturers of such equipment  indicate that
most of the equipment used in the UIH operating  systems are not date sensitive.
Where such equipment needs to be upgraded for Year 2000 issues, such vendors are
upgrading  without  charge.  These upgrades are expected to be completed  before
year-end  1999,  but such process is not wholly  within the control of us or our
systems.  Approximately 91.0% of the headend  controllers,  which are considered
the most critical  component of the headend  devices,  have been upgraded.  With
respect to billing  and  customer  care  systems,  we use  standard  billing and
customer care programs from several vendors. The Task Force is working with such
vendors to achieve Year 2000 compliance for all systems in UIH.

MINORITY-HELD  SYSTEMS.  We have several  minority  investments in international
multi-channel  television  and  telephony  operations.  With  respect  to  these
minority investments,  the Task Force is including their systems in the program.
Of these  investments,  95.0% have completed their  Identification  Phase of the
program and the Task Force is in the process of making  recommendations to these
entities as to Year 2000 compliance matters. No assurance can be given, however,
that these entities will implement the recommendations or otherwise be Year 2000
compliant.  On an overall  basis,  the Task Force  continues to analyze the Year
2000 program and will revise the program as necessary throughout 1999, including
procedures it undertakes with respect to third parties to ensure their Year 2000
compliance.

COSTS OF  COMPLIANCE.  The Task Force is not able to determine  the full cost of
its Year 2000 program and its related  impact on the financial  condition of the
Company.  In the  course  of our  business,  we have  made  substantial  capital
adjustments  over the past few years in  improving  our systems,  primarily  for
reasons other than Year 2000.  Because these upgrades also resulted in Year 2000
compliance, replacement and remediation costs have been low. The Task Force has,
however,  revised its  estimates  of the cost for the Year 2000  program to $3.9
million.  The cost  includes  certain  identified  replacement  and  remediation
procedures and external  consultants,  and has been increased  because of system
acquisitions  and additional  date sensitive  items that require  research as to
Year 2000 compliance.  Such estimate does not,  however,  include internal costs
because we do not separately track the internal costs incurred for the Year 2000
program.  Although no assurance can be made, we believe that the known Year 2000
compliance issues can be remedied without a material  financial impact on us. No
assurance can be made,  however, as to the total cost (excluding internal costs)
for the Year 2000 program until all of the data has been gathered.  In addition,
we can not predict the  financial  impact on us if Year 2000 problems are caused
by third parties upon which our systems are dependent or experienced by entities
in  which we hold  investments.  The  failure  of any one of  these  parties  to
implement  Year 2000  procedures  could  have a material  adverse  impact on our
operations and financial condition.

EUROPEAN ECONOMIC AND MONETARY UNION

On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing  sovereign  currencies
and the euro. The participating countries adopted the euro as their common legal
currency on that day. The euro trades on currency exchanges and is available for
non-cash  transactions  during the transition period between January 1, 1999 and
January 1, 2002.  During this  transition  period,  the existing  currencies are
scheduled to remain legal tender in the participating countries as denominations
of the euro and public and private  parties may pay for goods and services using
either the euro or the participating countries' existing currencies.

During the transition period, all UPC operating  companies' billing systems will
include amounts in euro as well as the respective  country's  existing currency.
All  of  UPC's  accounting  and  management   reporting  systems  currently  are
multi-currency.

UPC intends to use the euro as its reporting  currency by the end of 2000. We do
not  expect  the  introduction  of the euro to  affect  materially  UPC's  cable
television and other operations. We have not yet taken steps to confirm that the
financial  institutions  and other  third  parties  with whom we have  financial
relationships  are  prepared  for the use of the  euro.  Thus  far,  we have not
experienced  any  material  problem  with  third  parties  as a  result  of  the
introduction  of the euro.  We  believe  the  introduction  of the euro will not
require us to amend any of our financial  instruments or loan facilities,  other
than amendments that will be made  automatically by operation of law. These will
include automatic replacement of the currencies of participating  countries with
the euro.  They will also include  automatic  replacement  of interest  rates of
participating   countries  with  European   interest   rates.   We  believe  the
introduction of the euro will reduce our exposure to risk from foreign  currency
and interest rate fluctuations.

                                       54
<PAGE>

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
---------------------------------------------------------------------

INVESTMENT PORTFOLIO

We do not use derivative  financial  instruments in our  non-trading  investment
portfolio.  We place our cash and cash  equivalent  investments in highly liquid
instruments that meet high credit quality standards with original  maturities at
the date of purchase  of less than three  months.  We also place our  short-term
investments in liquid  instruments that meet high credit quality  standards with
original  maturities at the date of purchase of between three and twelve months.
We also limit the amount of credit exposure to any one issue,  issuer or type of
instrument. These investments are subject to interest rate risk and will fall in
value if market interest rates increase. We do not expect, however, any material
loss with respect to our investment portfolio.  Subsequent to December 31, 1998,
UPC completed  its initial  public  offering  raising net proceeds of NLG2,705.8
million ($1,431.6  million).  The proceeds from the offering will be invested in
short-term  investments  that meet high credit  quality  standards with original
maturities at the date of purchase between one and twelve months. We must comply
with the  restrictions  placed on us by the 1998 Notes  indenture,  which limits
such investments to a risk profile of A2/P2 commercial paper.

IMPACT OF FOREIGN CURRENCY RATE CHANGES

We are exposed to foreign  exchange rate  fluctuations  related to our operating
subsidiaries'  monetary  assets and  liabilities  and the  financial  results of
foreign  subsidiaries when their respective  financial statements are translated
into U.S.  dollars during  consolidation.  Our exposure to foreign exchange rate
fluctuations  also  arises  from  intercompany  charges  such  as  the  cost  of
equipment,  management  fees  and  certain  other  charges.  These  intercompany
accounts are predominantly denominated in the functional currency of the foreign
subsidiary.

The operating  companies' monetary assets and liabilities are subject to foreign
currency exchange risk as certain  equipment  purchases and payments for certain
operating expenses,  such as programming expenses, are denominated in currencies
other than their own functional currency. In addition,  certain of the operating
companies  have notes payable and notes  receivable  which are  denominated in a
currency other than their own functional currency. Foreign currency rate changes
also affect our share in results of our minority-owned affiliates.

The  functional  currency for our foreign  operations  is the  applicable  local
currency  for  each  affiliate  company.   Assets  and  liabilities  of  foreign
subsidiaries are translated at the exchange rates in effect at year-end, and the
statements of operations are translated at the average exchange rates during the
period.  Exchange rate  fluctuations on translating  foreign currency  financial
statements into U.S. dollars result in unrealized gains or losses referred to as
translation  adjustments.  Cumulative translation  adjustments are recorded as a
separate  component of other cumulative  comprehensive  loss in the statement 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 our  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.

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

                                       55
<PAGE>
<TABLE>
<CAPTION>
                                          Dutch         Australian    New Zealand    Chilean     Mexican
                                         Guilder          Dollar        Dollar         Peso        Peso
                                         -------        ----------    -----------    --------    -------
     <S>
     Spot Rates:                 <C>              <C>           <C>          <C>          <C>
     December 31, 1998..........         1.8900           1.6332        1.8939       472.5000     9.9080
     December 31, 1997..........         2.0200           1.5378        1.7161       439.8500     8.0700
     December 31, 1996..........         1.7400           1.2583        1.4156       424.7500     7.8900

     Average Rates:
     1998.......................         1.9900           1.6102        1.9133       459.7378     9.1431
     1997.......................         1.9500           1.5378        1.5126       419.0443     7.9205
     1996.......................         1.6900           1.2675        1.4400       412.1028     7.5604
</TABLE>

In  general,  we do not execute  hedge  transactions  to reduce our  exposure to
foreign currency  exchange rate risk.  Accordingly,  we may experience  economic
loss and a negative  impact on earnings  and equity with respect to our holdings
solely as a result of foreign currency  exchange rate  fluctuations.  During the
ten months ended December 31, 1998, we recorded a negative  change in cumulative
translation adjustments of $24.7 million,  primarily due to the strengthening of
the U.S. dollar compared to the currencies listed above.

INTEREST RATE SENSITIVITY

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

                                                                                                 As of December 31, 1998
                                                                                      ------------------------------------------
                                                                                      Book Value                      Fair Value
                                                                                      ----------                      ----------
                                                                                 (U.S. dollars, in thousands, except interest rates)
<S>                                                                                    <C>                             <C> 
Long-term and short-term  debt:
   Fixed rate U.S. dollar denominated 1998 Notes................................       $893,003                        $783,750
      Average interest rate.....................................................         10.75%                          12.46%
   Fixed rate U.S. dollar denominated UIH A/P Notes.............................       $356,640                        $246,433
      Average interest rate.....................................................         14.00%                          20.71%
   Fixed rate U.S. dollar denominated DIC Loan..................................       $ 84,214                        $ 84,214
      Average interest rate.....................................................          8.00%                           8.00%
   Fixed rate U.S. dollar denominated VTRH Note.................................       $  9,284                        $  9,284
      Average interest rate.....................................................         12.95%                          12.95%
   Fixed rate U.S. dollar denominated TVSB Seller Note..........................       $  5,853                        $  5,853
      Average interest rate.....................................................         10.00%                          10.00%
   Variable rate Dutch guilder denominated Senior Revolving Credit Facility.....       $512,179                        $512,179
      Average interest rate.....................................................          5.70%                           5.70%
   Variable rate U.S. dollar denominated Bridge Bank Facility...................       $ 60,063                        $ 60,063
      Average interest rate.....................................................         10.80%                          10.80%
   Variable rate French Franc denominated Mediareseaux Facility.................       $ 21,346                        $ 21,346
      Average interest rate.....................................................          5.20%                           5.20%
   Variable rate German Mark denominated Telekabel Hungary Facility.............       $ 15,504                        $ 15,504
      Average interest rate.....................................................          5.70%                           5.70%
   Variable rate Australian dollar denominated Austar Bank Facility.............       $104,090                        $104,090
      Average interest rate.....................................................          6.75%                           6.75%
   Variable rate U.S. dollar denominated ULA Revolving Credit Facility..........       $  8,000                        $  8,000
      Average interest rate.....................................................          8.83%                           8.83%
</TABLE>

The table below presents principal cash flows by expected maturity dates for our
debt obligations. The information is presented in U.S. dollar equivalents, which
is our reporting currency.

                                       56
<PAGE>
<TABLE>
<CAPTION>
                                                                                   As of December 31, 1998
                                                        ----------------------------------------------------------------------------
                                                          1999       2000         2001       2002      2003    Thereafter    Total
                                                        --------   --------     --------   --------  --------  ----------   --------
                                                                     (U.S. dollars, in thousands except interest rates)
<S>                                                     <C>        <C>             <C>   <C>            <C>     <C>         <C>
Long-term and short-term debt:
  Fixed rate U.S. dollar denominated
    1998 Notes..............................                  --         --        --         --        --      $893,003    $893,003
  Fixed rate U.S. dollar denominated 
    UIH A/P Notes............................                 --         --        --         --        --      $356,640    $356,640
  Fixed rate U.S. dollar denominated
    DIC Loan................................            $ 42,107   $ 42,107        --         --        --            --    $ 84,214
  Fixed rate U.S. dollar denominated 
    VTRH Note................................           $  9,284         --        --         --        --            --    $  9,284
  Fixed rate U.S. dollar denominated
    TVSB Seller Note.........................           $  5,853         --        --         --        --            --    $  5,853
  Variable rate Dutch guilder denominated
    Senior Revolving Credit Facility.........           $328,042   $184,137        --         --        --            --    $512,179
  Variable rate U.S. dollar denominated
    Bridge Bank Facility.....................           $ 60,063         --        --         --        --            --    $ 60,063
  Variable rate French Franc denominated
    Mediareseaux Facility....................                 --         --        --    $21,346        --            --    $ 21,346
  Variable rate German Mark denominated
    Telekabel Hungary Facility...............           $ 15,504         --        --         --        --            --    $ 15,504
  Variable rate Australian dollar denominated
    Austar Bank Facility.....................           $ 36,738         --        --         --        --       $ 67,352   $104,090
  Variable rate U.S. dollar denominated
    ULA Revolving Credit Facility............           $  8,000         --        --         --        --            --    $  8,000
</TABLE>

We use interest rate swap  agreements from time to time, to manage interest rate
risk on our floating rate debt facilities.  Interest rate swaps are entered into
depending on our  assessment  of the market,  and  generally are used to convert
floating rate debt to fixed rate debt.  Interest  differentials paid or received
under these swap  agreements  are  recognized  over the life of the contracts as
adjustments to the effective  yield of the underlying  debt, and related amounts
payable  to,  or  receivable  from,  the  counterparties  are  included  in  the
consolidated balance sheet. Currently, we have two interest rate swaps to manage
interest rate exposure on the Austar Bank Facility. These swap agreements expire
in 2002 and effectively  convert an aggregate principal amount of A$50.0 million
($30.6  million as of December 31, 1998) of variable  rate,  long-term debt into
fixed rate borrowings.  As of December 31, 1998, the weighted-average fixed rate
under these agreements was 7.94% compared to a weighted-average variable rate on
the  Austar  Bank  Facility  of  6.75%.  As a result of these  swap  agreements,
interest  expense was increased by  approximately  A$0.6 million ($0.4  million)
during 1998.

Fair values of the  interest  rate swap  agreements  are based on the  estimated
amounts  that  we  would  receive  or pay to  terminate  the  agreements  at the
reporting  date,  taking into  account  current  interest  rates and the current
creditworthiness of the counterparties.  As of December 31, 1998, we estimate we
would have paid  approximately  A$1.3  million  ($0.8  million) to terminate the
agreements.

                                       57
<PAGE>

The table below provides  information  about our interest rate swaps.  The table
presents  notional  amounts  and  weighted-average  interest  rates by  expected
(contractual)  maturity  dates.  Notional  amounts  are  used to  calculate  the
contractual  payments to be exchanged  under the contract.  The  information  is
presented in U.S.  dollar  equivalents  (in  thousands),  which is our reporting
currency.
<TABLE>
<CAPTION>
                                                              As of December 31, 1998
                                             ------------------------------------------------------------
                                             1999    2000    2001     2002    2003    Thereafter    Total
                                             ----    ----    ----     ----    ----    ----------    ----- 
                                                 (U.S. dollars, in thousands, except interest rates)
     <S>                                     <C>     <C>     <C>      <C>     <C>     <C>          <C>
     Interest Rate Swaps:
        Variable to fixed.............          --      --      --   $30,615    --         --      $30,615
        Average pay rate %............       8.00%   8.00%   8.00%     8.00%    --         --        8.00%
        Average receive rate %........       6.75%   6.75%   6.75%     6.75%    --         --        6.75%
</TABLE>

INFLATION AND FOREIGN INVESTMENT RISK

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

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

                                       58
<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...................................................................    60
     Consolidated Balance Sheets as of December 31, 1998 and February 28, 1998..................................    61
     Consolidated Statements of Operations for the Ten Months Ended December 31, 1998, and
       the Years Ended February 28, 1998 and February 28, 1997..................................................    62
     Consolidated Statements of Stockholders' (Deficit) Equity for the Ten Months Ended December 31, 1998, and
       the Years Ended February 28, 1998 and February 28, 1997..................................................    63
     Consolidated Statements of Cash Flows for the Ten Months Ended December 31, 1998, and
       the Years Ended February 28, 1998 and February 28, 1997..................................................    67
     Notes to Consolidated Financial Statements.................................................................    70
</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.

                                       59
<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
December 31, 1998 and February 28, 1998, and the related consolidated statements
of  operations,  stockholders'  deficit and cash flows for the ten months  ended
December  31,  1998 (see  Note 2) and the  years  ended  February  28,  1998 and
February 28, 1997.  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  these audits 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 United International  Holdings,
Inc. and  subsidiaries  as of December  31, 1998 and February 28, 1998,  and the
results  of their  operations  and their  cash  flows for the ten  months  ended
December 31, 1998 and the years ended February 28, 1998 and February 28, 1997 in
conformity with generally accepted accounting principles.



                                           ARTHUR ANDERSEN LLP


Denver, Colorado
April 30, 1999


                                       60
<PAGE>
<TABLE>
<CAPTION>


                                                  UNITED INTERNATIONAL HOLDINGS, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                        (Stated in thousands, except share and per share amounts)

                                                                                                             As of         As of
                                                                                                          December 31,  February 28,
                                                                                                             1998          1998
                                                                                                          ------------  ------------
                                                                                                           <S>           <C>
ASSETS
Current assets
  Cash and cash equivalents............................................................................... $   35,608    $ 303,441
  Restricted cash.........................................................................................     17,215       20,950
  Short-term liquid investments...........................................................................     41,498       33,731
  Subscriber receivables, net of allowance for doubtful accounts of $5,482 and $3,191, respectively.......     13,788        7,311
  Costs to be reimbursed by affiliated companies..........................................................     21,232       15,157
  Other related party receivables.........................................................................      2,064        4,167
  Other receivables.......................................................................................     15,380        5,474
  Inventory...............................................................................................     12,762        6,455
  Other current assets, net...............................................................................     16,363       14,313
                                                                                                           ----------   ----------
        Total current assets..............................................................................    175,910      410,999
Investments in and advances to affiliated companies, accounted for under the equity method, net...........    429,490      341,252
Property, plant and equipment, net of accumulated depreciation of $201,183 and $84,633, respectively......    464,059      440,735
Goodwill and other intangible assets, net of accumulated amortization of $39,683 and $14,532,
 respectively.............................................................................................    424,934      409,190
Deferred financing costs, net of accumulated amortization of $9,923 and $1,634, respectively..............     41,270       44,943
Non-current restricted cash and other assets, net.........................................................      6,432       32,716
                                                                                                           ----------   ----------
        Total assets...................................................................................... $1,542,095   $1,679,835
                                                                                                           ==========   ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
  Accounts payable, including related party payables of $247 and $86, respectively........................ $   76,696   $   55,741
  Accrued liabilities.....................................................................................     66,079       46,419
  Subscriber prepayments and deposits.....................................................................     24,210       12,145
  Short-term debt.........................................................................................     93,379           --
  Current portion of senior discount notes................................................................        412           --
  Current portion of other long-term debt.................................................................     62,252      163,325
  Other current liabilities...............................................................................      3,524       13,760
                                                                                                           ----------   ----------
        Total current liabilities.........................................................................    326,552      291,390
Senior discount notes.....................................................................................  1,249,643    1,127,763
Other long-term debt......................................................................................    689,646      575,008
Deferred compensation.....................................................................................    173,251        2,385
Deferred taxes............................................................................................      4,580       22,032
Other long-term liabilities...............................................................................      7,097        5,787
                                                                                                           ----------   ----------
Total liabilities.........................................................................................  2,450,769    2,024,365
                                                                                                           ----------   ----------
Minority interests in subsidiaries........................................................................     18,705       15,186
                                                                                                           ----------   ----------
Preferred  stock,  $0.01  par  value,  3,000,000  shares  authorized,  stated at liquidation value:
  Series A Convertible Preferred Stock, 132,144 and 170,513 shares issued and outstanding, respectively...     26,086       32,564
                                                                                                           ----------   ----------
  Series B Convertible Preferred Stock, 139,031 and 0 shares issued and outstanding, respectively.........     30,200           --
                                                                                                           ----------   ----------
Stockholders' deficit:
  Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 30,674,995 and 26,381,093 shares  
   issued and outstanding, respectively...................................................................        307          264
  Class B Common Stock, $0.01 par value, 30,000,000 shares authorized, 9,915,880 and 12,863,323 shares
   issued and outstanding, respectively...................................................................         99          128
  Additional paid-in capital..............................................................................    378,597      352,253
  Deferred compensation...................................................................................       (679)         (42)
  Treasury stock, at cost, 2,784,620 and 3,169,151 shares of Class A Common Stock, respectively...........    (29,061)     (33,074)
  Accumulated deficit..................................................................................... (1,241,986)    (646,085)
  Other cumulative comprehensive loss.....................................................................    (90,942)     (65,724)
                                                                                                           ----------   ----------
        Total stockholders' deficit.......................................................................   (983,665)    (392,280)
                                                                                                           ----------   ----------
Commitments and contingencies (Notes 13 and 14)

        Total liabilities and stockholders' deficit....................................................... $1,542,095   $1,679,835
                                                                                                           ==========   ==========

                        The  accompanying  notes are an  integral  part of these consolidated financial statements.
</TABLE>
                                                                   61
<PAGE>
<TABLE>
<CAPTION>
                                                  UNITED INTERNATIONAL HOLDINGS, INC.
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                        (Stated in thousands, except share and per share amounts)

                                                                                         For the Ten          For the Years Ended
                                                                                         Months Ended            February 28,
                                                                                         December 31,      -------------------------
                                                                                            1998              1998          1997
                                                                                         ------------      ----------    -----------
<S>                                                                                     <C>                <C>           <C>
Revenue.............................................................................    $   254,068        $   98,622    $   31,555
System operating expense............................................................       (122,811)          (65,631)      (26,251)
System selling, general and administrative expense..................................       (105,226)          (62,803)      (33,655)
Corporate general and administrative expense........................................       (194,767)          (28,553)      (20,365)
Depreciation and amortization.......................................................       (159,045)          (91,656)      (38,961)
                                                                                         ----------         ----------    ----------
        Net operating loss..........................................................       (327,781)         (150,021)      (87,677)

Interest income, including related party income of $497, $302 and $197,
 respectively.......................................................................         10,464             7,806        13,329
Interest expense....................................................................       (163,227)         (124,288)      (79,659)
Provision for losses on marketable equity securities and investment related costs...         (9,686)          (14,793)       (5,859)
Gain on sale of investments in affiliated companies.................................             --            90,020        65,249
Other expense, net..................................................................         (2,546)           (5,088)         (991)
                                                                                         ----------         ----------    ----------
        Net loss before other items.................................................       (492,776)         (196,364)      (95,608)

Share in results of affiliated companies, net.......................................        (54,166)          (68,645)      (47,575)
Minority interests in subsidiaries..................................................          1,410             1,568         4,358
                                                                                         ----------         ----------    ----------
        Net loss before extraordinary charge........................................       (545,532)         (263,441)     (138,825)

Extraordinary charge for early retirement of debt...................................             --           (79,091)           --
                                                                                         ----------        ----------    ----------
        Net loss....................................................................     $ (545,532)       $ (342,532)   $ (138,825)
                                                                                         ==========        ==========    ==========
Net loss per common share:
        Basic and diluted loss before extraordinary charge..........................     $   (13.71)       $    (6.75)   $    (3.59)
        Extraordinary charge........................................................             --             (2.02)           --
                                                                                         ----------        ----------    ----------
        Basic and diluted net loss..................................................     $   (13.71)       $    (8.77)   $    (3.59)
                                                                                         ==========        ==========    ==========

Weighted-average number of common shares outstanding................................     39,919,887        39,211,501    39,035,776
                                                                                         ==========        ==========    ==========





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

                                                                   62
<PAGE>
<TABLE>
<CAPTION>
                                                   UNITED INTERNATIONAL HOLDINGS, INC.
                                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
                                                (Stated in thousands, except share amounts)

                   Class A            Class B      Addi-                                             Other
                 Common Stock      Common Stock   tional   Deferred   Treasury Stock               Cumulative    Total
               ----------------  ---------------- Paid-In   Compen-  ---------------- Accumulated  Comprehen-  Comprehen- 
                Shares   Amount   Shares   Amount Capital   sation    Shares   Amount    Deficit  sive Loss(1) sive Loss    Total
               --------- ------  --------- ------ -------- --------  --------- ------ ----------- -----------  ---------- ----------
<S>            <C>        <C>   <C>         <C>   <C>       <C>     <C>         <C>    <C>          <C>        <C>         <C>
Balances,
 February
 29, 1996.....25,732,154  $257  13,274,685  $133  $325,716  $(842)         --   $ --   $(164,728)   $ (8,560)  $      --   $151,976
Issuance of
 Class A
 Common Stock
 in connect-
 ion with
 Company's
 stock option
 plan.........    39,750    --          --    --       349     --          --     --          --          --          --        349
Issuance of
 Class A
 Common Stock
 in connec-
 tion 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)         --     --          --          --          --         --
Amortization
 of deferred
 compensation..        --   --          --    --        --    909          --     --          --          --          --        909
Net loss.......        --   --          --    --        --     --          --     --    (138,825)         --    (138,825)  (138,825)
Unrealized
 loss on
 investments...        --   --          --    --        --     --          --     --          --      (4,880)     (4,880)    (4,880)
Change in
 cumulative
 translation
 adjustments...        --   --          --    --        --     --          --     --          --      (8,430)     (8,430)    (8,430)
               ---------- ----  ----------  ----  --------  -----   ---------   ----   ---------    --------   ---------   --------
Balances,
February
28, 1997..... 26,097,263  $261  12,971,775  $129  $340,753  $(624)         --   $ --   $(303,553)   $(21,870)  $(152,135)  $ 15,096
              ==========  ====  ==========  ====  ========  =====   =========   ====   =========    ========   =========   ========

                        The  accompanying  notes are an  integral  part of these consolidated financial statements.
</TABLE>
                                                                   63
<PAGE>
<TABLE>
<CAPTION>
                                                    UNITED INTERNATIONAL HOLDINGS, INC.
                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)
                                                (Stated in thousands, except share amounts)

                   Class A            Class B      Addi-                                             Other
                 Common Stock      Common Stock   tional   Deferred   Treasury Stock               Cumulative    Total
               ----------------  ---------------- Paid-In   Compen-  ---------------- Accumulated  Comprehen-  Comprehen- 
                Shares   Amount   Shares   Amount Capital   sation    Shares   Amount    Deficit  sive Loss(1) sive Loss    Total
               --------- ------  --------- ------ -------- --------  --------- ------ ----------- -----------  ---------- ----------
<S>            <C>         <C>   <C>         <C>   <C>       <C>     <C>       <C>       <C>        <C>        <C>         <C>
Balances,
 February
 28, 1997......26,097,263  $261  12,971,775  $129  $340,753  $(624)         -- $     --  $(303,553) $(21,870)  $      --  $  15,096
Issuance of
 Class A
 Common Stock
 in connection
 with Company's
 stock option
 plan..........   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
Purchase of
 Class A
 Common Stock
 by subsidiary.        --    --          --    --        --     --   3,169,151  (33,074)        --        --          --    (33,074)
Net loss......         --    --          --    --        --     --          --       --   (342,532)       --    (342,532)  (342,532)
Change in
 unrealized gain
 (loss) on
 investments,
 net...........        --    --          --    --        --     --          --       --         --    (1,593)     (1,593)    (1,593)
Provision for
 loss on
 marketable
 equity
 securities....        --    --          --    --        --     --          --       --         --     8,013       8,013      8,013
Change in
 cumulative
 translation
 adjustments...        --    --          --    --        --     --          --       --         --   (50,274)    (50,274)   (50,274)
               ----------  ----  ----------  ----  --------  -----   --------- --------  ---------  --------   ---------  ----------
Balances,
 February 28,
 1998..........26,381,093  $264  12,863,323  $128  $352,253  $ (42)  3,169,151 $(33,074) $(646,085) $(65,724)  $(386,386) $(392,280)
               ==========  ====  ==========  ====  ========  =====   ========= ========  =========  ========   =========  =========

                        The  accompanying  notes are an  integral  part of these consolidated financial statements.
</TABLE>
                                                                   64
<PAGE>
<TABLE>
<CAPTION>
                                                    UNITED INTERNATIONAL HOLDINGS, INC.
                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (Continued)
                                                (Stated in thousands, except share amounts)

                   Class A            Class B      Addi-                                             Other
                 Common Stock      Common Stock   tional   Deferred   Treasury Stock               Cumulative    Total
               ----------------  ---------------- Paid-In   Compen-  ---------------- Accumulated  Comprehen-  Comprehen- 
                Shares   Amount   Shares   Amount Capital   sation    Shares   Amount    Deficit  sive Loss(1) sive Loss    Total
               --------- ------  --------- ------ -------- --------  --------- ------ ----------- -----------  ---------- ----------
<S>            <C>         <C>   <C>         <C>   <C>       <C>    <C>       <C>       <C>          <C>       <C>        <C>
Balances,
 February 28,
 1998..........26,381,093  $264 12,863,323   $128  $352,253  $ (42) 3,169,151 $(33,074) $  (646,085) $(65,724) $      --  $(392,280)
Issuance of
 Class A
 Common Stock
 in connection
 with public
 offering,
 net of
 offering
 expense.......   450,000     5         --     --     7,399     --         --       --           --        --         --      7,404
Issuance of
 Class A
 Common Stock
 in connection
 with Company's
 stock option
 plan..........   453,144     5         --     --     4,783     --         --       --           --        --         --      4,788
Issuance of
 Class A
 Common Stock
 in connection
 with Company's
 401(k) plan...    17,858    --         --     --       260     --         --       --           --        --         --        260
Exchange of
 Class B
 Common Stock
 for Class A
 Common Stock.. 2,947,443    29 (2,947,443)   (29)       --     --         --       --           --        --         --         --
Exchange of
 Series A
 Convertible
 Preferred
 Stock for
 Class A
 Common Stock..   425,457     4         --     --     7,441     --         --       --           --        --         --      7,445
Accrual of
 dividends on
 convertible
 preferred
 stock.........        --    --         --     --    (1,623)    --         --       --           --        --         --     (1,623)
Repricing of
 stock options.        --    --         --     --     1,380 (1,380)        --       --           --        --         --         --
Amortization
 of deferred
 compensation..        --    --         --     --        --    743         --       --           --        --         --        743
Gain on deemed
 issuance of
 stock by
 subsidiary....        --    --         --     --     5,786     --         --       --           --        --         --      5,786
Class A
 Common Stock
 issued by
 subsidiary for
 additional
 interest
 in Ireland
 systems.......        --    --         --     --       918     --   (384,531)  4,013            --        --         --      4,931
Elimination
 of historical
 two month
 reporting
 difference
 due to change
 in fiscal
 year end......        --    --         --     --        --     --         --       --      (50,369)       --         --    (50,369)
Net loss.......        --    --         --     --        --     --         --       --     (545,532)       --   (545,532)  (545,532)

                        The  accompanying  notes are an  integral  part of these consolidated financial statements.
</TABLE>
                                                                   65

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

                   Class A            Class B      Addi-                                             Other
                 Common Stock      Common Stock   tional   Deferred   Treasury Stock               Cumulative    Total
               ----------------  ---------------- Paid-In   Compen-  ---------------- Accumulated  Comprehen-  Comprehen- 
                Shares   Amount   Shares   Amount Capital   sation    Shares   Amount    Deficit  sive Loss(1) sive Loss    Total
               --------- ------  --------- ------ -------- --------  --------- ------ ----------- -----------  ---------- ----------
<S>            <C>         <C>   <C>         <C>   <C>       <C>    <C>       <C>       <C>          <C>       <C>        <C>
Change in
 cumulative
 translation
 adjustments...        --  $ --         --   $ --  $     --  $  --         -- $     --  $        --  $(24,713) $ (24,713) $ (24,713)
Change in
 unrealized
 gain on
 investment....        --    --         --     --        --     --         --       --           --      (505)      (505)      (505)
               ----------  ---- -----------  ----  --------  -----  --------- --------  -----------  --------  ---------  ---------
Balances,
 December 31,
 1998..........30,674,995  $307  9,915,880   $ 99  $378,597  $(679) 2,784,620 $(29,061) $(1,241,986) $(90,942) $(570,750) $(983,665)
               ==========  ==== ===========  ====  ========  =====  ========= ========  ===========  ========  =========  =========
</TABLE>

(1) Other  Cumulative  Comprehensive  Loss at the end of each  reporting  period
consists of the following:
<TABLE>
<CAPTION>
                                                      As of           As of February 28,           As of
                                                   February 29,    -----------------------      December 31,
                                                      1996            1997          1998           1998
                                                   ------------    ---------     ---------      ------------
      <S>                                           <C>            <C>           <C>             <C>
     Foreign currency translation adjustments       $(7,371)       $(15,801)     $(66,075)       $(90,788)
     Unrealized (loss) gain on investments......     (1,189)         (6,069)          351            (154)
                                                    -------        --------      --------        --------
        Total...................................    $(8,560)       $(21,870)     $(65,724)       $(90,942)
                                                    =======        ========      ========        ======== 


                       The  accompanying  notes are an  integral  part of these consolidated financial statements.
</TABLE>
                                                                   66
<PAGE>
<TABLE>
<CAPTION>
                                                   UNITED INTERNATIONAL HOLDINGS, INC.
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                          (Stated in thousands)

                                                                                          For the Ten       For the Years Ended
                                                                                          Months Ended          February 28,
                                                                                          December 31,   -------------------------
                                                                                             1998           1998           1997
                                                                                          ------------   ----------     ----------
<S>                                                                                        <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..............................................................................     $(545,532)    $(342,532)     $(138,825)
Elimination of historical two month reporting difference due to change in
  fiscal year end.....................................................................       (50,369)           --             --
Adjustments to reconcile net loss to net cash flows from operating activities:
  Extraordinary charge for early retirement of debt...................................            --        79,091             --
  Share in results of affiliated companies, net.......................................        66,326        70,291         47,575
  Gain on sale of investments in affiliated companies.................................            --       (90,020)       (65,249)
  Minority interests share of losses..................................................        (1,186)       (1,568)        (4,358)
  Depreciation and amortization.......................................................       192,968        91,656         38,961
  Accretion of interest on senior notes and amortization of deferred financing costs..       130,803       110,633         73,695
  Compensation expense related to stock options.......................................       164,793           351             --
  Provision for losses on marketable equity securities and investment related costs...         9,473        14,793          5,859
  Increase in receivables, net........................................................       (12,755)       (3,222)        (2,801)
  (Decrease) increase in other assets.................................................        (8,528)        6,993        (13,409)
  Increase in accounts payable, accrued liabilities and other.........................        55,995         2,882         23,058
                                                                                          ----------     ---------      ---------
        Net cash flows from operating activities......................................         1,988       (60,652)       (35,494)
                                                                                          ----------     ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments.............................................      (149,601)      (94,656)      (359,534)
Proceeds from sale of short-term liquid investments...................................       141,834       131,284        324,867
Restricted cash released (deposited)..................................................        27,904        (8,350)        12,473
Investments in and advances to affiliated companies...................................      (139,011)     (177,632)       (73,865)
Proceeds from sale of investments in affiliated companies.............................        19,968       211,125         43,098
New acquisitions, net of cash acquired................................................      (109,881)           --        (26,382)
Capital expenditures..................................................................      (217,057)     (115,033)      (204,407)
Deconsolidation of New Zealand subsidiary.............................................        (9,881)           --             --
Proceeds from sale of property, plant and equipment...................................            --         5,332             --
Distribution received from affiliated company.........................................           223         1,248             --
(Decrease) increase in construction payables..........................................        (2,007)      (29,621)        38,331
Payments on notes receivable..........................................................         3,370        12,238         45,264
Acquisition, transaction and development costs and other..............................           679        (9,031)        (9,623)
                                                                                          ----------     ---------      ---------
        Net cash flows from investing activities......................................      (433,460)      (73,096)      (209,778)
                                                                                          ----------     ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from offering of senior discount notes.......................................            --       842,125        225,115
Retirement of existing senior notes...................................................            --      (531,800)            --
Proceeds from short-term and long-term borrowings.....................................       321,167       233,715             --
Deferred financing costs..............................................................        (5,932)      (30,868)       (10,670)
Repayments of long and short-term borrowings..........................................      (168,358)     (120,570)            --
Payment of sellers notes..............................................................            --       (46,351)       (11,856)
Issuance of common stock in connection with public offerings, net of financing costs..         7,402            --             --
Issuance of common stock in connection with Company's stock option plan...............         4,789           796            349
Cash (paid to) contributed from minority interest partners............................          (253)       22,042             --
Payment of warrants tendered to the Company...........................................            --            --         (2,156)
                                                                                          ----------     ---------      ---------
        Net cash flows from financing activities......................................       158,815       369,089        200,782
                                                                                          ----------     ---------      ---------
EFFECT OF EXCHANGE RATES ON CASH......................................................         4,824          (684)         1,056
                                                                                          ----------     ---------      ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS......................................      (267,833)      234,657        (43,434)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................       303,441        68,784        112,218
                                                                                          ----------     ---------      ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD..............................................    $   35,608     $ 303,441      $  68,784
                                                                                          ==========     =========      =========

                        The  accompanying  notes are an  integral  part of these consolidated financial statements.
</TABLE>
                                                                   67
<PAGE>
<TABLE>
<CAPTION>
                                                     UNITED INTERNATIONAL HOLDINGS, INC.
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                                            (Stated in thousands)


                                                                                          For the Ten       For the Years Ended
                                                                                          Months Ended          February 28,
                                                                                          December 31,   -------------------------
                                                                                             1998           1998           1997
                                                                                          ------------   ----------     ----------
<S>                                                                                       <C>            <C>            <C>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  CONTRIBUTION OF DUTCH CABLE SYSTEMS TO NEW JOINT VENTURE:
    Working capital...................................................................    $ (1,871)      $      --      $     --
    Investments in affiliated companies...............................................      96,866              --            --
    Property, plant and equipment.....................................................      85,037              --            --
    Goodwill and other intangible assets..............................................      78,515              --            --
    Senior secured notes and other debt...............................................    (111,553)             --            --
    Other liabilities.................................................................     (17,417)             --            --
                                                                                          --------       ---------      --------
          Total net assets contributed................................................    $129,577       $      --      $     --
                                                                                          ========       =========      ========
  Issuance of preferred stock utilized in purchase of Australian investments..........    $ 29,544       $      --      $     --
                                                                                          ========       =========      ========
  Seller note for purchase of system in Hungary.......................................    $ 18,000       $      --      $     --
                                                                                          ========       =========      ========
  Note issued upon purchase of remaining interest in Brazilian investment.............    $  5,683       $      --      $     --
                                                                                          ========       =========      ========
  Seller notes for purchase of Argentine systems......................................    $     --       $  52,061      $ 33,401
                                                                                          ========       =========      ========
  Note issued upon sale of investment in Venezuela....................................    $     --       $   6,500      $     --
                                                                                          ========       =========      ========
  Note receivable upon sale of investment in Brazil system............................    $     --       $      --      $ 35,000
                                                                                          ========       =========      ========
  Non-cash stock issuance for purchase of 50.0% interest in New Zealand affiliate.....    $     --       $      --      $  7,800
                                                                                          ========       =========      ========

  SUPPLEMENTAL CASH FLOW DISCLOSURES:
    Cash paid for interest............................................................    $ 40,929       $   7,513      $    870
                                                                                          ========       =========      ========
    Cash received for interest........................................................    $  9,074       $   7,694      $ 11,900
                                                                                          ========       =========      ========
  ACQUISITION OF DUTCH CABLE ASSETS:
    Property, plant and equipment and other long-term assets..........................    $(51,632)      $      --      $     --
    Goodwill and other intangible assets..............................................     (36,416)             --            --
                                                                                          --------       ---------      --------
          Total cash paid.............................................................    $(88,048)      $      --      $     --
                                                                                          ========       =========      ========
  DECONSOLIDATION OF NEW ZEALAND SUBSIDIARY:
    Working capital...................................................................    $  4,159       $      --      $     --
    Property, plant and equipment.....................................................     (26,484)             --            --
    Goodwill and other intangible assets..............................................      (2,805)             --            --
    Notes payable and other debt......................................................       3,833              --            --
    Minority interest.................................................................      11,416              --            --
                                                                                          --------       ---------      --------
          Total cash relinquished.....................................................    $ (9,881)      $      --      $     --
                                                                                          ========       =========      ========    
  SALE OF ARGENTINE CABLE SYSTEMS:
    Working capital, net of cash relinquished of $2,133...............................    $     --       $  (3,319)     $     --
    Investments in affiliated companies...............................................          --          83,535            --
    Property, plant and equipment and other long-term assets..........................          --           4,560            --
    Goodwill and other intangible assets..............................................          --          60,727            --
    Sellers notes (assumed by the buyers).............................................          --         (24,398)           --
    Gain on sale......................................................................          --          90,020            --
                                                                                          --------       ---------      --------
          Cash received from sale.....................................................    $     --       $ 211,125      $     --
                                                                                          ========       =========      ========
  ACQUISITION OF ADDITIONAL 50.0 % 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>

                                                                   68
<PAGE>
<TABLE>
<CAPTION>
                                                     UNITED INTERNATIONAL HOLDINGS, INC.
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                                            (Stated in thousands)


                                                                                          For the Ten       For the Years Ended
                                                                                          Months Ended          February 28,
                                                                                          December 31,   -------------------------
                                                                                             1998           1998           1997
                                                                                          ------------   ----------     ----------
<S>                                                                                       <C>            <C>            <C>
  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>

                                                                   69



<PAGE>                 UNITED INTERNATIONAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (Stated in thousands, except share and per share amounts)

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  outside the
United States.

The following chart presents a summary of the Company's significant  investments
in multi-channel television and telephony operations as of December 31, 1998.
<TABLE>
<CAPTION>
<S>               <C>
************************************************************************************************************************************
*                                                               UIH                                                                *
*                                                                                                                                  *
************************************************************************************************************************************
            100%  *                                                             100%  *
***************************************  *******************************************************************************************
*          UIH Europe, Inc.           *  *                       United International Properties, Inc.                             *
*             ("UIHE")                *  *                                     ("UIPI")                                            *
***************************************  *******************************************************************************************
                  *                                                                   *
                  *                                           **********************************************
          100%(1) *                                      98%  *                                            *  100%
***************************************  ********************************************* *********************************************
*United Pan-Europe Communications N.V.*  *   UIH Asia/Pacific Communications, Inc.   * *         UIH Latin America, Inc.           *
*               ("UPC")               *  *                 ("UAP")                   * *                 ("ULA")                   *
***************************************  ********************************************* *********************************************
                  *                                           *                                             *
                  *                                           *                                             *
***************************************  ********************************************* *********************************************
*Austria:                             *  *Australia:                                 * *Brazil:                                    *
* Telekabel Group            95.0%    *  * CTV Pty Limited and STV Pty               * * TV Show Brazil, S.A. ("TVSB")   100.0%    *
*Belgium:                             *  *  Limited (collectively,                   * * TV Cabo e Comunicacoes de                 *
* Radio Public N.V./S.A.              *  *  "Austar")                      100.0%    * *  Jundiai, S.A. ("Jundiai")       46.3%    *
*  ("TVD")                  100.0%    *  * United Wireless Pty Limited               * *Chile:                                     *
*Czech Republic:                      *  *  ("United Wireless")            100.0%    * * VTR Hipercable S.A. ("VTRH")     40.0% (7)*
* Kabel Net Group                     *  * XYZ Entertainment Pty Limited             * *Mexico:                                    *
*  ("KabelNet")             100.0%    *  *  ("XYZ Entertainment")           50.0%    * * Tele Cable de Morelos, S.A.               *
* Ceska Programova                    *  *China:                                     * *  de C.V. ("Megapo")              49.0%    *
*  Spolecnost SRO                     *  * Hunan International TV                    * *Peru:                                      *
*  ("TV Max")               100.0%    *  *  Communications Company Limited           * * Cable Star S.A. ("Cable Star")   60.0%    *
*France:                              *  *  ("HITV")                        49.0% (5)* *Latin American Programming:                *
* Mediareseaux Marne S.A.             *  *New Zealand:                               * * MGM Networks Latin America                *
*  ("Mediareseaux")          99.6%    *  * Saturn Communications Limited             * *  LLC ("MGM Networks LA")         50.0%    *
*Hungary:                             *  *  ("Saturn")                      65.0%    * *********************************************
* Telekabel Hungary BV                *  *Philippines:                               *
*  ("Telekabel Hungary")     79.3%    *  * Pilipino Cable Corporation                *  
* Kabelkom Kabeltelevizio             *  *  ("PCC")                         19.6% (6)*
*  KFT ("Telekabel Hungary            *  *Tahiti:                                    *
*   Programming")            50.0% (2)*  * Telefenua S.A. ("Telefenua")     90.0%    *      
* Monor Telefon Tarsasag,             *  *********************************************
*  Rt ("Monor")              44.8%    *
*Ireland:                             *
* Tara Television Limited             *
*  ("Tara")                  80.0%    *
*Israel:                              *
* Tevel Israel International          *
*  Communications Ltd.                *
*  ("Tevel")                 46.6%    *
*Malta:                               *
* Melita Cable TV PLC                 *
*  ("Melita")                50.0%    *
*The Netherlands:                     *
* United Telekabel Holding            *
*  N.V. ("UTH")              51.0% (3)*
*Norway:                              *
* Janco Multicom AS                   *
*  ("Janco")                100.0%    *
*Romania:                             *
* Control Cable Ventures SRL          *
*  ("Control Cable")        100.0%    *
* Multicanal Holdings SRL             *
*  ("Multicanal")           100.0%    *
* Eurosat CA-TV SRL                   *
*  ("Eurosat")               51.0%    *
*Slovak Republic:                     *
* Kabeltel SRO ("Kabeltel") 100.0%    *
* Trnavatel SRO                       *
*  ("Trnavatel")             75.0%    *
*Spain/Portugal:                      *
* Ibercom, Inc. ("IPS")      33.5% (4)*
***************************************
</TABLE>                                       70
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)


(1)  As of December  31,  1998,  UIHE held all of the voting  control of UPC and
     owned all of its issued and  outstanding  shares,  including  approximately
     7.2% of such shares,  which had been registered in the name of a foundation
     controlled by UIH to support UPC's  employee stock option plan. In February
     1999, UPC  successfully  completed an initial public offering  selling 44.6
     million of its shares on the Amsterdam  Stock Exchange and Nasdaq  National
     Market System and completed a sale of approximately 1.6 million shares to a
     strategic  investor,   resulting  in  an  ownership  interest  by  UIHE  of
     approximately 64.3% subsequent to the offering.
(2)  In March  1999,  Time Warner  Entertainment  Company ("TWE")  exercised its
     option to acquire UPC's interest in Telekabel Hungary Programming (see Note
     3).
(3)  On  February  17,  1999,  UPC  acquired  the  remaining  49.0%  of UTH  for
     euro250,187 (approximately $282,738) (see Note 3).
(4)  UIPI transferred its interest in IPS to UPC in February 1999.
(5)  Pursuant to a memorandum of understanding  with AmTec,  Inc.  ("AmTec") UAP
     and AmTec  agreed  to  exchange  UAP's  interest  in HITV for AmTec  stock.
     Closing on the transaction is expected to occur by the end of 1999, subject
     to certain conditions.
(6)  UAP currently holds a convertible  loan,  which upon full conversion  would
     provide UAP with a 40.0%  equity  ownership  interest in Sun Cable  Systems
     ("Sun  Cable").  UIH will hold an effective  19.6% interest in PCC when the
     merger  between Sun Cable  (49.0%) and Sky Cable  (51.0%) is  completed  in
     1999.
(7)  On April 29, 1999,  ULA acquired the remaining  ownership  interest in VTRH
     from its current partners,  increasing its ownership  interest to 100% (see
     Note 18).

LIQUIDITY AND CAPITAL RESOURCES

As of December  31,  1998,  the Company  had a net  working  capital  deficit of
$150,642.  However,  subsequent  to December 31, 1998  approximately  $36,738 of
short-term  debt was  refinanced  on a long-term  basis,  and UPC  completed  an
initial public offering  resulting in approximately  $1,431,600 in net proceeds.
Additional sources of cash in the next year may include the exercise of existing
warrants to purchase  UIH common  stock,  the raising of  additional  private or
public  debt or  equity  and/or  the sale of  non-strategic  assets  by  certain
subsidiaries.  Management  believes that these capital resources will enable UIH
to fund the operating and development  requirements of its  subsidiaries  and to
cover corporate  overhead for the next year. If UIH pursues new  acquisitions or
development  opportunities,  UIH would need to raise additional  capital or seek
strategic partners.



                                       71
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

PRINCIPLES OF CONSOLIDATION

The accompanying  consolidated  financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial interest
through the  ownership  of a majority  voting  interest,  except for UTH,  where
because of certain  minority  shareholders  rights the Company  accounts for its
investment  in UTH using the equity  method of  accounting.  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 has  consolidated the operations of Saturn since July 1, 1996. Prior
to that time,  the Company  accounted  for its  investment  in Saturn  under the
equity method. Effective January 1, 1998, the Company discontinued consolidating
the  results of  operations  of Saturn  and  returned  to the  equity  method of
accounting.  The change was made to comply  with the  consensus  guidance of the
Emerging Issues Task Force regarding Issue 96-16 "EITF 96-16", and related rules
of the SEC,  because the  minority  shareholders  of Saturn  have  participating
approval or veto rights with respect to certain significant  decisions of Saturn
in the  ordinary  course  of  business.  The  Company  is  currently  discussing
alternatives  which  would  allow for the  consolidation  of  Saturn.  Effective
October  1,  1998,  the  Company  discontinued   consolidating  the  results  of
operations of Telefenua due to an other-than-temporary loss of control and began
using the equity method of accounting.  In September  1996, ULA  contributed its
wholly-owned  subsidiaries  in Chile in exchange  for a 34.0%  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.

CHANGE IN FISCAL YEAR END

Prior to the ten months ended December 31, 1998,  the Company's  fiscal year end
was  February  28, and it  accounted  for its share of the income or loss of its
operating  companies  based  on the  calendar  year  results  of each  operating
company.  This  created a two month delay in  reporting  the  operating  company
results  in the  Company's  consolidated  results  for its fiscal  year-end.  On
February 24, 1999, the Company  changed its fiscal year-end from the last day in
February to the last day in December, effective December 31, 1998. To effect the
transition to the new fiscal year end, the combined results of operations of the
operating  companies for January and February 1998, a loss of $50,369,  has been
reported  as a one-time  charge to  retained  deficit as of March 1, 1998 in the
consolidated  statement of stockholders'  (deficit)  equity.  Consequently,  the
consolidated  statement of operations  presents the consolidated  results of the
Company and its  subsidiaries  for the ten months ended  December 31, 1998.  For
comparative purposes, the Company's consolidated revenue, net operating loss and
net loss were $84,297, $125,445 and $206,374,  respectively,  for the ten months
ended December 31, 1997.

CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS

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

RESTRICTED CASH

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

                                       72
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

COSTS TO BE REIMBURSED BY AFFILIATED COMPANIES

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

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

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

PROPERTY, PLANT AND EQUIPMENT

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

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

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

GOODWILL AND OTHER INTANGIBLE ASSETS

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

RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS

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

                                       73
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

DEFERRED FINANCING COSTS

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

SUBSCRIBER PREPAYMENTS AND DEPOSITS

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

OTHER COMPREHENSIVE LOSS

The Company has adopted  Statement of Financial  Accounting  Standards  No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an enterprise
(i) classify  items of other  comprehensive  income  (loss) by their nature in a
financial   statement  and  (ii)  display  the  accumulated   balance  of  other
comprehensive  income (loss)  separately  from retained  earnings and additional
paid-in capital in the equity section of a statement of financial position.

REVENUE RECOGNITION

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

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist  principally of 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 for the
Company's  stock option  plans,  which results in  compensation  expense for the
difference between the grant price and the fair market value at each measurement
date.  In addition to the Company's  stock option  plans,  UPC, UAP and ULA have
also adopted stock-based compensation plans for their employees. With respect to
these plans, the rights conveyed to employees are the substantive equivalents to
stock  appreciation  rights.  Accordingly,  compensation  expense  and  deferred
compensation  expense are recognized at each  financial  statement date based on
the  difference  between  the grant  price and the  estimated  fair value of the
respective subsidiary's common stock.

INCOME TAXES

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

                                       74
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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

Gains realized as a result of stock issuances 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 NET LOSS PER SHARE

"Basic loss per share" is  determined  by dividing net loss  available to common
stockholders by the weighted-average  number of common shares outstanding during
each period. Net loss available to common  stockholders  includes the accrual of
dividends on convertible preferred stock which is charged directly to additional
paid-in  capital.   "Diluted  net  loss  per  share"  includes  the  effects  of
potentially  issuable  common stock,  but only if dilutive.  The Company's stock
option plans and convertible  securities are excluded from the Company's diluted
loss  per  share  for all  periods  presented  because  their  effect  would  be
anti-dilutive.

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  and  are   included   in  Other   Cumulative
Comprehensive Loss.

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

Cash flows from the  Company's  operations in foreign  countries are  translated
based on their functional currencies. As a result, amounts related to assets and
liabilities reported in the consolidated statements of cash flows will not agree
to changes in the corresponding balances in the consolidated balance sheets. The
effects of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line below cash flows from financing activities.

Certain of the  Company's  foreign  operating  companies  have notes payable and
notes  receivable  that are  denominated  in a  currency  other  than  their own
functional currency.  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.

On January 11,  1999,  eleven of the fifteen  member  countries  of the European
Union fixed their conversion rates between their existing  sovereign  currencies
and the Euro,  eliminating the foreign exchange rate fluctuation exposure of UPC
related to its operating  subsidiaries in the eleven countries  (including UPC's
subsidiaries in The  Netherlands,  Austria,  Belgium,  France and Spain).  UPC's
investments  in countries  outside the eleven  countries  which have adopted the
Euro include Norway, Hungary, Ireland, Israel and Malta.

NEW ACCOUNTING PRINCIPLES

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  adopted  SFAS 131 for the ten months  ended
December 31, 1998.

                                       75
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"   ("SFAS  133"),   which  requires  that  companies   recognize  all
derivatives  as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133,  accounting for changes in fair value of a derivative depends on
its  intended  use and  designation.  SFAS 133 is  effective  for  fiscal  years
beginning after June 15, 1999. The Company is currently  assessing the effect of
this new standard.

The American Institute of Certified Public Accountants recently issued Statement
of Position 98-1,  "Accounting for the Costs of Computer  Software  Developed or
Obtained for Internal Use" ("SOP 98-1"),  which provides  guidance on accounting
for the costs of computer  software  developed or obtained for internal use. SOP
98-1  identifies  the  characteristics  of  internal-use  software  and provides
examples to assist in  determining  when computer  software is for internal use.
SOP 98-1 is effective for financial  statements for fiscal years beginning after
December 15, 1998,  for  projects in progress  and  prospectively,  with earlier
application  encouraged.  Management believes that the adoption of SOP 98-1 will
not have a material effect on its financial position or results of operations.

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.  The Company does
not expect the adoption of SOP 98-5 to have a material  effect on its  financial
position or results of operations.

RECLASSIFICATIONS

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

3.   ACQUISITIONS AND DISPOSITIONS

COMBIVISIE AND CNBH

Effective  January 1, 1998,  UPC acquired  certain  assets,  including the Dutch
cable  systems of Combivisie  for $88,048.  The purchase was funded with a Dutch
guilder ("NLG") 60,000  ($29,226) draw on UPC's Senior Revolving Credit Facility
(as defined in Note 10) and NLG120,762 ($58,822) from a UPC credit facility with
a bank which was subsequently  refinanced.  Subsequent to the  transaction,  the
assets and  liabilities of UPC's other Dutch systems and Combivisie were merged,
forming Cable Network Brabant Holding B.V. ("CNBH"),  a wholly-owned  subsidiary
of UPC.

TELEKABEL HUNGARY AND TELEKABEL HUNGARY PROGRAMMING

On June 29, 1998,  UPC acquired  TWE's  interest in its Hungarian  multi-channel
television  system  assets  for  $9,500  in  cash  and  a  non-interest  bearing
promissory  note in the amount of $18,000 (the "Time Warner Note").  UPC and TWE
retained their respective percentage interests in Telekabel Hungary Programming.
UPC  granted  TWE an option to  acquire  UPC's  interest  in  Telekabel  Hungary
Programming   along  with  certain  other  assets  in   consideration   for  the
cancellation  of the  Time  Warner  Note.  On June  30,  1998,  UPC  merged  its
100%-owned Hungarian multi-channel  television systems ("Kabelkom"),  along with
the assets  acquired from TWE, with  Hungary's  second largest  multiple  system
operator to form the new joint venture Telekabel  Hungary.  UPC retains a 79.25%
ownership interest in the new entity. In March 1999, TWE exercised its option to
acquire UPC's interest in Telekabel Hungary Programming and the Time Warner Note
was cancelled.

MGM NETWORKS LA

In 1997,  ULA and  International  Family  Entertainment  ("IFE")  created United
Family Communications, LLC ("UFC") which was 50.0% owned by ULA and IFE. In July
1997,   UFC   launched  two   channels  of  Spanish  and   Portuguese   language
family-oriented  programming distributed via satellite throughout Latin America.
In May 1998, ULA acquired IFE's 50.0% ownership interest in UFC and then entered
into a joint  venture with a division of  Metro-Goldwyn-Mayer,  Inc.  ("MGM") to
form MGM Networks LA. Under the terms of the joint venture,  ULA contributed its
100% interest in UFC for a 50.0% interest in MGM Networks LA, and MGM acquired a
50.0% interest in MGM Networks LA by  contributing  its Brazil channel (MGM Gold
Brazil) and  committing to fund the first $9,900  ($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.

                                       76
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

AUSTAR

In July 1998,  Austar acquired certain  Australian pay television assets of East
Coast  Television Pty Limited  ("ECT"),  an affiliate of Century  Communications
Corporation  ("Century"),  for $6,155 of the  Company's  newly-created  Series B
Convertible  Preferred Stock.  ECT's subscription  television  business includes
subscribers  and certain MMDS licenses and  transmission  equipment  serving the
areas in and around Newcastle, Gossford, Wollongong and Tasmania, Australia.

UTH

In August 1998,  UPC merged its Dutch cable  television  and  telecommunications
assets,  consisting of its 50.0%  interest in A2000 Holding NV ("A2000") and its
wholly-owned  subsidiary  CNBH, with those of the Dutch energy company N.V. NUON
Energie-Onderneming voor Gelderland,  Friesland en Flevoland ("NUON"), forming a
new company, UTH (the "UTH Transaction"). The transaction was accounted for as a
formation of a joint venture with NUON's and UPC's net assets  recorded at their
historical  carrying  values.  Although UPC retained a 51.0% economic and voting
interest  in UTH,  because of joint  governance  on most  significant  operating
decisions,  UPC accounted  for its  investment in UTH using the equity method of
accounting.

On February 17, 1999,  UPC  acquired the  remaining  49.0% of UTH from NUON (the
"NUON Transaction") for euro235,086 ($265,672). In addition, UPC repaid NUON and
assumed from NUON a euro15,101  ($17,066)  subordinated loan,  including accrued
interest,  dated December 31, 1998,  owed by UTH to NUON. The purchase of NUON's
interest and payment of the loan were funded with  proceeds  from UPC's  initial
public offering.

The following unaudited pro forma condensed  consolidated  operating results for
the ten months  ended  December  31, 1998 and the year ended  February  28, 1998
gives  effect to the UTH  Transaction  and the NUON  Transaction  as if they had
occurred at the  beginning of the periods  presented.  This  unaudited pro forma
condensed  consolidated financial information does not purport to represent what
the  Company's   results  of  operations   would  actually  have  been  if  such
transactions had in fact occurred on such dates.  The pro forma  adjustments are
based upon currently  available  information and upon certain  assumptions  that
management believes are reasonable.
<TABLE>
<CAPTION>
                                                                  For the Ten Months Ended         For the Year Ended
                                                                      December 31, 1998             February 28, 1998
                                                                  -------------------------     ------------------------- 
                                                                  Historical     Pro Forma       Historical    Pro Forma
                                                                  ----------    -----------     ------------  -----------
     <S>                                                          <C>           <C>             <C>           <C>
     Revenue.................................................     $  254,068    $  335,076      $   98,622    $   98,622
                                                                  ==========    ==========      ==========    ==========
     Net loss before extraordinary charge....................     $ (545,532)   $ (581,388)     $ (263,441)   $ (277,797)
                                                                  ==========    ==========      ==========    ==========
     Net loss................................................     $ (545,532)   $ (581,388)     $ (342,532)   $ (356,888)
                                                                  ==========    ==========      ==========    ==========
     Net loss per common share:
       Basic and diluted loss before extraordinary charge....     $   (13.71)   $   (14.60)     $    (6.75)   $    (7.11)
       Extraordinary charge..................................             --            --           (2.02)        (2.02)
                                                                  ----------    ----------      ----------    ----------
       Basic and diluted net loss............................     $   (13.71)   $   (14.60)     $    (8.77)   $    (9.13)
                                                                  ==========    ==========      ==========    ==========
     Weighted-average number of common shares
       outstanding...........................................     39,919,887    39,919,887      39,211,501    39,211,501
                                                                  ==========    ==========      ==========    ==========
</TABLE>

XYZ ENTERTAINMENT

In  September  1998,  UAP  acquired the  Australian  programming  assets held by
Century,  consisting  of  Century's  25.0%  interest  in  XYZ  Entertainment,  a
programming company that owns and/or distributes five channels to the Australian
multi-channel marketplace.  Following the acquisition, UAP owns a total of 50.0%
of XYZ Entertainment. The purchase price consisted of $1,231 in cash and $23,389
of the Company's Series B Preferred Stock.

                                       77
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

TVSB

On October 2, 1998,  ULA increased its ownership  interest in TVSB from 45.0% to
100% for $11,400, half of which was paid in cash, with the remainder financed by
the seller. This "TVSB Seller Note" bears interest at 10.0% and is due September
14, 1999.

CABLE STAR

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

TEVEL AND MELITA

In November 1998, UPC (i) acquired from Tele-Communications  International, Inc.
("TINTA")  its  indirect  23.3% and  25.0%  interests  in the  Tevel and  Melita
systems,  respectively for $91,500, doubling UPC's respective ownership in these
systems to 46.6% and 50.0%,  respectively,  (ii)  purchased an  additional  5.0%
interest  in Princes  Holdings  and 5.0% of Tara in  consideration  for  384,531
shares of UIH Class A Common Stock held by UPC, and (iii) sold the 5.0% interest
in Princes  Holdings,  together with its existing 20.0%  interest,  to TINTA for
$20,500. The net payment of $71,000 to TINTA ($68,000 after closing adjustments)
was funded with the proceeds of a $90,000  promissory  note made by a subsidiary
of UPC to its primary partners in the Tevel system (the "DIC Loan").

UPC

In July 1995, the Company and Philips Electronics N.V.  ("Philips")  contributed
their  respective  ownership  interests  in European  and Israeli  multi-channel
television  systems to UPC.  Philips  contributed  to UPC its 95.0%  interest in
cable  television  systems in Austria,  its 100%  interest  in cable  television
systems in Belgium,  its minority interests in multi-channel  television systems
in Germany, the Netherlands  (Eindhoven) and France. The Company contributed its
interests in  multi-channel  television  systems in Israel,  Ireland,  the Czech
Republic, Malta, Norway, Hungary, Sweden and Spain. The Company also contributed
$78,200  in cash to UPC and issued to  Philips  3,169,151  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 50.0% economic and voting interest in UPC.

On December 11, 1997, the Company acquired  Philips' entire interest in UPC (the
"UPC  Transaction").  As part  of the UPC  Transaction,  (i) UPC  purchased  the
3,169,151  shares of Class A Common Stock of the Company  held by Philips,  (ii)
UIH purchased NLG169,899 ($84,336) of the accreted amount of UPC's PIK Notes and
redeemed  them for  15,180,261  shares of UPC,  (iii) UPC repaid to Philips  the
remaining  NLG170,371($84,570)  accreted  amount  of the  PIK  Notes,  (iv)  UIH
purchased   13,121,604  shares  of  UPC  directly  from  Philips,  and  (v)  UPC
repurchased  Philips' remaining equity interest in UPC (24,378,396  shares). The
Company  effectively  owned  100% of UPC as a  result  of the  UPC  Transaction,
including  shares held by a foundation  controlled by UIH which  administers the
UPC stock plan for the  benefit of UPC  employees  and  management,  pursuant to
UPC's   equity   incentive   plans.   The  final   purchase   price   (excluding
transaction-related costs) was $425,200,  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 3,169,151  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 ($151,500),  a bridge bank facility through a subsidiary of
UPC ($111,200) and a cash investment by the Company of $162,500.

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:

                                       78
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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

JANCO

In January 1997 UPC deposited  NLG47,000 ($24,867) with a bank as collateral for
an obligation  to seller to purchase the  remaining  29.8% in Janco that UPC did
not already own. In November  1998,  UPC  exercised its call option and acquired
the remaining minority  shareholder  interest in Janco for NLG37,200  ($19,683).
The residual restricted funds held as collateral were released.

ARGENTINA

In October 1996,  the Company  acquired 100% of two cable systems and 80.0% 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 20.0% 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, ULA 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,  ULA agreed to acquire up to an 80.0%
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, ULA closed the  acquisition of the first 31.0% equity interest for a total
purchase  price of $23,000 and paid a $2,000  deposit to acquire the  additional
38.0% equity interest by July 15, 1997 and the additional  11.0% equity interest
by the end of July 1997.  The total purchase price was paid 50.0% 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 notes payable to sellers from the original  acquisitions.
From this net sales price of $242,900,  $29,600 was paid  directly by the buyers
to other  minority  interest  stockholders,  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.

                                       79
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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 75.0%. A gain of $1,629  recognized on the transaction was credited
to additional paid-in capital in accordance with SAB 51.

NET SAO PAULO

In August 1996, the Company sold its 34.0% interest in Net Sao Paulo for $43,098
in cash and a $35,000 note receivable  which was collected during the year ended
February 28, 1997. The Company recognized a gain of $65,249 on the transaction.

STX, CABLEVISION AND VTRH

In June 1995,  ULA  completed  an  acquisition  of 65.0% 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, ULA acquired the remaining 35.0% of STX for $24,000.  The
Company acquired an initial 50.0% interest in Cablevision  S.A.  ("Cablevision")
in January 1994 for $3,900.  In January  1996,  ULA  increased  its ownership in
Cablevision to 100% for approximately  $22,100. ULA contributed its interests in
STX and  Cablevision in exchange for a 40.0% 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,  in  contemplation of the formation
of VTRH.

SATURN

In July 1994,  the  Company  acquired a 50.0%  interest  in Kiwi  Communications
Limited,  which  subsequently  changed  its name to Saturn.  In July  1996,  the
Company  acquired the remaining  50.0% interest in Saturn in exchange for a 2.6%
interest in a wholly-owned  subsidiary of UAP, UIH  Australia/Pacific, Inc.("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 2.0% 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 50.0%             (9,133)
                                                              ------
          Net assets....................................        (973)
     Goodwill...........................................       8,773
                                                              ------
          Total consideration...........................      $7,800
                                                              ======

In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a 35.0%
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 65.0%. A gain of $5,985 recognized on the
transaction  was credited to additional  paid-in  capital in accordance with SAB
51.

PRO FORMA FINANCIAL INFORMATION FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997

The following 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.

                                       80
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)
<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>
     Revenue...............................................   $   98,622   $  244,394      $   31,555     $  172,246
                                                              ==========   ==========      ==========     ==========
     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 share in
         results 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 year ended  February 28, 1997 gives effect to the  disposition  of the 34.0%
interest in Net Sao Paulo as if it had occurred at the  beginning of the period.
This pro forma condensed  consolidated financial information and note thereto do
not purport to represent what the Company's results of operations would actually
have been if such  transaction  had in fact occurred on such date. The pro forma
adjustments  are based upon  currently  available  information  and upon certain
assumptions that management believes are reasonable.
<TABLE>
<CAPTION>
                                                                   For the Year Ended
                                                                   February 28, 1997
                                                               ---------------------------
                                                               Historical    Pro Forma (1)
                                                               ----------    -------------
     <S>                                                       <C>            <C> 
     Revenue..........................................         $   31,555     $   31,555
                                                               ==========     ==========
     Net loss.........................................         $ (138,825)    $ (202,285)
                                                               ==========     ==========
     Basic and diluted net loss per common share......         $    (3.59)    $    (5.21)
                                                               ==========     ==========
     Weighted-average number of shares outstanding....         39,035,776     39,035,776
                                                               ==========     ==========
</TABLE>

     (1)  Represents  elimination of historical statement of operations balances
          related to Net Sao Paulo and elimination of the gain recorded on sale.

                                       81
<PAGE>
                      UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

4.  CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM LIQUID INVESTMENTS
<TABLE>
<CAPTION>
                                                              As of December 31, 1998
                                                  ----------------------------------------------------
                                                                               Short-term
                                                  Cash and Cash   Restricted     Liquid
                                                   Equivalents       Cash      Investments      Total
                                                  -------------   ----------   -----------     -------
     <S>                                             <C>           <C>           <C>           <C>
     Cash........................................    $18,766       $17,215       $    --       $35,981
     Certificates of deposit.....................         --            --         4,000         4,000
     Commercial paper............................     16,580            --        10,541        27,121
     Corporate bonds.............................         --            --        15,935        15,935
     Government securities.......................        262            --        11,022        11,284
                                                     -------       -------       -------       -------
        Total....................................    $35,608       $17,215       $41,498       $94,321
                                                     =======       =======       =======       =======
</TABLE>
<TABLE>
<CAPTION>
                                                              As of February 28, 1998
                                                  ----------------------------------------------------
                                                                               Short-term
                                                  Cash and Cash   Restricted     Liquid
                                                   Equivalents       Cash      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>

                                       82
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

5.  INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
    EQUITY METHOD
<TABLE>
<CAPTION>
                                                                   As of December 31, 1998
                               ---------------------------------------------------------------------------------------------------
                                 Investments in                         Cumulative          Cumulative
                                 and Advances to       Dividends    Share in Results of     Translation     Valuation
                               Affiliated Companies    Received    Affiliated Companies     Adjustments     Allowance      Total
                               --------------------    ---------   --------------------     -----------     ---------    ---------
<S>                                 <C>                <C>             <C>                   <C>            <C>          <C>
Europe:
 UTH...........................     $135,290            $    --        $ (11,447)            $  8,288       $    --       $132,131
 Tevel.........................       96,340             (6,090)            (390)                (306)           --         89,554
 Melita........................       14,078                 --              997                  724            --         15,799
 Telekabel Hungary
   Programming.................       12,263                 --           (3,881)                  28            --          8,410
 Monor.........................       11,301                 --           (2,601)              (7,849)           --            851
 IPS...........................       14,082                 --           (7,418)                 (25)           --          6,639
 Other.........................        7,595                 --             (531)                 400            --          7,464
Asia/Pacific:
 Saturn........................       49,808                 --          (23,138)              (2,881)           --         23,789
 XYZ Entertainment.............       44,306                 --          (18,537)                 111            --         25,880
 PCC...........................       11,673                 --           (2,812)              (2,824)           --          6,037
 HITV..........................        6,073                 --           (2,435)                  16            --          3,654
 Telefenua.....................       18,599                 --          (14,215)                  --        (4,384)            --
 Other.........................          350                 --               --                   --            --            350
Latin America:
 VTRH..........................      112,052                 --          (17,203)              (9,874)           --         84,975
 Megapo........................       32,496             (1,471)          (1,122)             (11,067)           --         18,836
 MGM Networks LA (1)...........       19,272                 --          (19,272)                  --            --             --
 Jundiai.......................        6,797                 --             (587)              (1,089)           --          5,121
                                    --------            -------        ---------             --------       -------       --------
        Total..................     $592,375            $(7,561)       $(124,592)            $(26,348)      $(4,384)      $429,490
                                    ========            =======        =========             ========       =======       ========
</TABLE>
<TABLE>
<CAPTION>
                                                              As of February 28, 1998
                               --------------------------------------------------------------------------------------
                                 Investments in                         Cumulative          Cumulative
                                 and Advances to       Dividends    Share in Results of     Translation     
                               Affiliated Companies    Received    Affiliated Companies     Adjustments       Total
                               --------------------    ---------   --------------------     -----------     ---------
<S>                                 <C>                <C>             <C>                   <C>            <C>
Europe:
 A2000.........................     $109,373            $    --        $   (287)             $      4       $109,090
 Melita, Princes Holdings
  and Tevel....................       51,005                 --             (32)                   --         50,973
 Monor.........................       27,682                 --         (13,161)               (6,256)         8,265
 IPS...........................       13,920                 --          (7,261)                  (95)         6,564
 Kabelkom......................       28,605                 --             124                    (1)        28,728
 Other.........................        1,774                 --              --                    --          1,774
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
 Other.........................          182                 --              --                    --            182
Latin America:
 VTRH..........................       92,754                 --         (10,327)               (4,262)        78,165
 Megapo........................       32,496             (1,248)         (1,313)               (1,604)        28,331
 TVSB..........................        8,100                 --          (3,770)                   --          4,330
 UFC...........................       12,099                 --          (7,487)                   --          4,612
 Jundiai.......................        6,652                 --            (788)                   --          5,864
                                    --------            -------        --------              --------       --------
        Total..................     $421,661            $(1,248)       $(64,281)             $(14,880)      $341,252
                                    ========            =======        ========              ========       ========
</TABLE>
     (1)  Includes an accrued funding obligation of $3,012 at December 31, 1998.
          The Company would face significant and punitive dilution if it did not
          make the requested fundings.
     (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.

                                       83
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

As of December 31, 1998 and February  28,  1998,  the Company had the  following
differences related to the excess of its cost over its proportionate interest in
each  affiliate's  net  tangible  assets  included  in  the  above  table.  Such
differences are being amortized over 15 years.
<TABLE>
<CAPTION>
                                                    As of December 31, 1998           As of February 28, 1998
                                                  --------------------------        --------------------------
                                                    Basis       Accumulated           Basis       Accumulated
                                                  Difference    Amortization        Difference    Amortization
                                                  ----------    ------------        ----------    ------------
     <S>                                           <C>            <C>                <C>            <C>
     Europe:
       UTH....................................     $  1,471       $    (33)          $     --       $    --
       Tevel .................................       80,644         (3,351)                --            --
       Melita.................................       12,898           (451)                --            --
       Telekabel Hungary Programming .........        7,629           (302)                --            --
       A2000..................................           --             --             90,898            --
       Melita, Princes Holdings and Tevel.....           --             --             31,054            --
       Kabelkom...............................           --             --             20,509            --
       Monor..................................          885            (69)             3,838        (1,125)
       IPS....................................        2,216            (85)               651           (53)
       Other..................................        3,585            (73)                --            --
     Asia/Pacific:
       XYZ Entertainment......................       23,595             --                 --            --
       Saturn.................................       12,733         (1,005)                --            --
     Latin America:
       VTRH...................................       19,994         (1,941)            11,368        (1,211)
       Megapo.................................       19,583         (5,767)            21,528        (4,307)
       TVSB...................................           --             --              2,361          (895)
       Jundiai................................           --             --                540          (172)
       UFC....................................           --             --                439           (63)
                                                   --------       --------           --------       -------
            Total.............................     $185,233       $(13,077)          $183,186       $(7,826)
                                                   ========       ========           ========       ======= 
</TABLE>

Condensed  financial  information for UPC, stated in U.S. dollars,  is presented
below:
<TABLE>
<CAPTION>
                                                                     For the Year Ended        For the Year Ended
                                                                    December 31, 1997 (1)      December 31, 1996
                                                                    ---------------------      -------------------
     <S>                                                                 <C>                       <C>
     Revenue....................................................         $172,951                  $145,076
     Operating, selling, general and administrative expense              (121,833)                  (96,814)
     Depreciation and amortization..............................          (68,148)                  (47,238)
                                                                         --------                  --------
          Net operating (loss) income...........................          (17,030)                    1,024
     Interest, net..............................................          (32,936)                  (21,135)
     Share in results of affiliated companies, net..............          (10,395)                  (13,187)
     Other......................................................          (29,820)                  (14,152)
                                                                         --------                  --------
          Net loss..............................................         $(90,181)                 $(47,450)
                                                                         ========                  ======== 
</TABLE>
(1) The Company consolidated the results of UPC effective December 11, 1997.

                                       84
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
6.   PROPERTY, PLANT AND EQUIPMENT                                                         As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
     <S>                                                                                  <C>              <C>
     Cable distribution networks...................................................       $255,702        $203,015
     Subscriber premises equipment and converters..................................        264,867         200,990
     MMDS/DTH distribution facilities..............................................         62,872          61,509
     Office equipment, furniture and fixtures......................................         30,415          19,622
     Buildings and leasehold improvements..........................................         11,236           9,070
     Other.........................................................................         40,150          31,162
                                                                                          --------       ---------
                                                                                           665,242         525,368
          Accumulated depreciation.................................................       (201,183)        (84,633)
                                                                                          --------        --------
          Net property, plant and equipment........................................       $464,059        $440,735
                                                                                          ========        ========

</TABLE>
<TABLE>
<CAPTION>
7.   GOODWILL AND OTHER INTANGIBLE ASSETS                                                  As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
     <S>                                                                                  <C>              <C>
     Europe:
       Telekabel Group.............................................................       $206,092         $192,828
       Janco.......................................................................         87,563           94,200
       CNBH (1)....................................................................            --            39,847
       Telekabel Hungary...........................................................         51,550               --
       TVD.........................................................................         22,322           20,903
       Other.......................................................................         12,971           14,174
     Asia/Pacific:
       Austar......................................................................         55,804           51,552
       Saturn (2)..................................................................             --            6,100
       Other.......................................................................          4,267            2,873
     Latin America:
       TVSB........................................................................         16,161               --
       Cable Star..................................................................          7,887            1,245
                                                                                          --------         --------
                                                                                           464,617          423,722
          Accumulated amortization.................................................        (39,683)         (14,532)
                                                                                          --------         --------
          Net goodwill and other intangible assets.................................       $424,934         $409,190
                                                                                          ========         ========
</TABLE>
     (1)  Effective  August 6, 1998,  CNBH was contributed to UTH as part of the
          UTH Transaction.
     (2)  Saturn was de-consolidated effective January 1, 1998.

<TABLE>
<CAPTION>
8.   SHORT-TERM DEBT                                                                       As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
     <S>                                                                                  <C>              <C>
     Austar Bank Facility (see Note 10)............................................       $36,738          $    --
     Time Warner Note..............................................................        18,000               --
     Telekabel Hungary Facility....................................................        15,504               --
     VTRH Note.....................................................................         9,284               --
     ULA Revolving Credit Facility.................................................         8,000               --
     TVSB Seller Note (see Note 3).................................................         5,853               --
                                                                                          -------          -------
          Total short-term debt....................................................       $93,379          $    --
                                                                                          =======          =======
</TABLE>
     Carrying value approximates fair value for these short-term facilities.

                                       85
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

TIME WARNER NOTE

In December  1998,  TWE extended the maturity date of its  non-interest  bearing
note for a period of 90 days to the  earlier  of June 30,  1999 or 90 days after
written  notice from TWE.  Subsequent to December 31, 1998, the Time Warner Note
was cancelled as TWE  exercised  its option to acquire  UPC's 50.0%  interest in
Telekabel Hungary Programming.

TELEKABEL HUNGARY FACILITY

In October  1998,  Telekabel  Hungary  entered into a German mark ("DM")  65,600
($39,317)  six-month secured bridge facility.  Availability  under this facility
depends on certain financial  covenants.  The DM49,200  ($29,488)  international
tranche of the  facility and half of the DM16,400  ($9,829)  local  tranche bear
interest  at LIBOR  plus  2.5% per  annum  plus an  additional  cost of  funding
calculation.  The remaining half of the local tranche must be drawn in Hungarian
forints and bears  interest at Budapest  interbank  offered  rates for Hungarian
forints,  plus 2.5% per annum plus an  additional  cost of funding  calculation.
Telekabel Hungary is using the facility,  among other things, to finance capital
expenditures and to acquire minority shares in UPC's Hungarian systems.  UPC has
pledged  its  indirect  79.25%  interest  in  Telekabel  Hungary  to secure  the
facility.  The facility  also is secured by a pledge over certain  assets of the
Telekabel  Hungary group and a negative pledge.  Telekabel  Hungary is currently
negotiating  a  long-term  facility  with the  lenders  to replace  this  bridge
facility.  As of December 31, 1998, the amount  outstanding  under this facility
totaled DM25,861 ($15,504).

VTRH NOTE

UIH Chile, Inc., a wholly-owned subsidiary of ULA, executed a promissory note in
the amount of $7,770 payable to VTR S.A.,  the majority  shareholder of VTRH, in
exchange  for  51,993  shares of VTRH (the  "VTRH  Note").  The VTRH Note  bears
interest  at 12.95% per annum and is due April 30,  1999.  On April 29, 1999 the
VTRH Note was repaid in conjunction with the VTRH acquisition (see Note 18).

ULA REVOLVING CREDIT FACILITY

In November 1997, ULA entered into an amended and restated credit agreement with
a bank for a  revolving  credit  facility of up to $40,000  (the "ULA  Revolving
Credit  Facility").  Borrowings under this facility were due within 12 months at
an interest rate of LIBOR plus 3.5%. The facility was extendable up to 18 months
under certain  conditions.  In November 1998, ULA exercised its option to extend
the maturity date until  February  1999,  increasing  the interest rate to LIBOR
plus 4.0%. The agreement was also amended to reduce the facility from $40,000 to
$8,000  effective  November  20,  1998.  As of  December  31,  1998,  ULA had an
outstanding  balance of $8,000 under this facility  which was repaid in February
1999.

9.   SENIOR DISCOUNT NOTES
                                                      As of          As of
                                                   December 31,   February 28,
                                                      1998           1998
                                                   ------------   ------------

     1998 Notes (as defined below).............    $  893,003      $  818,272
     Old Notes (as defined below)..............           412             368
     1996 UIH A/P Notes (as defined below).....       321,687         278,662
     1997 UIH A/P Notes (as defined below).....        34,953          30,461
                                                   ----------      ----------
                                                   $1,250,055       1,127,763
        Less current portion...................          (412)             --
                                                   ----------      ----------
        Total senior discount notes............    $1,249,643      $1,127,763
                                                   ==========      ==========

                                       86
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

1998 NOTES AND OLD 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 their 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 14.0% 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 aggregate  accreted  value of
approximately   $466,200  as  of  February  5,  1998.   The  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 $79,091.

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.  The Indenture
also limits the amount of additional  debt that its  subsidiaries  or controlled
affiliates  may borrow,  or  preferred  shares  that they may issue.  Generally,
additional borrowings, when added to existing indebtedness,  must satisfy, among
other  conditions,  at least  one of the  following  tests:  (i) 7.0  times  the
borrower's  consolidated  operating cash flow; (ii) 1.75 times its  consolidated
interest expense; or (iii) 225% of the borrower's  consolidated  invested equity
capital.  In addition,  there must be no existing default under the Indenture at
the time of the  borrowing.  The  Indenture  also  restricts  its  subsidiaries'
ability to make certain asset sales and certain payments.

In  conjunction  with  the Old  Notes,  the  Company  issued  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  $15.00  per  share.  At any time
between January 31, 1996 and March 1, 1996, the Warrant holders had the right to
require the Company to  repurchase  all or a part of the Warrants for $28.34 per
Warrant.  Holders  of the  Warrants  required  the  Company to  purchase  76,070
Warrants to purchase 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.  Subsequent  to
December 31,  1998, a total of 204,840  warrants  were  exercised,  resulting in

                                       87
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

proceeds to the Company of $13,900.  A total of 928,942 shares of Class A Common
Stock were issued.  The remaining  113,090  outstanding  warrants  (representing
512,863  shares of Class A Common  Stock)  are  exercisable  at any time  before
November 15,  1999,  and would result in proceeds of  approximately  $7,700,  if
exercised.

1996 UIH A/P NOTES

The 14.0%  senior  notes,  which UIH A/P issued in May 1996 at a  discount  from
their principal  amount of $443,000 (the "1996 UIH A/P Notes"),  had an accreted
value of $321,687 as of  December  31,  1998.  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 1996 UIH A/P Notes are due May
15, 2006.  Effective May 16, 1997, the interest rate on these notes increased by
an  additional  0.75%  per  annum  to  14.75%.  On  October  14,  1998,  UIH A/P
consummated  an equity sale resulting in gross proceeds of $70,000 which reduced
the  interest  rate from 14.75% to 14.0% per annum.  Due to the  increase in the
interest rate effective May 16, 1997 until  consummation of the equity sale, the
1996 UIH A/P Notes will  accrete to a  principal  amount of  $447,418 on May 15,
2001, the date cash interest begins to accrue.

1997 UIH A/P NOTES

The 14.0% senior  notes,  which UIH A/P issued in  September  1997 at a discount
from their  principal  amount of  $45,000  (the  "1997 UIH A/P  Notes"),  had an
accreted  value of $34,953 as of December 31,  1998.  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%.  On October 14, 1998, UIH
A/P consummated an equity sale,  reducing the interest rate from 14.75% to 14.0%
per annum. Due to the increase in the interest rate effective September 23, 1997
until  consummation of the equity sale, the 1997 UIH A/P Notes will accrete to a
principal  amount of $45,448 on May 15, 2001,  the date cash interest  begins to
accrue.

On November 17, 1997, pursuant to the terms of the indentures governing the 1996
and 1997 UIH A/P  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.

10.  OTHER LONG-TERM DEBT

                                                      As of          As of
                                                   December 31,   February 28,
                                                      1998           1998
                                                   ------------   ------------

     UPC Senior Revolving Credit Facility.....      $512,179        $437,598
     UPC Bridge Bank Facility.................        60,063         125,000
     UPC Mediareseaux Facility................        21,346              --
     UPC DIC Loan.............................        84,214              --
     Other UPC................................         3,821          61,084
     Austar Bank Facility.....................        67,352          71,531
     ULA Revolving Credit Facility............           --           33,000
     Other Asia/Pacific.......................         2,923          10,120
                                                    --------        --------
                                                     751,898         738,333
        Less current portion..................       (62,252)       (163,325)
                                                    --------        --------
        Total other long-term debt............      $689,646        $575,008
                                                    ========        ========

                                       88
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

UPC SENIOR REVOLVING CREDIT FACILITY

In October 1997, UPC and certain of its subsidiaries entered into a NLG1,100,000
($582,000)  multi-currency  Senior Revolving Credit Facility with a syndicate of
banks. As of December 31, 1998, a total of NLG968,000 ($512,179) was outstanding
under this facility.  The amount  outstanding for UPC, Telekabel Group and Janco
was NLG620,000  ($328,042),  NLG213,500  ($112,963)  and  NLG134,500  ($71,174),
respectively.  Amounts  advanced under the Senior Revolving Credit Facility bear
interest at the London  interbank  offered rate  ("LIBOR") plus a margin ranging
from 0.5% to 2.0% per annum.  The aggregate amount available for borrowing under
the facility is reduced automatically by 5.0% per quarter beginning December 31,
2001. The borrowings of UPC and its subsidiaries in Austria,  Belgium and Norway
are limited by financial  covenants under the Senior  Revolving Credit Facility.
The  principal  amount of all  borrowings by UPC and such  subsidiaries  may not
exceed certain multiples of total annualized net operating cash flow for UPC and
such  subsidiaries.  In addition,  the principal amount of all borrowings of UPC
and such subsidiaries may not exceed certain multiples of their cable television
net  operating  cash  flow.  The  Senior  Revolving  Credit  Facility  generally
prohibits dividends and other distributions to shareholders of UPC unless, among
other  things,  UPC  achieves  for at least  two  consecutive  quarters  certain
financial ratios.  The Senior Revolving Credit Facility also includes  financial
covenants  relating to interest and debt service  coverage  and  application  of
proceeds  from  asset  sales and  securities  offerings.  Borrowings  by UPC and
certain of its  subsidiaries  in Austria,  Belgium  and Norway  under the Senior
Revolving  Credit  Facility  together  with  borrowings  under the  Bridge  Bank
Facility may not exceed  NLG1,300,000  ($687,831) before September 30, 2001. The
Senior Revolving  Credit Facility also generally  limits to NLG80,000  ($42,328)
UPC's investments in, loans to and guarantees for, certain of UPC's subsidiaries
and downstream  affiliates that are not borrowers or guarantors under the Senior
Revolving  Credit  Facility.  UPC repaid a portion of this  facility in February
1999 with proceeds from their initial public offering (see Note 18).

UPC BRIDGE BANK FACILITY

In connection  with the UPC  Transaction,  UPC entered into the $125,000  Bridge
Bank Facility with a syndicate of banks.  The Bridge Bank Facility is a one year
bridge originally due December 5, 1998 and bears interest at LIBOR plus a margin
ranging from 4.5% to 6.0% per annum.  In November 1998,  the lenders  granted an
extension  of the  maturity  date to June 5,  1999.  The  Bridge  Bank  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 share holdings or partnership  interests of UPC in operating
systems in The  Netherlands,  France,  Israel and Malta, as well as a first lien
over  approximately  2,784,620  shares of UIH's  Class A Common  Stock which UPC
acquired from Philips as part of the UPC  Transaction.  The Bridge Bank Facility
prohibits  all of the  companies  whose  interests  are pledged  from  incurring
additional indebtedness,  subject to certain exceptions. UPC must apply proceeds
from disposals,  if any, of certain share holdings and partnership  interests to
prepayment  of the facility,  which  restricts the manner and terms on which UPC
may  dispose of these  assets.  UPC must  maintain  on  deposit  with the bank a
compensating  balance,  restricted  for payment of interest,  until the facility
matures.  The balance in this interest reserve account,  including proceeds from
the sale of Princes Holdings,  was NLG30,263  ($16,012) as of December 31, 1998.
UPC repaid  $64,937 of the Bridge Bank Facility  during the year ended  December
31, 1998, resulting in an outstanding amount of $60,063 as of December 31, 1998.
UPC repaid the remaining balance of this facility in February 1999 with proceeds
from their initial public offering (see Note 18).

UPC MEDIARESEAUX FACILITY

In July 1998, Mediareseaux entered into a 9.5 year term facility with a bank for
an amount of French francs ("FRF")680,000 ($121,400) ("Mediareseaux  Facility").
The purpose of the facility is to finance on-going capital expenditures, working
capital and acquisitions with a limit of FRF120,000 ($21,400).  The Mediareseaux
Facility  bears  interest at LIBOR plus a margin ranging from 0.75% to 2.0%. The
availability  of the facility  depends on revenue  generated  and debt to equity
ratios. The availability  period ends at December 31, 2002. The repayment period
starts  from  January 1, 2003 to final  maturity in 2007.  During the  repayment
period,  Mediareseaux  must apply 50.0% of its excess cash flow in prepaying the
facility. The Mediareseaux Facility generally restricts the payment of dividends
and  distributions.  This facility also  restricts  Mediareseaux  from incurring
additional   indebtedness,   subject  to  certain  exceptions.   In  July  1998,
Mediareseaux  secured a 9.5 year FRF20,000 ($3,600) overdraft facility,  subject
to the same terms and conditions as the  Mediareseaux  Facility  except that the
availability  tests are not  applicable.  As of  December  31, 1998 an amount of
FRF120,000 ($21,346) was outstanding under the Mediareseaux Facility.

                                       89
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

UPC DIC LOAN

In November 1998, a subsidiary of Discount Investment Corporation ("DIC") loaned
UPC a total of $90,000 to acquire the additional  interests in Tevel and Melita.
The DIC Loan  matures in  November  2000 and is  secured by UPC's  pledge of its
ownership interest in Tevel. The DIC Loan bears interest at 8.0% and is payable,
together with 106.0% of the principal amount,  on maturity.  The DIC Loan may be
repaid on quarterly  prepayment dates with three months' prior notice by UPC. In
connection  with the DIC Loan,  UPC granted to an  affiliate of DIC an option to
acquire a total of $90,000,  plus accrued interest, of ordinary shares of UPC at
a price equal to 90.0% of the initial public offering price.  The exercise price
of this option,  which expires upon the initial public  offering,  is payable in
cash or delivery of the DIC Loan promissory  notes. UPC allocated the $90,000 in
loan  proceeds  between  the debt  instrument  ($84,214)  and the equity  option
element  ($5,786)  on the  basis  of  relative  fair  values.  Accordingly,  the
effective  interest rate on the debt  instrument  exceeds the stated rate as set
forth above.  At the date of UPC's initial  public  offering,  DIC exercised the
option and acquired 1,558,654 ordinary shares of UPC.

AUSTAR BANK FACILITY

In July 1997,  Austar  secured a senior  syndicated  term debt  facility  in the
amount  of  A$200,000  ($122,459  as of  December  31,  1998)  to fund  Austar's
subscriber  acquisition and working capital needs (the "Austar Bank  Facility").
The  Austar  Bank  Facility  consisted  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.  All of Austar's  assets  were  pledged as
collateral  for the Austar Bank  Facility.  As of December 31, 1998,  Austar had
drawn the entire  amount of the working  capital  facility  and the cash advance
facility totaling  A$110,000  ($67,352).  The working capital facility was fully
repayable  on June 30,  2000.  The cash  advance  facility  was fully  repayable
pursuant to an amortization schedule beginning December 31, 2000 and ending June
30, 2004.

In September  1998,  Austar  received an  amendment to the Austar Bank  Facility
which allowed Austar to temporarily draw under the remaining  A$90,000 term loan
facility at an increased  interest rate of 2.25% above the  professional  market
rate in Australia.  As of December 31, 1998, Austar had drawn A$60,000 ($36,738)
on the  term  loan  facility  for a  total  outstanding  balance  of  A$170,000.
Subsequent to year-end an additional A$30,000 was borrowed against the term loan
facility  which,  along with the A$60,000  draw,  was payable April 30, 1999. On
April 23, 1999  (subsequently  executed and A$222,000 funded on April 28, 1999),
Austar secured a new A$400,000 Syndicated Senior Secured Debt Facility (the "New
Austar Bank  Facility") to refinance  the A$200,000  Austar Bank Facility and to
fund Austar's  subscriber  acquisition and working capital needs. The New Austar
Bank Facility  consists of two  sub-facilities:  (i) A$200,000  amortizing  term
facility  ("Tranche 1") and (ii) A$200,000 cash advance facility  ("Tranche 2").
Tranche 1 was used to  refinance  the Austar  Bank  Facility,  and  Tranche 2 is
available upon the  contribution  of additional  equity on a 2:1  debt-to-equity
basis.  All of Austar's  assets are pledged as collateral for this facility.  In
addition,  pursuant to this facility, Austar cannot pay any dividends,  interest
or fees under its  technical  assistance  agreements  without the consent of the
majority banks.  The New Austar Bank Facility bears interest at the professional
market rate in  Australia  plus a margin  ranging from 1.75% to 2.25% based upon
certain  debt to cash  flow  ratios.  The New  Austar  Bank  Facility  is  fully
repayable  pursuant to an amortization  schedule beginning December 31, 2002 and
ending March 31, 2006.

                                       90

<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

FAIR VALUE OF SENIOR DISCOUNT NOTES AND OTHER LONG-TERM DEBT

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

                                                  Carrying Value  Fair Value
                                                  --------------  ----------
     As of December 31, 1998:
       1998 Notes...............................    $  893,003    $  783,750
       Old Notes................................           412           412
       UPC Senior Revolving Credit Facility.....       512,179       512,179
       UPC Bridge Bank Facility.................        60,063        60,063
       UPC Mediareseaux Facility................        21,346        21,346
       UPC DIC Loan.............................        84,214        84,214
       Other UPC................................         3,821         3,821
       1996 UIH A/P Notes.......................       321,687       223,700
       1997 UIH A/P Notes.......................        34,953        22,700
       Austar Bank Facility.....................        67,352        67,352
       Other....................................         2,923         2,923
                                                    ----------    ----------
            Total...............................    $2,001,953    $1,782,460
                                                    ==========    ==========

     As of February 28, 1998:
       1998 Notes...............................    $  818,272    $  831,875
       Old Notes................................           368           368
       UPC Senior Revolving Credit Facility.....       437,598       437,598
       UPC Bridge Bank Facility.................       125,000       125,000
       Other UPC................................        61,084        61,084
       1996 UIH A/P Notes.......................       278,662       292,380
       1997 UIH A/P Notes.......................        30,461        29,700
       Austar Bank Facility.....................        71,531        71,531
       ULA Revolving Credit Facility............        33,000        33,000
       Other....................................        10,316        10,316
                                                    ----------    ----------
            Total...............................    $1,866,292    $1,892,852
                                                    ==========    ==========


DEBT MATURITIES

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

     Year Ended December 31, 1999........................       $   62,664
     Year Ended December 31, 2000........................           85,471
     Year Ended December 31, 2001........................               --
     Year Ended December 31, 2002........................           46,570
     Year Ended December 31, 2003........................          118,537
     Thereafter..........................................        1,688,711
                                                                ----------
          Total..........................................       $2,001,953
                                                                ==========
                                       91
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

OTHER FINANCIAL INSTRUMENTS

Interest  rate swap  agreements  are used by the Company  from time to time,  to
manage  interest rate risk on its floating rate debt  facilities.  Interest rate
swaps are entered into depending on the Company's  assessment of the market, and
generally  are used to  convert  the  floating  rate  debt to fixed  rate  debt.
Interest  differentials  paid  or  received  under  these  swap  agreements  are
recognized  over the life of the contracts as adjustments to the effective yield
of the underlying  debt, and related amounts payable to, or receivable from, the
counterparties are included in the consolidated  balance sheet.  Currently,  the
Company has two  interest  rate swaps to manage  interest  rate  exposure on the
Austar  Bank  Facility.  These swap  agreements  expire in 2002 and  effectively
convert an aggregate  principal  amount of A$50,000  ($30,600) of variable rate,
long-term  debt into  fixed  rate  borrowings.  As of  December  31,  1998,  the
weighted-average  fixed rate under  these  agreements  was 7.94%  compared  to a
weighted-average variable rate on the Austar Bank Facility of 6.75%. As a result
of these swap agreements,  interest expense was increased by approximately A$600
($400) during 1998.

Fair values of the  interest  rate swap  agreements  are based on the  estimated
amounts that the Company would receive or pay to terminate the agreements at the
reporting  date,  taking into  account  current  interest  rates and the current
creditworthiness  of the  counterparties.  As of December 31, 1998,  the Company
estimates  it would have paid  approximately  A$1,300  ($800) to  terminate  the
agreements.

11.  CONVERTIBLE PREFERRED STOCK

SERIES A

In connection  with the Company's  acquisition  of an additional  40.0% economic
interest in Austar in 1995, the Company issued 170,513 shares of par value $0.01
per share Series A Preferred  Stock. The Series A Preferred Stock had an initial
liquidation  value of $175.00  per share  (approximately  $29,840)  and  accrues
dividends  at a rate of 4.0% 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.  During the ten months ended December
31, 1998,  38,369 shares of Series A Preferred Stock were converted into 425,457
shares of Class A Common  Stock.  Subsequent to December 31, 1998, an additional
100,144  shares of Series A Preferred  Stock were  converted into Class A Common
Stock.

SERIES B

In connection  with the Company's  acquisition  of certain assets of ECT in July
1998, and the  acquisition  of an additional  interest in XYZ  Entertainment  in
September  1998, the Company issued a total of 139,031 shares of par value $0.01
per share Series B Preferred  Stock. The Series B Preferred Stock had an initial
liquidation  value of $212.50  per share  (approximately  $29,544)  and  accrues
dividends  at a rate of 6.5% per  annum,  compounded  quarterly.  Each  share of
Series B  Preferred  Stock is  convertible  into the  number  of  shares  of the
Company's  Class A Common  Stock equal to the  liquidation  value at the time of
conversion  divided by $21.25.  The  Company is  required to redeem the Series B
Preferred  Stock  on June  30,  2008 at a  redemption  price  equal  to its then
liquidation  value  plus  accrued  dividends.  Assuming  none  of the  Series  B
Preferred Stock is converted prior to redemption,  the total cost to the Company
upon redemption would be approximately  $55,723. The Company has granted certain
rights  to  holders  of the  Series B  Preferred  Stock to  register  under  the
Securities Act of 1933 the sale of shares of Class A Common Stock into which the
Series B Preferred Stock may be converted.

                                       92
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

12.  STOCKHOLDERS' DEFICIT

COMMON STOCK

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

CUMULATIVE TRANSLATION ADJUSTMENTS

During the ten months ended December 31, 1998,  the Company  recorded a negative
change in cumulative  translation  adjustments of $24,713,  primarily due to (i)
the   strengthening  of  the  U.S.  dollar  compared  to  the  Mexican  peso  of
approximately  23.0%,  (ii) the strengthening of the U.S. dollar compared to the
Hungarian forint of approximately  6.0% and (iii) the  strengthening of the U.S.
dollar compared to the Chilean peso of approximately 7.0%.

TREASURY STOCK

As a  result  of the UPC  Transaction,  UPC  acquired  3,169,151  shares  of the
Company's Class A Common Stock,  valued at cost on December 11, 1997 at $33,074.
In November 1998, UPC used 384,531 shares to acquire an additional 5.0% interest
in Tara and Princes Holdings, resulting in 2,784,620 UIH shares remaining in the
treasury.

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  496,149  were
available for grant as of December 31, 1998.

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  32,500  were
available for grant as of December 31, 1998.

                                       93
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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 the ten months  ended
December 31, 1998 and the year ended  February 28, 1998 using the  Black-Scholes
single-option pricing model and the following weighted-average assumptions:
<TABLE>
<CAPTION>
                                          For the Ten
                                          Months Ended     For the Year Ended      For the Year Ended
                                          December 31,        February 28,            February 28,
                                              1998               1998                    1997
                                          ------------     ------------------      ------------------
     <S>                                   <C>                 <C>                     <C>
     Risk-free interest rate........        4.60%               5.91%                   6.38%
     Expected lives.................       7 years             7 years                 7 years
     Expected volatility............        55.34%              53.46%                  54.72%
     Expected dividend yield........          0%                  0%                      0%
</TABLE>

The total fair value of options  granted was  approximately  $3,746,  $2,929 and
$5,376 for the ten months ended  December 31, 1998 and 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 ten  months  ended
December  31, 1998 and the years  ended  February  28, 1998 and 1997,  pro forma
stock-based  compensation,  net of the effect of the  forfeitures,  was  $2,694,
$2,773 and $2,002, respectively, as follows:
<TABLE>
<CAPTION>
                                          For the Ten Months        For the Year Ended       For the Year Ended
                                       Ended December 31, 1998      February 28, 1998        February 28, 1997
                                      ------------------------   ----------------------    ----------------------
                                         Net        Net Loss        Net        Net Loss       Net       Net Loss
                                         Loss      Per Share        Loss      Per Share       Loss      Per Share
                                      ---------    ---------     ---------    ---------    ---------    ---------
     <S>                              <C>           <C>          <C>           <C>         <C>           <C>
     As reported....................  $(545,532)    $(13.71)     $(342,532)    $(8.77)     $(138,825)    $(3.59)
     Pro forma......................  $(548,226)    $(13.77)     $(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.

                                       94
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

A summary of stock option activity for the Employee Plan is as follows:
<TABLE>
<CAPTION>
                                                     For the Ten Months        For the Year Ended          For the Year Ended
                                                  Ended December 31, 1998      February 28, 1998           February 28, 1997
                                                  -----------------------   -----------------------     -------------------------
                                                  Number       Weighted-      Number      Weighted-       Number      Weighted-
                                                    of          Average         of         Average          of         Average
                                                  Shares    Exercise Price    Shares    Exercise Price    Shares    Exercise Price
                                                ----------  --------------  ----------  --------------  ----------  --------------
     <S>                                        <C>            <C>          <C>           <C>           <C>            <C>
     Outstanding at beginning of year.........  2,947,476      $11.8348     2,793,851     $11.7458      2,315,122      $11.5673
     Granted during the year..................    369,500      $ 9.8808       435,625     $10.9943        655,000      $13.0011
     Cancelled during the year................   (249,069)     $18.6709      (130,106)    $14.8130       (136,521)     $15.6011
     Exercised during the year................   (413,144)     $10.8813      (151,894)    $ 5.2366        (39,750)     $ 8.7925
                                                ---------      --------     ---------     --------      ---------      --------
     Outstanding at end of year...............  2,654,763      $11.0699     2,947,476     $11.8348      2,793,851      $11.7458
                                                =========      ========     =========     ========      =========      ========
     Exercisable at end of year...............  1,681,162      $11.0977     2,014,070     $11.5499      1,661,936      $10.7192
                                                =========      ========     =========     ========      =========      ========
</TABLE>
A summary of stock option activity for the Director Plan is as follows:
<TABLE>
<CAPTION>
                                                     For the Ten Months        For the Year Ended          For the Year Ended
                                                  Ended December 31, 1998      February 28, 1998           February 28, 1997
                                                  -----------------------   -----------------------     -------------------------
                                                  Number       Weighted-      Number      Weighted-       Number      Weighted-
                                                    of          Average         of         Average          of         Average
                                                  Shares    Exercise Price    Shares    Exercise Price    Shares    Exercise Price
                                                ----------  --------------  ----------  --------------  ----------  --------------
     <S>                                         <C>           <C>            <C>           <C>           <C>          <C>
     Outstanding at beginning of year.........   260,000       $12.1636       280,000       $12.5358      280,000      $12.5358
     Granted during the year..................   165,000       $ 9.8768        20,000       $11.1250           --      $     --  
     Cancelled during the year................        --       $     --       (40,000)      $14.2500           --      $     --
     Exercised during the year................   (40,000)      $ 9.5000            --       $     --           --      $     --
                                                 -------       --------       -------       --------      -------      --------
     Outstanding at end of year...............   385,000       $11.4603       260,000       $12.1636      280,000      $12.5358
                                                 =======       ========       =======       ========      =======      ========
     Exercisable at end of year...............   231,978       $12.5712       243,333       $12.2346      219,445      $12.1753
                                                 =======       ========       =======       ========      =======      ========
</TABLE>

The combined  weighted-average fair values and weighted-average  exercise prices
of options granted are as follows:
<TABLE>
<CAPTION>
                                  For the Ten Months Ended               For the Year Ended               For the Year Ended
                                     December 31, 1998                   February 28, 1998                February 28, 1997
                               ------------------------------     ------------------------------     ------------------------------
                                  Number      Fair   Exercise        Number     Fair   Exercise       Number     Fair     Exercise
Exercise Price                 of Options    Value     Price      of Options   Value     Price      of Options   Value      Price
--------------                 ----------  --------  --------     ----------  -------  --------     ----------  --------  ---------
<S>                             <C>        <C>       <C>           <C>        <C>      <C>           <C>        <C>        <C>
Less than market price......     75,000    $13.2225  $10.3750        3,125    $4.2937  $ 9.5000        5,000    $10.2382   $ 5.0000
Equal to market price.......    459,500    $ 5.9935  $ 9.7987      432,500    $6.6316  $10.7912      550,000    $ 8.2285   $13.0968
Greater than market price...         --    $     --  $     --       20,000    $2.3484  $15.7500      100,000    $ 7.9957   $12.8750
                                -------    --------  --------      -------    -------  --------      -------    --------   --------
     Total..................    534,500    $ 7.0078  $ 9.8796      455,625    $6.4276  $11.0000      655,000    $ 8.2083   $13.0011
                                =======    ========  ========      =======    =======  ========      =======    ========   ========
</TABLE>

                                       95
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

The following  table  summarizes  information  about employee and director stock
options outstanding and exercisable at December 31, 1998:

<TABLE>
<CAPTION>
                                                                  Options Outstanding                  Options Exercisable
                                                      -------------------------------------------    -----------------------
                                                                     Weighted-Average   Weighted-                  Weighted-
                                                       Number of         Remaining       Average      Number of     Average
                                                        Options      Contractual Life   Exercise       Options     Exercise
     Exercise Price Range                             Outstanding         (Years)         Price      Exercisable     Price
     --------------------                             -----------    ----------------   ---------    -----------   ---------    
     <S>                                               <C>                 <C>          <C>           <C>          <C>
     $ 4.5000 - $ 8.3125............................     361,000           8.57         $ 7.4639         92,666    $ 5.0069
     $ 9.5000 - $ 9.5000............................     930,050           4.51         $ 9.5000        930,050    $ 9.5000
     $10.2500 - $10.8750............................     786,418           8.88         $10.6874        238,164    $10.8212
     $11.1875 - $18.2500............................     967,095           6.74         $14.4314        657,060    $14.8536
                                                       ---------           ----         --------      ---------    --------
        Total.......................................   3,044,563           6.83         $11.1317      1,917,940    $11.2810
                                                       =========           ====         ========      =========    ========
</TABLE>

SUBSIDIARY STOCK OPTION PLANS

UPC PLAN

In June 1996,  UPC  adopted a stock  option plan (the "UPC Plan") for certain of
its employees and those of its  subsidiaries.  There are 6,000,000  total shares
available for the granting of options under the UPC Plan,  which are held by the
Stichting Administratiekantoor UPC (the "Foundation"), which administers the UPC
Plan.  Each  option  represents  the  right to  acquire  from the  Foundation  a
certificate representing the economic value of one share. Following consummation
of the initial public offering,  any  certificates  issued to employees who have
exercised their options will be convertible  into UPC common stock. UIH appoints
the  board  members  of the  Foundation  and thus  controls  the  voting  of the
Foundation's  common  stock.  The  options  are  granted  at fair  market  value
determined by UPC's Supervisory Board at the time of the grant. The maximum term
that the options can be exercised  is five years from the date of the grant.  In
order to  introduce  the  element  of  "vesting"  of the  options,  the UPC Plan
provides that even though the options are exercisable immediately, the shares to
be issued or options  granted in 1996 vest in equal  monthly  increments  over a
three-year  period from the  effective  date set forth in the option  grant.  In
March 1998,  the UPC Plan was revised to increase the vesting period for any new
grants of  options to four  years,  vesting in equal  monthly  increments.  Upon
termination  of an  employee  (except  in the case of death,  disability  or the
like),  all  unvested  options  previously  exercised  must  be  resold  to  the
Foundation  at the  original  purchase  price,  or all  vested  options  must be
exercised,  within 30 days of the termination  date. The  Supervisory  Board may
alter these vesting  schedules in its  discretion.  An employee has the right at
any time to put his  certificates or shares from exercised vested options to the
Foundation  at a price  equal to the fair market  value.  UPC can also call such
certificates  or shares for a cash  payment upon  termination  in order to avoid
dilution,  except  for  certain  awards,  which  can not be  called by UPC until
expiration of the underlying options.  The UPC Plan also contains  anti-dilution
protection  and provides  that, in the case of change of control,  the acquiring
company has the right to require  UPC to acquire all of the options  outstanding
at the per share value  determined in the transaction  giving rise to the change
of control.

                                      96
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

A summary of stock option activity for the UPC Plan is as follows:
<TABLE>
<CAPTION>
                                                                          For the Years Ended December 31,
                                               ------------------------------------------------------------------------------------
                                                        1998                           1997                         1996
                                               -------------------------   --------------------------   ---------------------------
                                                 Number      Weighted-       Number       Weighted-        Number       Weighted-
                                                   of         Average          of          Average           of          Average
                                                 Shares   Exercise Price     Shares    Exercise Price      Shares    Exercise Price
                                               ---------  --------------   ---------   --------------   ----------   --------------
                                                         (Dutch guilders)             (Dutch guilders)              (Dutch guilders)
     <S>                                       <C>            <C>          <C>             <C>          <C>               <C>
     Outstanding at beginning of period......  2,241,552      10.49        2,300,417       10.49                --           --
     Granted during the period...............  2,343,000      12.10               --          --         3,990,000        10.49
     Cancelled during the period.............    (14,052)     10.49          (58,865)      10.49            (9,583)       10.49
     Exercised during the period.............   (375,000)     10.49               --          --        (1,680,000)          --
                                               ---------      -----        ---------       -----        ----------        -----
     Outstanding at end of period............  4,195,500      11.39        2,241,552       10.49         2,300,417        10.49
                                               =========      =====        =========       =====        ==========        =====
     Exercisable at end of period (1)........  4,195,500      11.39        2,241,552       10.49         2,300,417        10.49
                                               =========      =====        =========       =====        ==========        =====
</TABLE>
(1) Includes certificate rights as well as options.

UPC  granted no stock  options  during the year ended  December  31,  1997.  The
combined  weighted-average  fair values and weighted-average  exercise prices of
options  granted  during the year  ended  December  31,  1998 and the year ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
                                                   For the Year Ended                For the Year Ended
                                                   December 31, 1998                 December 31, 1996
                                            --------------------------------   -------------------------------
                                              Number      Fair      Exercise     Number      Fair   Exercise
                                            of Options    Value      Price     of Options    Value    Price
                                            ----------    -----     --------   ----------    -----   --------
                                                            (Dutch guilders)                 (Dutch guilders)
<S>                                          <C>          <C>        <C>        <C>          <C>      <C>
Exercise price equal to market price......   2,343,000    12.10      12.10      3,990,000    10.49    10.49
</TABLE>

The following table summarizes  information about stock options  outstanding and
exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
                                                              Weighted-Average
                                                Number of         Remaining         Number of
                                                 Options      Contractual Life       Options
     Exercise Price (Dutch guilders)           Outstanding         (Years)         Exercisable
     -------------------------------           -----------    -----------------    -----------
     <S>                                        <C>                 <C>             <C>
     10.49................................      1,852,500           2.47            1,852,500
     12.00................................      2,195,250           4.63            2,195,250
     13.57................................        147,750           4.71              147,750
                                                ---------           ----            ---------
          Total...........................      4,195,500           3.68            4,195,500
                                                =========           ====            =========
</TABLE>

The UPC Plan is accounted for as a variable  plan  because,  based on the plan's
provisions,  the rights conveyed to employees are the substantive equivalents to
stock appreciation  rights.  Accordingly,  compensation expense is recognized at
each financial  statement  date based on the difference  between the grant price
and the  estimated  fair value of UPC's common  stock.  Compensation  expense of
NLG268,109  ($134,728),  NLG4,818  ($2,477) and NLG0 was  recognized for the ten
months  ended  December  31,  1998 and the years  ended  December  31,  1997 and
December 31, 1996, respectively.  UPC's estimate of the fair value of its common
stock as of December 31, 1998 utilized in recording  compensation  expense under
the UPC Plan was NLG63.91,  which is the initial public offering price.  Because
UPC will account for the UPC Plan as a variable  plan up until the  consummation
date of its initial public offering, and thereafter as a fixed plan due to

                                      97
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

modifications  to the UPC  Plan  which  will  occur  on  that  date,  the  total
compensation  expense and deferred  compensation  expense  recognized related to
options granted as of December 31, 1998 will not increase.

UPC PHANTOM STOCK OPTION PLAN

In March 1998,  UPC adopted a phantom stock option plan (the "UPC Phantom Plan")
which  permits the grant of phantom  stock rights in up to  2,400,000  shares of
UPC's common  stock.  The rights are granted at fair market value  determined by
UPC's  Supervisory  Board  at the time of  grant,  and  generally  vest in equal
monthly  increments  over the four-year  period  following the effective date of
grant and may be exercised for ten years  following the effective date of grant.
The UPC Phantom Plan gives the employee  the right to receive  payment  equal to
the difference  between the fair market value of a share of UPC common stock and
the option  base price for the  portion of the rights  vested.  UPC, at its sole
discretion,  may make payment in (i) cash,  (ii) freely  tradable  shares of UIH
Class A Common Stock or (iii) if UPC's stock is publicly traded, freely tradable
shares of its stock.  If UPC  chooses to make a cash  payment,  even  though its
stock is publicly  traded,  employees  have the option to receive an  equivalent
number of freely tradable shares of stock instead.  Concurrent with the approval
of the UPC Phantom Plan, the  Supervisory  Board ratified the grant of 1,232,250
and  825,000  phantom  stock  rights at base prices of  NLG12.00  and  NLG13.57,
respectively,  and specified  retroactive vesting for several of the grants. The
UPC Phantom Plan contains anti-dilution protection and provides that, in certain
cases of a change of  control,  all phantom  options  outstanding  become  fully
exercisable.

A summary of stock option activity for the UPC Phantom Plan is as follows:
<TABLE>
<CAPTION>
                                                           For the Year Ended
                                                           December 31, 1998
                                                      -------------------------------
                                                        Number           Weighted-
                                                          of              Average
                                                        Shares        Exercise Price
                                                      ---------      ----------------
                                                                     (Dutch guilders)
     <S>                                              <C>                 <C> 
     Outstanding at beginning of period..........            --              --
     Granted during the period...................     2,057,250           12.63
     Cancelled during the period.................            --              --
     Exercised during the period.................            --              --
                                                      ---------           -----
     Outstanding at end of period................     2,057,250           12.63
                                                      =========           =====

     Vested and exercisable at end of period.....       470,469           12.15
                                                      =========           =====
</TABLE>

The combined  weighted-average fair values and weighted-average  exercise prices
of options granted during the year ended December 31, 1998 are as follows:

                                                   Number     Fair     Exercise
                                                 of Options   Value      Price
                                                 ----------   ------   ---------
                                                              (Dutch guilders)
     Exercise price equal to market price......   2,057,250   12.63      12.63

                                      98
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

The following  table  summarizes  information  about stock options  outstanding,
vested and exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
                                                                   Weighted-Average      Number of
                                                     Number of         Remaining          Options
                                                      Options      Contractual Life     Vested and
     Exercise Price (Dutch guilders)                Outstanding         (Years)         Exercisable
     -------------------------------                -----------    -----------------    -----------
     <S>                                             <C>                 <C>              <C>
     12.00..................................         1,232,250           8.54             425,469
     13.57..................................           825,000           9.70              45,000
                                                     ---------           ----             -------
          Total.............................         2,057,250           9.00             470,469
                                                     =========           ====             =======
</TABLE>

The UPC Phantom Plan is accounted for as a variable plan in accordance  with its
terms,  resulting in compensation  expense for the difference  between the grant
price and the fair market value at each financial  statement date.  Compensation
expense of NLG52,374  ($26,319) was recognized for the ten months ended December
31,  1998.  UPC's  estimate of the fair value of its common stock as of December
31, 1998 utilized in recording  compensation  expense under the UPC Phantom Plan
was NLG63.91, which is the initial public offering price.

CHELLO STOCK OPTION PLAN

In June 1998, UPC adopted a phantom stock option plan (the "chello Plan"), which
permits the grant of phantom stock rights in up to 1,500,000 shares of chello, a
wholly-owned  subsidiary  of UPC.  The rights are granted at fair  market  value
determined  by chello's  Supervisory  Board at the time of grant,  and generally
vest in  equal  monthly  increments  over the  four-year  period  following  the
effective  date of  grant  and may be  exercised  for ten  years  following  the
effective date of grant. The chello Plan gives the employee the right to receive
payment  equal to the  difference  between the fair  market  value of a share of
chello and the option base price for the portion of the rights  vested.  UPC, at
its sole  discretion,  may make payment in (i) cash, (ii) freely tradable shares
of UIH Class A Common Stock or (iii) if UPC's stock is publicly  traded,  freely
tradable shares of its stock. If UPC chooses to make a cash payment, even though
its stock is publicly traded, employees have the option to receive an equivalent
number of freely tradable shares of stock instead.  Concurrent with the approval
of the chello Plan, the Supervisory  Board ratified the grant of 570,000 options
at a base price of NLG10.00,  and specified  retroactive  vesting for several of
the  grants.   For  the  ten  months  ended  December  31,  1998,  UPC  recorded
compensation  expense of NLG2,144  ($1,077) for options granted under the chello
Plan.

A summary of stock option activity for the chello Plan is as follows:
<TABLE>
<CAPTION>
                                                           For the Year Ended
                                                           December 31, 1998
                                                      ------------------------------
                                                       Number            Weighted-
                                                         of               Average
                                                       Shares         Exercise Price
                                                      --------       ---------------
                                                                     (Dutch guilders)
     <S>                                              <C>                 <C>
     Outstanding at beginning of period.........           --                --
     Granted during the period..................      570,000             10.00
     Cancelled during the period................           --                --
     Exercised during the period................           --                --
                                                      -------             -----
     Outstanding at end of period...............      570,000             10.00
                                                      =======             =====
     Vested and exercisable at end of period....       70,625             10.00
                                                      =======             =====
</TABLE>

The weighted-average  remaining contractual life for these options is 9.47 years
as of December 31, 1998.

                                      99
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

UAP Plan

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.  No  compensation  expense  has been
recognized under the UAP Plan through December 31, 1998.

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

                                                         For the Ten Months
                                                      Ended December 31, 1998
                                                   -----------------------------
                                                     Number         Weighted-
                                                       of            Average
                                                     Shares       Exercise Price
                                                   ---------      --------------

     Outstanding at beginning of period.....              --         $   --
     Granted during the period..............       1,779,500         $10.00
     Cancelled during the period............              --         $   --
     Exercised during the period............              --         $   --
                                                   ---------         ------
     Outstanding at end of period...........       1,779,500         $10.00
                                                   =========         ======
     Exercisable at end of period...........         584,063         $10.00
                                                   =========         ======

The combined  weighted-average fair values and weighted-average  exercise prices
of options granted during the ten months ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
                                                             For the Ten Months Ended
                                                                  December 31, 1998
                                               ----------------------------------------------------
                                                 Number                 Fair               Exercise
                                               of Options               Value                Price
                                               ----------              -------             --------
<S>                                             <C>                    <C>                  <C>
     Exercise price equal to market price....   1,779,500              $10.00               $10.00
</TABLE>

The following table  summarizes  information  about the UAP Plan phantom options
outstanding and exercisable at December 31, 1998:

                                             Weighted-Average
                               Number of         Remaining         Number of
                                Options      Contractual Life       Options
     Exercise Price           Outstanding         (Years)         Exercisable
     --------------           -----------   ------------------    -----------

     $10.00.................   1,779,500           9.08              584,063


                                      100
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

ULA Plan

In April 1998,  ULA's Board of Directors  approved a stock option plan (the "ULA
Plan") which  permits the grant of phantom  stock  options or the grant of stock
options to purchase up to 1,631,000  shares of ULA's Class A Common  Stock.  The
options vest in equal monthly increments over the four-year period following the
date of grant.  Concurrent with approval of the ULA Plan,  ULA'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 ULA 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. For the ten months
ended  December 31, 1998 ULA  recognized  $2,669 and $1,060 in non-cash and cash
compensation expense related to these phantom options, respectively.

A summary of phantom stock option activity for the ULA Plan is as follows:
<TABLE>
<CAPTION>
                                                               For the Ten Months
                                                             Ended December 31, 1998
                                                          ----------------------------
                                                            Number       Weighted-
                                                              of          Average
                                                            Shares     Exercise Price
                                                          ----------   --------------
     <S>                                                  <C>              <C>
     Outstanding at beginning of period..........                --             --
     Granted during the period...................         1,785,500        $5.6295
     Cancelled during the period.................          (317,296)       $5.4723
     Exercised during the period.................          (279,787)       $5.1935
                                                          ---------        -------
     Outstanding at end of period................         1,188,417        $5.7741
                                                          =========        =======
     Exercisable at end of period................           268,730        $4.8646
                                                          =========        =======
</TABLE>

The combined  weighted-average fair values and weighted-average  exercise prices
of options granted during the ten months ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
                                                              For the Ten Months Ended
                                                                  December 31, 1998
                                                      -----------------------------------
                                                        Number         Fair      Exercise
                                                      of Options       Value       Price
                                                      ----------     -------     --------
     <S>                                              <C>            <C>          <C>
     Exercise price equal to market price........       945,500      $5.8075      $5.8075
     Exercise price greater than market price           840,000      $4.2600      $5.4300
                                                      ---------      -------      -------
        Total....................................     1,785,500      $5.0795      $5.6295
                                                      =========      =======      =======
</TABLE>

The following table  summarizes  information  about the ULA Plan phantom options
outstanding and exercisable at December 31, 1998:

                                             Weighted-Average
                               Number of         Remaining          Number of
                                Options      Contractual Life        Options
     Exercise Price           Outstanding         (Years)          Exercisable
     --------------           -----------    ----------------      -----------

     $ 4.26................     531,750           8.43              140,813
     $ 4.59................     150,000           8.43               56,250
     $ 4.96................     100,000           8.43               37,500
     $ 5.93................      30,000           8.43               11,250
     $ 6.76................      66,667           8.43                4,167
     $ 8.98................     310,000           9.72               18,750
                              ---------           ----              -------
          Total............   1,188,417           8.77              268,730
                              =========           ====              =======

                                      101
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

13.  COMMITMENTS

The Company has entered  into  various  operating  lease  agreements  for office
space, office furniture and equipment, and vehicles.  Rental expense under these
lease  agreements  totaled  $5,824,  $4,125 and $3,481 for the ten months  ended
December  31, 1998 and for the years ended  February  28, 1998 and  February 28,
1997, respectively.
<TABLE>
<CAPTION>
     The  Company  has  operating  lease  obligations  and other  non-cancelable
     commitments as follows:
     <S>                                                                                              <C>
     Year ended December 31, 1999..............................................................       $  9,374
     Year ended December 31, 2000..............................................................          6,035
     Year ended December 31, 2001..............................................................          4,860
     Year ended December 31, 2002..............................................................          3,331
     Year ended December 31, 2003 and thereafter...............................................          2,732
                                                                                                      --------
        Total..................................................................................       $ 26,332
                                                                                                      ========

     The Company has MMDS  license  fees and  programming  license  fees payable
     annually as follows:

     Year ended December 31, 1999..............................................................       $ 38,310
     Year ended December 31, 2000..............................................................         45,658
     Year ended December 31, 2001..............................................................         51,541
     Year ended December 31, 2002..............................................................         54,583
     Year ended December 31, 2003 and thereafter...............................................         57,152
                                                                                                      --------
        Total..................................................................................       $247,244
                                                                                                      ========


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

     Year ended December 31, 1999..............................................................       $  4,440
     Year ended December 31, 2000..............................................................          4,440
     Year ended December 31, 2001..............................................................          4,440
     Year ended December 31, 2002..............................................................          2,960
     Year ended December 31, 2003..............................................................             --
                                                                                                      --------
        Total..................................................................................       $ 16,280
                                                                                                      ========
</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 ten months
ended  December  31, 1998 and 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.

In September  1998,  UTH entered into a  subordinated  loan agreement to provide
funding up to $30,000 for A2000.  UTH's share of the funding is $15,000.  UPC is
obligated to fund drawdowns on the loan in proportion to its 51.0%  ownership in
UTH  (representing  a total funding  obligation  of $7,650).  As of December 31,
1998,  UPC had funded  $3,750 of its  commitment.  Subsequent  to year end,  UPC
provided a letter of support to A2000 stating that it would  continue to provide
to A2000 the funding necessary to continue operations through at least 1999.

                                      102
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

14.  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.

The  territorial   government  of  Tahiti  (in  French  Polynesia)  had  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
then brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to  Telefenua.  On  November  25,  1998,  the Conseil d' Etat
cancelled the MMDS licenses awarded to Telefenua. Telefenua is in the process of
seeking a new  authorization.  The Company  has no reason to believe  that a new
authorization  will  not  be  granted.  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.

On July 14, 1998, UIH SFCC, a wholly-owned subsidiary of UIPI, filed a complaint
in the United States  District  Court for the District of Colorado,  for damages
for breach of  contract,  breach of  fiduciary  duty and to  enforce  UIH SFCC's
rights as General Partner in UIH-SFCC LP, a Colorado Limited  Partnership  which
owns an interest in SFCC, the 100% parent of Telefenua. The three defendants are
Loic Brigato,  Winfred Anderson and Yoshiko Payne,  limited partners of UIH-SFCC
LP. On September 27, 1998, UIH filed a parallel action in the District Court for
the State of Colorado.  Specifically,  the complaints allege that the defendants
have refused to abide by the terms of the  Partnership  Agreement and have taken
actions highly  detrimental to Telefenua.  UIH SFCC seeks  monetary  damages,  a
decree of specific performance requiring defendants to perform their obligations
and a constructive trust over defendants' partnership interest.  Defendants have
filed in the federal court a motion to dismiss the complaint for lack of subject
matter  jurisdiction.  There has been no  decision  issued as of this date.  The
Company intends to vigorously defend its position.

On April 20, 1999,  a class  action was filed in the District  Court of Tel Aviv
against  several  cable  operators in Israel,  including  Tevel.  The  complaint
alleges that the cable operators have taken advantage of their monopoly position
in the market by  charging  excessive  prices  for the  services  provided.  The
plaintiffs  are  seeking  damages  in the  amount of  approximately  NIS1,000.00
(approximately $240.00) per subscriber and a judicial order instructing Tevel to
reduce its subscriber fee to the alleged fair market price.  The plaintiffs have
also applied for a judicial order against the Ministry of Communication to avoid
considering   the  extension  of  Tevel's  cable   franchise   term  for  unfair
exploitation and monopoly status.  Tevel's cable television service subscription
rates are subject to governmental  regulation  through franchise  agreements and
through the arrangement  approved by the Restrictive  Trade Practices  Tribunal.
Tevel intends to vigorously defend itself against these allegations.

                                      103
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

15.  INCOME TAXES

In general,  a United States  corporation may claim a foreign tax credit against
its federal income tax expense for foreign income taxes paid or accrued. Because
the Company  must  calculate  its foreign tax credit  separately  for  dividends
received from each foreign  corporation in which the Company owns 10.0% to 50.0%
of the voting  stock,  and because of certain other  limitations,  the Company's
ability to claim a foreign tax credit may be limited,  particularly with respect
to dividends paid out of earnings  subject to a high rate of foreign income tax.
Generally, the Company's ability to claim a foreign tax credit is limited to the
amount of U.S. taxes the Company pays with respect to its foreign source income.
In calculating  its foreign  source income,  the Company is required to allocate
interest  expense and overhead  incurred in the United States between its United
States  and  foreign  activities.  Accordingly,  to  the  extent  United  States
borrowings are used to finance equity contributions to its foreign subsidiaries,
the  Company's  ability  to claim a  foreign  tax  credit  may be  significantly
reduced.  These limitations and the inability of the Company to offset losses in
one foreign  jurisdiction  against income earned in another foreign jurisdiction
could result in a high effective tax rate on the Company's earnings. 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  loss  and net  loss  for  financial
reporting  purposes  relate to  accounting  for the share in  results of foreign
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  $163,000 and $141,000 at December 31,
1998  and  February  28,  1998,   respectively)  in  investments  in  affiliated
companies, which in turn have investments in foreign corporations.

The Company's  United States tax net operating  losses,  totaling  approximately
$255,000 at December  31, 1998,  expire  beginning  in 2004  through  2014.  The
Company's tax net  operating  loss  carryforwards  of its  consolidated  foreign
subsidiaries   totaled   $191,000,   $286,000   and  $6,000  for  UAP  and  ULA,
respectively.  The  significant  components of the net deferred tax asset are as
follows:
<TABLE>
<CAPTION>
                                                                                          As of           As of
                                                                                       December 31,    February 28,
                                                                                           1998            1998
                                                                                       ------------    ------------ 
     <S>                                                                                <C>             <C>
     Deferred Tax Assets:
     --------------------
        Tax net operating loss carryforward of consolidated foreign subsidiaries...     $183,656        $144,356
        Company's U.S. tax net operating loss carryforward.........................       97,044          67,141
        Accrued interest expense on the UIH A/P Notes..............................       32,885          18,856
        Stock-based compensation...................................................        7,215             --
        Investment valuation allowance and other...................................        2,605           3,302
        Basis difference in marketable equity securities...........................        3,070           3,192
        Deferred compensation and severence........................................        1,175           1,260
        Other......................................................................           70             149
                                                                                        --------        --------
             Total deferred tax assets.............................................      327,720         238,256
        Valuation allowance........................................................     (319,292)       (231,710)
                                                                                        --------        --------
             Deferred tax assets, net of valuation allowance.......................        8,428           6,546

     Deferred Tax Liabilities:
     -------------------------
        Intangible assets........................................................         (5,852)        (23,800)
        Property, plant and equipment, net.......................................         (7,156)         (5,046)
        Other....................................................................             --             268
                                                                                        --------        --------
            Total deferred tax liabilities........................................       (13,008)        (28,578)
                                                                                        --------        --------
            Deferred tax liabilities, net.........................................      $ (4,580)       $(22,032)
                                                                                        ========        ======== 
</TABLE>
                                      104
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

Of the  Company's  1998  consolidated  net loss,  $361,637  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 Ten      For the Years Ended
                                                                             Months Ended  --------------------------
                                                                             December 31,  February 28,  February 28,
                                                                                1998           1998         1997
                                                                             ------------  ------------  ------------
     <S>                                                                     <C>            <C>           <C>
     Expected income tax benefit at the U.S. statutory rate of 35%......     $(172,472)     $(68,727)     $(33,463)
     Tax effect of permanent and other differences:
       Change in valuation allowance....................................       127,810         66,519        30,787
       Non-deductible expenses..........................................        49,497            566           --
       Book/tax basis differences associated with foreign investments...         1,176          3,901         3,428
       State tax, net of federal benefit................................       (14,783)        (5,891)       (2,868)
       International rate differences...................................           619           (515)         (181)
       Non-deductible interest accretion on the UIH A/P Notes...........         2,148          2,145           973
       Amortization of licenses.........................................         1,516          1,312           625
       Other............................................................         4,489            690           699
                                                                             ---------      ---------     ---------
           Total income tax benefit.....................................     $      --      $      --     $      --
                                                                             =========      =========     =========
</TABLE>

During 1996,  the  Austrian tax  authorities  passed  legislation  which had the
effect  of  eliminating   approximately   NLG256,000  ($135,450)  of  tax  basis
associated  with  certain  amounts  of  goodwill  recorded  at  Telekabel  Group
effective  January 1, 1997.  This change in tax law is expected to be challenged
on constitutional  grounds.  However,  there can be no assurance of a successful
repeal of such  legislation.  Accordingly,  this change caused Telekabel Group's
effective  tax rate to increase from the  historical  effective tax rate through
December 31, 1996, due to the  non-deductibility  of such goodwill  amortization
subsequent to January 1, 1997.

16.  SEGMENT AND GEOGRAPHIC INFORMATION

The Company adopted SFAS 131 for the ten months ended December 31, 1998. The new
rules establish revised standards for public companies relating to the reporting
of financial information about operating segments.  The adoption of SFAS 131 did
not have a material effect on the Company's  consolidated  financial  statements
but did affect the  Company's  segment  information  disclosure.  The  Company's
business has  historically  been derived from its video  entertainment  segment.
This service has been provided in various  countries  where the Company owns and
operates  it  systems.   During  1998,  the  Company  introduced  telephony  and
internet/data  services and during 1999 the Company  will  continue to introduce
these services to several systems.  To date,  revenues and net operating results
from these services have not been significant and therefore segment  information
for  these  services  is  not  required.   Accordingly,  the  Company's  current
reportable segments are the various countries in which it operates multi-channel
television,  programming and/or telephony operations.  These reportable segments
are evaluated  separately  because each  geographic  region  presents  different
marketing strategies and technology issues as well as distinct economic climates
and regulatory constraints.  The key operating performance criteria used in this
evaluation  includes  revenue  growth,  operating  income  before  depreciation,
amortization  and stock-based  compensation  expense  ("Adjusted  EBITDA"),  and
capital  expenditures.  Senior  management  of the Company does not view segment
results below Adjusted EBITDA,  therefore,  interest income,  interest  expense,
provision for losses on investment  related costs,  gain on sale of investments,
share in results of affiliated companies, minority interests in subsidiaries and
other expenses are not broken out by segment below.

                                      105
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

The Company's segment information is as follows:
<TABLE>
<CAPTION>
                             For the Ten Months Ended December 31, 1998                    As of December 31, 1998
                             ------------------------------------------   --------------------------------------------------------
                                           Depreciation                   Investments       Property,
                                                &          Adjusted           in            Plant and     Total          Capital
                                Revenue    Amortization    EBITDA(1)      Affiliates        Equipment     Assets      Expenditures
                                -------    ------------    --------      -----------        ---------    --------     ------------
<S>                             <C>          <C>           <C>            <C>               <C>         <C>            <C>
Europe:
  The Netherlands............   $ 21,500     $  (9,503)    $(3,658)       $132,131          $  5,176    $  297,068     $ (12,874)
  Austria....................     74,629       (31,527)      30,975             --           140,550       341,159       (41,458)
  Belgium....................     15,854        (8,357)       5,071             --            27,558        57,847        (9,930)
  Czech Republic.............      3,753        (3,142)        (722)            --             8,737        11,497          (523)
  France.....................      3,395        (1,684)      (1,941)            --            40,328        51,092       (26,329)
  Hungary....................     11,672        (2,743)       3,819          8,410            26,788        86,921        (6,727)
  Norway.....................     39,040       (18,487)      12,636             --            63,335       219,068       (25,725)
  Other......................      2,444        (1,107)      (3,572)       120,307             6,574        22,744       (17,981)
                                --------     ---------     --------       --------          --------    ----------      --------- 
    Total Europe.............    172,287       (76,550)      42,608        260,848           319,046     1,087,396      (141,547)
                                --------     ---------     --------       --------          --------    ----------      --------- 
Asia/Pacific:
  Australia..................     74,209       (79,538)     (25,725)        25,880           122,968       181,169       (71,197)
  Other......................      3,060          (208)      (7,655)        33,830                61        72,781          (337)
                                --------     ---------     --------       --------          --------    ----------      --------- 
    Total Asia/Pacific.......     77,269       (79,746)     (33,380)        59,710           123,029       253,950       (71,534)
                                --------     ---------     --------       --------          --------    ----------      --------- 
Latin America:
  Chile......................         --            --           --         84,975                --        84,975            --
  Other......................      4,512        (1,637)     (10,264)        23,957            11,715        73,048        (3,238)
                                --------     ---------     --------       --------          --------    ----------      --------- 
    Total Latin America......      4,512        (1,637)     (10,264)       108,932            11,715       158,023        (3,238)
                                --------     ---------     --------       --------          --------    ----------      --------- 
Corporate & Other............         --        (1,112)      (2,907)            --            10,269        42,726          (738)
                                --------     ---------     --------       --------          --------    ----------      --------- 
    Total Company............   $254,068     $(159,045)    $ (3,943)      $429,490          $464,059    $1,542,095     $(217,057)
                                ========     =========     ========       ========          ========    ==========      =========
</TABLE>
<TABLE>
<CAPTION>
                                For the Year Ended February 28, 1998                       As of February 28, 1998
                             ------------------------------------------   -------------------------------------------------------- 
                                           Depreciation                   Investments       Property,
                                                &          Adjusted           in            Plant and     Total          Capital
                                Revenue    Amortization    EBITDA(1)     Affiliates         Equipment     Assets      Expenditures
                                -------    ------------    --------      -----------        ---------    --------     ------------
<S>                             <C>          <C>           <C>            <C>               <C>          <C>            <C>
Europe:
  The Netherlands............   $    --      $     --      $     --       $109,090          $ 20,773    $  308,907      $      --
  Austria....................        --            --            --             --           115,786       323,298             --
  Belgium....................        --            --            --             --            24,526        49,204             --
  Norway.....................        --            --            --             --            51,369       215,517             --
  Other......................     9,996        (6,343)       (9,204)        96,304            27,636        54,572         (6,423)
                                -------      --------      --------       --------          --------    ----------      --------- 
    Total Europe.............     9,996        (6,343)       (9,204)       205,394           240,090       951,498         (6,423)
                                -------      --------      --------       --------          --------    ----------      --------- 
Asia/Pacific:
  Australia..................    64,370       (77,557)      (24,082)            --           147,871       202,325        (84,375)
  New Zealand................       473        (2,033)       (6,688)            --            26,484        43,349        (16,258)
  Other......................     4,118        (1,212)       (7,192)        14,556             8,746        48,871           (502)
                                -------      --------      --------       --------          --------    ----------      --------- 
    Total Asia/Pacific.......    68,961       (80,802)      (37,962)        14,556           183,101       294,545       (101,135)
                                -------      --------      --------       --------          --------    ----------      --------- 
Latin America:
  Argentina..................    17,627        (3,296)        2,836            --                 --           --          (1,329)
  Chile......................        --            --            --         78,165                --        78,165            --
  Other......................     1,617          (207)      (11,114)        43,137             6,541        69,102         (3,112)
                                -------      --------      --------       --------          --------    ----------      --------- 
    Total Latin America......    19,244        (3,503)       (8,278)       121,302             6,541       147,267         (4,441)
                                -------      --------      --------       --------          --------    ----------      --------- 
Corporate & Other............       421        (1,008)       (2,921)            --            11,003       286,525         (3,034)
                                -------      --------      --------       --------          --------    ----------      --------- 
    Total Company............   $98,622      $(91,656)     $(58,365)      $341,252          $440,735    $1,679,835      $(115,033)
                                =======      ========      ========       ========          ========    ==========      ========= 
</TABLE>
                                      106
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

                                 For the Year Ended February 28, 1997
                                ---------------------------------------
                                            Depreciation
                                                 &            Adjusted
                                Revenue     Amortization      EBITDA(1)
                                -------     ------------     ----------

Europe - Other...............   $   --        $    (80)       $ (7,893)
                                -------       --------        --------
Asia/Pacific:
  Australia..................    21,354        (34,087)        (25,471)
  Tahiti.....................     3,513         (1,382)           (816)
  Other......................       145           (800)         (7,935)
                                -------       --------        --------
    Total Asia/Pacific.......    25,012        (36,269)        (34,222)
                                -------       --------        --------
Latin America:
  Argentina..................     4,385         (1,597)           (185)
  Other......................     1,409           (192)         (3,132)
                                -------       --------        --------
    Total Latin America           5,794         (1,789)         (3,317)
                                -------       --------        --------
Corporate & Other............       749           (823)         (3,284)
                                -------       --------        --------
    Total Company............   $31,555       $(38,961)       $(48,716)
                                =======       ========        ======== 

(1)  "Adjusted EBITDA" represents  earnings before net interest expense,  income
     tax  expense,  depreciation  and  amortization,   stock-based  compensation
     charges, minority interest, share in results of affiliated companies (net),
     currency exchange gains (losses) and other  non-operating  income (expense)
     items. Industry analysts generally consider Adjusted EBITDA to be a helpful
     way  to  measure  the  performance  of  cable  television   operations  and
     communications   companies.   Management  believes  Adjusted  EBITDA  helps
     investors to assess the cash flow from operations from period to period and
     thus to value the Company's business.  Adjusted EBITDA should not, however,
     be  considered a  replacement  for net income,  cash flows or for any other
     measure of performance or liquidity  under  generally  accepted  accounting
     principles,  or as an indicator of a company's operating  performance.  The
     Company  is not  entirely  free to use the  cash  represented  by  Adjusted
     EBITDA.  Several of the  Company's  consolidated  operating  companies  are
     restricted  by the terms of their debt  arrangements.  Each company has its
     own  operating  expenses and capital  expenditure  requirements,  which can
     limit the Company's use of cash. The  presentation  of Adjusted  EBITDA may
     not be  comparable  to  statistics  with a similar  name  reported by other
     companies.  Not all companies and analysts calculate Adjusted EBITDA in the
     same manner.

     Adjusted EBITDA  reconciles to the consolidated  statement of operations as
     follows:
<TABLE>
<CAPTION>
                                                   For the Ten       For the Years Ended
                                                   Months Ended          February 28,
                                                   December 31,   -------------------------
                                                      1998           1998           1997
                                                   ------------   ----------     ----------
          <S>                                       <C>            <C>           <C> 
          Net operating loss.....................   $(327,781)    $(150,021)     $(87,677)
          Depreciation and amortization..........     159,045        91,656        38,961
          Stock-based compensation expense.......     164,793            --            --
                                                    ---------     ---------      --------
               Consolidated Adjusted EBIDTA......   $  (3,943)    $ (58,365)     $(48,716)
                                                     =========    =========      ========
</TABLE>

                                      107
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

17.   RELATED PARTY TRANSACTIONS

LOANS TO EMPLOYEES

In 1996,  UPC loaned  certain  employees  of UPC amounts for the exercise of the
employees' stock options,  taxes on options  exercised,  or both. These recourse
loans  bear  interest  at 5.0% per annum.  The  employees'  liability  to UPC is
presented in the  consolidated  financial  statements net of UPC's obligation to
the employees  under the plan. As of December 31, 1998 and 1997,  the receivable
from employees,  including  accrued  interest  totaled  NLG19,177  ($10,147) and
NLG18,561 ($9,189), respectively.

ACQUISITIONS OF INTEREST IN PRINCES HOLDINGS AND TARA

In November  1998,  UPC purchased  from RCL, an entity owned by a  discretionary
trust for the benefit of the members of the family of John Riordan,  a member of
the Board of  Management  of UPC, a 5.0% interest in Tara and a 5.0% interest in
Princes Holdings.  The price for these interests was 384,531 shares of UIH Class
A Common Stock that UPC acquired as part of the UPC Transaction.

18.   SUBSEQUENT EVENTS

UPC INITIAL PUBLIC OFFERING

During  February 1999,  UPC  successfully  completed an initial public  offering
selling  44,600,000  shares on the Amsterdam  Stock Exchange and Nasdaq National
Market  System  and  raising  gross and net  proceeds  at NLG 63.91 per share of
approximately   NLG2,850,300   ($1,508,100)   and   NLG2,705,800   ($1,431,600),
respectively.  Concurrent with the offering, DIC exercised one of its two option
agreements acquiring 1,558,654 shares for $45,000. Proceeds from the sale of the
shares to DIC were used to repay  $45,000 of the DIC Loan and related  interest.
Also  concurrent  with the  offering,  proceeds  were used to reduce  the Senior
Revolving Credit Facility  totaling  NLG635,800  ($336,400),  including  accrued
interest of NLG15,800  ($8,400),  repay in its entirety the Bridge Bank Facility
totaling NLG110,000 ($58,200),  net of the interest reserve account, and acquire
NUON's  49.0%  interest in UTH.  Based on the  carrying  value of the  Company's
investment in UPC as of December 31, 1998,  UIH would have  recognized a gain of
approximately  $825,000  from the  resulting  step-up in the carrying  amount of
UIH's investment in UPC, in accordance with SAB 51. The final gain will be based
on  the  Company's  investment  in  UPC as of the  date  of the  initial  public
offering.  No deferred  taxes will be  recorded  related to this gain due to the
Company's intent on holding its investment in UPC  indefinitely.  UPC's offering
reduced the Company's ownership interest from 100% to approximately 64.3%.

RELATIONSHIP WITH MICROSOFT

On January 25, 1999,  UPC and  Microsoft  Corporation  signed a letter of intent
providing  for  the  establishment  of a  technical  services  relationship.  In
connection with this letter of intent, UPC agreed to grant Microsoft warrants to
purchase up to  3,800,000  of its shares or ADSs at  Microsoft's  option,  at an
exercise  price of $28.00.  Half of these warrants will be issued at the earlier
of April 25,  1999 or the  signing  of the  first  definitive  agreement.  These
warrants will be exercisable  after one year from issuance for a period of three
years.  The other half of the  warrants  will be issued  upon the signing of the
first  definitive  agreement.  This half of the  warrants  will vest and  become
exercisable  based on  performance  criteria to be established in the definitive
agreements,  although they also will not be exercisable  until at least one year
after the date of the closing of UPC's initial public  offering.  The first half
of the  warrants  are for the right to  negotiate  to  license  technology  from
Microsoft  under  definitive  agreements  to be  negotiated  in the future.  UPC
expects  to  record  as  contract  acquisition  rights  approximately  NLG64,400
($34,100)  associated  with the  first  half of the  warrants.  Such  costs  are
expected to be amortized  on a  straight-line  basis over the expected  contract
life, which is yet to be determined. The accounting for the cost associated with
the  second  half of the  warrants  will  depend on the  ultimate  nature of the
performance  criteria  giving  rise to the  earn-out  of these  warrants.  These
warrants  will  be  recorded  as  such at fair  value  when it is  probable  the
performance criteria will be met in accordance with EITF Issue No. 96-18.

DIC LOAN

In  connection  with the loan from DIC,  UPC  granted  DIC,  its  partner in the
Israeli system, an option to acquire $90,000, plus accrued interest, of ordinary
shares of UPC at a price equal to 90.0% of the initial public offering price.

                                      108
<PAGE>
                       UNITED INTERNATIONAL HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

Subsequent  to December 31, 1998,  UPC  negotiated  an amendment to this option,
resulting in an option to acquire $45,000,  plus accrued  interest,  of ordinary
shares at a price equal to 90.0% of the initial public offering  price,  and, if
this  option is  exercised,  another  option to acquire  $45,000,  plus  accrued
interest,  of ordinary  shares at a price  equal to the 30 day  average  closing
price of UPC's shares on the Amsterdam Stock Exchange  immediately  prior to the
second option  exercise,  or the initial  public  offering  price,  whichever is
higher.  At the IPO, DIC exercised the first option and thus acquired  1,558,654
ordinary  shares of UPC. The other option is  exercisable  until  September  30,
2000.

ACQUISITION OF BRATISLAVA CABLE TV SYSTEM

In March 1999, UPC reached final agreement with Siemens  Austria  ("Siemens") to
purchase  Siemens'  95.63%  interest  in SKT s.r.o.,  the company  that owns and
operates the cable TV system in Bratislava,  Slovak Republic.  The completion of
the purchase is subject to obtaining the approval of regulatory authorities. The
purchase price for the 95.63% interest is approximately NLG77,500 ($41,000).

AGREEMENT FOR THE PURCHASE OF TIME WARNER CABLE FRANCE

In March 1999,  UPC and TWE reached a definitive  agreement  for the purchase by
UPC of 100% of Time Warner Cable France,  a company which  controls and operates
three cable TV systems in the suburbs of Paris and Lyon and the city of Limoges.
Completion of the purchase, which is subject to regulatory approval, is expected
to take place in the third quarter of 1999.

VTRH ACQUISITION

On April 29, 1999, an indirect wholly owned subsidiary of the Company acquired a
60.0% interest in VTRH (the "VTRH Acquisition"). This acquisition, combined with
the  40.0%  interest  in VTRH that is owned by  another  indirect  wholly  owned
subsidiary of the Company,  gives the Company an indirect 100% interest in VTRH.
The purchase price for the 60.0% interest in VTRH was approximately  $258,000 in
cash, which included  repayment of advances from the other  shareholders of VTRH
and certain other expenses.  In addition,  the Company provided capital for VTRH
to prepay approximately  $126,000 of existing bank indebtedness and a promissory
note from the Company to one of the other shareholders of VTRH.

To finance the prepayment of VTRH's  indebtedness  and a portion of the purchase
price  for the VTRH  Acquisition,  The  Company  concurrently  sold in a private
transaction  $208,900  of  10.875%  Senior  Discount  Notes due 2009 (the  "1999
Notes").  The remaining  portion of the VTRH Acquisition was funded with cash on
hand and approximately  $145,000 borrowed under a Senior Secured Credit Facility
between VTRH and a syndicate of banks (the "VTRH Bank Facility").

The VTRH Bank  Facility  consists of two tranches - Tranche A, which is a single
term loan facility with an aggregate principal amount of $140,000, substantially
all of which was  borrowed for the VTRH  Acquisition,  and Tranche B, which is a
three-year  term loan  facility,  with an  aggregate  principal  amount of up to
$80,000.  Both tranches have been guaranteed by VTRH and its  subsidiaries.  The
banks are in the process of syndicating the final  approximately  $50,000 of the
VTRH Bank Facility.  The Company has agreed to participate in the syndication as
necessary.

The 1999 Notes have essentially the same terms as the 1998 Notes, except for the
maturity and coupon rate and that the 1999 Notes are not secured.




                                      109
<PAGE>

                                    PART III



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

The  information  required by this item appears in the Company's Proxy Statement
for the  1999  Annual  Meeting  to be filed  within  30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.

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

The  information  required by this item appears in the Company's Proxy Statement
for the  1999  Annual  Meeting  to be filed  within  30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.

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

The  information  required by this item appears in the Company's Proxy Statement
for the  1999  Annual  Meeting  to be filed  within  30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.

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

The  information  required by this item appears in the Company's Proxy Statement
for the  1999  Annual  Meeting  to be filed  within  30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.


                                      110
<PAGE>
                                     PART IV


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

     (a) INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                                    Page
                                                                                                                    ----
     <S>                                                                                                            <C>
     UNITED INTERNATIONAL HOLDINGS, INC.
     Report of Independent Public Accountants...................................................................     60
     Consolidated Balance Sheets as of December 31, 1998 and February 28, 1998..................................     61
     Consolidated Statements of Operations for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................     62
     Consolidated Statements of Stockholders' (Deficit) Equity for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................     63
     Consolidated Statements of Cash Flows for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................     67
     Notes to Consolidated Financial Statements.................................................................     70

     UNITED INTERNATIONAL HOLDINGS, INC. (Parent only)
     Report of Independent Public Accountants on Schedule.......................................................    116
     Schedule I Condensed Financial Information of Registrant (Parent only).....................................    117
     Schedule I Condensed Information as to the Operations of the Registrant (Parent only)......................    118
     Schedule I Condensed Information as to the Cash Flows of the Registrant (Parent only)......................    119

     UNITED INTERNATIONAL PROPERTIES, INC.
     Report of Independent Public Accountants...................................................................    120
     Consolidated Balance Sheets as of December 31, 1998 and February 28, 1998..................................    122
     Consolidated Statements of Operations for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................    123
     Consolidated Statements of Stockholder's (Deficit) Equity for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................    124
     Consolidated Statements of Cash Flows for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................    125
     Notes to Consolidated Financial Statements.................................................................    127

     UIH EUROPE, INC.
     Report of Independent Public Accountants...................................................................    150
     Consolidated Balance Sheets as of December 31, 1998 and February 28, 1998..................................    151
     Consolidated Statements of Operations for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................    152
     Consolidated Statements of Stockholder's (Deficit) Equity for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................    153
     Consolidated Statements of Cash Flows for the Ten Months Ended December 31, 1998,
       the Years Ended February 28, 1998 and February 28, 1997..................................................    154
     Notes to Consolidated Financial Statements.................................................................    156

     UNITED TELEKABEL HOLDING N.V.
     Independent Auditors' Report ..............................................................................    178
     Consolidated Balance Sheet as of December 31, 1998 ........................................................    179
     Consolidated Statement of Operations from August 6, 1998 (commencement of operations)
       until December 31, 1998..................................................................................    180
     Consolidated Statement of Cash Flows from August 6, 1998 (commencement of operations)
       until December 31, 1998..................................................................................    181
     Notes to Consolidated Financial Statements.................................................................    182
</TABLE>
                                      111

<PAGE>

(b)  REPORTS ON FORM 8-K
<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>

(c)  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       Certificate of Designation with respect to Convertible  Preferred
               Stock, Series B of the Company.(4)

     3.5       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 3.1-3.5.

     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").(5)

     4.4       Indenture dated as of November 22, 1995,  between the Company and
               Trustee (the "1995 Indenture").(6)

     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.(6)

     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.(6)

     4.7       Supplemental  Indenture dated as of February 5, 1998, between the
               Company and Trustee with respect to the 1994 Indenture.(7)

     4.8       Supplemental  Indenture dated as of February 5, 1998, between the
               Company and Trustee with respect to the 1995 Indenture.(7)

     4.9       Warrant  Agreement  dated as of November  23,  1994,  between the
               Company and Trustee, as Warrant Agent.(5)

     4.10      Amendment  No. 1 to Warrant  Agreement  dated as of November  14,
               1995, between the Company and Trustee, as Warrant Agent.(6)

     4.11      Indenture dated as of February 27, 1996,  between the Company and
               Trustee.(8)

     4.12      Indenture  dated as of February 5, 1998,  between the Company and
               Trustee.(9)

     4.13      Indenture  dated as of April 29,  1999  between  the  Company and
               Trustee.(10)

     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").(11)

     10.2      Standstill  Agreement  dated as of April 13,  1993,  between  the
               Company and Apollo.(11)

                                      112
<PAGE>

     10.3      Letter  Agreement  dated April 15, 1993,  between the Company and
               Apollo.(11)

     10.4      Registration Rights Agreement dated as of April 13, 1993, between
               the Company and Apollo.(11)

     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.(12)

     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").(13)

     10.10     First Amendment to 1995 Pledge  Agreement dated as of February 5,
               1998, between the Company and the Collateral Agent.(7)

     10.11     Pledge  Agreement  dated as of  February  5,  1998,  between  the
               Company and the Collateral Agent.(7)

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

     10.13     Indenture  dated as of  September 23,  1997,  between UIH A/P and
               Trustee.(15)

     10.14     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.(16)

     10.15     Supplemental  Agreement dated January 25, 1999,  relating to Loan
               Agreement for a NLG1,100,000,000  Multi-currency Revolving Credit
               Facility  between  UPC and  certain of its  subsidiaries  and The
               Toronto-Dominion Bank.(17)

     10.16     Loan Agreement for Facilities up to  euro340,000,000  dated as of
               March  10,  1999,  among  N.V.  Telekabel  as  borrower,  and the
               guarantors and banks named therein.

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

     10.18     Credit  Agreement  dated as of April  28,  1999,  among UIH Chile
               Holding S.A., the subsidiary  guarantors  named therein,  Toronto
               Dominion  (Texas),  Inc., TD Securities (USA), Inc. and Citibank,
               N.A.(10)

     10.19     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)

     10.20     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.(17)

     10.21     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.(17)

     10.22     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.(17)
  

                                      113
<PAGE>

     10.23     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.(17)

     10.24     Promise  Agreement entered into as of October 15, 1998, among UIH
               Latin America, Inc., VTR S.A. and Compania Nacional de Telefonos,
               Telefonica del Sur S.A.(10)

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

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

     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 Telekabel Holding N.V.).

     23.5      Consent of Independent  Auditors--Galaz,  Gomez Morfin,  Chavero,
               Yamazaki, S.C. (Megapo Comunicaciones de Mexico, S.A. de C.V.).

     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 8-K dated July 9, 1998 (File No.
          0-21974).
     (5)  Incorporated  by reference  from Form 10-K for the year ended February
          28, 1995 (File No. 0-21974).
     (6)  Incorporated  by reference  from the  November  30, 1995,  Form 10-Q/A
          dated January 26, 1996 (File No. 0-21974).
     (7)  Incorporated  by reference  from Form 8-K dated February 5, 1998 (File
          No. 0-21974).
     (8)  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.
     (9)  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.
     (10) Incorporated by reference from Form 8-K dated April 29, 1999 (File No.
          0-21974).
     (11) Incorporated by reference from the Company's Registration Statement on
          Form S-1 (File No.  33-61376)  filed with the  Commission on April 21,
          1993.
     (12) 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.
     (13) Incorporated  by  reference  from  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.
     (14) Incorporated  by reference  from Form 10-K for the year ended February
          29, 1996 (File No. 0-21974).
 
                                      114
<PAGE>


     (15) Incorporated  by reference  from UIH A/P's  Registration  Statement on
          Form S-4 filed on November 6, 1997 (File No. 333-39707).
     (16) Incorporated  by reference from Form 8-K dated December 11, 1997 (File
          No. 0-21974).
     (17) Incorporated  by reference from Amendment No. 8 to UPC's  Registration
          Statement on Form S-1 filed on February 10, 1999 (File No. 333-67895).
     (18) Incorporated  by reference  from Form 8-K dated October 17, 1997 (File
          No. 0-21974).
     (19) Incorporated  by reference from Amendment No. 6 to UPC's  Registration
          Statement  on Form  S-1  dated  February  4,  1999  (Registration  No.
          333-67895).
     (20) Incorporated  by reference from Form 8-K dated February 17, 1999 (File
          No. 0-21974).

(d) SEE INDEX TO FINANCIAL STATEMENTS IN (a) ABOVE.


                                      115
<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 April 30,
1999.  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,
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
April 30, 1999


                                      116
<PAGE>
<TABLE>
<CAPTION>
                                                UNITED INTERNATIONAL HOLDINGS, INC.
                                                            PARENT ONLY
                                                             SCHEDULE I
                                           Condensed Financial Information of Registrant
                                                       (Stated in thousands)

                                                                                                               As of       As of
                                                                                                           December 31, February 28,
                                                                                                               1998        1998
                                                                                                           ------------ ------------
<S>                                                                                                         <C>           <C>
ASSETS
Current assets
  Cash and cash equivalents...............................................................................  $    7,553    $ 236,511
  Restricted cash.........................................................................................         450          835
  Short-term liquid investments...........................................................................      38,367       21,406
  Management fee receivables from related parties.........................................................          --        1,242
  Notes receivable........................................................................................          --          381
  Costs to be reimbursed by affiliated companies, net.....................................................      17,430       13,223
  Other receivables......................................................................................          772           --
  Other current assets, net...............................................................................       1,849          286
                                                                                                            ----------    ---------
        Total current assets..............................................................................      66,421      273,884

Notes receivable, including accrued interest from wholly-owned subsidiaries...............................     200,005       38,993
Investments in and advances to affiliated companies, accounted for under the equity method, net...........          --      123,193
Property, plant and equipment, net of accumulated depreciation of $917 and $917, respectively.............       2,325        2,599
Deferred financing costs, net of accumulated amortization of $1,772 and $139, respectively................      18,133       19,356
Non-current restricted cash and other assets, net.........................................................          74        2,610
                                                                                                            ----------    ---------
        Total assets......................................................................................  $  286,958    $ 460,635
                                                                                                            ==========    =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
  Accounts payable, including related party payables of $0 and $86, respectively..........................  $      264    $     663
  Accrued liabilities.....................................................................................       1,817        1,416
  Losses recognized in excess of investment in unconsolidated subsidiaries................................     319,253           --
                                                                                                            ----------    ---------
        Total current liabilities.........................................................................     321,334        2,079

Senior discount notes.....................................................................................     893,003      818,272
                                                                                                            ----------    ---------
        Total liabilities.................................................................................   1,214,337      820,351
                                                                                                            ----------    ---------
Preferred  stock,  $0.01  par  value,  3,000,000  shares  authorized,  stated at liquidation value:
  Series A Convertible Preferred Stock, 132,144 and 170,513 shares issued and outstanding, respectively...      26,086       32,564
                                                                                                            ----------    ---------
  Series B Convertible Preferred Stock, 139,031 and 0 shares issued and outstanding, respectively.........      30,200           --
                                                                                                            ----------    ---------
Stockholders' deficit:
  Class A Common Stock, $0.01 par value, 60,000,000 shares authorized, 30,674,995
    and 26,381,093 shares issued and outstanding, respectively............................................         307          264
  Class B Common Stock, $0.01 par value, 30,000,000 shares authorized 9,915,880 and 12,863,323 shares
    issued and outstanding, respectively..................................................................          99          128
  Additional paid-in capital..............................................................................     378,597      352,253
  Deferred compensation...................................................................................        (679)         (42)
  Treasury stock, at cost, 2,784,620 and 3,169,151 shares of Class A Common Stock, respectively...........     (29,061)     (33,074)
  Accumulated deficit.....................................................................................  (1,241,986)    (646,085)
  Other cumulative comprehensive loss.....................................................................     (90,942)     (65,724)
                                                                                                            ----------    ---------
        Total stockholders' deficit.......................................................................    (983,665)    (392,280)
                                                                                                            ----------    ---------
        Total liabilities and stockholders' deficit.......................................................  $  286,958    $ 460,635
                                                                                                            ==========    =========
</TABLE>
                                                                    117
<PAGE>
<TABLE>
<CAPTION>

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

                                                              For the Ten           For the Years Ended
                                                              Months Ended             February 28,
                                                              December 31,     ----------------------------
                                                                  1998             1998            1997
                                                              ------------     ------------    ------------
<S>                                                           <C>                <C>            <C>
Management fee income from related parties..............      $      --          $     452      $     801

Corporate general and administrative expense............         (1,698)              (983)        (1,069)
Depreciation and amortization...........................           (278)              (366)          (395)
                                                              ---------          ---------      --------- 
        Net operating loss..............................         (1,976)              (897)          (663)

Interest income.........................................          5,051              5,006          6,652
Interest expense........................................        (76,364)            (6,228)           (27)
Interest income, related parties, net...................         13,558              7,443          5,227
Provision for losses on investment related costs........            255               (451)           (35)
Other income (expense), net.............................             13               (202)           894
                                                              ---------          ---------      --------- 
        Net (loss) income before other items............        (59,463)             4,671         12,048

Share in results of affiliated companies, net...........       (486,069)          (347,203)      (150,873)
                                                              ---------          ---------      ---------
        Net loss........................................      $(545,532)         $(342,532)     $(138,825)
                                                              =========          =========      ========= 
</TABLE>

                                      118
<PAGE>
<TABLE>
<CAPTION>
                                                UNITED INTERNATIONAL HOLDINGS, INC.
                                                            PARENT ONLY
                                                             SCHEDULE I
                                        Condensed Information as to Cash Flows of Registrant
                                                       (Stated in thousands)

                                                                                       For the Ten           For the Years Ended
                                                                                       Months Ended             February 28,
                                                                                       December 31,     ----------------------------
                                                                                          1998             1998             1997
                                                                                       ------------     -----------      -----------
<S>                                                                                    <C>               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................................................. $(545,532)        $(342,532)      $(138,825)
Adjustments to reconcile net loss to net cash flows from operating activities:
  Share in results of affiliated companies, net.......................................   486,069           347,203         150,873
  Depreciation and amortization.......................................................       279               366             395
  Accretion of interest on senior notes and amortization of deferred financing costs..    76,365             6,212              --
  Provision for losses on marketable equity securities and investment related costs...        --               451              35
  (Increase) decrease in other assets.................................................    (8,813)             (157)          2,238
  (Decrease) increase in accounts payable, accrued liabilities and other..............   (11,524)           (2,582)          1,506
                                                                                       ---------         ---------       ---------
Net cash flows from operating activities..............................................    (3,156)            8,961          16,222
                                                                                       ---------         ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments.............................................  (145,678)          (77,668)       (160,290)
Proceeds from sale of short-term liquid investments...................................   128,717           107,982         144,262
Restricted cash and short-term investments released...................................       385               765           2,653
Payoff of debt recorded as subsidiary level by parent - recorded as deemed
 capital contribution to subsidiary...................................................        --          (531,800)             --
Investments in and advances to affiliated companies and other investments.............   (69,412)         (192,565)        (18,041)
Increase in notes receivable from affiliates..........................................  (147,333)               --         (37,500)
Payments on note receivable from affiliates...........................................        --             37,500             --
Capital expenditures..................................................................       (56)           (1,841)           (479)
Distribution received from affiliated company.........................................        --            123,230             --
Acquisition, transaction and development costs and other..............................    (4,207)           (2,676)          5,560
                                                                                       ---------         ---------       ---------
    Net cash flows from investing activities..........................................  (237,584)         (537,073)        (63,835)
                                                                                       ---------         ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from offering of senior discount notes.......................................        --           812,200              --
Deferred financing costs..............................................................      (409)          (19,495)             --
Issuance of common stock in connection with public offerings, net of financing costs..     7,402                --              --
Issuance of common stock in connection with Company's stock option plan...............     4,789               796             349
Cash paid for warrants................................................................        --                --          (2,156)
Payments made on payable to affiliate, net............................................        --           (76,782)          7,729
                                                                                       ---------         ---------       ---------
    Net cash flows from financing activities..........................................    11,782           716,719           5,922
                                                                                       ---------         ---------       ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS......................................  (228,958)          188,607         (41,691)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................   236,511            47,904          89,595
                                                                                       ---------         ---------       ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................. $   7,553         $ 236,511       $  47,904
                                                                                       =========         =========       =========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Issuance of preferred stock utilized in purchase of Australian investments.......... $  29,544         $      --       $      --
                                                                                       =========         =========       =========
  Non-cash issuance of warrants by subsidiary to purchase subsidiary stock............ $      --         $   3,678       $      --
                                                                                       =========         =========       =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
  Cash received for interest.......................................................... $   5,003         $   5,318       $   6,964
                                                                                       =========         =========       =========
</TABLE>

                                      119
<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
December 31, 1998 and February 28, 1998, and the related consolidated statements
of operations, parent's deficit and cash flows for the ten months ended December
31, 1998 (see Note 2) and for the years ended February 28, 1998 and February 28,
1997.  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,
1998, we did not audit the financial statements of Tele Cable de Morelos S.A. de
C.V. and related companies  ("Megapo") as of and for the year ended December 31,
1997, an investment which is reflected in the accompanying  financial statements
using the equity method of accounting.  Those financial  statements were audited
by other auditors whose report has been furnished to us and our opinion, insofar
as  it  relates  to  the  amounts   included  for  Megapo  in  the  accompanying
consolidated  financial  statements and related footnotes is based solely on the
report of 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  report  of other  auditors,  provide  a
reasonable basis for our opinion.

In our  opinion,  based on our  audits  and the  report 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  December  31,  1998  and  February  28,  1998  and the  results  of their
operations  and their cash flows for the ten months ended  December 31, 1998 and
the years ended  February 28, 1998 and February 28,  1997,  in  conformity  with
generally accepted accounting principles.


                               ARTHUR ANDERSEN LLP


Denver, Colorado
April 30, 1999

                                      120

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

                                                                                                             As of          As of
                                                                                                          December 31,  February 28,
                                                                                                             1998           1998
                                                                                                          ------------  ------------
<S>                                                                                                        <C>           <C>
ASSETS
Current assets
  Cash and cash equivalents.............................................................................   $ 12,409      $ 22,764
  Restricted cash.......................................................................................        753         9,115
  Short-term liquid investments.........................................................................      3,131        12,325
  Subscriber receivables, net of allowance for doubtful accounts of $634 and $0, respectively...........      6,970         2,648
  Costs to be reimbursed by affiliated companies, net...................................................        280           211
  Other related party receivables.......................................................................      2,064         3,608
  Other receivables.....................................................................................        933         2,194
  Other current assets, net.............................................................................      6,231         4,899
                                                                                                           --------      --------
        Total current assets............................................................................     32,771        57,764

Investments in and advances to affiliated companies, accounted for under the equity method, net.........    175,281       149,218
Property, plant and equipment, net of accumulated depreciation of $153,860 and $80,103, respectively....    142,688       198,684
Goodwill and other intangible assets, net of accumulated amortization of $18,989 and $12,121,
  respectively..........................................................................................     65,130        50,029
Deferred financing costs, net of accumulated amortization of $3,237 and $1,386, respectively............     11,675        13,734
Non-current restricted cash and other assets, net.......................................................      4,610         5,000
                                                                                                           --------      --------
        Total assets....................................................................................   $432,155      $474,429
                                                                                                           ========      ========

LIABILITIES AND PARENT'S DEFICIT
Current liabilities
  Accounts payable, including related party payables of $2,291 and $1,810, respectively.................   $ 11,679      $ 14,761
  Accrued liabilities...................................................................................     34,165        27,812
  Short-term debt.......................................................................................     59,875           --
  Current portion of senior discount notes..............................................................        412           --
  Current portion of other long-term debt...............................................................      2,189        36,682
  Other current liabilities.............................................................................      3,524           743
                                                                                                           --------      --------
        Total current liabilities.......................................................................    111,844        79,998

Notes payable to parent.................................................................................    107,396        38,993
Senior discount notes...................................................................................    356,640       309,491
Other long-term debt....................................................................................     68,086        77,969
Other long-term liabilities, including due to parent of $575 and $3,238, respectively...................      3,016         4,665
                                                                                                           --------      --------
        Total liabilities...............................................................................    646,982       511,116
                                                                                                           --------      --------
Minority interests in subsidiaries......................................................................      4,983        11,830
                                                                                                           --------      --------
Parent's deficit:
  Common  Stock,  $0.01 par value,  1,000  shares  authorized,  100 and 100 shares issued and
    outstanding, respectively, (pledged as collateral under parent's senior discount notes).............         --            --
  Additional paid-in capital............................................................................    615,712       509,959
  Accumulated deficit...................................................................................   (770,620)     (514,990)
  Other cumulative comprehensive loss...................................................................    (64,902)      (43,486)
                                                                                                           --------      --------
        Total parent's deficit..........................................................................   (219,810)      (48,517)
                                                                                                           --------      --------
Commitments and Contingencies (Notes 13 and 14)

        Total liabilities and parent's deficit..........................................................   $432,155      $474,429
                                                                                                           ========      ========

                      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 Ten         For the Years Ended
                                                                                       Months Ended            February 28,
                                                                                       December 31,     --------------------------
                                                                                          1998             1998           1997
                                                                                       ------------     -----------    -----------
<S>                                                                                     <C>              <C>           <C>
Revenue.............................................................................    $  81,781        $  88,644     $  30,771
System operating expense............................................................      (65,688)         (62,886)      (26,799)
System selling, general and administrative expense..................................      (48,825)         (59,385)      (33,655)
Corporate general and administrative expense........................................      (14,790)         (20,250)      (16,258)
Depreciation and amortization.......................................................      (82,217)         (85,204)      (38,566)
                                                                                        ---------        ---------     ---------
        Net operating loss..........................................................     (129,739)        (139,081)      (84,507)

Interest income.....................................................................        1,973            2,568         6,480
Interest expense....................................................................      (48,339)        (116,015)      (79,632)
Interest expense, related party.....................................................       (7,536)          (7,063)       (5,029)
Provision for losses on marketable equity securities and investment related costs...       (6,810)         (14,342)       (5,824)
Gain on sale of investments in affiliated companies.................................           --           90,020        65,249
Other expense, net..................................................................       (3,896)          (4,961)         (833)
                                                                                        ---------        ---------     ---------
        Net loss before other items.................................................     (194,347)        (188,874)     (104,096)

Share in results of affiliated companies, net.......................................      (28,487)         (26,771)      (23,273)
Minority interests in subsidiaries..................................................          617            1,685         4,358
                                                                                        ---------        ---------     ---------
        Net loss before extraordinary charge........................................     (222,217)        (213,960)     (123,011)

Extraordinary charge for early retirement of debt...................................           --          (79,091)           --
                                                                                        ---------        ---------     ---------
        Net loss ...................................................................    $(222,217)       $(293,051)    $(123,011)
                                                                                        =========        =========     ========= 



                      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)

                                                                                           Other                 
                                             Common Stock      Additional                Cumulative         Total 
                                         --------------------   Paid-In    Accumulated  Comprehensive    Comprehensive
                                           Shares      Amount   Capital      Deficit       Loss(1)           Loss          Total
                                         ----------  --------  ----------  -----------  --------------   -------------   ---------
<S>                                      <C>           <C>     <C>         <C>            <C>              <C>           <C>
Balances, February 29, 1996.............    100        $ --    $ 61,669    $ (98,928)     $ (5,484)        $      --     $ (42,743)
Gain on sale of stock by subsidiary.....     --          --       5,898           --            --                --         5,898
Capital distribution to parent..........     --          --      (2,079)          --            --                --        (2,079)
Net loss................................     --          --          --     (123,011)           --          (123,011)     (123,011)
Unrealized loss on investment...........     --          --          --           --        (4,880)           (4,880)       (4,880)
Change in cumulative translation
 adjustments............................     --          --          --           --        (1,141)           (1,141)       (1,141)
                                            ---        ----     --------   ---------      --------         ---------     --------- 
Balances, February 28, 1997.............    100          --      65,488     (221,939)      (11,505)        $(129,032)     (167,956)
                                                                                                           =========

Issuance of warrants to purchase
 common stock of subsidiary.............     --          --       3,678           --            --         $      --         3,678
Gain on sale of stock by subsidiary.....     --          --       7,614           --            --                --         7,614
Payoff of debt recorded at subsidiary
 level by parent - recorded as
 deemed capital contribution............     --          --     531,800           --            --                --       531,800
Capital distribution to parent, net          --          --     (98,621)          --            --                --       (98,621)
Net loss................................     --          --          --     (293,051)           --          (293,051)     (293,051)
Change in unrealized gain (loss)
 on investments, net....................     --          --          --           --        (1,593)           (1,593)       (1,593)
Provision for loss on marketable
 equity securities......................     --          --          --           --         8,013             8,013         8,013
Change in cumulative translation
 adjustments............................     --          --          --           --       (38,401)          (38,401)      (38,401)
                                            ---        ----    --------    ---------      --------         ---------     --------- 
Balances, February 28, 1998.............    100          --     509,959     (514,990)      (43,486)        $(325,032)      (48,517)
                                                                                                           =========

Cash contributions from parent..........     --          --      65,982           --            --         $      --        65,982
Non-cash contributions from parent......     --          --      39,767           --            --                --        39,767
Distribution of net investment in
 subsidiaries to parent, at cost........     --          --           4           --            --                --             4
Elimination of historical two month
 reporting difference due to change
 in fiscal year end.....................     --          --          --      (33,413)           --                --       (33,413)
Net loss................................     --          --          --     (222,217)           --          (222,217)     (222,217)
Change in unrealized gain (loss)
 on investment, net.....................     --          --          --           --          (505)             (505)         (505)
Change in cumulative translation
 adjustments............................     --          --          --           --       (20,911)          (20,911)      (20,911)
                                            ---        ----    --------    ---------      --------         ---------     --------- 
Balances, December 31, 1998.............    100        $ --    $615,712    $(770,620)     $(64,902)        $(243,633)    $(219,810)
                                            ===        ====    ========    =========      ========         =========     ========= 

 (1) Other  Cumulative  Comprehensive  Loss at the end of each reporting  period consists of the following:

                                                   As of          As of February 28,           As of
                                               February 29,     ----------------------      December 31,
                                                   1996           1997         1998            1998
                                               ------------     ---------    ---------      ------------

Foreign currency translation adjustments...      $(4,295)       $ (5,436)    $(43,837)       $(64,748)
Unrealized gain (loss) on investments......       (1,189)         (6,069)         351            (154)
                                                 -------        --------     --------        --------
        Total..............................      $(5,484)       $(11,505)    $(43,486)       $(64,902)
                                                 =======        ========     ========        ======== 


                      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 Ten         For the Years Ended
                                                                                         Months Ended            February 28,
                                                                                         December 31,     --------------------------
                                                                                            1998             1998           1997
                                                                                         ------------     -----------    -----------
<S>                                                                                       <C>              <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................. $(222,217)       $(293,051)    $(123,011)
Elimination of historical two month reporting difference due to change in fiscal year
 end.....................................................................................   (33,413)             --            --
Adjustments to reconcile net loss to net cash flows from operating activities:
  Extraordinary charge for early retirement of debt......................................        --           79,091            --
  Share in results of affiliated companies, net..........................................    34,423           27,860        23,273
  Allocation of general, administrative and other expenses accounted for as a net
    contribution of capital by parent....................................................     7,899           15,910         9,091
  Gain on sale of investments in affiliated companies, net...............................        --          (90,020)      (65,249)
  Minority interests share of losses.....................................................      (617)          (1,685)       (4,358)
  Depreciation and amortization..........................................................     99,703          85,204        38,566
  Accretion of interest on senior notes and amortization of deferred financing costs.....     49,798         104,311        73,695
  Compensation expense related to stock options..........................................      2,669              --            --
  Provision for losses on marketable equity securities and investment related costs......      6,342          14,342         5,824
  Increase in receivables, net...........................................................     (3,395)         (4,128)         (991)
  (Increase) decrease in  other assets...................................................     (8,723)          7,471        (8,263)
  Increase in accounts payable, accrued liabilities and other............................     26,969           9,905        25,595
                                                                                          ----------      ----------     ---------
        Net cash flows from operating activities.........................................    (40,562)        (44,790)      (25,828)
                                                                                          ----------      ----------     ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term liquid investments................................................     (3,923)        (16,988)     (199,242)
Proceeds from sale of short-term liquid investments......................................     13,117          23,303       180,602
Restricted cash released (deposited).....................................................      7,943          (9,115)        9,820
Investments in and advances to affiliated companies......................................    (38,346)        (64,540)     (100,247)
Proceeds from sale of investments in affiliated company..................................         --         211,125        43,098
Capital expenditures.....................................................................    (75,454)       (106,776)     (204,187)
Deconsolidation of New Zealand subsidiary................................................     (9,881)             --            --
Proceeds from sale of property, plant and equipment......................................         --           5,332            --
Distribution received from affiliated company............................................        223           1,248            --
(Decrease) increase in construction payables.............................................     (2,007)        (29,621)       38,331
Payments on notes receivable.............................................................      3,370          11,827        45,264
Acquisition, transaction and development costs and other.................................       (633)         (3,322)      (13,057)
                                                                                          ----------      ----------     ---------
        Net cash flows from investing activities.........................................   (105,591)         22,473      (199,618)
                                                                                          ----------      ----------     ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from offering of senior discount notes..........................................         --          29,925       225,115
Proceeds from short-term and long-term borrowings........................................     39,519         233,210         7,263
Deferred financing costs.................................................................       (486)        (11,373)      (10,670)
Repayments of long and short-term borrowings.............................................    (30,183)       (119,114)      (15,463)
Capital contribution from (distribution to) parent.......................................     65,982        (123,230)      (11,170)
Payments received on receivable from parent, net.........................................         --          76,782            --
Proceeds from (payment on) note payable to parent........................................     60,865         (37,500)       39,428
Payment of sellers notes.................................................................         --         (46,351)      (11,856)
Cash contributed from minority interest partners.........................................         --          22,042            --
                                                                                          ----------      ----------     ---------
        Net cash flows from financing activities.........................................    135,697          24,391       222,647
                                                                                          ----------      ----------     ---------
EFFECT OF EXCHANGE RATES ON CASH.........................................................        101            (190)        1,056
                                                                                          ----------      ----------     ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.........................................    (10,355)          1,884        (1,743)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...........................................     22,764          20,880        22,623
                                                                                          ----------      ----------     ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................. $   12,409      $   22,764     $  20,880
                                                                                          ==========      ==========     =========

                      The  accompanying  notes  are an  integral  part of  these consolidated financial statements.
</TABLE>
                                                                125

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


                                                                                         For the Ten         For the Years Ended
                                                                                         Months Ended            February 28,
                                                                                         December 31,     --------------------------
                                                                                            1998             1998           1997
                                                                                         ------------     -----------    -----------
<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     $      --
                                                                                          ==========      ==========     =========
  Issuance of parent company preferred stock utilized in purchase of Australian
   investment............................................................................ $   29,544      $     --       $      --
                                                                                          ==========      ==========     =========
  Note issued upon purchase of remaining interest in Brazilian investment................ $    5,683
                                                                                          ==========      ==========     =========
  Seller notes for purchase of Argentine systems......................................... $       --      $   52,061     $  33,401
                                                                                          ==========      ==========     =========
  Note issued upon sale of investments in Venezuela...................................... $       --      $    6,500     $      --
                                                                                          ==========      ==========     =========
  Note received upon sale of investment in Brazil system................................. $       --      $       --     $  35,000
                                                                                          ==========      ==========     =========
  Non-cash stock issuance for purchase of 50.0% interest in New Zealand affiliate......... $       --      $       --     $   7,800
                                                                                          ==========      ==========     =========
  Conversion of notes receivable to equity investment.................................... $       --      $    6,908     $      --
                                                                                          ==========      ==========     =========
  SUPPLEMENTAL CASH FLOW DISCLOSURES:
    Cash paid for interest............................................................... $    6,223      $    7,497     $     870
                                                                                          ==========      ==========     =========
    Cash received for interest........................................................... $      558      $    2,376     $   4,936
                                                                                          ==========      ==========     =========
  DECONSOLIDATION OF NEW ZEALAND SUBSIDIARY:
    Working capital...................................................................... $    4,159       $      --      $     --
    Property, plant and equipment........................................................    (26,484)             --            --
    Goodwill and other intangible assets.................................................     (2,805)             --            --
    Notes payable and other debt.........................................................      3,833              --            --
    Minority interest....................................................................     11,416              --            --
                                                                                          ----------       ---------      --------
          Total cash relinquished........................................................ $   (9,881)      $      --      $     --
                                                                                          ==========       =========      ========
  SALE OF ARGENTINE CABLE SYSTEMS:
    Working capital, net of cash relinquished of $2,133.................................. $       --      $   (3,319)    $      --
    Investments in affiliated companies..................................................         --          83,535            --
    Property, plant and equipment and other long-term assets.............................         --           4,560            --
    Goodwill and other intangible assets.................................................         --          60,727            --
    Sellers notes (assumed by the buyers)................................................         --         (24,398)           --
    Gain on sale.........................................................................         --          90,020            --
                                                                                          ==========      ==========     =========
          Cash received from sale........................................................ $       --      $  211,125     $      --
                                                                                          ==========      ==========     =========
  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
            (Stated in thousands, except share and per share amounts)

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 discount notes (the "Old Notes").

Under UIH's offering of the Old 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  and
Asia/Pacific since inception.  UIPI reflected all of the transfers from UIH as a
capital  contribution  from parent in the  accompanying  consolidated  financial
statements.

The following chart presents a summary of the Company's significant  investments
in multi-channel television and telephony operations as of December 31, 1998.

********************************************************************************
*                                                                              *
*                                     UIH                                      *
*                                                                              *
********************************************************************************
                                       * 
                                 100%  *                             
********************************************************************************
*                                                                              *
*                                     UIPI                                     *
*                                                                              *
********************************************************************************
                                       *    
                  ****************************************
             98%  *                                      *  100%       
*************************************** ****************************************
*UIH Asia/Pacific Communications, Inc.* *       UIH Latin America, Inc.        *
*              ("UAP")*               * *             ("UIH LA")               *
*************************************** ****************************************
                   *                         *  
                   *                         *
*************************************** ****************************************
*                                     * *                                      *
*Australia:                           * *Brazil:                               *
* CTV Pty Limited and STV Pty         * * TV Show Brasil, S.A.                 *
*  Limited (collectively,             * *  ("TVSB")                  100.0%    *
*  "Austar")                100.0%    * * TV Cabo e Comunicacoes               *
* United Wireless Pty                 * *  de Jundiai, S.A.                    *
*  Limited ("United                   * *  ("Jundiai")                46.3%    *
*  Wireless")               100.0%    * *Chili:                                *
* XYZ Entertainment Pty               * * VTR Hipercable S.A.                  *
*  Limited ("XYZ                      * *  ("VTRH")                   40.0% (3)*
*  Entertainment")           50.0%    * *Mexico:                               *
*China:                               * * Tele Cable de Morelos, S.A.          *
* Hunan International TV              * *  de C.V. ("Megapo")         49.0%    *
*  Communications Company             * *Peru:                                 *
*  Limited ("HITV")          49.0% (1)* * Cable Star S.A. ("Cable              *
*New Zealand:                         * *  Star")                     60.0%    *
* Saturn Communications               * *Latin American Programming:           *
*  Limited ("Saturn")        65.0%    * * MGM Networks Latin                   *
*Philippines:                         * *  America LLC ("MGM                   *
* Philipino Cable                     * *  Networks LA")              50.0%    *
*  Corporation ("PCC")       19.6% (2)* *                                      *
*Tahiti:                              * ****************************************
* Telefenua S.A.                      *
*  ("Telefenua")             90.0%    *          
*                                     *
*************************************** 

(1)  Pursuant to a memorandum of understanding  with AmTec,  Inc.  ("AmTec") UAP
     and AmTec  agreed  to  exchange  UAP's  interest  in HITV for AmTec  stock.
     Closing on the transaction is expected to occur by the end of 1999, subject
     to certain conditions.

                                      127
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

(2)  UAP currently holds a convertible  loan,  which upon full conversion  would
     provide UAP with a 40.0%  equity  ownership  interest in Sun Cable  Systems
     ("Sun Cable").  UIPI will hold an effective  19.6% interest in PCC when the
     merger  between Sun Cable  (49.0%) and Sky Cable  (51.0%) is  completed  in
     1999.
(3)  On April 29, 1999,  ULA acquired the remaining  ownership  interest in VTRH
     from its current partners,  increasing its ownership  interest to 100% (see
     Note 17).

LIQUIDITY AND CAPITAL RESOURCES

As of December  31,  1998,  the Company  had a net  working  capital  deficit of
$79,073.  Subsequent  to  December  31,  1998,  $36,738 of  short-term  debt was
refinanced  on a long-term  basis.  Sources of cash in the next year may include
funding from UIH, raising of additional  private or public debt or equity and/or
the sale of non-strategic  assets by certain  subsidiaries.  Management believes
that  these  capital  resources  will  enable  UIPI to fund  the  operating  and
development requirements of its subsidiaries and to cover corporate overhead for
the next year. If UIPI pursues new  acquisitions  or development  opportunities,
UIPI would need to raise additional capital or seek strategic partners.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

PRINCIPLES OF CONSOLIDATION

The accompanying  consolidated  financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial interest
through  the  ownership  of  a  majority  voting   interest.   The  Company  has
consolidated  the  operations of Saturn since July 1, 1996.  Prior to that time,
the Company  accounted  for its  investment  in Saturn under the equity  method.
Effective January 1, 1998, the Company discontinued consolidating the results of
operations of Saturn and returned to the equity method of accounting. The change
was made to comply with the consensus guidance of the Emerging Issues Task Force
regarding  Issue 96-16 "EITF 96-16",  and related rules of the SEC,  because the
minority shareholders of Saturn have participating  approval or veto rights with
respect to certain  significant  decisions of Saturn in the  ordinary  course of
business. The Company is currently discussing alternatives which would allow for
the consolidation of Saturn. Effective October 1, 1998, the Company discontinued
consolidating   the   results   of   operations   of   Telefenua   due   to   an
other-than-temporary  loss of  control  and  began  using the  equity  method of
accounting.  In September 1996, ULA 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.

CHANGE IN FISCAL YEAR END

Prior to the ten months ended December 31, 1998,  the Company's  fiscal year end
was  February  28, and it  accounted  for its share of the income or loss of its
operating  companies  based  on the  calendar  year  results  of each  operating
company.  This  created a two month delay in  reporting  the  operating  company
results  in the  Company's  consolidated  results  for its fiscal  year-end.  On
February 24, 1999, the Company  changed its fiscal year-end from the last day in
February to the last day in December, effective December 31, 1998. To effect the
transition to the new fiscal year end, the combined results of operations of the
operating  companies for January and February 1998, a loss of $33,413,  has been
reported  as a one-time  charge to  retained  deficit as of March 1, 1998 in the
consolidated  statement  of parent's  deficit.  Consequently,  the  consolidated
statement of operations presents the consolidated results of the Company and its
subsidiaries  for the ten  months  ended  December  31,  1998.  For  comparative
purposes,  the Company's  consolidated  revenue, net operating loss and net loss
were  $74,381,  $115,275 and  $173,174,  respectively,  for the ten months ended
December 31, 1997.

CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS

Cash and cash equivalents  include cash and investments with original maturities
of less than  three  months.  Short-term  investments  include  certificates  of

                                      128
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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

RESTRICTED CASH

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

COSTS TO BE REIMBURSED BY AFFILIATED COMPANIES

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

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

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

PROPERTY, PLANT AND EQUIPMENT

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

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

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

GOODWILL AND OTHER INTANGIBLE ASSETS

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

RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS

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

                                      129
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

DEFERRED FINANCING COSTS

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

OTHER COMPREHENSIVE LOSS

The Company has adopted  Statement of Financial  Accounting  Standards  No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an enterprise
(i) classify  items of other  comprehensive  income  (loss) by their nature in a
financial   statement  and  (ii)  display  the  accumulated   balance  of  other
comprehensive  income (loss)  separately  from retained  earnings and additional
paid-in capital in the equity section of a statement of financial position.

REVENUE RECOGNITION

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

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist  principally of 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,  which
results in compensation  expense for the difference  between the grant price and
the fair market value at each new  measurement  date. UAP and ULA have incentive
stock option plans for their employees.  With respect to these plans, the rights
conveyed to employees  are the  substantive  equivalents  to stock  appreciation
rights. Accordingly,  compensation expense and deferred compensation expense are
recognized at each financial  statement date based on the difference between the
grant price and the estimated fair value of the respective  subsidiary's  common
stock.

INCOME TAXES

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

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.

                                      130
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

Cumulative  translation  adjustments  are  recorded as a separate  component  of
parent's (deficit) equity, included in Other Comprehensives Loss.

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

Cash flows from the  Company's  operations in foreign  countries are  translated
based on their functional currencies. As a result, amounts related to assets and
liabilities reported on the consolidated statements of cash flows will not agree
to changes in the corresponding balances on the consolidated balance sheets. The
effects of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line below cash flows from financing activities.

Certain of the  Company's  foreign  operating  companies  have notes payable and
notes  receivable  that are  denominated  in a  currency  other  than  their own
functional currency.  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.

NEW ACCOUNTING PRINCIPLES

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  adopted  SFAS 131 for the ten months  ended
December 31, 1998.

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"   ("SFAS  133"),   which  requires  that  companies   recognize  all
derivatives  as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133,  accounting for changes in fair value of a derivative depends on
its  intended  use and  designation.  SFAS 133 is  effective  for  fiscal  years
beginning after June 15, 1999. The Company is currently  assessing the effect of
this new standard.

The American Institute of Certified Public Accountants recently issued Statement
of Position 98-1,  "Accounting for the Costs of Computer  Software  Developed or
Obtained for Internal Use" ("SOP 98-1"),  which provides  guidance on accounting
for the costs of computer  software  developed or obtained for internal use. SOP
98-1  identifies  the  characteristics  of  internal-use  software  and provides
examples to assist in  determining  when computer  software is for internal use.
SOP 98-1 is effective for financial  statements for fiscal years beginning after
December 15, 1998,  for  projects in progress  and  prospectively,  with earlier
application  encouraged.  Management believes that the adoption of SOP 98-1 will
not have a material effect on its financial position or results of operations.

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.  The company does
not expect the adoption of SOP 98-5 to have a material  effect on its  financial
position or results of operations.

RECLASSIFICATIONS

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

3.   ACQUISITIONS AND DISPOSITIONS

MGM NETWORKS LA

In 1997,  ULA and  International  Family  Entertainment  ("IFE")  created United
Family Communications, LLC ("UFC") which was 50.0% owned by ULA and IFE. In July
1997,   UFC   launched  two   channels  of  Spanish  and   Portuguese   language
family-oriented  programming distributed via satellite throughout Latin America.
In May 1998, ULA acquired IFE's 50.0% ownership interest in UFC and then entered
into a joint  venture with a division of  Metro-Goldwyn-Mayer,  Inc.  ("MGM") to
form MGM Networks LA. Under the terms of the joint venture,  ULA contributed its
100.0% interest in UFC for a 50.0% interest in MGM Networks LA, and MGM acquired

                                      131
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

a 50.0% 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.

AUSTAR

In July 1998,  Austar acquired certain  Australian pay television assets of East
Coast  Television Pty Limited  ("ECT"),  an affiliate of Century  Communications
Corporation  ("Century"),  for $6,155 of the  Company's  newly-created  Series B
Convertible  Preferred Stock.  ECT's subscription  television  business includes
subscribers  and certain MMDS licenses and  transmission  equipment  serving the
areas in and around Newcastle, Gossford, Wollongong and Tasmania, Australia.

XYZ ENTERTAINMENT

In  September  1998,  UAP  acquired the  Australian  programming  assets held by
Century,  consisting  of  Century's  25.0%  interest  in  XYZ  Entertainment,  a
programming company that owns and/or distributes five channels to the Australian
multi-channel marketplace.  Following the acquisition, UAP owns a total of 50.0%
of XYZ Entertainment. The purchase price consisted of $1,231 in cash and $23,389
of the Company's Series B Preferred Stock.

TVSB

On October 2, 1998,  ULA increased its ownership  interest in TVSB from 45.0% to
100% for $11,400, half of which was paid in cash, with the remainder financed by
the seller. This "TVSB Seller Note" bears interest at 10.0% and is due September
14, 1999.

CABLE STAR

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

ARGENTINA

In October 1996,  the Company  acquired 100% of two cable systems and 80.0% 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 20.0% 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, ULA 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,  ULA agreed to acquire up to an 80.0%
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, ULA closed the  acquisition of the first 31.0% equity interest for a total
purchase  price of $23,000 and paid a $2,000  deposit to acquire the  additional
38.0% equity interest by July 15, 1997 and the additional  11.0% equity interest
by the end of July 1997.  The total purchase price was paid 50.0% 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

                                      132
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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 notes payable to sellers from the original  acquisitions.
From this net sales price of $242,900,  $29,600 was paid  directly by the buyers
to other  minority  interest  stockholders,  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 75.0%. A gain of $1,629  recognized on the transaction was credited
to additional paid-in capital in accordance with SAB 51.

NET SAO PAULO

In August 1996, the Company sold its 34.0% interest in Net Sao Paulo for $43,098
in cash and a $35,000 note receivable  which was collected during the year ended
February 28, 1997. The Company recognized a gain of $65,249 on the transaction.

STX, CABLEVISION AND VTRH

In June 1995,  ULA  completed  an  acquisition  of 65.0% 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, ULA acquired the remaining 35.0% of STX for $24,000.  The
Company acquired an initial 50.0% interest in Cablevision  S.A.  ("Cablevision")
in January 1994 for $3,900.  In January  1996,  ULA  increased  its ownership in
Cablevision to 100% for approximately  $22,100. ULA contributed its interests in
STX and  Cablevision in exchange for a 40.0% 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,  in  contemplation of the formation
of VTRH.

SATURN

In July 1994,  the  Company  acquired a 50.0%  interest  in Kiwi  Communications
Limited,  which  subsequently  changed  its name to Saturn.  In July  1996,  the
Company  acquired the remaining  50.0% interest in Saturn in exchange for a 2.6%
interest in a wholly-owned  subsidiary of UAP, UIH Australia/Pacific  Inc. ("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 2.0% 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 50.0%......         (9,133)
                                                                ------
         Net assets....................................           (973)
     Goodwill..........................................          8,773
                                                                ------
         Total consideration...........................         $7,800
                                                                ======

In July 1997, SaskTel Holdings (New Zealand), Inc. ("SaskTel") purchased a 35.0%
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 65.0%. A gain of $5,985 recognized on the
transaction  was credited to additional  paid-in  capital in accordance with SAB
51.

PRO FORMA FINANCIAL INFORMATION FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997

The following 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.

                                      133
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)
<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>
     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>
     (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 year ended  February 28, 1997 gives effect to the  disposition  of the 34.0%
interest in Net Sao Paulo as if it had occurred at the  beginning of the period.
This pro forma condensed  consolidated financial information and note thereto do
not purport to represent what the Company's results of operations would actually
have been if such  transaction  had in fact occurred on such date. The pro forma
adjustments  are based upon  currently  available  information  and upon certain
assumptions that management believes are reasonable.

                                                For the Year Ended
                                                February 28, 1997
                                            ---------------------------
                                            Historical    Pro Forma (1)
                                            ----------    -------------
     Revenue..............................  $  30,771       $  30,771
                                            =========       =========
     Net loss.............................  $(123,011)      $(186,471)
                                            =========       ========= 

     (1) Represents  elimination of historical  statement of operations balances
         related to Net Sao Paulo and  elimination  of the gain  recorded on the
         sale.

4.   CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
<TABLE>
<CAPTION>
                                                           As of December 31, 1998
                                           -------------------------------------------------------
                                                            Restricted 
                                                             Cash and        
                                           Cash and Cash    Short-term      Short-term
                                            Equivalents     Investments     Investments     Total
                                           -------------    -----------     -----------    -------
     <S>                                     <C>               <C>            <C>          <C>
     Cash.................................   $ 1,499           $753           $   --       $ 2,252
     Certificates of deposit..............        --             --              250           250
     Commercial paper.....................    10,648             --            1,187        11,835
     Corporate bonds......................        --             --              187           187
     Government securities................       262             --            1,507         1,769
                                             -------           ----           ------       -------
        Total.............................   $12,409           $753           $3,131       $16,293
                                             =======           ====           ======       =======
</TABLE>
<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
                                             -------          ------         -------       -------
        Total.............................   $22,764          $9,115         $12,325       $44,204
                                             =======          ======         =======       =======
</TABLE>
                                      134
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

5.  INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER THE
    EQUITY METHOD
<TABLE>
<CAPTION>
                                                                   As of December 31, 1998
                               ---------------------------------------------------------------------------------------------------
                                 Investments in                         Cumulative          Cumulative
                                 and Advances to       Dividends    Share in Results of     Translation     Valuation
                               Affiliated Companies    Received    Affiliated Companies     Adjustments     Allowance      Total
                               --------------------    ---------   --------------------     -----------     ---------    ---------
<S>                                 <C>                <C>             <C>                   <C>            <C>          <C>
Europe:
 IPS........................        $ 14,082           $    --         $  (7,418)            $    (25)      $    --      $  6,639
Asia/Pacific:
 Saturn.....................          49,808                --           (23,138)              (2,881)           --        23,789
 XYZ Entertainment..........          44,306                --           (18,537)                 111            --        25,880
 PCC........................          11,673                --            (2,812)              (2,824)           --         6,037
 HITV.......................           6,073                --            (2,435)                  16            --         3,654
 Telefenua..................          18,599                --           (14,215)                  --        (4,384)           --
 Other......................             350                --                --                   --            --           350
Latin America:
 VTRH.......................         112,052                --           (17,203)              (9,874)           --        84,975
 Megapo.....................          32,496            (1,471)           (1,122)             (11,067)           --        18,836
 MGM Networks LA (1)........          19,272                --           (19,272)                  --            --            --
 Jundiai....................           6,797                --              (587)              (1,089)           --         5,121
                                    --------           -------         ---------             --------       -------      --------
        Total...............        $315,508           $(1,471)        $(106,739)            $(27,633)      $(4,384)     $175,281
                                    ========           =======         =========             ========       =======      ========
</TABLE>
<TABLE>
<CAPTION>
                                                           As of February 28, 1998
                              ---------------------------------------------------------------------------------------
                                 Investments in                         Cumulative          Cumulative
                                 and Advances to       Dividends    Share in Results of     Translation
                               Affiliated Companies    Received    Affiliated Companies     Adjustments       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 (2)......          18,610                --          (18,720)                  110             --
 Sun Cable..................          12,336                --           (1,023)               (2,783)         8,530
 HITV.......................           6,073                --             (236)                    7          5,844
 Other......................             182                --               --                    --            182
Latin America:
 VTRH.......................          92,754                --          (10,327)               (4,262)        78,165
 Megapo.....................          32,496            (1,248)          (1,313)               (1,604)        28,331
 TVSB.......................           7,132                --           (3,771)                   --          3,361
 UFC........................          12,099                --           (7,487)                   --          4,612
 Jundiai....................           6,652                --             (788)                   --          5,864
                                    --------           -------         --------              --------       --------
        Total...............        $229,436           $(1,248)        $(64,087)             $(14,883)      $149,218
                                    ========           =======         ========              ========       ========
</TABLE>
     (1) Includes an accrued funding  obligation of $3,012 at December 31, 1998.
         The Company would face significant and punitive  dilution if it did not
         make the requested fundings.
     (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.


As of December 31, 1998 and February  28,  1998,  the Company had the  following
differences  related to the excess of cost over its  proportionate  interest  in
each  affiliates  net  tangible  assets  included  in  the  above  table.   Such
differences are being amortized over 15 years.

                                      135
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                    As of December 31, 1998         As of February 28, 1998
                                  --------------------------      ---------------------------
                                    Basis       Accumulated         Basis       Accumulated
                                  Difference    Amortization      Difference    Amortization
                                  ----------    ------------      ----------    ------------
<S>                                <C>           <C>               <C>            <C>
Europe:
 IPS........................       $ 2,216       $   (85)          $   651        $   (53)
Asia/Pacific:
 XYZ Entrtainment...........        23,595            --                --             --
 Saturn.....................        12,733        (1,005)               --             --
Latin America:
 VTRH.......................        19,994        (1,941)           11,368         (1,211)
 Megapo.....................        19,583        (5,767)           21,528         (4,307)
 TVSB.......................            --            --             2,361           (895)
 Jundiai....................            --            --               540           (172)
 UFC........................            --            --               439            (63)
                                   -------       -------           -------        ------- 
   Total....................       $78,121       $(8,798)          $36,887        $(6,701)
                                   =======       =======           =======        =======
</TABLE>

VTRH

Condensed financial information for VTRH stated in U.S. dollars is as follows:
<TABLE>
<CAPTION>
                                                                             As of December 31,
                                                                        --------------------------
                                                                          1998              1997
                                                                        --------          --------
     <S>                                                                <C>               <C>
     Cash......................................................         $ 11,254          $ 11,788
     Goodwill, net.............................................          109,464           123,278
     Property, plant and equipment, net........................          186,660           173,264
     Other Assets..............................................           33,486            78,276
                                                                        --------          --------
          Total assets.........................................         $340,864          $386,606
                                                                        ========          ========

     Accounts payable and accrued liabilities..................         $ 53,877          $ 24,642
     Bank debt.................................................           88,495           165,160
     Related party debt........................................            1,663               404
     Shareholders' equity......................................          196,829           196,400
                                                                        --------          --------
          Total liabilities and shareholders' equity...........         $340,864          $386,606
                                                                        ========          ========
</TABLE>
<TABLE>
<CAPTION>
                                                                                     For the Years Ended
                                                                                        December 31,
                                                                        ------------------------------------------
                                                                          1998             1997             1996
                                                                        --------         --------         --------
     <S>                                                                <C>              <C>              <C>
     Revenue...................................................         $119,005         $114,318         $ 70,717
     Operating, selling, general and administrative expense....          (90,983)         (92,970)         (61,084)
     Depreciation and amortization.............................          (27,531)         (22,707)         (14,192)
                                                                        --------         --------         --------
          Net operating loss...................................              491           (1,359)          (4,559)
     Other.....................................................          (19,524)         (19,252)          (8,928)
                                                                        --------         --------         --------
          Net loss.............................................         $(19,033)        $(20,611)        $(13,487)
                                                                        ========         ========         ======== 
</TABLE>
                                      136
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

Condensed  financial  information  for  Saturn,  stated in U.S.  dollars,  is as
follows:
                                                                     As of
                                                               December 31, 1998
                                                               -----------------
     Current assets..........................................      $  4,071
     Non-current assets......................................        59,242
                                                                   --------
          Total assets.......................................      $ 63,313
                                                                   ========

     Current liabilities.....................................      $ 33,608
     Non-current liabilities.................................            19
     Shareholders' equity....................................        29,686
                                                                   --------
          Total liabilities and shareholders' equity.........      $ 63,313
                                                                   ========

                                                              For the Year Ended
                                                              December 31, 1998
                                                              ------------------
     Revenue.................................................      $  1,693
     Expenses................................................       (16,934)
                                                                   --------
          Net loss...........................................      $(15,241)
                                                                   ========
<TABLE>
<CAPTION>
6.   PROPERTY, PLANT AND EQUIPMENT                                                         As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
     <S>                                                                                  <C>              <C>
     Cable distribution networks............................................              $  9,095         $ 22,460
     Subscriber premises equipment and converters...........................               193,689          160,728
     MMDS/DTH distribution facilities.......................................                55,532           55,093
     Office equipment, furniture and fixtures...............................                10,485           11,279
     Buildings and leasehold improvements...................................                 3,027            5,729
     Other..................................................................                24,720           23,498
                                                                                          --------         --------
                                                                                           296,548          278,787
        Accumulated depreciation............................................              (153,860)         (80,103)
                                                                                          --------         --------
        Net property, plant and equipment...................................              $142,688         $198,684
                                                                                          ========         ========
</TABLE>
<TABLE>
<CAPTION>
7.   GOODWILL AND OTHER INTANGIBLE ASSETS                                                  As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
   <S>                                                                                    <C>              <C>
   Europe:
     Other..................................................................              $    --          $   380
   Asia/Pacific: 
     Austar.................................................................               55,804           51,552
     Saturn (1).............................................................                   --            6,100
     Other..................................................................                4,267            2,873
   Latin America:
     TVSB...................................................................               16,161               --
     Cable Star.............................................................                7,887            1,245
                                                                                          --------         -------
                                                                                           84,119           62,150
        Accumulated amortization............................................              (18,989)         (12,121)
                                                                                          -------          -------
        Net goodwill and other intangible assets............................              $65,130          $50,029
                                                                                          =======          =======
</TABLE>
(1) Saturn was de-consolidated effective January 1, 1998.

                                      137
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
8.   SHORT-TERM DEBT                                                                       As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
     <S>                                                                                  <C>              <C>
     Austar Bank Facility (see Note 10).....................................              $36,738          $    --
     VTRH Note..............................................................                9,284               --
     ULA Revolving Credit Facility..........................................                8,000               --
     TVSB Seller Note (see Note 3)..........................................                5,853               --
                                                                                          -------          -------
        Total short-term debt...............................................              $59,875          $    --
                                                                                          =======          =======
</TABLE>
Carrying value approximates fair value for these short-term facilities.

VTRH NOTE

UIH Chile, Inc., a wholly-owned subsidiary of ULA, executed a promissory note in
the amount of $7,770 payable to VTR S.A.,  the majority  shareholder of VTRH, in
exchange  for  51,993  shares of VTRH (the  "VTRH  Note").  The VTRH Note  bears
interest  at 12.95% per annum and is due April 30,  1999.  On April 29, 1999 the
VTRH Note was repaid in conjunction with the VTRH Acquisition (see Note 17).

ULA REVOLVING CREDIT FACILITY

In November 1997, ULA entered into an amended and restated credit agreement with
a bank for a  revolving  credit  facility of up to $40,000  (the "ULA  Revolving
Credit  Facility").  Borrowings under this facility were due within 12 months at
an interest rate of LIBOR plus 3.5%. The facility was extendable up to 18 months
under certain  conditions.  In November 1998, ULA exercised its option to extend
the maturity date until  February  1999,  increasing  the interest rate to LIBOR
plus 4.0%. The agreement was also amended to reduce the facility from $40,000 to
$8,000  effective  November  20,  1998.  As of  December  31,  1998,  ULA had an
outstanding  balance of $8,000 under this facility  which was repaid in February
1999.

9.   SENIOR DISCOUNT NOTES
                                                 As of           As of
                                              December 31,    February 28,
                                                 1998            1998
                                              ------------    ------------
     Old Notes (as defined below)............   $    412        $    368
     1996 UIH A/P Notes (as defined below)...    321,687         278,662
     1997 UIH A/P Notes (as defined below)...     34,953          30,461
                                                --------        --------
                                                 357,052         309,491
        Less current portion.................      (412)              --
                                                --------        --------
        Total senior discount notes..........   $356,640        $309,491
                                                ========        ========

1998 NOTES AND OLD 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 their 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 the UIH's existing  14.0% 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. The 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
$79,091.

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 UIH on or after
February 15, 2003.

                                      138
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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 the 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
totaling $15,000,  refinancing  indebtedness,  normal indebtedness to restricted
affiliates and other letters of credit in the ordinary  course of business.  The
Indenture  also limits the amount of additional  debt that its  subsidiaries  or
controlled  affiliates  may  borrow,  or  preferred  shares that they may issue.
Generally,  additional  borrowings,  when added to existing  indebtedness,  must
satisfy,  among other  conditions,  at least one of the following tests: (i) 7.0
times the  borrower's  consolidated  operating  cash  flow;  (ii) 1.75 times its
consolidated  interest  expense;  or (iii) 225% of the  borrower's  consolidated
invested equity capital.  In addition,  there must be no existing  default under
the Indenture at the time of the  borrowing.  The Indenture  also  restricts its
subsidiaries' ability to make certain asset sales and certain payments.

1996 UIH A/P NOTES

The 14.0%  senior  notes,  which UIH A/P issued in May 1996 at a  discount  from
their principal  amount of $443,000 (the "1996 UIH A/P Notes"),  had an accreted
value of $321,687 as of  December  31,  1998.  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 1996 UIH A/P Notes are due May
15, 2006.  Effective May 16, 1997, the interest rate on these notes increased by
an  additional  0.75%  per  annum  to  14.75%.  On  October  14,  1998,  UIH A/P
consummated  an equity sale resulting in gross proceeds of $70,000 which reduced
the  interest  rate from 14.75% to 14.0% per annum.  Due to the  increase in the
interest rate effective May 16, 1997 until  consummation of the equity sale, the
1996 UIH A/P Notes will  accrete to a  principal  amount of  $447,418 on May 15,
2001, the date cash interest begins to accrue.

1997 UIH A/P NOTES

The 14.0% senior  notes,  which UIH A/P issued in  September  1997 at a discount
from their  principal  amount of  $45,000  (the  "1997 UIH A/P  Notes"),  had an
accreted  value of $34,953 as of December 31,  1998.  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%.  On October 14, 1998, UIH
A/P consummated an equity sale,  reducing the interest rate from 14.75% to 14.0%
per annum. Due to the increase in the interest rate effective September 23, 1997
until  consummation of the equity sale, the 1997 UIH A/P Notes will accrete to a
principal  amount of $45,448 on May 15, 2001,  the date cash interest  begins to
accrue.

On November 17, 1997, pursuant to the terms of the indentures governing the 1996
and 1997 UIH A/P  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.

                                      139
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

10.  OTHER LONG-TERM DEBT                              As of           As of
                                                    December 31,    February 28,
                                                       1998            1998
                                                    ------------    ------------
     Austar Bank Facility........................     $67,352        $ 71,531
     ULA Revolving Credit Facility(See Note 8)...          --          33,000
     Other Asia/Pacific..........................       2,923          10,120
                                                      -------        --------
                                                       70,275         114,651
        Less current portion.....................      (2,189)        (36,682)
                                                      -------        --------
        Total other long-term debt...............     $68,086        $ 77,969
                                                      =======        ========

AUSTAR BANK FACILITY

In July 1997,  Austar  secured a senior  syndicated  term debt  facility  in the
amount  of  A$200,000  ($122,459  as of  December  31,  1998)  to fund  Austar's
subscriber  acquisition and working capital needs (the "Austar Bank  Facility").
The  Austar  Bank  Facility  consisted  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.  All of Austar's  assets  were  pledged as
collateral  for the Austar Bank  Facility.  As of December 31, 1998,  Austar had
drawn the entire  amount of the working  capital  facility  and the cash advance
facility totaling  A$110,000  ($67,352).  The working capital facility was fully
repayable  on June 30,  2000.  The cash  advance  facility  was fully  repayable
pursuant to an amortization schedule beginning December 31, 2000 and ending June
30, 2004.

In  September  1998, Austar  received an amendment  to the Austar Bank  Facility
which allowed Austar to  temporarily  draw under the A$90,000 term loan facility
at an increased  interest  rate of 2.25% above the  professional  market rate in
Australia.  As of December 31, 1998, Austar had drawn A$60,000  ($36,738) on the
term loan facility for a total outstanding  balance of A$170,000.  Subsequent to
year-end an  additional  A$30,000  was borrowed  against the term loan  facility
which,  along with the A$60,000  draw,  was payable April 30, 1999. On April 23,
1999  (subsequently  executed and A$222,000  funded on April 28,  1999),  Austar
secured a new A$400,000 Syndicated Senior Secured Debt Facility (the "New Austar
Bank  Facility")  to refinance  the  A$200,000  Austar Bank Facility and to fund
Austar's  subscriber  acquisition and working capital needs. The New Austar Bank
Facility consists of two sub-facilities:  (i) A$200,000 amortizing term facility
("Tranche 1") and (ii) A$200,000 cash advance facility  ("Tranche 2"). Tranche 1
was used to refinance the Austar Bank Facility,  and Tranche 2 is available upon
the  contribution of additional  equity on a 2:1  debt-to-equity  basis.  All of
Austar's  assets are  pledged as  collateral  for this  facility.  In  addition,
pursuant to this  facility,  Austar cannot pay any  dividends,  interest or fees
under its technical  assistance  agreements  without the consent of the majority
banks.  The New Austar Bank Facility bears interest at the  professional  market
rate in Australia  plus a margin  ranging from 1.75% to 2.25% based upon certain
debt to cash flow  ratios.  The New  Austar  Bank  Facility  is fully  repayable
pursuant to an  amortization  schedule  beginning  December  31, 2002 and ending
March 31, 2006.

FAIR VALUE OF SENIOR DISCOUNT 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>
                                                                                                  Carrying       Fair
                                                                                                   Value         Value
                                                                                                  --------      --------  
     <S>                                                                                          <C>           <C>
     As of December 31, 1998:
       Old Notes.........................................................................         $    412      $    412
       1996 UIH A/P Notes................................................................          321,687       223,700
       1997 UIH A/P Notes................................................................           34,953        22,700
       Austar Bank Facility..............................................................           67,352        67,352
       Other debt........................................................................            2,923         2,923
                                                                                                  --------      --------
            Total........................................................................         $427,327      $317,087
                                                                                                  ========      ========
     As of February 28, 1998:
       Old Notes.........................................................................         $    368      $    368
       1996 UIH A/P Notes................................................................          278,662       292,380
       1997 UIH A/P Notes................................................................           30,461        29,700
       Austar Bank Facility..............................................................           71,531        71,531
       Other debt........................................................................           10,120        10,120
                                                                                                  --------      --------
            Total........................................................................         $391,142      $404,099
                                                                                                  ========      ========
</TABLE>
                                      140
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

DEBT MATURITIES
<TABLE>
<CAPTION>
The maturities of the Company's  senior  discount notes and other long-term debt
are as follows:
     <S>                                                                                          <C>
     Year Ended December 31, 1999........................................................         $  2,601
     Year Ended December 31, 2000........................................................              734
     Year Ended December 31, 2001........................................................               --
     Year Ended December 31, 2002........................................................               --
     Year Ended December 31, 2003........................................................               --
     Thereafter..........................................................................          423,992
                                                                                                  --------
     Total...............................................................................         $427,327
                                                                                                  ========
</TABLE>

OTHER FINANCIAL INSTRUMENTS

Interest  rate swap  agreements  are used by the Company  from time to time,  to
manage  interest rate risk on its floating rate debt  facilities.  Interest rate
swaps are entered into depending on the Company's  assessment of the market, and
generally  are used to  convert  the  floating  rate  debt to fixed  rate  debt.
Interest  differentials  paid  or  received  under  these  swap  agreements  are
recognized  over the life of the contracts as adjustments to the effective yield
of the underlying  debt, and related amounts payable to, or receivable from, the
counterparties are included in the consolidated  balance sheet.  Currently,  the
Company has two  interest  rate swaps to manage  interest  rate  exposure on the
Austar  Bank  Facility.  These swap  agreements  expire in 2002 and  effectively
convert an aggregate  principal  amount of A$50,000  ($30,600) of variable rate,
long-term  debt into  fixed  rate  borrowings.  As of  December  31,  1998,  the
weighted-average  fixed rate under  these  agreements  was 7.94%  compared  to a
weighted-average variable rate on the Austar Bank Facility of 6.75%. As a result
of these swap agreements,  interest expense was increased by approximately A$600
($400) during 1998.

Fair values of the  interest  rate swap  agreements  are based on the  estimated
amounts that the Company would receive or pay to terminate the agreements at the
reporting  date,  taking into  account  current  interest  rates and the current
creditworthiness  of the  counterparties.  As of December 31, 1998,  the Company
estimates  it would have paid  approximately  A$1,300  ($800) to  terminate  the
agreements.

11.  NOTE PAYABLE TO PARENT
<TABLE>
<CAPTION>
                                                                 As of         As of
                                                             December 31,  February 28,
                                                                 1998          1998
                                                             ------------  ------------
     <S>                                                       <C>           <C>
     Note payable to parent, including accrued interest
          of $16,693 and $9,155, respectively...............   $107,396      $38,993
                                                               ========      =======
</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 14.0% 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 March 1998,  UIH loaned the Company  $60,865 in  connection  with funding the
general operations of ULA as well as repayment of a portion of the ULA Revolving
Credit Facility. The UIH loan accrues interest at 10.75% 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 ULA of $37,500. Interest on the note
accrued at LIBOR plus 6.0%. In November  1997, ULA repaid the note plus interest
with proceeds from the Argentina Transaction.

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

                                      141
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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.

12.  PARENT'S DEFICIT

COMMON STOCK

Authorized capital consists of 1,000 shares of Common Stock, $.01 par value, 100
shares  issued and  outstanding,  held by UIH.  Such shares have been pledged as
collateral under UIH's 1998 Notes.

CUMULATIVE TRANSLATION ADJUSTMENTS

During the ten months ended December 31, 1998,  the Company  recorded a negative
change in cumulative translation adjustments of $20,911 primarily due to (i) the
strengthening  of the U.S. dollar compared to the Mexican peso of  approximately
23.0%  and (ii) the  strengthening  of the U.S.  dollar to the  Chilean  peso of
approximately 7.0%.

STOCK OPTION PLANS

UAP PLAN

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.

A summary of phantom stock option activity for the UAP Plan is as follows:
<TABLE>
<CAPTION>
                                                               For the Ten Months
                                                             Ended December 31, 1998
                                                          ----------------------------
                                                            Number        Weighted-
                                                              of           Average
                                                            Shares      Exercise Price
                                                          ---------     --------------
     <S>                                                  <C>              <C>
     Outstanding at beginning of period..........                --        $   --
     Granted during the period...................         1,779,500        $10.00
     Cancelled during the period.................                --        $   --
     Exercised during the period.................                --        $   --
                                                          ---------        ------

     Outstanding at end of period................         1,779,500        $10.00
                                                          =========        ======
     Exercisable at end of period................           584,063        $10.00
                                                          =========        ======
</TABLE>
The combined  weighted-average fair values and weighted-average  exercise prices
of options granted during the ten months ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
                                                                  For the Ten Months Ended
                                                                      December 31, 1998
                                                          ----------------------------------------
                                                            Number          Fair          Exercise
                                                          of Options        Value           Price
                                                          ----------       -------         -------
     <S>                                                  <C>              <C>             <C> 
     Exercise price equal to market price........         1,779,500        $10.00          $10.00
</TABLE>

                                      142
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

The following table  summarizes  information  about the UAP Plan phantom options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
                                                                 Weighted-Average
                                                   Number of         Remaining         Number of
                                                    Options      Contractual Life       Options
Exercise Price                                    Outstanding         (Years)         Exercisable
--------------                                    -----------    ----------------     -----------
<S>                                                <C>                 <C>              <C>
$ 10.00..........................................  1,779,500           9.08             584,063

</TABLE>

ULA PLAN

In April 1998,  ULA's Board of Directors  approved a stock option plan (the "ULA
Plan") which  permits the grant of phantom  stock  options or the grant of stock
options to purchase up to 1,631,000  shares of ULA's Class A Common  Stock.  The
options vest in equal monthly increments over the four-year period following the
date of grant.  Concurrent with approval of the ULA Plan,  ULA'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 ULA 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. For the ten months
ended December 31, 1998,  ULA recognized  $2,669 and $1,060 in non-cash and cash
compensation expense related to these phantom options, respectively.

A summary of phantom stock option activity for the ULA Plan is as follows:
<TABLE>
<CAPTION>
                                                               For the Ten Months
                                                             Ended December 31, 1998
                                                          ----------------------------
                                                            Number        Weighted-
                                                              of           Average
                                                            Shares      Exercise Price
                                                          ---------     --------------
     <S>                                                  <C>              <C>
     Outstanding at beginning of period                          --             --
     Granted during the period.......................     1,785,500        $5.6295
     Cancelled during the period.....................      (317,296)       $5.4723
     Exercised during the period.....................      (279,787)       $5.1935
                                                          ---------        -------
     Outstanding at end of period....................     1,188,417        $5.7741
                                                          =========        =======

     Exercisable at end of period....................       268,730        $4.8646
                                                          =========        =======
</TABLE>

The combined  weighted-average fair values and weighted-average  exercise prices
of options granted during the ten months ended December 31, 1998 are as follows:
<TABLE>
<CAPTION>
                                                                  For the Ten Months Ended
                                                                      December 31, 1998
                                                          ----------------------------------------
                                                            Number          Fair          Exercise
                                                          of Options        Value           Price
                                                          ----------       -------         -------
     <S>                                                  <C>              <C>             <C> 
     Exercise price equal to market price............       945,500        $5.8075         $5.8075
     Exercise price greater than market price........       840,000        $4.2600         $5.4300
                                                          ---------        -------         -------
        Total........................................     1,785,500        $5.0795         $5.6295
                                                          =========        =======         =======
</TABLE>
                                      143
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)


The following table  summarizes  information  about the ULA Plan phantom options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
                                                                     Weighted-Average
                                                       Number of         Remaining         Number of
                                                        Options      Contractual Life       Options
     Exercise Price                                   Outstanding         (Years)         Exercisable
     --------------                                   -----------    ----------------     -----------
     <S>                                               <C>                 <C>              <C>
     $4.26..........................................     531,750           8.43             140,813
     $4.59..........................................     150,000           8.43              56,250
     $4.96..........................................     100,000           8.43              37,500
     $5.93..........................................      30,000           8.43              11,250
     $6.76..........................................      66,667           8.43               4,167
     $8.98..........................................     310,000           9.72              18,750
                                                       ---------           ----             -------
        Total.......................................   1,188,417           8.77             268,730
                                                       =========           ====             =======
</TABLE>
13.  COMMITMENTS

The Company has entered  into  various  operating  lease  agreements  for office
space, office furniture and equipment, and vehicles.  Rental expense under these
lease  agreements  totaled  $1,959,  $3,494 and $2,342 for the ten months  ended
December  31, 1998 and for the years ended  February  28, 1998 and  February 28,
1997, respectively.
<TABLE>
<CAPTION>
     The  Company  has  operating  lease  obligations  and other  non-cancelable
     commitments as follows:
     <S>                                                                                             <C>
     Year ended December 31, 1999..............................................................      $  2,973
     Year ended December 31, 2000..............................................................           811
     Year ended December 31, 2001..............................................................           592
     Year ended December 31, 2002..............................................................           149
     Year ended December 31, 2003 and thereafter...............................................            23
                                                                                                     --------
        Total..................................................................................      $  4,548
                                                                                                     ========
</TABLE>
<TABLE>
<CAPTION>
     The Company has MMDS  license  fees and  programming  license  fees payable
     annually as follows:
     <S>                                                                                             <C>
     Year ended December 31, 1999..............................................................      $ 38,310
     Year ended December 31, 2000..............................................................        45,658
     Year ended December 31, 2001..............................................................        51,541
     Year ended December 31, 2002..............................................................        54,583
     Year ended December 31, 2003 and thereafter...............................................        57,152
                                                                                                     --------
        Total..................................................................................      $247,244
                                                                                                     ========
</TABLE>
<TABLE>
<CAPTION>
     A  subsidiary  of  Austar  has a  five-year  agreement  to  lease  a 54 MHz
     satellite transponder. Pursuant to the agreement, which commenced September
     1, 1997,  Austar will pay  approximately  $4,440 in satellite  service fees
     annually as follows:
     <S>                                                                                             <C>
     Year ended December 31, 1999..............................................................      $  4,440
     Year ended December 31, 2000..............................................................         4,440
     Year ended December 31, 2001..............................................................         4,440
     Year ended December 31, 2002..............................................................         2,960
     Year ended December 31, 2003..............................................................            --
                                                                                                     --------
        Total..................................................................................      $ 16,280
                                                                                                     ========
</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.

                                      144
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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 ten months
ended  December  31, 1998 and 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.

14.  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.

The  territorial   government  of  Tahiti  (in  French  Polynesia)  had  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
then brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to  Telefenua.  On  November  25,  1998,  the Conseil d' Etat
cancelled the MMDS licenses awarded to Telefenua. Telefenua is in the process of
seeking a new  authorization.  The Company  has no reason to believe  that a new
authorization  will  not  be  granted.  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.

On July 14, 1998,  UIH SFCC, a wholly-owned  subsidiary of the Company,  filed a
complaint in the United States District Court for the District of Colorado,  for
damages  for breach of  contract,  breach of  fiduciary  duty and to enforce UIH
SFCC's rights as General Partner in UIH-SFCC LP, a Colorado Limited  Partnership
which  owns an  interest  in SFCC,  the 100%  parent  of  Telefenua.  The  three
defendants  are Loic  Brigato,  Winfred  Anderson  and  Yoshiko  Payne,  limited
partners of UIH-SFCC LP. On September 27, 1998,  UIH filed a parallel  action in
the  District  Court for the State of  Colorado.  Specifically,  the  complaints
allege that the defendants have refused to abide by the terms of the Partnership
Agreement and have taken actions highly detrimental to Telefenua. UIH SFCC seeks
monetary  damages,  a decree of specific  performance  requiring  defendants  to
perform their obligations and a constructive trust over defendants'  partnership
interest.  Defendants  have filed in the  federal  court a motion to dismiss the
complaint for lack of subject  matter  jurisdiction.  There has been no decision
issued as of this date. The Company intends to vigorously defend its position.

15.  INCOME TAXES

In general,  a United States  corporation may claim a foreign tax credit against
its federal income tax expense for foreign income taxes paid or accrued. Because
the Company  must  calculate  its foreign tax credit  separately  for  dividends
received from each foreign  corporation in which the Company owns 10.0% to 50.0%
of the voting  stock,  and because of certain other  limitations,  the Company's
ability to claim a foreign tax credit may be limited,  particularly with respect

                                      145
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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  loss  and net  loss  for  financial
reporting  purposes  relate to  accounting  for the share in  results of foreign
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  $133,000 and $79,000 at December 31,
1998  and  February  28,  1998,   respectively)  in  investments  in  affiliated
companies, which in turn have investments in foreign corporations.

The Company's  United States tax net operating  losses,  totaling  approximately
$174,000 at December  31, 1998,  expire  beginning  in 2004  through  2014.  The
Company's tax net  operating  loss  carryforwards  of its  consolidated  foreign
subsidiaries  totaled  $286,000  and $6,000 for UAP and ULA,  respectively.  The
significant components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
                                                                                            As of             As of
                                                                                        December 31,      February 28,
                                                                                            1998              1998
                                                                                        ------------      ------------
     <S>                                                                                  <C>               <C>
     Deferred Tax Assets:
     -------------------
       Tax net operating loss carryforward of consolidated foreign subsidiaries...        $111,152          $ 70,196
       Company's U.S. tax net operating loss carryforward.........................          66,099            65,525
       Accrued interest expense on the UIH A/P Notes..............................          32,885            18,856
       Stock-based compensation...................................................             --                --
       Investment valuation allowance and other...................................           2,605             2,605
       Basis difference in marketable equity securities...........................           3,070             3,192
       Deferred compensation and severence........................................             144               144
       Other......................................................................            (319)              149
                                                                                          --------          --------
            Total deferred tax assets                                                      215,636           160,667
       Valuation allowance........................................................        (215,636)         (160,667)
                                                                                          --------          --------
            Deferred tax assets, net of valuation allowance.......................              --                --

     Deferred Tax Liabilities:
     ------------------------
       Other......................................................................        $     --          $     --
                                                                                          --------          --------
            Total deferred tax liabilities                                                      --                --
                                                                                          --------          --------
            Deferred tax liabilities, net.........................................        $     --          $     --
                                                                                          ========          ========
</TABLE>
                                      146
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

Of the  Company's  1998  consolidated  net loss,  $122,797  is derived  from the
Company's 1998 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 Ten           For the Years Ended
                                                                               Months Ended        ----------------------------
                                                                               December 31,       February 28,    February 28,
                                                                                   1998               1998            1997
                                                                               ------------       ------------    ------------
     <S>                                                                        <C>                <C>             <C>
     Expected income tax benefit at the U.S. statutory rate of 35%.........     $(68,022)          $(74,886)       $(43,054)
     Tax effect of permanent and other differences:
       Change in valuation allowance.......................................       65,588             65,257          37,453
       Non-deductible expenses.............................................        4,279                987          (1,296)
       Amortization of outside basis associated with foreign investments...        1,176             12,119          10,400
       State tax, net of federal benefit...................................       (5,830)            (6,419)         (4,920)
       International rate differences......................................         (855)              (515)           (181)
       Non-deductible interest accretion on the UIH A/P Notes..............        2,148              2,145             973
       Amortization of licenses............................................        1,516              1,312             625
                                                                                --------           --------        --------
            Total income tax benefit.......................................     $     --           $     --        $     --
                                                                                ========           ========        ========
</TABLE>
16.  SEGMENT AND GEOGRAPHIC INFORMATION

The Company adopted SFAS 131 for the ten months ended December 31, 1998. The new
rules establish revised standards for public companies relating to the reporting
of financial information about operating segments.  The adoption of SFAS 131 did
not have a material effect on the Company's  consolidated  financial  statements
but did affect the  Company's  segment  information  disclosure.  The  Company's
business has  historically  been derived from its video  entertainment  segment.

This service has been provided in various  countries  where the Company owns and
operates  it  systems.   During  1998,  the  Company  introduced  telephony  and
internet/data  services and during 1999 the Company  will  continue to introduce
these services to several systems.  To date,  revenues and net operating results
from these services have not been significant, therefore segment information for
these services is not required.  Accordingly,  the Company's current  reportable
segments  are  the  various   countries  in  which  it  operates   multi-channel
television,  programming and/or telephony operations.  These reportable segments
are evaluated  separately  because each  geographic  region  presents  different
marketing strategies and technology issues as well as distinct economic climates
and regulatory constraints.  The key operating performance criteria used in this
evaluation  includes  revenue  growth,  operating  income  before  depreciation,
amortization  and stock-based  compensation  expense  ("Adjusted  EBITDA"),  and
capital  expenditures.  Senior  management  of the Company does not view segment
results below Adjusted EBITDA,  therefore,  interest income,  interest  expense,
provision for losses on investment  related costs,  gain on sale of investments,
share in results of affiliated companies, minority interests in subsidiaries and
other expenses are not broken out by segment below.
<TABLE>
<CAPTION>
                             For the Ten Months Ended December 31, 1998                    As of December 31, 1998
                             ------------------------------------------   ----------------------------------------------------
                                           Depreciation                   Investments    Property,
                                                &          Adjusted           in         Plant and    Total        Capital
                                Revenue    Amortization    EBITDA(1)      Affiliates     Equipment    Assets     Expenditures
                                -------    ------------    ---------     -----------     ---------   --------    ------------
<S>                             <C>          <C>           <C>            <C>            <C>          <C>           <C>
Europe:
  Other...................      $    --      $     --      $     --       $  6,639       $     --     $  6,639      $     --
                                -------      --------      --------       --------       --------     --------      -------- 
Asia/Pacific:
  Australia...............       74,209       (79,538)      (25,725)        25,880        122,968      181,169       (71,197)
  Other...................        3,060          (208)       (7,655)        33,830             61       72,781          (337)
                                -------      --------      --------       --------       --------     --------      -------- 
    Total Asia/Pacific....       77,269       (79,746)      (33,380)        59,710        123,029      253,950      (71,534)
                                -------      --------      --------       --------       --------     --------      -------- 
Latin America:
  Chile...................           --            --            --         84,975             --       84,975            --
  Other...................        4,512        (1,637)      (10,264)        23,957         11,715       73,048        (3,238)
                                -------      --------      --------       --------       --------     --------      -------- 
    Total Latin America...        4,512        (1,637)      (10,264)       108,932         11,715      158,023        (3,238)
                                -------      --------      --------       --------       --------     --------      -------- 

Corporate & Other.........           --          (834)       (1,209)            --          7,944       13,543          (682)
                                -------      --------      --------       --------       --------     --------      -------- 
    Total.................      $81,781      $(82,217)     $(44,853)      $175,281       $142,688     $432,155      $(75,454)
                                =======      ========      ========       ========       ========     ========      ======== 
</TABLE>
                                       147
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                For the Year Ended February 28, 1998                 As of February 28, 1998
                             ------------------------------------------   ---------------------------------------------------
                                           Depreciation                   Investments    Property,
                                                &          Adjusted           in         Plant and     Total        Capital
                                Revenue    Amortization    EBITDA(1)      Affiliates     Equipment     Assets     Expenditures
                                -------    ------------    ---------     -----------     ---------   --------    ------------
<S>                             <C>          <C>           <C>            <C>            <C>          <C>           <C>
Europe:
  Other....................     $    --      $     --      $     --       $ 14,329       $    --      $ 14,329      $    --
                                -------      --------      --------       --------       --------     --------      --------- 
Asia/Pacific:
  Australia................      64,370       (77,557)      (24,082)            --        147,871      202,325        (84,375)
  New Zealand..............         473        (2,033)       (6,688)            --         26,484       43,349        (16,258)
  Other....................       4,118        (1,212)       (7,192)        14,556          8,746       48,871           (502)
                                -------      --------      --------       --------       --------     --------      --------- 
    Total Asia/Pacific.....      68,961       (80,802)      (37,962)        14,556        183,101      294,545       (101,135)
                                -------      --------      --------       --------       --------     --------      --------- 
Latin America:
  Argentina................      17,627        (3,296)        2,836             --             --           --         (1,329)
  Chile....................          --            --            --         78,165             --       78,165             --
  Other....................       1,617          (207)      (11,114)        42,168          6,541       69,102         (3,112)
                                -------      --------      --------       --------       --------     --------      --------- 
    Total Latin America....      19,244        (3,503)       (8,278)       120,333          6,541      147,267         (4,441)
                                -------      --------      --------       --------       --------     --------      --------- 

Corporate & Other..........         439          (899)       (7,637)            --          9,042       18,288         (1,200)
                                -------      --------      --------       --------       --------     --------      --------- 
    Total..................     $88,644      $(85,204)     $(53,877)      $149,218       $198,684     $474,429      $(106,776)
                                =======      ========      ========       ========       ========     ========      ========= 
</TABLE>
                                 For the Year Ended February 28, 1997
                                --------------------------------------
                                            Depreciation
                                                 &            Adjusted
                                Revenue     Amortization     EBITDA(1)
                                -------     ------------     ---------
Asia/Pacific:
  Australia................     $21,354      $(34,087)       $(25,471)
  Tahiti...................       3,513        (1,382)           (816)
  Other....................         145          (800)         (7,935)
                                -------      --------        --------
    Total Asia/Pacific.....      25,012       (36,269)        (34,222)
                                -------      --------        --------
Latin America:
  Argentina................       4,385        (1,597)           (185)
  Other....................       1,409          (192)         (3,132)
                                -------      --------        --------
    Total Latin America....       5,794        (1,789)         (3,317)
                                -------      --------        --------

Corporate & Other..........         (35)         (508)         (8,402)
                                -------      --------        --------
    Total..................     $30,771      $(38,566)       $(45,941)
                                =======      ========        ======== 

(1)  "Adjusted EBITDA" represents  earnings before net interest expense,  income
     tax  expense,  depreciation  and  amortization,   stock-based  compensation
     charges, minority interest, share in results of affiliated companies (net),
     currency exchange gains (losses) and other  non-operating  income (expense)
     items. Industry analysts generally consider Adjusted EBITDA to be a helpful
     way  to  measure  the  performance  of  cable  television   operations  and
     communications   companies.   Management  believes  Adjusted  EBITDA  helps
     investors to assess the cash flow from operations from period to period and
     thus to value the Company's business.  Adjusted EBITDA should not, however,
     be  considered a  replacement  for net income,  cash flows or for any other
     measure of performance or liquidity  under  generally  accepted  accounting
     principles,  or as an indicator of a company's operating  performance.  The
     Company  is not  entirely  free to use the  cash  represented  by  Adjusted
     EBITDA.  Several of the  Company's  consolidated  operating  companies  are
     restricted  by the terms of their debt  arrangements.  Each company has its
     own  operating  expenses and capital  expenditure  requirements,  which can
     limit the Company's use of cash. The  presentation  of Adjusted  EBITDA may
     not be  comparable  to  statistics  with a similar  name  reported by other
     companies.  Not all companies and analysts calculate Adjusted EBITDA in the
     same manner.

                                       148
<PAGE>
                      UNITED INTERNATIONAL PROPERTIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

     Adjusted EBITDA  reconciles to the consolidated  statement of operations as
     follows:
<TABLE>
<CAPTION>
                                                   For the Ten       For the Years Ended
                                                   Months Ended          February 28,
                                                   December 31,   -------------------------
                                                      1998           1998           1997
                                                   ------------   ----------     ----------
     <S>                                            <C>            <C>           <C>
     Net operating loss..........................   $(129,739)     $(139,081)    $(84,507)
     Depreciation and amortization...............      82,217         85,204       38,566
     Stock-based compensation expense............       2,669             --           --
                                                    ---------      ---------     --------
          Consolidated Adjusted EBITDA...........   $ (44,853)     $ (53,877)    $(45,941)
                                                    =========      =========     ======== 
</TABLE>

17.  SUBSEQUENT EVENTS

VTRH ACQUISITION

On April 29, 1999, an indirect wholly owned subsidiary of the Company acquired a
60.0% interest in VTRH (the "VTRH Acquisition"). This acquisition, combined with
the  40.0%  interest  in VTRH that is owned by  another  indirect  wholly  owned
subsidiary of the Company,  gives the Company an indirect 100% interest in VTRH.
The purchase price for the 60.0% interest in VTRH was approximately  $258,000 in
cash, which included  repayment of advances from the other  shareholders of VTRH
and certain other expenses.  In addition,  the Company provided capital for VTRH
to prepay approximately  $126,000 of existing bank indebtedness and a promissory
note from the Company to one of the other shareholders of VTRH.

To finance the prepayment of VTRH's  indebtedness  and a portion of the purchase
price  for the VTRH  Acquisition,  The  Company  concurrently  sold in a private
transaction  $208,900  of  10.875%  Senior  Discount  Notes due 2009 (the  "1999
Notes").  The remaining  portion of the VTRH Acquisition was funded with cash on
hand and approximately  $145,000 borrowed under a Senior Secured Credit Facility
between VTRH and a syndicate of banks (the "VTRH Bank Facility").

The VTRH Bank  Facility  consists of two tranches - Tranche A, which is a single
term loan facility with an aggregate principal amount of $140,000, substantially
all of which was  borrowed for the VTRH  Acquisition,  and Tranche B, which is a
three-year  term loan  facility,  with an  aggregate  principal  amount of up to
$80,000.  Both tranches have been guaranteed by VTRH and its  subsidiaries.  The
banks are in the process of syndicating the final  approximately  $50,000 of the
VTRH Bank Facility.  The Company has agreed to participate in the syndication as
necessary.

The 1999 Notes have essentially the same terms as the 1998 Notes, except for the
maturity and coupon rate and that the 1999 Notes are not secured.

                                      149
<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)  and subsidiaries as of December 31, 1998 and February
28, 1998, and the related consolidated statements of operations, parent's equity
and cash flows for the ten months  ended  December 31, 1998 (see Note 2) and the
years ended February 28, 1998 and February 28, 1997. 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.  and
subsidiaries  as of December  31, 1998 and  February 28, 1998 and the results of
their operations and their cash flows for the ten months ended December 31, 1998
and for the years ended  February 28, 1998 and  February 28, 1997 in  conformity
with generally accepted accounting principles.



                               ARTHUR ANDERSEN LLP


Denver, Colorado
April 30, 1999



                                      150
<PAGE>
<TABLE>
<CAPTION>
                                                   UIH EUROPE, INC.
                                               CONSOLIDATED BALANCE SHEETS
                                  (Stated in thousands, except share and per share amounts)
                                                                                                             As of          As of
                                                                                                          December 31,  February 28,
                                                                                                             1998           1998
                                                                                                          ------------  ------------
<S>                                                                                                        <C>           <C>
ASSETS
Current assets
  Cash and cash equivalents............................................................................... $   15,646    $ 49,166
  Restricted cash.........................................................................................     16,012      11,000
  Subscriber receivables, net of allowance for doubtful accounts of $4,899 and $3,191, respectively.......      6,818       4,663
  Costs to be reimbursed by affiliated companies..........................................................     14,432       7,411
  Other receivables.......................................................................................     13,675       4,070
  Inventory...............................................................................................     12,762       6,455
  Other current assets, net...............................................................................      8,283       7,958
                                                                                                           ----------    --------
        Total current assets..............................................................................     87,628      90,723

Investments in and advances to affiliated companies, accounted for under the equity method, net...........    254,209     190,565
Marketable equity securities of parent, at fair value.....................................................     53,499      33,074
Property, plant and equipment, net of accumulated depreciation of $46,406 and $3,675, respectively .......    319,046     239,452
Goodwill and other intangible assets, net of accumulated amortization of $20,693 and $2,411,
 respectively.............................................................................................    359,804     359,161
Deferred financing costs, net of accumulated amortization of $4,914 and $109, respectively ...............     11,462      11,853
Non-current restricted cash and other assets, net.........................................................      1,748      25,105
                                                                                                           ----------    --------
        Total assets...................................................................................... $1,087,396    $949,933
                                                                                                           ==========    ========
LIABILITIES AND PARENT'S DEFICIT
Current liabilities
  Accounts payable, including related party payables of $8,281 and $6,056, respectively .................. $   75,078    $ 60,242
  Accrued liabilities.....................................................................................     30,097      17,191
  Subscriber prepayments and deposits.....................................................................     24,210          --
  Short-term debt.........................................................................................     33,504          --
  Notes payable to parent.................................................................................     92,609          --
  Current portion of other long-term debt.................................................................     60,063     126,643
  Other current liabilities...............................................................................         --      12,986
                                                                                                           ----------    --------
        Total current liabilities.........................................................................    315,561     217,062

Other long-term debt......................................................................................    621,560     497,039
Deferred compensation.....................................................................................    173,251          --
Deferred taxes............................................................................................      4,580      28,776
Other long-term liabilities...............................................................................      4,655          --
                                                                                                           ----------    --------
        Total liabilities.................................................................................  1,119,607     742,877

Minority interests in subsidiaries........................................................................     13,722       3,356
                                                                                                           ----------    --------
Parent's (deficit) 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 discount notes)................         --          --
  Additional paid-in capital..............................................................................    339,074     329,463
  Accumulated deficit.....................................................................................   (383,651)   (102,844)
  Other cumulative comprehensive loss.....................................................................     (1,356)    (22,919)
                                                                                                           ----------    --------
        Total parent's (deficit) equity...................................................................    (45,933)    203,700
                                                                                                           ----------    --------
Commitments and Contingencies (Note 12 and 13)

        Total liabilities and parent's (deficit) equity................................................... $1,087,396    $949,933
                                                                                                           ==========    ========


                      The  accompanying  notes  are an  integral  part of  these consolidated financial statements.
</TABLE>
                                                                151


<PAGE>
<TABLE>
<CAPTION>
                                                           UIH EUROPE, INC.
                                                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (Stated in thousands, except share and per share amounts)


                                                                                       For the Ten         For the Years Ended
                                                                                       Months Ended            February 28,
                                                                                       December 31,     --------------------------
                                                                                          1998             1998           1997
                                                                                       ------------     -----------    -----------
<S>                                                                                     <C>              <C>           <C>
Revenue..............................................................................   $ 172,287        $  9,945      $     --
System operating expense.............................................................     (57,123)         (2,754)           --
System selling, general and administrative expense...................................     (56,401)         (3,418)           --
Corporate general and administrative expense.........................................    (178,279)         (7,320)       (4,693)
Depreciation and amortization........................................................     (76,550)         (6,086)           --
                                                                                        ---------        --------      --------
        Net operating loss...........................................................    (196,066)         (9,633)       (4,693)

Interest income .....................................................................       3,440              --            --
Interest expense.....................................................................     (38,524)         (2,045)           --
Interest expense, related party......................................................      (6,022)             --            --
Provision for losses on marketable equity securities and investment related costs....      (3,131)             --            --
Other income, net....................................................................       1,338              74            --
                                                                                        ---------        --------      --------
       Net loss before other items...................................................    (238,965)        (11,604)       (4,693)

Share in results of affiliated companies, net........................................     (25,679)        (42,431)      (24,662)
Minority interests in subsidiaries...................................................         793            (117)           --
                                                                                        ---------        --------      --------
       Net loss......................................................................   $(263,851)       $(54,152)     $(29,355)
                                                                                        =========        ========      ======== 




                      The  accompanying  notes  are an  integral  part of  these consolidated financial statements.
</TABLE>
                                                                152
<PAGE>
<TABLE>
<CAPTION>
 
                                                           UIH EUROPE, INC.
                                          CONSOLIDATED STATEMENTS OF PARENT'S (DEFICIT) EQUITY
                                              (Stated in thousands, except share amounts)

                                                                                           Other                 
                                             Common Stock      Additional                Cumulative         Total 
                                         --------------------   Paid-In    Accumulated  Comprehensive    Comprehensive
                                           Shares      Amount   Capital      Deficit       Loss(1)           Loss          Total
                                         ----------  --------  ----------  -----------  --------------   -------------   ---------
<S>                                         <C>        <C>     <C>         <C>             <C>            <C>            <C>
Balances, February 29, 1996.............    100        $ --    $154,197    $(19,337)       $(3,758)       $      --      $131,102

Capital contributions from parent.......     --          --       5,044          --             --               --         5,044
Net loss................................     --          --          --     (29,355)            --          (29,355)      (29,355)
Change in cumulative translation
 adjustments............................     --          --          --          --         (7,289)          (7,289)       (7,289)
                                            ---        ----    --------    ---------       -------        ---------      --------
Balances, February 28, 1997.............    100          --     159,241     (48,692)       (11,047)       $ (36,644)       99,502
                                                                                                          =========
Capital contributions from parent.......     --          --     170,222          --             --        $      --       170,222
Net loss................................     --          --          --     (54,152)            --          (54,152)      (54,152)
Change in cumulative translation
 adjustments............................     --          --          --          --        (11,872)         (11,872)      (11,872)
                                            ---        ----    --------    ---------       -------        ---------      --------
Balances, February 28, 1998.............    100          --     329,463    (102,844)       (22,919)       $ (66,024)      203,700
                                                                                                          =========
Non-cash contributions from parent......     --          --       3,825          --             --        $      --         3,825
Gain on deemed issuance of stock
 by subsidiary..........................     --          --       5,786          --             --               --         5,786
Elimination of historical two-month
 reporting difference due to change
 in fiscal year end.....................     --          --          --     (16,956)            --               --       (16,956)
Net loss................................     --          --          --    (263,851)            --         (263,852)     (263,851)
Change in unrealized gain on
 investments............................     --          --          --          --         23,350           23,350        23,350
Change in cumulative translation
 adjustments............................     --          --          --          --         (1,787)          (1,787)       (1,787)
                                            ---        ----    --------    --------        -------        ---------      --------
Balances, December 31, 1998.............    100        $ --    $339,074   $(383,651)       $(1,356)       $(242,289)     $(45,933)
                                            ===        ====    ========   =========        =======        =========      ========


(1) Other  Cumulative  Comprehensive  Loss at the end of each  reporting  period
consists of the following:

                                                   As of          As of February 28,           As of
                                               February 29,     ----------------------      December 31,
                                                   1996           1997         1998            1998
                                               ------------     ---------    ---------      ------------

Foreign currency translation adjustments         $(3,758)       $(11,047)    $(22,919)        $(24,706)
Unrealized gain on investment...........              --              --           --           23,350
                                                 -------        --------     --------         --------
        Total......................              $(3,758)       $(11,047)    $(22,919)        $ (1,356)
                                                 =======        ========     ========         ======== 

                      The  accompanying  notes  are an  integral  part of  these consolidated financial statements.
</TABLE>
                                                                153
<PAGE>
<TABLE>
<CAPTION>
                                                           UIH EUROPE, INC.
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (Stated in thousands)

                                                                                         For the Ten         For the Years Ended
                                                                                         Months Ended            February 28,
                                                                                         December 31,     --------------------------
                                                                                            1998             1998           1997
                                                                                         ------------     -----------    -----------
<S>                                                                                       <C>              <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..............................................................................    $(263,851)       $(54,152)      $(29,355)
Elimination of historical two month reporting difference due to change in
 fiscal year end......................................................................      (16,956)             --             --
Adjustments to reconcile net loss to net cash flows from operating activities:
  Share in results of affiliated companies, net.......................................       31,903          42,431         24,662
  Allocation of general, administrative and other expenses accounted for as a net
   contribution of capital by parent..................................................        3,825           7,322          4,693
  Minority interests share of (income) losses.........................................         (569)            117             --
  Depreciation and amortization.......................................................       92,986           6,086             --
  Amortization of deferred financing costs............................................        4,640             109             --
  Compensation expense related to stock options.......................................      162,124              --             --
  Provision for losses on marketable equity securities and investment 
   related costs......................................................................        3,131              --             --
  Increase in receivables, net........................................................       (9,919)           (709)            --
  (Increase) decrease in other assets.................................................       (5,364)            422             --
  Increase in accounts payable, accrued liabilities and other.........................       47,705           5,574             --
                                                                                         ----------        --------       --------
        Net cash flows from operating activities......................................       49,655           7,200             --
                                                                                         ----------        --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash released..............................................................       19,576              --             --
Investments in and advances to affiliated companies...................................     (100,665)       (111,628)            --
Proceeds from sale of investments in affiliated companies.............................       19,968              --             --
New acquisitions, net of cash acquired................................................     (109,881)             --             --
Capital expenditures..................................................................     (141,547)         (7,461)            --
                                                                                         ----------        --------       --------
        Net cash flows from investing activities......................................     (312,549)       (119,089)            --
                                                                                         ----------        --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term  and long-term borrowings....................................      281,648             505             --
Deferred financing costs..............................................................       (5,037)             --             --
Repayments of long and short-term borrowings..........................................     (138,175)         (1,456)            --
Proceeds from note payable to parent..................................................       86,468              --             --
Cash contribution from parent.........................................................           --         162,500             --
Cash paid to minority interest partners...............................................         (253)             --             --
                                                                                         ----------        --------       --------
        Net cash flows from financing activities......................................      224,651         161,549             --
                                                                                         ----------        --------       --------
EFFECT OF EXCHANGE RATES ON CASH......................................................        4,723            (494)            --
                                                                                         ----------        --------       --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS......................................      (33,520)         49,166             --
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................       49,166              --             --
                                                                                         ----------        --------       --------
CASH AND CASH EQUIVALENTS, END OF PERIOD..............................................   $   15,646        $ 49,166       $     --
                                                                                         ==========        ========       ========


                      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 (Continued)
                                                        (Stated in thousands)

                                                                                         For the Ten         For the Years Ended
                                                                                         Months Ended            February 28,
                                                                                         December 31,     --------------------------
                                                                                            1998             1998           1997
                                                                                         ------------     -----------    -----------
<S>                                                                                       <C>              <C>             <C>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  CONTRIBUTION OF DUTCH CABLE SYSTEMS TO NEW JOINT VENTURE:
    Working capital...................................................................    $ (1,871)        $      --      $    --
    Investments in affiliated companies...............................................      96,866                --           --
    Property, plant and equipment.....................................................      85,037                --           --
    Goodwill and other intangible assets..............................................      78,515                --           --
    Senior secured notes and other debt...............................................    (111,553)               --           --
    Other liabilities.................................................................     (17,417)               --           --
                                                                                          --------         ---------       ------
          Total net assets contributed................................................    $129,577         $      --       $   --
                                                                                          ========         =========       ======
  Seller note for purchase of system in Hungary.......................................    $ 18,000         $      --       $   --
                                                                                          ========         =========       ======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
    Cash paid for interest............................................................    $ 34,706         $      --       $   --
                                                                                          ========         =========       ======
    Cash received for interest........................................................    $  3,513         $      --       $   --
                                                                                          ========         =========       ======
ACQUISITION OF DUTCH CABLE ASSETS:
   Property, plant and equipment and other long-term assets...........................    $(51,632)        $      --       $   --
   Goodwill and other intangible assets...............................................     (36,416)               --           --
                                                                                          --------         ---------       ------
          Total cash paid.............................................................    $(88,048)        $      --       $   --
                                                                                          ========         =========       ======
ACQUISITION OF ADDITIONAL 50.0% INTEREST IN 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
            (Stated in thousands, except share and per share amounts)

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 December 31, 1998.

          ***********************************************************
          *                                                         *
          *                           UIH                           *
          *                                                         * 
          ***********************************************************
                                100%   *                 
          ***********************************************************
          *                                                         * 
          *                          UIHE                           *
          *                                                         * 
          *********************************************************** 
                                       *
                                100%(1)*                 
          ***********************************************************
          *                                                         *  
          *      United Pan-Europe Communications N.V. ("UPC")      *
          *                                                         *  
          *********************************************************** 
                                       *                 
                                       *                 
          *********************************************************** 
          *Austria:                                                 * 
          * Telekabel Group                                 95.0%   *
          *Belgium:                                                 * 
          * Radio Public N.V./S.A. ("TVD")                 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:                                                 *
          * Telekabel Hungary BV ("Telekabel Hungary")      79.3%   *
          * Kabelkom Kabeltelevizio KFT ("Telekabel                 *
          *  Hungary Programming")                          50.0%(2)*
          * Monor Telefon Tarsasag, Rt ("Monor")            44.8%   * 
          *Ireland:                                                 * 
          * Tara Television Limited ("Tara")                80.0%   *
          *Israel:                                                  *
          * Tevel Israel International Communications               *
          *  Ltd. ("Tevel")                                 46.6%   *
          *Malta:                                                   *
          * Melita Cable TV PLC ("Melita")                  50.0%   * 
          *The Netherlands:                                         *
          * United Telekabel Holding NV ("UTH")             51.0%(3)*
          *Norway:                                                  *
          * Janco Multicom AS ("Janco")                    100.0%   *
          *Romania:                                                 *
          * Control Cable Ventures SRL ("Control Cable")   100.0%   *
          * Multicanal Holdings SRL ("Multicanal")         100.0%   *
          * Eurostat CA-TV SRL ("Eurosat")                  51.0%   *
          *Slovak Republic:                                         *
          * Kabeltel SRO ("Kabeltel")                      100.0%   *
          * Trnavatel SRO ("Trnavatel")                     75.0%   *
          *Spain/Portugal:                                          *
          * Ibercom, Inc. ("IPS")                           33.5%(4)*
          ***********************************************************

(1)  As of December 31, 1998, UIHE held effectively all of the voting control of
     UPC  and  owned  all  of  its  issued  and  outstanding  shares,  including
     approximately 7.2% of such shares, which had been registered in the name of
     a foundation controlled by UIH to support UPC's employee stock option plan.
     In February 1999,  UPC  successfully  completed an initial public  offering
     selling  44.6  million of its shares on the  Amsterdam  Stock  Exchange and
     Nasdaq  National  Market System and completed a sale of  approximately  1.6
     million shares to a strategic investor,  resulting in an ownership interest
     by UIHE of approximately 64.3% subsequent to the offering.

                                      156
<PAGE>
                                UIH EUROPE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            (Stated in thousands, except share and per share amounts)

(2)  In March 1999,  Time Warner  Entertainment  Company  ("TWE")  exercised its
     option to acquire UPC's interest in Telekabel Hungary Programming (see Note
     3).
(3)  On  February  17,  1999,  UPC  acquired  the  remaining  49.0%  of UTH  for
     euro250,187 (approximately $282,738) (see Note 3).
(4)  UIH transferred its interest in IPS to UPC in February 1999.

LIQUIDITY AND CAPITAL RESOURCES

As of December  31,  1998,  the Company  had a net  working  capital  deficit of
$227,933.  However,  subsequent  to December 31, 1998,  UPC completed an initial
public  offering   resulting  in  approximately   $1,431,600  in  net  proceeds.
Management  believes  that these funds will enable UPC to fund the operating and
development requirements of its subsidiaries and to cover corporate overhead for
the next year.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

PRINCIPLES OF CONSOLIDATION

The accompanying  consolidated  financial statements include the accounts of the
Company and all subsidiaries where it exercises a controlling financial interest
through the  ownership  of a majority  voting  interest,  except for UTH,  where
because of certain  minority  shareholders  rights the Company  accounts for its
investment  in UTH using the equity  method of  accounting.  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.
All significant  intercompany  accounts and transactions have been eliminated in
consolidation.

CHANGE IN FISCAL YEAR END

Prior to the ten months ended December 31, 1998,  the Company's  fiscal year end
was  February  28, and it  accounted  for its share of the income or loss of its
operating  companies  based  on the  calendar  year  results  of each  operating
company.  This  created a two month delay in  reporting  the  operating  company
results  in the  Company's  consolidated  results  for its fiscal  year-end.  On
February 24, 1999, the Company  changed its fiscal year-end from the last day in
February to the last day in December, effective December 31, 1998. To effect the
transition to the new fiscal year end, the combined results of operations of the
operating  companies for January and February 1998, a loss of $16,956,  has been
reported  as a one-time  charge to  retained  deficit as of March 1, 1998 in the
consolidated  statement  of parent's  deficit.  Consequently,  the  consolidated
statement of operations presents the consolidated results of the Company and its
subsidiaries  for the ten  months  ended  December  31,  1998.  For  comparative
purposes,  the Company's  consolidated  revenue, net operating loss and net loss
were $9,945, $2,318 and $36,750, respectively, for the ten months ended December
31, 1997.

CASH AND CASH EQUIVALENTS AND SHORT-TERM LIQUID INVESTMENTS

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

RESTRICTED CASH

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

                                      157
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

COSTS TO BE REIMBURSED BY AFFILIATED COMPANIES

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

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

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

PROPERTY, PLANT AND EQUIPMENT

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

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

     Cable distribution networks....................    7-20 years
     Subscriber premises equipment and converters...       5 years
     MMDS/DTH distribution facilities...............    7-20 years
     Office equipment, furniture and fixtures.......     3-8 years
     Buildings and leasehold improvements...........   20-33 years
     Other..........................................    3-10 years

GOODWILL AND OTHER INTANGIBLE ASSETS

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

RECOVERABILITY OF TANGIBLE AND INTANGIBLE ASSETS

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

DEFERRED FINANCING COSTS

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

                                      158
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

SUBSCRIBER PREPAYMENTS AND DEPOSITS

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

OTHER COMPREHENSIVE LOSS

The Company has adopted  Statement of Financial  Accounting  Standards  No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which requires that an enterprise
(i) classify  items of other  comprehensive  income  (loss) by their nature in a
financial   statement  and  (ii)  display  the  accumulated   balance  of  other
comprehensive  income (loss)  separately  from retained  earnings and additional
paid-in  capital in the equity  section of a statement  of  financial  position.

REVENUE RECOGNITION

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

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist  principally of 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,  which
results in compensation  expense for the difference  between the grant price and
the fair market value at each  measurement  date. UPC has incentive stock option
plans for their  employees.  With respect to these plans, the rights conveyed to
employees  are  the  substantive   equivalents  to  stock  appreciation  rights.
Accordingly,   compensation  expense  and  deferred   compensation  expense  are
recognized at each financial  statement date based on the difference between the
grant price and the estimated fair value of the respective  subsidiary's  common
stock.

INCOME TAXES

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

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.

                                      159
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

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, included in Other Comprehensive Loss.

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

Cash flows from the  Company's  operations in foreign  countries are  translated
based on their functional currencies. As a result, amounts related to assets and
liabilities reported on the consolidated statements of cash flows will not agree
to changes in the corresponding balances on the consolidated balance sheets. The
effects of exchange rate changes on cash balances held in foreign currencies are
reported as a separate line below cash flows from financing activities.

Certain of the  Company's  foreign  operating  companies  have notes payable and
notes  receivable  that are  denominated  in a  currency  other  than  their own
functional currency.  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.

On January 11,  1999,  eleven of the fifteen  member  countries  of the European
Union fixed their conversion rates between their existing  sovereign  currencies
and the Euro,  eliminating the foreign exchange rate fluctuation exposure of UPC
related to its operating  subsidiaries in the eleven countries  (including UPC's
subsidiaries in The  Netherlands,  Austria,  Belgium,  France and Spain).  UPC's
investments  in countries  outside the eleven  countries  which have adopted the
Euro include Norway, Hungary, Ireland, Israel and Malta.

NEW ACCOUNTING PRINCIPLES

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  adopted  SFAS 131 for the ten months  ended
December 31, 1998.

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"   ("SFAS  133"),   which  requires  that  companies   recognize  all
derivatives  as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133,  accounting for changes in fair value of a derivative depends on
its  intended  use and  designation.  SFAS 133 is  effective  for  fiscal  years
beginning after June 15, 1999. The Company is currently  assessing the effect of
this new standard.

The American Institute of Certified Public Accountants recently issued Statement
of Position 98-1, "Accounting  for the Costs of Computer  Software  Developed or
Obtained for Internal  Use" ("SOP 98-1"),  which provides guidance on accounting
for the costs of computer  software  developed or obtained for internal use. SOP
98-1  identifies  the  characteristics  of  internal-use  software  and provides
examples to assist in  determining  when computer  software is for internal use.
SOP 98-1 is effective for financial  statements for fiscal years beginning after
December 15, 1998,  for  projects in progress  and  prospectively,  with earlier
application  encouraged.  Management believes that the adoption of SOP 98-1 will
not have a material effect on its financial position or results of operations.

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.  The Company does
not expect the adoption of SOP 98-5 to have a material  effect on its  financial
position or results of operations.

                                      160
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

RECLASSIFICATIONS

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

3.   ACQUISITIONS AND DISPOSITIONS

COMBIVISIE AND CNBH

Effective  January 1, 1998,  UPC acquired  certain  assets,  including the Dutch
cable  systems of Combivisie  for $88,048.  The purchase was funded with a Dutch
guilder ("NLG") 60,000  ($29,226) draw on UPC's Senior Revolving Credit Facility
(as defined in Note 10) and NLG120,762 ($58,822) from a UPC credit facility with
a bank which was subsequently  refinanced.  Subsequent to the  transaction,  the
assets and  liabilities of UPC's other Dutch systems and Combivisie were merged,
forming Cable Network Brabant Holding B.V. ("CNBH"),  a wholly-owned  subsidiary
of UPC.

TELEKABEL HUNGARY AND TELEKABEL HUNGARY PROGRAMMING

On June 29, 1998,  UPC acquired  TWE's  interest in its Hungarian  multi-channel
television  system  assets  for  $9,500  in  cash  and  a  non-interest  bearing
promissory  note in the amount of $18,000 (the "Time Warner Note").  UPC and TWE
retained their respective percentage interests in Telekabel Hungary Programming.
UPC  granted  TWE an option to  acquire  UPC's  interest  in  Telekabel  Hungary
Programming   along  with  certain  other  assets  in   consideration   for  the
cancellation  of the  Time  Warner  Note.  On June  30,  1998,  UPC  merged  its
100%-owned Hungarian multi-channel  television systems ("Kabelkom"),  along with
the assets  acquired from TWE, with  Hungary's  second largest  multiple  system
operator to form the new joint venture Telekabel  Hungary.  UPC retains a 79.25%
ownership interest in the new entity. In March 1999, TWE exercised its option to
acquire UPC's interest in Telekabel Hungary Programming and the Time Warner Note
was cancelled.

UTH

In August 1998,  UPC merged its Dutch cable  television  and  telecommunications
assets,  consisting of its 50.0%  interest in A2000 Holding NV ("A2000") and its
wholly-owned  subsidiary  CNBH, with those of the Dutch energy company N.V. NUON
Energie-Onderneming voor Gelderland,  Friesland en Flevoland ("NUON"), forming a
new company, UTH (the "UTH Transaction"). The transaction was accounted for as a
formation of a joint venture with NUON's and UPC's net assets  recorded at their
historical carrying values. Although UPC retained a majority economic and voting
interest  in UTH,  because of joint  governance  on most  significant  operating
decisions,  UPC accounted  for its  investment in UTH using the equity method of
accounting.

On February 17, 1999,  UPC  acquired the  remaining  49.0% of UTH from NUON (the
"NUON Transaction") for euro235,086 ($265,672). In addition, UPC repaid NUON and
assumed from NUON a euro15,101  ($17,066)  subordinated loan,  including accrued
interest,  dated December 31, 1998,  owed by UTH to NUON. The purchase of NUON's
interest and payment of the loan were funded with  proceeds  from UPC's  initial
public offering.

The following unaudited pro forma condensed  consolidated  operating results for
the ten months  ended  December  31, 1998 and the year ended  February  28, 1998
gives  effect to the UTH  Transaction  and the NUON  Transaction  as if they had
occurred at the  beginning of the periods  presented.  This  unaudited pro forma
condensed  consolidated financial information does not purport to represent what
the  Company's   results  of  operations   would  actually  have  been  if  such
transactions had in fact occurred on such dates.  The pro forma  adjustments are
based upon currently  available  information and upon certain  assumptions  that
management believes are reasonable.

<TABLE>
<CAPTION>
                                                  For the Ten Months            For the Year Ended
                                               Ended December 31, 1998          February 28, 1998
                                               ------------------------     -------------------------
                                               Historical    Pro Forma      Historical     Pro Forma
                                               ----------   -----------     ----------    -----------
     <S>                                       <C>           <C>            <C>            <C>
     Revenue................................   $ 172,287     $ 253,295      $  9,945       $  9,945
                                               =========     =========      ========       ========
     Net loss...............................   $(263,852)    $(299,708)     $(54,152)      $(68,508)
                                               =========     =========      ========       ======== 
</TABLE>
                                      161
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

TEVEL AND MELITA

In November 1998, UPC (i) acquired from Tele-Communications  International, Inc.
("TINTA") its indirect 23.3% and 25.0% interests in the Tevel and Melita systems
for $91,500,  doubling UPC's respective  ownership in these systems to 46.6% and
50.0%,  respectively,  (ii)  purchased an  additional  5.0%  interest in Princes
Holdings  and 5.0% of Tara in  consideration  for 384,531  shares of UIH Class A
Common Stock held by UPC, and (iii) sold the 5.0% interest in Princes  Holdings,
together with its existing 20.0% interest, to TINTA for $20,500. The net payment
of $71,000 to TINTA  ($68,000  after  closing  adjustments)  was funded with the
proceeds of a $90,000 promissory note made by a subsidiary of UPC to its primary
partners in the Tevel system (the "DIC Loan").

UPC

In July 1995, the Company and Philips Electronics N.V.  ("Philips")  contributed
their  respective  ownership  interests  in European  and Israeli  multi-channel
television  systems to UPC.  Philips  contributed  to UPC its 95.0%  interest in
cable  television  systems in Austria,  its 100%  interest  in cable  television
systems in Belgium,  its minority interests in multi-channel  television systems
in Germany, the Netherlands  (Eindhoven) and France. The Company contributed its
interests in  multi-channel  television  systems in Israel,  Ireland,  the Czech
Republic, Malta, Norway, Hungary, Sweden and Spain. The Company also contributed
$78,200  in cash to UPC and issued to  Philips  3,169,151  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 50.0% economic and voting interest in UPC.

On December 11, 1997, the Company acquired  Philips' entire interest in UPC (the
"UPC  Transaction").  As part  of the UPC  Transaction,  (i) UPC  purchased  the
3,169,151  shares of Class A Common Stock of the Company  held by Philips,  (ii)
UIH purchased NLG169,899 ($84,336) of the accreted amount of UPC's PIK Notes and
redeemed  them for  15,180,261  shares of UPC,  (iii) UPC repaid to Philips  the
remaining  NLG170,371  ($84,570)  accreted  amount  of the PIK  Notes,  (iv) UIH
purchased   13,121,604  shares  of  UPC  directly  from  Philips,  and  (v)  UPC
repurchased  Philips' remaining equity interest in UPC (24,378,396  shares). The
Company effectively owned 100% of UPC as a result of the UPC Transaction, except
for shares held by a  foundation  controlled  by UIH which  administers  the UPC
stock plan for the benefit of UPC  employees and  management,  pursuant to UPC's
equity incentive plans. The final purchase price (excluding  transaction-related
costs) was  $425,200,  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
3,169,151 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
($151,500),  a bridge bank facility through a subsidiary of UPC ($111,200) and a
cash investment by the Company of $162,500.

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:

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

In January 1997 UPC deposited  NLG47,000 ($24,867) with a bank as collateral for
an obligation  to seller to purchase the  remaining  29.8% in Janco that UPC did
not already own. In November  1998,  UPC  exercised its call option and acquired
the remaining minority  shareholder  interest in Janco for NLG37,200  ($19,683).
The residual restricted funds held as collateral were released.

                                      162
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

PRO FORMA FINANCIAL INFORMATION FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997

The following 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          For the Year Ended
                                                   February 28, 1998           February 28, 1997
                                               -------------------------    --------------------------
                                               Historical   Pro Forma(1)    Historical   Pro Forma (2)
                                               ----------   ------------    ----------   -------------
     <S>                                       <C>            <C>           <C>            <C>

     Revenue................................   $  9,945       $ 173,344     $     --       $145,076
                                               ========       =========     ========       ======== 
     Net loss...............................   $(54,152)      $(104,925)    $(29,355)      $(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 December 31, 1998
                                      -------------------------------------------------------------------------------------
                                        Investments in                         Cumulative          Cumulative
                                        and Advances to       Dividends    Share in Results of     Translation     
                                      Affiliated Companies    Received    Affiliated Companies     Adjustments      Total
                                      --------------------    ---------   --------------------     -----------    ---------
<S>                                        <C>                <C>             <C>                    <C>          <C>
UTH.................................       $135,290           $    --         $(11,447)              $8,288       $132,131
Tevel...............................         96,340            (6,090)            (390)                (306)        89,554
Melita..............................         14,078                --              997                  724         15,799
Telekabel Hungary Programming.......         12,263                --           (3,881)                  28          8,410
Monor...............................         11,301                --           (2,601)              (7,849)           851
Other...............................          7,595                --             (531)                 400          7,464
                                           --------           -------         --------               ------       --------
        Total.......................       $276,867           $(6,090)        $(17,853)              $1,285       $254,209
                                           ========           =======         ========               ======       ========
</TABLE>
<TABLE>
<CAPTION>
                                                                  As of February 28, 1998
                                     ---------------------------------------------------------------------------------------
                                        Investments in                         Cumulative          Cumulative
                                        and Advances to       Dividends    Share in Results of     Translation
                                      Affiliated Companies    Received    Affiliated Companies     Adjustments       Total
                                     --------------------    ---------   --------------------     -----------     ---------
<S>                                        <C>                <C>              <C>                    <C>          <C>
A2000...............................       $109,373           $    --           $(287)                $ 4          $109,090
Melita, Princes Holdings and Tevel..         51,005                --             (32)                 --            50,973
Kabelkom............................         28,605                --             124                 (1)            28,728
Other...............................          1,774                --              --                  --             1,774
                                           --------           -------           -----                 ---          --------     
        Total.......................       $190,757           $    --           $(195)                $ 3          $190,565
                                           ========           =======           =====                 ===          ========
</TABLE>
                                      163
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

As of December 31, 1998 and February  28,  1998,  the Company had the  following
differences related to the excess of its cost over its proportionate interest in
each  affiliate's  net  tangible  assets  included  in  the  above  table.  Such
differences are being amortized over 15 years.
<TABLE>
<CAPTION>
                                         As of December 31, 1998         As of February 28, 1998
                                       --------------------------      ---------------------------
                                         Basis       Accumulated         Basis       Accumulated
                                       Difference    Amortization      Difference    Amortization
                                       ----------    ------------      ----------    ------------
<S>                                     <C>            <C>              <C>             <C>
UTH...................................  $  1,471       $   (33)         $     --        $  --
Tevel ................................    80,644        (3,351)               --           --
Melita................................    12,898          (451)               --           --
Telekabel Hungary Programming ........     7,629          (302)               --           --
A2000.................................        --            --            90,898           --
Melita, Princes Holdings and Tevel....        --            --            31,054           --
Kabelkom..............................        --            --            20,509           --
Monor.................................       885           (69)               --           --
Other.................................     3,585           (73)               --           --
                                        --------       -------          --------        -----
        Total.........................  $107,112       $(4,279)         $142,461        $  --
                                        ========       =======          ========        =====
</TABLE>
Condensed  financial  information for UPC, stated in U.S. dollars,  is presented
below:
<TABLE>
<CAPTION>
                                                                  For the Year Ended        For the Year Ended
                                                                 December 31, 1997 (1)      December 31, 1996
                                                                 ---------------------      ------------------
     <S>                                                              <C>                        <C>
     Revenue...................................................       $ 172,951                  $145,076
     Operating, selling, general and administrative expense....        (121,833)                  (96,814)
     Depreciation and amortization.............................         (68,148)                  (47,238)
                                                                      ---------                  --------
        Net operating (loss) income............................         (17,030)                    1,024
     Interest, net.............................................         (32,936)                  (21,135)
     Share in results of affiliated companies, net.............         (10,395)                  (13,187)
     Other.....................................................         (29,820)                  (14,152)
                                                                      ---------                  --------
        Net loss...............................................       $ (90,181)                 $(47,450)
                                                                      =========                  ======== 
</TABLE>
(1) The Company consolidated the results of UPC effective December 11, 1997.


5.   MARKETABLE EQUITY SECURITIES OF PARENT

As a result of the UPC Transaction, UPC acquired 3,169,151 shares of UIH's Class
A Common  Stock,  valued at cost on December  11,  1997 at $33,074.  In November
1998, UPC used 384,531 shares to acquire an additional 5.0% interest in Tara and
Princes Holdings, resulting in 2,784,620 remaining UIH shares held by UPC.

                                      164

<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
6.   PROPERTY, PLANT AND EQUIPMENT                                                         As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
     <S>                                                                                  <C>              <C>
     Cable distribution networks.....................................................     $246,607         $180,555
     Subscriber premises equipment and converters....................................       71,178           40,262
     MMDS/DTH distribution facilities................................................        7,340            6,416
     Office equipment, furniture and fixtures........................................       18,674            6,475
     Buildings and leasehold improvements............................................        6,748            1,838
     Other...........................................................................       14,905            7,581
                                                                                          --------         --------
                                                                                           365,452          243,127
          Accumulated depreciation...................................................      (46,406)          (3,675)
                                                                                          --------         --------
          Net property, plant and equipment..........................................     $319,046         $239,452
                                                                                          ========         ========

</TABLE>
<TABLE>
<CAPTION>
7.   GOODWILL AND OTHER INTANGIBLE ASSETS                                                  As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
     <S>                                                                                  <C>              <C>
     Telekabel Group.................................................................     $206,092         $192,828
     Janco ..........................................................................       87,563           94,200
     CNBH (1)........................................................................           --           39,847
     Telekabel Hungary...............................................................       51,550              --
     TVD.............................................................................       22,322           20,903
     Other...........................................................................       12,970           13,794
                                                                                          --------         --------
                                                                                           380,497          361,572
          Accumulated amortization...................................................      (20,693)          (2,411)
                                                                                          --------         --------
          Net goodwill and other intangible assets...................................     $359,804         $359,161
                                                                                          ========         ========

</TABLE>

     (1)  Effective  August 6, 1998,  CNBH was contributed to UTH as part of the
          UTH Transaction.
<TABLE>
<CAPTION>
8.   SHORT-TERM DEBT                                                                       As of             As of
                                                                                        December 31,     February 28,
                                                                                           1998              1998
                                                                                        ------------     ------------
     <S>                                                                                   <C>             <C>
     Time Warner Note................................................................      $18,000         $    --
     Telekabel Hungary Facility......................................................       15,504              --
                                                                                           -------         -------
          Total short-term debt......................................................      $33,504         $    --
                                                                                           =======         =======
</TABLE>
Carrying value approximates fair value for these short-term facilities.

                                      165
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

TIME WARNER NOTE

In December  1998,  TWE extended the maturity date of its  non-interest  bearing
note for a period of 90 days to the  earlier  of June 30,  1999 or 90 days after
written  notice from TWE.  Subsequent to December 31, 1998, the Time Warner Note
was cancelled as TWE  exercised  its option to acquire  UPC's 50.0%  interest in
Telekabel Hungary Programming.

TELEKABEL HUNGARY FACILITY

In October  1998,  Telekabel  Hungary  entered into a German mark ("DM")  65,600
($39,317)  six-month secured bridge facility.  Availability  under this facility
depends on certain financial  covenants.  The DM49,200  ($29,488)  international
tranche of the  facility and half of the DM16,400  ($9,829)  local  tranche bear
interest  at LIBOR  plus  2.5% per  annum  plus an  additional  cost of  funding
calculation.  The remaining half of the local tranche must be drawn in Hungarian
forints and bears  interest at Budapest  interbank  offered  rates for Hungarian
forints,  plus 2.5% per annum plus an  additional  cost of funding  calculation.
Telekabel Hungary is using the facility,  among other things, to finance capital
expenditures and to acquire minority shares in UPC's Hungarian systems.  UPC has
pledged  its  indirect  79.25%  interest  in  Telekabel  Hungary  to secure  the
facility.  The facility  also is secured by a pledge over certain  assets of the
Telekabel  Hungary group and a negative pledge.  Telekabel  Hungary is currently
negotiating  a  long-term  facility  with the  lenders  to replace  this  bridge
facility.  As of December 31, 1998, the amount  outstanding  under this facility
totaled DM25,861 ($15,504).

9.   NOTE PAYABLE TO PARENT
<TABLE>
<CAPTION>
                                                                   As of            As of
                                                                December 31,     February 28,
                                                                   1998             1998
                                                                ------------     ------------
     <S>                                                          <C>               <C>
     Note payable to parent, including accrued interest
       of $6,141 and $0, respectively........................     $92,609           $    --
                                                                  =======           =======
</TABLE>

UIH loaned the Company a total of $86,468 in connection with funding the general
operations  of UPC as well as the repayment of the UPC Bridge Bank Facility (see
Note 10). The UIH loan accrues  interest at 10.75% per annum. The Company repaid
$87,499 of principal  and  interest in February  1999 with  proceeds  from UPC's
initial public offering.

10.  OTHER LONG-TERM DEBT
<TABLE>
<CAPTION>
                                                                   As of            As of
                                                                December 31,     February 28,
                                                                   1998             1998
                                                                ------------     ------------
     <S>                                                          <C>              <C>
     Senior Revolving Credit Facility........................     $512,179         $437,598
     Bridge Bank Facility....................................       60,063          125,000
     Mediareseaux Facility...................................       21,346               --
     DIC Loan................................................       84,214               --
     Other UPC...............................................        3,821           61,084
                                                                  --------         --------
                                                                   681,623          623,682
          Less current portion...............................      (60,063)        (126,643)
                                                                  --------         --------
          Total other long-term debt.........................     $621,560         $497,039
                                                                  ========         ========
</TABLE>

SENIOR REVOLVING CREDIT FACILITY

In October 1997, UPC and certain of its subsidiaries entered into a NLG1,100,000
($582,000)  multi-currency  Senior Revolving Credit Facility with a syndicate of
banks. As of December 31, 1998, a total of NLG968,000 ($512,179) was outstanding
under this facility.  The amount  outstanding for UPC, Telekabel Group and Janco
was NLG620,000 ($328,042), NLG213,500 ($112,963) and NLG134,500 ($71,174),

                                      166
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

respectively.  Amounts  advanced under the Senior Revolving Credit Facility bear
interest at the London  interbank  offered rate  ("LIBOR") plus a margin ranging
from 0.5% to 2.0% per annum.  The aggregate amount available for borrowing under
the facility is reduced automatically by 5.0% per quarter beginning December 31,
2001. The borrowings of UPC and its subsidiaries in Austria,  Belgium and Norway
are limited by financial  covenants under the Senior  Revolving Credit Facility.
The  principal  amount of all  borrowings by UPC and such  subsidiaries  may not
exceed certain multiples of total annualized net operating cash flow for UPC and
such  subsidiaries.  In addition,  the principal amount of all borrowings of UPC
and such subsidiaries may not exceed certain multiples of their cable television
net  operating  cash  flow.  The  Senior  Revolving  Credit  Facility  generally
prohibits dividends and other distributions to shareholders of UPC unless, among
other  things,  UPC  achieves  for at least  two  consecutive  quarters  certain
financial ratios.  The Senior Revolving Credit Facility also includes  financial
covenants  relating to interest and debt service  coverage  and  application  of
proceeds  from  asset  sales and  securities  offerings.  Borrowings  by UPC and
certain of its  subsidiaries  in Austria,  Belgium  and Norway  under the Senior
Revolving  Credit  Facility  together  with  borrowings  under the  Bridge  Bank
Facility may not exceed  NLG1,300,000  ($687,831) before September 30, 2001. The
Senior Revolving  Credit Facility also generally  limits to NLG80,000  ($42,328)
UPC's investments in, loans to and guarantees for, certain of UPC's subsidiaries
and downstream  affiliates that are not borrowers or guarantors under the Senior
Revolving  Credit  Facility.  UPC repaid a portion of this  facility in February
1999 with proceeds from their initial public offering (see Note 17).

BRIDGE BANK FACILITY

In connection  with the UPC  Transaction,  UPC entered into the $125,000  Bridge
Bank Facility with a syndicate of banks.  The Bridge Bank Facility is a one year
bridge originally due December 5, 1998 and bears interest at LIBOR plus a margin
ranging from 4.5% to 6.0% per annum.  In November 1998,  the lenders  granted an
extension  of the  maturity  date to June 5,  1999.  The  Bridge  Bank  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 share holdings or partnership  interests of UPC in operating
systems in The  Netherlands,  France,  Israel and Malta, as well as a first lien
over  approximately  2,784,620  shares of UIH's  Class A Common  Stock which UPC
acquired from Philips as part of the UPC  Transaction.  The Bridge Bank Facility
prohibits  all of the  companies  whose  interests  are pledged  from  incurring
additional indebtedness,  subject to certain exceptions. UPC must apply proceeds
from disposals,  if any, of certain share holdings and partnership  interests to
prepayment  of the facility,  which  restricts the manner and terms on which UPC
may  dispose of these  assets.  UPC must  maintain  on  deposit  with the bank a
compensating  balance,  restricted  for payment of interest,  until the facility
matures.  The balance in this interest reserve account,  including proceeds from
the sale of Princes Holdings,  was NLG30,263  ($16,012) as of December 31, 1998.
UPC repaid  $64,937 of the Bridge Bank Facility  during the year ended  December
31, 1998, resulting in an outstanding amount of $60,063 as of December 31, 1998.
UPC repaid the remaining balance of this facility in February 1999 with proceeds
from their initial public offering (see Note 17).

MEDIARESEAUX FACILITY

In July 1998, Mediareseaux entered into a 9.5 year term facility with a bank for
an amount of French francs ("FRF")680,000 ($121,400) ("Mediareseaux  Facility").
The purpose of the facility is to finance on-going capital expenditures, working
capital and acquisitions with a limit of FRF120,000 ($21,400).  The Mediareseaux
Facility  bears  interest at LIBOR plus a margin ranging from 0.75% to 2.0%. The
availability  of the facility  depends on revenue  generated  and debt to equity
ratios. The availability  period ends at December 31, 2002. The repayment period
starts  from  January 1, 2003 to final  maturity in 2007.  During the  repayment
period,  Mediareseaux  must apply 50.0% of its excess cash flow in prepaying the
facility. The Mediareseaux Facility generally restricts the payment of dividends
and  distributions.  This facility also  restricts  Mediareseaux  from incurring
additional   indebtedness,   subject  to  certain  exceptions.   In  July  1998,
Mediareseaux  secured a 9.5 year FRF20,000 ($3,600) overdraft facility,  subject
to the same terms and conditions as the  Mediareseaux  Facility  except that the
availability  tests are not  applicable.  As of  December  31, 1998 an amount of
FRF120,000 ($21,346) was outstanding under the Mediareseaux Facility.

DIC LOAN

In November 1998, a subsidiary of Discount Investment Corporation ("DIC") loaned
UPC a total of $90,000 to acquire the additional  interests in Tevel and Melita.
The DIC Loan  matures in  November  2000 and is  secured by UPC's  pledge of its
ownership interest in Tevel. The DIC Loan bears interest at 8.0% and is payable,
together with 106.0% of the principal amount,  on maturity.  The DIC Loan may be
repaid on quarterly  prepayment dates with three months' prior notice by UPC. In

                                      167
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

connection  with the DIC Loan,  UPC granted to an  affiliate of DIC an option to
acquire a total of $90,000,  plus accrued interest, of ordinary shares of UPC at
a price equal to 90.0% of the initial public offering price.  The exercise price
of this option,  which expires upon the initial public  offering,  is payable in
cash or delivery of the DIC Loan promissory  notes. UPC allocated the $90,000 in
loan  proceeds  between  the debt  instrument  ($84,214)  and the equity  option
element  ($5,786)  on the  basis  of  relative  fair  values.  Accordingly,  the
effective  interest rate on the debt  instrument  exceeds the stated rate as set
forth above.  At the date of UPC's initial  public  offering,  DIC exercised the
option and acquired 1,558,654 ordinary shares of UPC.

FAIR VALUE OF DEBT

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

                                             Carrying Value   Fair Value
                                             --------------   ----------
     As of December 31, 1998:
       Senior Revolving Credit Facility....     $512,179       $512,179
       Bridge Bank Facility................       60,063         60,063
       Mediareseaux Facility...............       21,346         21,346
       DIC Loan............................       84,214         84,214
       Other UPC...........................        3,821          3,821
                                                --------       --------
          Total............................     $681,623       $681,623
                                                ========       ========

     As of February 28, 1998:
       Senior Revolving Credit Facility....     $437,598       $437,598
       Bridge Bank Facility................      125,000        125,000
       Other UPC...........................       61,084         61,084
                                                --------       --------
          Total............................     $623,682       $623,682
                                                ========       ========

DEBT MATURITIES

The maturities of the Company's debt are as follows:

     Year Ended December 31, 1999...........    $ 60,063
     Year Ended December 31, 2000...........      84,737
     Year Ended December 31, 2001...........          --
     Year Ended December 31, 2002...........      46,570
     Year Ended December 31, 2003...........     118,537
     Thereafter.............................     371,716
                                                --------
          Total.............................    $681,623
                                                ========

1998 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 their 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 $79,091.

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

                                      168
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)


February  15,  2008,  and will be  redeemable  at the  option of UIH 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 UIH of UIPI;  however,  only
holders of the 1998 Notes have a first-priority  security  interest in the stock
and intercompany notes to UIH 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
totaling $15,000,  refinancing  indebtedness,  normal indebtedness to restricted
affiliates and other letters of credit in the ordinary  course of business.  The
Indenture  also limits the amount of additional  debt that its  subsidiaries  or
controlled  affiliates  may  borrow,  or  preferred  shares that they may issue.
Generally,  additional  borrowings,  when added to existing  indebtedness,  must
satisfy,  among other  conditions,  at least one of the following tests: (i) 7.0
times the  borrower's  consolidated  operating  cash  flow;  (ii) 1.75 times its
consolidated  interest  expense;  or (iii) 225% of the  borrower's  consolidated
invested equity capital.  In addition,  there must be no existing  default under
the Indenture at the time of the  borrowing.  The Indenture  also  restricts its
subsidiaries' ability to make certain asset sales and certain payments.

11.  PARENT'S (DEFICIT) 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 1998 Notes.

SUBSIDIARY STOCK OPTION PLANS

UPC PLAN

In June 1996,  UPC  adopted a stock  option plan (the "UPC Plan") for certain of
its employees and those of its  subsidiaries.  There are 6,000,000  total shares
available for the granting of options under the UPC Plan,  which are held by the
Stichting Administratiekantoor UPC (the "Foundation"), which administers the UPC
Plan.  Each  option  represents  the  right to  acquire  from the  Foundation  a
certificate representing the economic value of one share. Following consummation
of the initial public offering,  any  certificates  issued to employees who have
exercised their options will be convertible  into UPC common stock. UIH appoints
the  board  members  of the  Foundation  and thus  controls  the  voting  of the
Foundation's  common  stock.  The  options  are  granted  at fair  market  value
determined by UPC's Supervisory Board at the time of the grant. The maximum term
that the options can be exercised  is five years from the date of the grant.  In
order to  introduce  the  element  of  "vesting"  of the  options,  the UPC Plan
provides that even though the options are exercisable immediately, the shares to
be issued or options  granted in 1996 vest in equal  monthly  increments  over a
three-year  period from the  effective  date set forth in the option  grant.  In
March 1998,  the UPC Plan was revised to increase the vesting period for any new
grants of  options to four  years,  vesting in equal  monthly  increments.  Upon
termination  of an  employee  (except  in the case of death,  disability  or the
like),  all  unvested  options  previously  exercised  must  be  resold  to  the
Foundation  at the  original  purchase  price,  or all  vested  options  must be
exercised,  within 30 days of the termination  date. The  Supervisory  Board may
alter these vesting  schedules in its  discretion.  An employee has the right at
any time to put his  certificates or shares from exercised vested options to the
Foundation  at a price  equal to the fair market  value.  UPC can also call such
certificates  or shares for a cash  payment upon  termination  in order to avoid
dilution,  except  for  certain  awards,  which  can not be  called by UPC until
expiration of the underlying options.  The UPC Plan also contains  anti-dilution
protection  and provides  that, in the case of change of control,  the acquiring
company has the right to require  UPC to acquire all of the options  outstanding
at the per share value  determined in the transaction  giving rise to the change
of control.
                                      169
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

A summary of stock option activity for the UPC Plan is as follows:
<TABLE>
<CAPTION>
                                                                          For the Years Ended December 31,
                                               ------------------------------------------------------------------------------------
                                                        1998                           1997                         1996
                                               -------------------------   --------------------------   ---------------------------
                                                 Number      Weighted-       Number       Weighted-        Number       Weighted-
                                                   of         Average          of          Average           of          Average
                                                 Shares   Exercise Price     Shares    Exercise Price      Shares    Exercise Price
                                               ---------  --------------   ---------   --------------   ----------   --------------
                                                         (Dutch guilders)             (Dutch guilders)              (Dutch guilders)
     <S>                                       <C>            <C>          <C>             <C>          <C>               <C>
     Outstanding at beginning of period......  2,241,552      10.49        2,300,417       10.49                --           --
     Granted during the period...............  2,343,000      12.10               --          --         3,990,000        10.49
     Cancelled during the period.............    (14,052)     10.49          (58,865)      10.49            (9,583)       10.49
     Exercised during the period.............   (375,000)     10.49               --          --        (1,680,000)          --
                                               ---------      -----        ---------       -----         ---------        -----
     Outstanding at end of period............  4,195,500      11.39        2,241,552       10.49         2,300,417        10.49
                                               =========      =====        =========       =====         =========        =====
     Exerciseable at end of period (1).......  4,195,500      11.39        2,241,552       10.49         2,300,417        10.49
                                               =========      =====        =========       =====         =========        =====
</TABLE>
     (1) Includes certificate rights as well as options.

UPC  granted no stock  options  during the year ended  December  31,  1997.  The
combined  weighted-average  fair values and weighted-average  exercise prices of
options  granted  during the year  ended  December  31,  1998 and the year ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
                                                   For the Year Ended                For the Year Ended
                                                   December 31, 1998                 December 31, 1996
                                            --------------------------------  -------------------------------
                                              Number      Fair      Exercise     Number      Fair   Exercise
                                            of Options    Value      Price     of Options    Value    Price
                                            ----------    -----     --------   ----------    -----   --------
                                                            (Dutch guilders)                  (Dutch guilders)
<S>                                          <C>          <C>        <C>         <C>         <C>      <C>
Exercise price equal to market price......   2,343,000    12.10      12.10       3,990,000   10.49    10.49
</TABLE>

The following table summarizes  information about stock options  outstanding and
exercisable as of December 31, 1998:
<TABLE>
<CAPTION>
                                                              Weighted-Average
                                                Number of         Remaining         Number of
                                                 Options      Contractual Life       Options
     Exercise Price (Dutch guilders)           Outstanding         (Years)         Exercisable
     -------------------------------           -----------    -----------------    -----------
     <S>                                        <C>                 <C>             <C>
     10.49................................      1,852,500           2.47            1,852,500
     12.00................................      2,195,250           4.63            2,195,250
     13.57................................        147,750           4.71              147,750
                                                ---------           ----            ---------
          Total...........................      4,195,500           3.68            4,195,500
                                                =========           ====            =========
</TABLE>

The UPC Plan is accounted for as a variable  plan  because,  based on the plan's
provisions,  the rights conveyed to employees are the substantive equivalents to
stock appreciation  rights.  Accordingly,  compensation expense is recognized at
each financial  statement  date based on the difference  between the grant price
and the  estimated  fair value of UPC's common  stock.  Compensation  expense of
NLG268,109  ($134,728),  NLG4,818  ($2,477) and NLG0 was  recognized for the ten
months  ended  December  31,  1998 and the years  ended  December  31,  1997 and
December 31, 1996, respectively.  UPC's estimate of the fair value of its common
stock as of December 31, 1998 utilized in recording  compensation  expense under
the UPC Plan was NLG63.91,  which is the initial public offering price.  Because
UPC will account for the UPC Plan as a variable  plan up until the  consummation
date of its  initial  public  offering,  and  thereafter  as a fixed plan due to
modifications  to the UPC  Plan  which  will  occur  on  that  date,  the  total
compensation  expense and deferred  compensation  expense  recognized related to
options granted as of December 31, 1998 will not increase.

                                      170
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

UPC PHANTOM STOCK OPTION PLAN

In March 1998,  UPC adopted a phantom stock option plan (the "UPC Phantom Plan")
which  permits the grant of phantom  stock rights of up to  2,400,000  shares of
UPC's common  stock.  The rights are granted at fair market value  determined by
UPC's  Supervisory  Board  at the time of  grant,  and  generally  vest in equal
monthly  increments  over the four-year  period  following the effective date of
grant and may be exercised for ten years  following the effective date of grant.
The UPC Phantom Plan gives the employee  the right to receive  payment  equal to
the difference  between the fair market value of a share of UPC common stock and
the option  base price for the  portion of the rights  vested.  UPC, at its sole
discretion,  may make payment in (i) cash,  (ii) freely  tradable  shares of UIH
Class A Common Stock or (iii) if UPC's stock is publicly traded, freely tradable
shares of its stock.  If UPC  chooses to make a cash  payment,  even  though its
stock is publicly  traded,  employees  have the option to receive an  equivalent
number of freely tradable shares of stock instead.  Concurrent with the approval
of the UPC Phantom Plan, the  Supervisory  Board ratified the grant of 1,232,250
and  825,000  phantom  stock  rights at base prices of  NLG12.00  and  NLG13.57,
respectively,  and specified  retroactive vesting for several of the grants. The
UPC Phantom Plan contains anti-dilution protection and provides that, in certain
cases of a change of  control,  all phantom  options  outstanding  become  fully
exercisable.

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

<TABLE>
<CAPTION>
                                                           For the Year Ended
                                                           December 31, 1998
                                                      -------------------------------
                                                        Number           Weighted-
                                                          of              Average
                                                        Shares        Exercise Price
                                                      ---------      ----------------
                                                                     (Dutch guilders)
     <S>                                              <C>                 <C> 
     Outstanding at beginning of period..........            --              --
     Granted during the period...................     2,057,250           12.63
     Cancelled during the period.................            --              --
     Exercised during the period.................            --              --
                                                      ---------           -----
     Outstanding at end of period................     2,057,250           12.63
                                                      =========           =====

     Vested and exercisable at end of period.....       470,469           12.15
                                                      =========           =====
</TABLE>

The combined  weighted-average fair values and weighted-average  exercise prices
of options granted during the year ended December 31, 1998 are as follows:

                                                   Number       Fair    Exercise
                                                 of Options     Value     Price
                                                 ----------     ----------------
                                                                (Dutch guilders)
     Exercise price equal to market price......   2,057,250     12.63     12.63

The following  table  summarizes  information  about stock options  outstanding,
vested and exercisable as of December 31, 1998:

<TABLE>
<CAPTION>
                                                                   Weighted-Average      Number of
                                                     Number of         Remaining          Options
                                                      Options      Contractual Life     Vested and
     Exercise Price (Dutch guilders)                Outstanding         (Years)         Exercisable
     -------------------------------                -----------    -----------------    -----------
     <S>                                             <C>                 <C>              <C>
     12.00..................................         1,232,250           8.54             425,469
     13.57..................................           825,000           9.70              45,000
                                                     ---------           ----             -------
          Total.............................         2,057,250           9.00             470,469
                                                     =========           ====             =======
</TABLE>
                                      171
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

The UPC Phantom Plan is accounted for as a variable plan in accordance  with its
terms,  resulting in compensation  expense for the difference  between the grant
price and the fair market value at each financial  statement date.  Compensation
expense of NLG52,374  ($26,319) was recognized for the ten months ended December
31,  1998.  UPC's  estimate of the fair value of its common stock as of December
31, 1998 utilized in recording  compensation  expense under the UPC Phantom Plan
was NLG63.91, which is the initial public offering price.

CHELLO STOCK OPTION PLAN

In June 1998, UPC adopted a phantom stock option plan (the "chello Plan"), which
permits the grant of phantom stock rights in up to 1,500,000 shares of chello, a
wholly-owned  subsidiary  of UPC.  The rights are granted at fair  market  value
determined  by chello's  Supervisory  Board at the time of grant,  and generally
vest in  equal  monthly  increments  over the  four-year  period  following  the
effective  date of  grant  and may be  exercised  for ten  years  following  the
effective date of grant. The chello Plan gives the employee the right to receive
payment  equal to the  difference  between the fair  market  value of a share of
chello and the option base price for the portion of the rights  vested.  UPC, at
its sole  discretion,  may make payment in (i) cash, (ii) freely tradable shares
of UIH Class A Common Stock or (iii) if UPC's stock is publicly  traded,  freely
tradable shares of its stock. If UPC chooses to make a cash payment, even though
its stock is publicly traded, employees have the option to receive an equivalent
number of freely tradable shares of stock instead.  Concurrent with the approval
of the chello Plan, the Supervisory  Board ratified the grant of 570,000 options
at a base price of NLG10.00,  and specified  retroactive  vesting for several of
the  grants.   For  the  ten  months  ended  December  31,  1998,  UPC  recorded
compensation  expense of NLG2,144  ($1,077) for options granted under the chello
Plan.

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

<TABLE>
<CAPTION>
                                                           For the Year Ended
                                                           December 31, 1998
                                                      ------------------------------
                                                       Number            Weighted-
                                                         of               Average
                                                       Shares         Exercise Price
                                                      --------       ---------------
                                                                     (Dutch guilders)
     <S>                                              <C>                 <C>
     Outstanding at beginning of period.........           --                --
     Granted during the period..................      570,000             10.00
     Cancelled during the period................           --                --
     Exercised during the period................           --                --
                                                      -------             -----
     Outstanding at end of period...............      570,000             10.00
                                                      =======             =====
     Vested and exercisable at end of period....       70,625             10.00
                                                      =======             =====
</TABLE>

The weighted-average  remaining contractual life for these options is 9.47 years
as of December 31, 1998.

12.  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 $3,374, $0 and $0 for the ten months ended December 31,
1998  and for  the  years  ended  February  28,  1998  and  February  28,  1997,
respectively.
<TABLE>
<CAPTION>
The Company has operating lease obligations and other non-cancelable commitments as follows:
     <S>                                                                                    <C>
     Year ended December 31, 1999......................................................     $ 5,849
     Year ended December 31, 2000.....................................................        4,640
     Year ended December 31, 2001.....................................................        3,623
     Year ended December 31, 2002.....................................................        2,568
     Year ended December 31, 2003 and thereafter......................................        2,300
                                                                                            -------
          Total.......................................................................      $18,980
                                                                                            =======
</TABLE>
In September  1998,  UTH entered into a  subordinated  loan agreement to provide
funding up to $30,000 for A2000.  UTH's share of the funding is $15,000.  UPC is
obligated to fund drawdowns on the loan in proportion to its 51.0%  ownership in

                                      172
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

UTH (representing a total funding obligation of $7,650). As of December 31,
1998,  UPC had funded  $3,750 of its  commitment.  Subsequent  to year end,  UPC
provided a letter of support to A2000 stating that it would  continue to provide
to A2000 the funding necessary to continue operations through at least 1999.

13.  CONTINGENCIES

The  Company  is not a  party  to any  material  legal  proceedings  other  than
described  below,  nor is it currently  aware of any  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.

On April 20, 1999,  a class  action was filed in the District  Court of Tel Aviv
against  several  cable  operators in Israel,  including  Tevel.  The  complaint
alleges that the cable operators have taken advantage of their monopoly position
in the market by  charging  excessive  prices  for the  services  provided.  The
plaintiffs  are  seeking  damages  in the  amount of  approximately  NIS1,000.00
(approximately $240.00) per subscriber and a judicial order instructing Tevel to
reduce its subscriber fee to the alleged fair market price.  The plaintiffs have
also applied for a judicial order against the Ministry of Communication to avoid
considering   the  extension  of  Tevel's  cable   franchise   term  for  unfair
exploitation and monopoly status.  Tevel's cable television service subscription
rates are subject to governmental  regulation  through franchise  agreements and
through the arrangement  approved by the Restrictive  Trade Practices  Tribunal.
Tevel intends to vigorously defend itself against these allegations.

14.  INCOME TAXES

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

The  primary  differences  between  taxable  loss  and net  loss  for  financial
reporting  purposes  relate to  accounting  for the share in  results of foreign
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  $30,000  and  $62,000  at
December  31, 1998 and  February  28,  1998,  respectively)  in  investments  in
affiliated  companies,  which in turn have investments in foreign  corporations.

The Company's  United States tax net operating  losses,  totaling  approximately
$9,000 at December 31, 1998,  expire  beginning in 2004 through  2014.  Tax loss
carry forwards arise primarily in Norway,  The  Netherlands,  Czech Republic and
Austria.  The tax loss carry  forwards of Norway,  aggregating to $147,052 as of
December  31, 1998 will expire  during the years  1999-2008.  The tax loss carry
forwards of The  Netherlands,  Belgium and Austria of $61,966 as of December 31,
1998 have no expiration  date. The tax loss carry forwards of the Czech Republic
of $15,702 as of  December  31,  1998 will  expire in the years  2001-2005.  The
significant components of the net deferred tax asset are as follows:

                                      173
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

<TABLE>
<CAPTION>                                                                                  As of           As of
                                                                                       December 31,    February 28,
                                                                                           1998            1998
                                                                                       ------------    ------------ 
     <S>                                                                                <C>             <C>
     Deferred Tax Assets:
     --------------------
       Tax net operating loss carryforward of consolidated foreign subsidiaries.....     $72,504        $ 74,159
       Company's U.S. tax net operating loss carryforward...........................       3,266           5,826
       Stock-based compensation.....................................................       7,215              --
       Other........................................................................         426              --
                                                                                         -------        --------
          Total deferred tax assets.................................................      83,411          79,985
       Valuation allowance..........................................................     (74,983)        (73,439)
                                                                                         -------        --------
          Deferred tax assets, net of valuation allowance...........................       8,428           6,546

     Deferred Tax Liabilities:
     ------------------------
       Intangible assets............................................................      (5,852)        (23,800)
       Property, plant and equipment, net...........................................      (7,156)         (5,046)
       Other........................................................................          --             268
                                                                                        --------        --------
       Total deferred tax liabilities...............................................     (13,008)        (28,578)
                                                                                        --------        --------
          Deferred tax liabilities, net.............................................    $ (4,580)       $(22,032)
                                                                                        ========        ======== 
</TABLE>
Of the  Company's  1998  consolidated  net loss,  $238,840  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 Ten      For the Years Ended
                                                                             Months Ended  --------------------------
                                                                             December 31,  February 28,  February 28,
                                                                                1998           1998         1997
                                                                             ------------  ------------  ------------
     <S>                                                                      <C>            <C>           <C>
     Expected income tax benefit at the U.S. statutory rate of 35%            $(83,638)      $(4,061)      $(1,643)
     Tax effect of permanent and other differences:
       Change in valuation allowance..............................              39,951         4,409         1,784
       Non-deductible expenses....................................              49,382            --            --
       International rate differences.............................               1,474            --            --
       State tax, net of federal benefit..........................              (7,169)         (348)         (141)
                                                                             ---------       -------       -------
          Total income tax benefit................................           $      --       $    --       $    --
                                                                             =========       =======       =======
</TABLE>

During 1996,  the  Austrian tax  authorities  passed  legislation  which had the
effect  of  eliminating   approximately   NLG256,000  ($135,450)  of  tax  basis
associated  with  certain  amounts  of  goodwill  recorded  at  Telekabel  Group
effective  January 1, 1997.  This change in tax law is expected to be challenged
on constitutional  grounds.  However,  there can be no assurance of a successful
repeal of such  legislation.  Accordingly,  this change caused Telekabel Group's
effective  tax rate to increase from the  historical  effective tax rate through
December 31, 1996, due to the  non-deductibility  of such goodwill  amortization
subsequent to January 1, 1997.

15.  SEGMENT AND GEOGRAPHIC INFORMATION

The Company adopted SFAS 131 for the ten months ended December 31, 1998. The new
rules establish revised standards for public companies relating to the reporting
of financial information about operating segments.  The adoption of SFAS 131 did
not have a material effect on the Company's  consolidated  financial  statements
but did affect the  Company's  segment  information  disclosure.  The  Company's
business has  historically  been derived from its video  entertainment  segment.
This service has been provided in various  countries  where the Company owns and
operates  it  systems.   During  1998,  the  Company  introduced  telephony  and
internet/data  services and during 1999 the Company  will  continue to introduce
these services to several systems.  To date,  revenues and net operating results
from these services have not been significant and therefore segment  information
for  these  services  is  not  required.   Accordingly,  the  Company's  current
reportable segments are the various countries in which it operates multi-channel
television,  programming and/or telephony operations.  These reportable segments
are evaluated  separately  because each  geographic  region  presents  different
marketing strategies and technology issues as well as distinct economic climates

                                      174
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

and regulatory constraints.  The key operating performance criteria used in this
evaluation  includes  revenue  growth,  operating  income  before  depreciation,
amortization  and stock-based  compensation  expense  ("Adjusted  EBITDA"),  and
capital  expenditures.  Senior  management  of the Company does not view segment
results below Adjusted EBITDA,  therefore,  interest income,  interest  expense,
provision for losses on investment  related costs,  gain on sale of investments,
share in results of affiliated companies, minority interests in subsidiaries and
other expenses are not broken out by segment below.

The Company's segment information is as follows:
<TABLE>
<CAPTION>
                             For the Ten Months Ended December 31, 1998                    As of December 31, 1998
                             ------------------------------------------   --------------------------------------------------------
                                           Depreciation                   Investments       Property,
                                                &          Adjusted           in            Plant and     Total         Capital
                                Revenue    Amortization    EBITDA(1)      Affiliates        Equipment     Assets      Expenditures
                                -------    ------------    ---------     -----------        ---------    --------     ------------
<S>                             <C>          <C>           <C>            <C>               <C>         <C>            <C>
The Netherlands..............   $ 21,500     $ (9,503)     $(3,658)       $132,131          $  5,176   $  297,068      $ (12,874)
Austria......................     74,629      (31,527)      30,975              --           140,550      341,159        (41,458)
Belgium......................     15,854       (8,357)       5,071              --            27,558       57,847         (9,930)
Czech Republic...............      3,753       (3,142)        (722)             --             8,737       11,497           (523)
France.......................      3,395       (1,684)      (1,941)             --            40,328       51,092        (26,329)
Hungary......................     11,672       (2,743)       3,819           8,410            26,788       86,921         (6,727)
Norway.......................     39,040      (18,487)      12,636              --            63,335      219,068        (25,725)
Other........................      2,444       (1,107)      (3,572)        113,668             6,574       22,744        (17,981)
                                --------     --------      -------        --------          --------   ----------      ---------
  Total Europe...............   $172,287     $(76,550)     $42,608        $254,209          $319,046   $1,087,396      $(141,547)
                                ========     ========      =======        ========          ========   ==========      ========= 
</TABLE>
<TABLE>
<CAPTION>
                                For the Year Ended February 28, 1998                       As of February 28, 1998
                             ------------------------------------------   --------------------------------------------------------
                                           Depreciation                   Investments       Property,
                                                &          Adjusted           in            Plant and     Total         Capital
                                Revenue    Amortization    EBITDA(1)      Affiliates        Equipment     Assets      Expenditures
                                -------    ------------    ---------      -----------       ---------     --------    ------------
<S>                             <C>          <C>           <C>            <C>               <C>          <C>            <C>
The Netherlands..............   $   --       $    --       $    --        $109,090          $ 20,773     $308,907       $    --
Austria......................       --            --            --              --           115,786      323,298            --
Belgium......................       --            --            --              --            24,526       49,204            --
Norway.......................       --            --            --              --            51,369      215,517            --
Other........................    9,945        (6,086)       (3,547)         81,475            26,998       53,007        (7,461)
                                ------       -------       -------        --------          --------     --------       -------
  Total Europe...............   $9,945       $(6,086)      $(3,547)       $190,565          $239,452     $949,933       $(7,461)
                                ======       =======       =======        ========          ========     ========       ======= 
</TABLE>
                                  For the Year Ended February 28, 1997
                                  ------------------------------------
                                            Depreciation
                                                 &            Adjusted
                                 Revenue    Amortization     EBITDA(1)
                                 -------    ------------     ---------

Europe - Other...............    $    --       $    --        $(4,693)
                                 =======       =======        ========

(1)  "Adjusted EBITDA" represents  earnings before net interest expense,  income
     tax  expense,  depreciation  and  amortization,   stock-based  compensation
     charges, minority interest, share in results of affiliated companies (net),
     currency exchange gains (losses) and other  non-operating  income (expense)
     items. Industry analysts generally consider Adjusted EBITDA to be a helpful
     way  to  measure  the  performance  of  cable  television   operations  and
     communications   companies.   Management  believes  Adjusted  EBITDA  helps
     investors to assess the cash flow from operations from period to period and
     thus to value the Company's business.  Adjusted EBITDA should not, however,
     be  considered a  replacement  for net income,  cash flows or for any other
     measure of performance or liquidity  under  generally  accepted  accounting
     principles,  or as an indicator of a company's operating  performance.  The
     Company  is not  entirely  free to use the  cash  represented  by  Adjusted
     EBITDA.  Several of the  Company's  consolidated  operating  companies  are
     restricted  by the terms of their debt  arrangements.  Each company has its
     own  operating  expenses and capital  expenditure  requirements,  which can
     limit the Company's use of cash. The  presentation  of Adjusted  EBITDA may
     not be  comparable  to  statistics  with a similar  name  reported by other
     companies.  Not all companies and analysts calculate Adjusted EBITDA in the
     same manner.

                                      175
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

     Adjusted EBITDA  reconciles to the consolidated  statement of operations as
     follows:
<TABLE>
<CAPTION>
                                                   For the Ten       For the Years Ended
                                                   Months Ended          February 28,
                                                   December 31,   -------------------------
                                                      1998           1998           1997
                                                   ------------   ----------     ----------
     <S>                                            <C>            <C>           <C>
     Net operating loss.......................      $(196,066)     $(9,633)      $(4,693)
     Depreciation and amortization............         76,550        6,086            --
     Stock-based compensation expense.........        162,124           --            --
                                                    ---------      -------       ------- 
         Cosolidated Adjusted EBITDA..........      $  42,608      $(3,547)      $(4,693) 
                                                    =========      =======       =======
</TABLE>

16.   RELATED PARTY TRANSACTIONS

LOANS TO EMPLOYEES

In 1996,  UPC loaned  certain  employees  of UPC amounts for the exercise of the
employees' stock options,  taxes on options  exercised,  or both. These recourse
loans  bear  interest  at 5.0% per annum.  The  employees'  liability  to UPC is
presented in the  consolidated  financial  statements net of UPC's obligation to
the employees  under the plan. As of December 31, 1998 and 1997,  the receivable
from employees,  including  accrued  interest  totaled  NLG19,177  ($10,147) and
NLG18,561 ($9,189), respectively.

ACQUISITIONS OF INTEREST IN PRINCES HOLDINGS AND TARA

In November  1998,  UPC purchased  from RCL, an entity owned by a  discretionary
trust for the benefit of the members of the family of John Riordan,  a member of
the Board of  Management  of UPC, a 5.0% interest in Tara and a 5.0% interest in
Princes Holdings.  The price for these interests was 384,531 shares of UIH Class
A Common Stock that UPC acquired as part of the UPC Transaction.

17.   SUBSEQUENT EVENTS

INITIAL PUBLIC OFFERING

During  February 1999,  UPC  successfully  completed an initial public  offering
selling  44,600,000  shares on the Amsterdam  Stock Exchange and Nasdaq National
Market  System and  raising  gross and net  proceeds  at  NLG63.91  per share of
approximately   NLG2,850,300   ($1,508,100)   and   NLG2,705,800   ($1,431,600),
respectively.  Concurrent with the offering, DIC exercised one of its two option
agreements acquiring 1,558,654 shares for $45,000. Proceeds from the sale of the
shares to DIC were used to repay  $45,000 of the DIC Loan and related  interest.
Also  concurrent  with the  offering,  proceeds  were used to reduce  the Senior
Revolving Credit Facility  totaling  NLG635,800  ($336,400),  including  accrued
interest of NLG15,800  ($8,400),  repay in its entirety the Bridge Bank Facility
totaling NLG110,000 ($58,200),  net of the interest reserve account, and acquire
NUON's  49.0%  interest in UTH.  Based on the  carrying  value of the  Company's
investment in UPC as of December 31, 1998,  the Company would have  recognized a
gain of approximately $825,000 from the resulting step-up in the carrying amount
of the Company's  investment  in UPC, in accordance  with SAB 51. The final gain
will be based on the  Company's  investment in UPC as of the date of the initial
public offering.  No deferred taxes will be recorded related to this gain due to
the  Company's  intent on holding  its  investment  in UPC  indefinitely.  UPC's
offering  reduced the Company's  ownership  interest from 100% to  approximately
64.3%.

RELATIONSHIP WITH MICROSOFT

On January 25, 1999,  UPC and  Microsoft  Corporation  signed a letter of intent
providing  for  the  establishment  of a  technical  services  relationship.  In
connection with this letter of intent, UPC agreed to grant Microsoft warrants to
purchase up to  3,800,000  of its shares or ADSs at  Microsoft's  option,  at an
exercise  price of $28.00.  Half of these warrants will be issued at the earlier
of April 25,  1999 or the  signing  of the  first  definitive  agreement.  These
warrants will be exercisable  after one year from issuance for a period of three
years.  The other half of the  warrants  will be issued  upon the signing of the
first  definitive  agreement.  This half of the  warrants  will vest and  become
exercisable  based on  performance  criteria to be established in the definitive
agreements,  although they also will not be exercisable  until at least one year
after the date of the closing of UPC's initial public  offering.  The first half
of the  warrants  are for the right to  negotiate  to  license  technology  from
Microsoft under definitive agreements to be negotiated in the future. UPC

                                      176
<PAGE>
                                UIH EUROPE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
            (Stated in thousands, except share and per share amounts)

expects  to  record  as  contract  acquisition  rights  approximately  NLG64,400
($34,100)  associated  with the  first  half of the  warrants.  Such  costs  are
expected to be amortized  on a  straight-line  basis over the expected  contract
life, which is yet to be determined. The accounting for the cost associated with
the  second  half of the  warrants  will  depend on the  ultimate  nature of the
performance  criteria  giving  rise to the  earn-out  of these  warrants.  These
warrants  will  be  recorded  as  such at fair  value  when it is  probable  the
performance criteria will be met in accordance with EITF Issue No. 96-18.

DIC LOAN

In  connection  with the loan from DIC,  UPC  granted  DIC,  its  partner in the
Israeli system, an option to acquire $90,000, plus accrued interest, of ordinary
shares of UPC at a price equal to 90.0% of the initial  public  offering  price.
Subsequent  to December 31, 1998,  UPC  negotiated  an amendment to this option,
resulting in an option to acquire $45,000,  plus accrued  interest,  of ordinary
shares at a price equal to 90.0% of the initial public offering  price,  and, if
this  option is  exercised,  another  option to acquire  $45,000,  plus  accrued
interest,  of ordinary  shares at a price  equal to the 30 day  average  closing
price of UPC's shares on the Amsterdam Stock Exchange  immediately  prior to the
second option  exercise,  or the initial  public  offering  price,  whichever is
higher.  At the IPO, DIC exercised the first option and thus acquired  1,558,654
ordinary  shares of UPC. The other option is  exercisable  until  September  30,
2000.

ACQUISITION OF BRATISLAVA CABLE TV SYSTEM

In March 1999, UPC reached final agreement with Siemens  Austria  ("Siemens") to
purchase  Siemens'  95.63%  interest  in SKT s.r.o.,  the company  that owns and
operates the cable TV system in Bratislava,  Slovak Republic.  The completion of
the purchase is subject to obtaining the approval of regulatory authorities. The
purchase price for the 95.63% interest is approximately NLG77,500 ($41,000).

AGREEMENT FOR THE PURCHASE OF TIME WARNER CABLE FRANCE

In March 1999,  UPC and TWE reached a definitive  agreement  for the purchase by
UPC of 100% of Time Warner Cable France,  a company which  controls and operates
three cable TV systems in the suburbs of Paris and Lyon and the city of Limoges.
Completion of the purchase, which is subject to regulatory approval, is expected
to take place in the third quarter of 1999.

                                      177
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


INTRODUCTION

We have  audited  the  consolidated  financial  statements  of UNITED  TELEKABEL
HOLDING  N.V.,  Amsterdam,  The  Netherlands,  for the year 1998 for  purpose of
inclusion  in  the  Form  10-K  of  one of  its  shareholders.  These  financial
statements   are  the   responsibility   of  the   company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

SCOPE

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

OPINION

In our opinion, the consolidated  financial statements give a true and fair view
of the  financial  position of the  company as at  December  31, 1998 and of the
result for the period from  commencement  of  operations  at August 6, 1998 then
ended  in  accordance  with  accounting  principles  generally  accepted  in The
Netherlands.

Generally  accepted  accounting  principles in The  Netherlands  vary in certain
significant respects from generally accepted accounting principles in the United
States of America.  Application of generally accepted  accounting  principles in
the United  States of America would have  affected  total  assets,  statement of
operations and  shareholders'  equity as at and for the period from commencement
of  operations  at  August  6, 1998  ended  December  31,  1998,  to the  extent
summarized in Note 18. to the consolidated financial statements.


                                             ARTHUR ANDERSEN


Amstelveen, The Netherlands,
March 19, 1999

                                      178
<PAGE>


                          UNITED TELEKABEL HOLDING N.V.
                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)


Assets

Fixed assets:
   Intangible fixed assets.....................................         564,438
   Tangible fixed assets.......................................         847,056
   Affiliated companies........................................         206,332
                                                                      ---------
Total fixed assets.............................................       1,617,826
                                                                      ---------

Current assets:
   Inventories.................................................           3,091
   Receivables.................................................          40,638
   Cash and cash equivalents...................................          10,475
                                                                      ---------
Total current assets...........................................          54,204
                                                                      ---------

Total assets...................................................       1,672,030
                                                                      =========

Shareholders' Equity and Liabilities

   Shareholders' Equity........................................         635,521
   Minority interest...........................................           1,104
                                                                      ---------
                                                                        636,625

   Provisions..................................................          42,054
   Long-term liabilities.......................................         232,727
   Current liabilities.........................................         760,624
                                                                      ---------
Total shareholders' equity and liabilities.....................       1,672,030
                                                                      =========




                                      179
<PAGE>


                          UNITED TELEKABEL HOLDING N.V.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)







Total revenues.................................................          99,122
                                                                       --------
Operating Expenses:
   Direct operating expenses...................................         (33,172)
   Selling, general and administrative expenses................         (36,096)
   Depreciation and amortization...............................         (39,490)
                                                                       --------
Total operating expenses.......................................        (108,758)
                                                                       --------

   Operating loss..............................................          (9,636)
   Financial income and expense................................         (16,699)
                                                                       --------
Loss before income taxes.......................................         (26,335)
   Income taxes................................................           1,212
                                                                       --------
Loss after taxes...............................................         (25,123)
   Share in results of affiliated companies....................         (24,486)
                                                                       --------
Group loss.....................................................         (49,609)
   Minority interest...........................................             235
                                                                       --------
Net loss.......................................................         (49,374)
                                                                       ========


                                      180
<PAGE>


                          UNITED TELEKABEL HOLDING N.V.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)




Cash flows from operating activities:
 Net loss..........................................................     (49,374)
Adjustments to reconcile net loss to net cash
flows from operating activities:
 Depreciation and amortization.....................................      39,490
 Share in results of affiliated companies, net.....................      24,486
 Minority interest in subsidiaries.................................        (235)
Changes in assets and liabilities:
 Decrease in current assets........................................      40,098
 (Decrease) in current liabilities.................................     (55,186)
 (Decrease) in deferred taxes and other provisions.................      (1,132)
                                                                      ---------
Net cash flows from operating activities...........................      (1,853)
                                                                      ---------

Cash flows from investing activities:
 Capital expenditures..............................................    (121,384)
 Loan to affiliated companies......................................      (7,120)
 Acquisitions, net of cash acquired................................     (12,588)
                                                                       --------
Net cash flows from investing activities...........................    (141,092)
                                                                       --------

Cash flows from financing activities:
 Proceeds from short-term borrowings...............................     120,705
 Proceeds from long-term borrowings................................       9,621
                                                                       --------
Net cash flows from financing activities...........................     130,326
                                                                       --------

 Net decrease in cash and cash equivalents.........................     (12,619)
 Cash and cash equivalents at beginning of period..................         100
 Cash and cash equivalents contributed.............................      22,994
                                                                       --------
Cash and cash equivalents at end of period.........................      10,475
                                                                       ========




Supplemental cash-flow disclosures:
 Cash paid for interest...........................................      (19,470)
                                                                       ========

Non-cash investing activities:
Contribution of Dutch cable systems
 Working capital..................................................      (73,850)
 Affiliated companies.............................................      223,698
 Tangible fixed assets............................................      764,762
 Intangible fixed assets..........................................      550,911
 Short-term debt..................................................     (544,918)
 Long-term liabilities............................................     (223,106)
 Provisions.......................................................      (35,696)
 Cash and cash equivalents........................................       22,994
                                                                       --------
Equity contributed................................................      684,795
                                                                       ========



                                      181
<PAGE>

                          UNITED TELEKABEL HOLDING N.V.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

1.  ORGANIZATION AND NATURE OF OPERATIONS

United  Telekabel  Holding  N.V.  ("UTH" or the  "Company"),  legally  seated in
Almere, The Netherlands, was legally formed in May 1998 and commenced operations
on August 6, 1998. UTH was formed as a joint venture  between United  Pan-Europe
Communications N.V. ("UPC") and N.V. NUON  Energie-Onderneming  voor Gelderland,
Friesland en Flevoland  ("NUON").  UPC became a 51%  shareholder  and NUON a 49%
shareholder.   UTH  was  formed  for  the   purpose  of   offering   cable-based
communications  through its networks in the  Netherlands.  UTH currently  offers
cable television services and is further developing and upgrading its network to
provide digital video, voice and internet/data services in its Dutch markets.

UTH commenced  operations on August 6, 1998 when both  shareholders  contributed
their  interests in Dutch cable  television  operating  companies  to UTH.  NUON
contributed  its  interest  in  N.V.  Telekabel  Beheer  ("Telekabel")  and  UPC
contributed its interest in Cable Network Brabant Holding B.V.  ("CNBH") and 50%
of the  shares  in  A2000  Holding  N.V.  ("A2000").  UTH  recorded  the  assets
contributed at their fair market value.  The table below  summarizes the opening
balance sheet of UTH,  based on the net assets  contributed at their fair market
values by NUON and UPC as of August 6, 1998.

     Cash and cash equivalents contributed................         23,094
     Other current assets.................................         83,827
     Affiliated companies.................................        223,698
     Tangible fixed assets................................        764,762
     Intangible fixed assets..............................        550,911
                                                                ---------

        Total assets......................................      1,646,292
                                                                =========

     Short-term debt......................................        544,918
     Other current liabilities............................        157,677
     Provisions...........................................         35,696
     Long-term liabilities................................        223,106
     Shareholders' equity.................................        684,895
                                                                ---------

        Total shareholders' equity and liabilities........      1,646,292
                                                                =========

Due to the fact that  operations  commenced  at August 6, 1998,  no  comparative
financial statements have been presented.  Proforma  information  (unaudited) is
presented in note 19.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with accounting  principles generally accepted in the Netherlands for
financial  statements.  The accounting  policies followed in the preparation for
the  consolidated  financial  statements,  differ  in  some  respects  to  those
generally accepted in the United States of America (US GAAP). See note 18.

The  preparation  of financial  statements  in conformity  with Dutch  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of assets and liabilities and the
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting  period.  Actual  results  could differ from those  estimates.  In the
opinion of management, all adjustments (consisting of normal recurring accruals)
have been made which are necessary to present  fairly the financial  position of
the Company as of December  31, 1998 and the results of its  operations  for the
period from commencement of operations (August 6, 1998) to December 31, 1998.

                                      182
<PAGE>

                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

PRINCIPLES OF CONSOLIDATION

The accompanying  consolidated  financial statements include the accounts of UTH
and its group  companies  (the "UTH  Group").  Group  companies are companies or
other legal entities in which UTH has an ownership  interest of more than 50% of
the  issued  share  capital  or that UTH  otherwise  controls.  All  significant
intercompany accounts and transactions have been eliminated in consolidation.

The  following  chart  presents a summary of UTH's  significant  investments  in
multi-channel  television,  programming and telephony  operations as of December
31, 1998:

      Name                                   City           Percentage Ownership
      ----                                   ----           --------------------
      Cable Network Brabant Holding B.V.     Eindhoven             100
      N.V. Telekabel Beheer                  Arnhem                100
      A2000 Holding N.V.                     Amsterdam              50 (1)
      Uniport Communications B.V.                                   80
                                          
      (1)     Not consolidated

FOREIGN CURRENCIES

Assets and  liabilities  denominated in foreign  currencies are translated  into
Dutch guilders at the yearend exchange rate.  Transactions in foreign currencies
are  translated at the exchange  rate in effect at the time of the  transaction.
The exchange  results are  recorded  under  financial  income and expense in the
statement of income.

BALANCE SHEET

(a)  General
     -------
 
Assets and liabilities are stated at face value unless indicated otherwise.

(b)  Fixed assets
     ------------

INTANGIBLE FIXED ASSETS

The excess of investments  in  consolidated  subsidiaries  over the net tangible
asset value at acquisition is amortized on a straight-line  basis over 15 years.
Licenses in newly acquired  companies are recognized at the fair market value of
those  licenses at the date of  acquisition  and include the  development  costs
incurred  prior to the date a new license  was  acquired.  The license  value is
amortized on a  straight-line  basis over the initial  license  period,  up to a
maximum of 20 years.  Deferred  financing  costs are amounts spent in connection
with financing the UTH Group. The amortization  period is the period relating to
the term of the  financing.  When  assets  are  fully  amortized,  the costs and
accumulated amortization are removed from the accounts.

TANGIBLE FIXED ASSETS

Tangible fixed assets are stated at cost. Additions, replacements,  installation
costs and major  improvements are  capitalized,  and costs for normal repair and
maintenance of tangible fixed assets are charged to expense as incurred.  Assets
constructed by  subsidiaries of UTH  incorporate  overhead  expense and interest
charges  incurred during the period of  construction;  investment  subsidies are
deducted.  Depreciation is calculated  using the  straight-line  method over the
economic life of the asset, taking into account the residual value. The economic
lives of tangible fixed assets at acquisition are as follows:

      Networks                                          7-20 years
      Buildings and leasehold improvements             20-33 years
      Machinery & Other                                 3-10 years

                                      183
<PAGE>

                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

AFFILIATED COMPANIES

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

(c)  RECEIVABLES
     -----------

Receivables are stated at face value, less an allowance for doubtfull  accounts.
The allowance for doubtful  accounts is based upon  specific  identification  of
overdue  accounts  receivable.  An allowance  for a percentage of the account is
established  once  the  receivable  is  overdue.   Upon   disconnection  of  the
subscriber,  the account is fully  reserved.  The allowance is maintained on the
books until receipt of payment or for a maximum of three years.

(d)  CASH AND CASH EQUIVALENTS
     -------------------------

Cash and cash equivalents  include cash and investments with original maturities
of less than three months.

(e)  PROVISIONS
     ----------

Deferred  tax  liabilities  arising  from  temporary   differences  between  the
financial  and  tax  bases  of  assets  and  liabilities  are  included  in  the
provisions.  The  principal  differences  arise  in  connection  with  valuation
differences of intangible  fixed assets.  In calculating the provision,  current
tax rates are applied.

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

     (f)  FAIR VALUE OF FINANCIAL INSTRUMENTS
          -----------------------------------

SFAS Statement No. 107, "Disclosures about Fair Values of Financial Instruments"
requires the disclosure of estimated fair values for all financial  instruments,
both on and off balance  sheet,  for which it is  practicable  to estimate  fair
value.   For  certain   instruments,   including  cash  and  cash   equivalents,
receivables, current liabilities and certain provisions, it was assumed that the
carrying  amount  approximated  fair  value due to the short  maturity  of those
instruments.  For short and long term debt, the carrying value  approximates the
fair value since all debt instruments  carry a variable  interest rate component
except for the  convertible  loans  which  carried a fixed  interest  rate.  For
investments in affiliated  companies  carried at cost,  quoted market prices for
the same or similar financial instruments were used to estimate the fair values.
UTH has adopted the  principles of this  statement in its financial  statements.
UTH did not have any  material off balance  sheet  financial  instruments  as of
December 31, 1998.

     (g)  RECOVERABILITY OF TANGIBLE AND INTANGIBLE FIXED ASSETS
          ------------------------------------------------------

UTH evaluates the carrying value of all tangible and intangible  assets whenever
events or  circumstances  indicate the carrying value of assets may exceed their

                                      184
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

recoverable  amounts. An impairment loss is recognized when the estimated future
cash flows  (undiscounted and without interest)  expected to result from the use
of an asset are less than the carrying  amount of the asset.  Measurement  of an
impairment  loss  is  based  on the  fair  value  of the  asset  computed  using
discounted cash flows if the asset is expected to be held and used.  Measurement
of an  impairment  loss for an asset held for sale would be based on fair market
value less estimated costs to sell.

     (h)  CONCENTRATION OF CREDIT RISK
          ----------------------------

Financial  instruments which potentially subject UTH to concentrations of credit
risk consist  principally of trade  receivables.  Concentrations  of credit risk
with  respect to trade  receivables  are limited  due to UTH's  large  number of
customers.

     (i)  OTHER COMPREHENSIVE INCOME
          --------------------------

UTH has adopted Statement of Financial  Accounting Standards No. 130, "Reporting
Comprehensive  Income"  ("SFAS 130"),  which  requires  that an  enterprise  (i)
classify  items of other  comprehensive  income by their  nature in a  financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained  earnings and additional  paid-in capital in the equity
section of a statement of financial  position.  As of December 31, 1998, UTH had
no other comprehensive income items.

INCOME STATEMENT

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

NEW ACCOUNTING PRINCIPLES

In March 1998, the American  Institute of Certified  Public  Accountants  issued
Statement  of Position  98-1,  "Accounting  For the Costs of  Computer  Software
Developed or Obtained for Internal Use" ("SOP 98-1"), which provides guidance on
accounting for the costs of computer software developed or obtained for internal
use.  SOP 98-1  identifies  the  characteristics  of  internal-use  software and
provides  examples  to assist  in  determining  when  computer  software  is for
internal use. SOP 98-1 is effective for  financial  statements  for fiscal years
beginning  after December 15, 1998, for projects in progress and  prospectively,
with earlier  application  encouraged.  Management believes that the adoption of
SOP 98-1 will not have a material effect on the financial statements.

The American Institute of Certified Public Accountants recently issued Statement
of Position 98-5,  "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"),
which is required to be adopted by affected companies for fiscal years beginning
after December 15, 1998. SOP 98-5 defines start-up and organization costs, which
must  be  expensed  as  incurred.   In  addition,   all  deferred  start-up  and
organization  costs  existing  as of  January  1, 1999 must be  written-off  and
accounted  for  as a  cumulative  effect  of an  accounting  change.  Management
believes  that the  adoption of SOP 98-1 will not have a material  effect on the
financial statements.

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"   ("SFAS  133"),   which  requires  that  companies   recognize  all
derivatives  as either assets or liabilities in the balance sheet at fair value.
Under SFAS 133,  accounting for changes in fair value of a derivative depends on
its  intended  use and  designation.  SFAS 133 is  effective  for  fiscal  years
beginning after June 15, 1999.  Management is currently  assessing the effect of
this new standard.

                                      185
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)
<TABLE>
<CAPTION>

3.   INTANGIBLE FIXED ASSETS
                                                                        Balance as of December 31, 1998
                                                                      -----------------------------------
                                                                                    Licenses    Deferred
                                                                                      and       Financing
                                                                       Total        Goodwill      Costs
                                                                      -------       --------    ---------
     <S>                                                              <C>           <C>           <C>
     Value upon contribution.....................................     550,911       547,869       3,042
     Investment..................................................      30,996        29,745       1,251
     Amortization................................................     (17,469)      (17,149)       (320)
                                                                      -------       -------       -----
     Book value as of December 31, 1998..........................     564,438       560,465       3,973
                                                                      =======       =======       =====
</TABLE>
<TABLE>
<CAPTION>
                                                                        Balance as of December 31, 1998
                                                                      -----------------------------------
                                                                                    Licenses    Deferred
                                                                                      and       Financing
                                                                       Total        Goodwill      Costs
                                                                      -------       --------    ---------
     <S>                                                              <C>           <C>           <C> 
     Gross Value.................................................     581,907       577,614       4,293
     Amortization................................................     (17,469)      (17,149)       (320)
                                                                      -------       -------       -----
     Book value as of December 31, 1998..........................     564,438       560,465       3,973
                                                                      =======       =======       =====
</TABLE>
<TABLE>
<CAPTION>
4.   TANGIBLE FIXED ASSETS
                                                                                    Land and                   Machinery
                                                                       Total        Buildings     Network       & Other
                                                                      -------       ---------     -------      ---------
     <S>                                                              <C>             <C>         <C>           <C> 
     Value upon contribution.....................................     764,762         6,025       745,503       13,234
     Additions...................................................     104,315           130       102,023        2,162
     Depreciation................................................     (22,021)         (182)      (20,005)      (1,834)
                                                                      -------         -----       -------       ------
     Book value as of December 31, 1998..........................     847,056         5,973       827,521       13,562
                                                                      =======         =====       =======       ======
</TABLE>
<TABLE>
<CAPTION>
                                                                               Balance as of December 31, 1998
                                                                      ---------------------------------------------------
                                                                                    Land and                    Machinery
                                                                       Total        Buildings     Network        & Other
                                                                      -------       ---------     -------       ---------
     <S>                                                              <C>             <C>         <C>            <C>

     Cost........................................................     869,077         6,155       847,526        15,396
     Depreciation................................................     (22,021)         (182)      (20,005)       (1,834)
                                                                      -------         -----       -------        ------
     Book value as of December 31, 1998..........................     847,056         5,973       827,521        13,562
                                                                      =======         =====       =======        ======
</TABLE>
<TABLE>
<CAPTION>
5.   AFFILIATED COMPANIES

                                                                       Total      Investments     Advances
                                                                      -------     -----------     --------
     <S>                                                              <C>           <C>            <C>
     Balance upon contribution...................................     223,698       223,698            -
     Additions...................................................       7,120             -        7,120
     Share in results............................................     (24,486)      (24,486)           -
                                                                      -------       -------        -----
     Balance as of December 31, 1998.............................     206,332       199,212        7,120
                                                                      =======       =======        =====
</TABLE>

                                      186
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

     The investments in affiliated companies as of December 31, 1998 are:
<TABLE>
<CAPTION>
                                                                                 Investments in        Cumulative Share
                                                                      %          and Advances to        In Results of
                                                                  Ownership   Affiliated Companies   Affiliated Companies     Total
                                                                  ---------   --------------------   --------------------    -------
     <S>                                                            <C>             <C>                     <C>              <C>
     A2000.......................................................   50.0%           229,481                 (24,449)         205,032
     Interway....................................................   33.0%             1,337                     (37)           1,300
                                                                                    -------                 -------          -------
     Total.......................................................                   230,818                 (24,486)         206,332
                                                                                    =======                 =======          =======
</TABLE>

UTH had the  following  differences  related  to the excess of cost over the net
tangible assets acquired for its equity investments.  Such differences are being
amortized over 12 to 15 years:
                                                                      
                                                   Basis        Accumulated
                                                 Difference     Amortization
                                                 ----------     ------------

      A2000..................................     249,236         (8,200)
                                                  =======         ====== 
                                                                

These  differences  have been  presented as  affiliated  companies  and share in
result of affiliated companies respectively.

Subsequent  to year end, UPC provided a letter of support to A2000  stating that
it would  continue  to  provide  to A2000  the  funding  necessary  to  continue
operations through at least 1999.

Summary  financial  information  for  A2000  based on Dutch  generally  accepted
accounting principles is as follows:


     Balance sheet                                     As of December 31,
                                                             1998
                                                       ------------------
     Intangible fixed assets........................        113,361
     Tangible fixed assets..........................        356,623
     Financial fixed assets.........................            770
     Liquid assets..................................            369
     Other current assets...........................         37,482
                                                            -------
        Total assets................................        508,605
                                                            =======

     Provisions.....................................          1,610
     Long-term debt.................................        467,430
     Current liabilities............................        125,813
                                                            -------
        Total liabilities...........................        594,853
                                                            -------
     Total shareholders' value......................        (86,248)
                                                            ========

     Statement of income                                  For the Five
                                                             Months
                                                        Ended December 31,
                                                             1998
                                                        ------------------
     Revenue........................................         53,954
     Costs..........................................        (39,271)
     Depreciation and amortization..................        (35,888)
     Financial income/charges.......................        (11,293)
                                                            --------
        Net loss....................................        (32,498)
                                                            ========

                                      187
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

6.  RECEIVABLES

Receivables  as presented  under  current  assets mature within one year and are
specified as follows:

     Trade accounts receivable                                22,519
     Receivables from affiliated companies                     1,654
     Prepaid expenses and accrued income                       1,447
     Other receivables                                        15,018
                                                              ------
     Total                                                    40,638
                                                              ====== 

 A major item under "other  receivables" is current reclaimable VAT 3,676. As of
 December 31, 1998 the valuation allowance on trade receivables amounted to 538.

7.  CASH AND CASH EQUIVALENTS

Cash and cash equivalents include demand accounts held in a bank with a maturity
of less than three months.

8.  SHAREHOLDERS' EQUITY

UTH's issued share capital  consists of 100,000 shares with a par value of NLG 1
each. All issued shares are fully paid-in.
<TABLE>
<CAPTION>
                                                 Ordinary       Additional      Accumulated
                                                  Capital    Paid-in Capital      Deficit      Total
                                                 --------    ---------------    -----------  --------
<S>                                                 <C>          <C>            <C>          <C>
Balance at inception........................        100                -              -          100
Balances upon contribution of properties....
  to joint venture, August 6, 1998..........          -          684,795              -      684,795
Net loss....................................          -                -        (49,374)     (49,374)
                                                    ---          -------        -------      -------
                                                    100          684,795        (49,374)     635,521
                                                    ===          =======        =======      =======
</TABLE>
9.   PROVISIONS

Provisions relate mainly to deferred taxation.

10.  LONG-TERM LIABILITIES
                                                            Amount
                                            Average       Outstanding
                            Range of        Rate of       December 31,
                            Interest        Interest         1998
                            --------        --------      ------------

     Bank loans             5-7.625%          5.2          235,947
                                                               
Long-term liabilities at December 31, 1998 will be payable as follows:

                                        Bank Loans
                                        ----------
                1999                       3,220
                2000                       2,353
                2001                       8,404
                2002                      16,948
                2003                      30,104
                Thereafter               174,918
                                         -------
                Total                    235,947
                                         =======

On February 20, 1998 CNBH secured a 250,000  nine-year term facility,  which was
amended in August  1998 to  266,000.  The CNBH  facility  bears  interest at the
applicable Amsterdam Interbank Offered Rate ("AIBOR") plus a margin ranging from
0.60% to 1.60% per annum, and is secured by, among other things,  an encumbrance
over CNBH's  assets and a pledge of the shares of CNBH.  The facility is used to
refinance several  acquisitions and will furthermore be used for the development
and  exploitation  of enhanced  cable TV services,  data  services and telephony
services. As of December 31, 1998, 219,000 was outstanding on the facility.

The shares of UTH held by UPC are pledged for a certain loan of UPC.

                                      188
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

11.   CURRENT LIABILITIES

The current  liabilities  relate to short-term debt and other  liabilities which
are specified below:

      (a)  SHORT-TERM DEBT
           Long-term debt repayable within one year              3,220
           Short-term debt to shareholders                     662,403
                                                               -------
           Total                                               665,623
                                                               -------

SHORT TERM DEBT TO SHAREHOLDERS AS OF DECEMBER 31, 1998

NUON's  contribution to UTH included an existing  690,000-debt  facility with an
outstanding  balance  of  approximately  543,000  (as of August 6,  1998).  This
facility  bears an  interest  rate of  6.65%  over the  reporting  period  up to
November 30, 1998.  As of November 30, 1998 this rate was  increased by 1.5%. As
of December 31, 1998, approximately 614,000 was outstanding on the facility. The
debt  facility is due March 15, 1999,  with an extension  period of 15 days.  As
security for  repayment of the debt  facility,  NUON  received a pledge over the
shares of N.V.  Telekabel  Beheer  (the  assets  contributed  by NUON).  UTH has
negotiated with the lenders to refinance the debt facility (see Note 20).

SUBORDINATED LOANS

UTH entered into a subordinated loan agreement with NUON in December 1998 for an
amount of NLG 33.0  million.  The interest  payable is 5.5% on an annual  basis.
This  subordinated  loan was entered into for purposes of continuing  funding of
incurred losses and capital  expenditures.  UTH entered into a subordinated loan
agreement  with UPC in  December  1998 for an  amount of NLG 15.2  million.  The
interest payable is 5.5% on an annual basis.  This subordinated loan was entered
into  for  purposes  of  continuing  funding  of  incurred  losses  and  capital
expenditures.

      (b)  OTHER LIABILITIES
           Accounts payable to trade creditors                  47,459
           Deposits by customers                                   197
           Other short-term liabilities                         39,855
           Deferred income and accrued expenses                  7,490
                                                               -------
           Total                                                95,001
                                                               -------

           Total current liabilities                           760,624
                                                               =======

12.  INFORMATION PER GEOGRAPHICAL AREA

 All operations of UTH are in The Netherlands.  In addition,  substantially  all
 operations relate to cable television services.

13.  PERSONNEL

      Labor cost is specified as follows:

      Salaries and wages                           9,173
      Pension costs                                  538
      Social securities                            1,911
                                                  ------
      Total                                       11,622
                                                  ======

      The information about employees by category is as follows:

      Operating                                      160
      Other                                          184
                                                     ---
      Total                                          344
                                                     ===

                                      189
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

14.  FINANCIAL INCOME AND EXPENSES

      Interest income                                       14
      Interest expense                                 (16,713)
                                                       --------

      Total                                            (16,699)
                                                       ======= 

Under interest expense an amount of 11,348 was accounted for as interest related
parties.

15.  INCOME TAXES

In general, a Dutch holding company may benefit from the so-called participation
exemption.  The participation exemption is a facility in Dutch corporate tax law
which under  certain  conditions  allows a Dutch  company to exempt any dividend
income and capital gains in relation  with its  participation  in  subsidiaries.
Capital losses are also exempt,  apart from liquidation  losses (under stringent
conditions).

For UTH the primary  difference  between taxable loss and net loss for financial
reporting  purposes  relates to the  amortization of goodwill.  The consolidated
financial  statements have been prepared  assuming partial tax basis for license
fees  capitalized  relating to certain  acquisitions.  Deferred  taxes have been
provided for that portion of the licenses which management believes no tax basis
will be allowed.

The difference  between income tax expense provided in the financial  statements
and the expected income tax benefit at statutory rates is reconciled as follows:

      Expected income tax benefit at the Dutch statutory
       rate of 35%                                                  (9,217)
      Tax effect of permanent and other differences:
      Change in valuation allowance                                  6,541
      Non-deductible expenses                                        1,464
                                                                   -------

      Total income tax benefit                                     (1,212)
                                                                   ====== 


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

      DEFERRED TAX ASSETS:
      Tax net operating loss carries forward...............          20,112
      Valuation allowance..................................         (20,112)
                                                                    -------
         Deferred tax assets, net of valuation allowance...               0
                                                                    -------

      DEFERRED TAX LIABILITIES:
      Intangible assets....................................          33,438
      Tangible fixed assets, net...........................             962
                                                                     ------
      Total deferred tax liabilities.......................          34,400
                                                                     ------
         Deferred tax liabilities, net.....................          34,400
                                                                     ======

The tax loss carry forwards have no expiration date.

                                      190
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

16.  RELATED PARTIES TRANSACTIONS

UTH signed management services agreements with both of its shareholders.  In the
reporting period an amount of NLG 4,255 has been taken into account as expenses.
In addition UTH delivers  service to NUON.  These services are rendered at arms-
length  prices and made up 8% of the  revenues  over the  reporting  period.  As
mentioned  under Note 11 UTH has a  short-term  debt  payable to NUON as well as
subordinated  loans to both  NUON and UPC.  UPC  charged  an  amount  of 988 for
salaries and related costs for employees seconded to UTH Group.

17.  COMMITMENTS AND GUARANTEES

The UTH Group has entered  into  various  rent and lease  agreements  for office
space,  cars, etc. The terms of the agreements call for future minimum  payments
as follows:

      1999                                       4,000
      2000                                       3,200
      2001                                       2,100
      2002                                       1,600
      2003                                       1,400

Subsequent to December 31, 1998, UTH provided  additional  funding to A2000.  In
total UTH's share of the funding commitment is $15,000. As of December 31, 1998,
UTH had funded $3,750 of its commitment.

18.  US GAAP RECONCILIATION

GENERAL

The  accounting  policies  followed  in the  preparation  for  the  consolidated
financial  statements differ in some respects to those generally accepted in the
United States of America (US GAAP).

The   differences   which   have  a   material   effect   on  net  loss   and/or
shareholders' equity and/or total assets are as follows:

      -    The fair market value of licences,  goodwill,  land and buildings and
           networks for US GAAP purposes should be set at historical cost of the
           contributor.  Consequently,  no step-up in asset value is allowed for
           the difference  between  historical cost and the fair market value of
           the assets contributed by both UPC and NUON.
      -    Deferred taxes have been established for the difference  between book
           and tax basis of contributed  assets, if applicable.

INCOME TAXES

The Company  accounts  for income  taxes under the  provisions  of  Statement of
Financial  Accounting  Standards  No. 109,  "Accounting  for Income Taxes" which
requires  recognition  of deferred tax assets and  liabilities  for the expected
future income tax  consequences of transactions  which have been included in the
financial statements or tax returns. Under this method,  deferred tax assets and
liabilities are determined  based upon the difference  between the financial and
tax bases of assets and liabilities and carryforwards using enacted tax rates in
effect for the year in which the  differences  are expected to reverse.  UTH has
adopted the principles of this statement in its financial statements.

                                      191
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

US GAAP INFORMATION

The   calculation   of  net  loss,   shareholders'   equity  and  total  assets,
substantially in accordance with US GAAP, is as follows:

      Net loss as per Consolidated
      ----------------------------
      Statements of income                                 (49,374)
      --------------------

      Adjustments to reported income (loss):
      Amortisation of goodwill                               4,082
      Share in results of affiliated companies                 747
                                                         ---------
      Approximate net loss in accordance with US
      GAAP                                                 (44,545)
                                                         ==========

      Shareholders' equity as per
      ---------------------------
      Consolidated balance sheets                          635,521
      ---------------------------

      Adjustments to reported equity:
      Goodwill                                            (152,105)
      Affiliated Companies                                 (27,893)
                                                         ---------
      Approximate shareholders' equity
      in accordance with US GAAP                           455,523
                                                         =========

      Total assets as per Consolidated
      --------------------------------
      Balance sheets                                     1,672,030
      --------------

      Adjustments to reported assets:
      Goodwill                                            (152,105)
      Affiliated Companies                                 (27,893)
                                                         ---------
      Approximate total assets in accordance with US
      GAAP                                               1,492,032
                                                         =========

19.  PROFORMA INFORMATION (UNAUDITED)

On August 6, 1998 both  shareholders  contributed  their  interests in the Dutch
cable  market  into  UTH.  The  following  pro  forma   condensed   consolidated
information for the year ended December 31, 1997 and 1998 give effect to the UTH
Transaction  as if it had occurred at the  beginning  of the periods  presented.
This pro forma condensed consolidated  information does not purport to represent
what UTH's result of operations would actually have been if such transaction had
in fact  occurred  on such  date.  The pro  forma  adjustments  are  based  upon
currently  available  information and upon certain  assumptions  that management
believes are reasonable.
<TABLE>
<CAPTION>
                                               For the Year Ended    For the Year Ended
                                               December 31, 1997     December 31, 1998
                                               -----------------     -----------------
      <S>                                            <C>                   <C>
      Total revenues......................           157,836               219,314
      Net loss............................           (47,194)              (90,600)
</TABLE>

                                      192
<PAGE>
                          UNITED TELEKABEL HOLDING N.V.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                 FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
                      (AUGUST 6, 1998) TO DECEMBER 31, 1998
                     (stated in thousands of Dutch guilders)

20.  SUBSEQUENT EVENTS

SUBORDINATED LOAN

UTH entered into a subordinated  loan  agreement with UPC in March,  1999 for an
amount of 119,000  million.  The  interest is payable on an annual  basis.  This
subordinated  loan was  entered  into for  purposes  of  continuing  funding  of
incurred losses and capital expenditures.

NUON SHARE PURCHASE AGREEMENT

On February 17, 1999,  UPC acquired the remaining  49% of UTH. This  transaction
completed  the purchase by UPC of 100% of UTH. UPC  purchased  the interest from
NUON for 518,100.  In  addition,  UPC repaid NUON and assumed from NUON a 33,300
subordinated  loan,  including accrued interest dated December 31, 1998, owed by
UTH to NUON.

REFINANCING

Subsequent to December 31, 1998, UTH replaced their  existing  690,000  facility
with a senior  facility and additional  shareholder  loans.  The senior facility
consists of a euro 340 million (750,000)  revolving  facility to N.V.  Telekabel
Beheer that will convert to a term facility on December 31, 2001. Euro 5 million
of this  facility  will be in the form of an  overdraft  facility  that  will be
available until December 31, 2007. This existing  facility will be used to repay
a portion of the UTH  facility  and for capital  expenditures.  The new facility
will bear  interest at the Euro  Interbank  Offered  Rate plus a margin  between
0.75% and 2.00% based on the leverage  multiples tied to N.V. Telekabel Beheer's
net operating income. The new facility will be secured by, among other things, a
pledge  over  shares  held by the  borrower  and will  restrict  N.V.  Telekabel
Beheer's ability to incur additional debt.


                                      193
<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 14th day of May 1999.

                                             United International Holdings, Inc.
                                             a Delaware corporation

                                             By:  /s/ Valerie L. Cover
                                                 ------------------------------
                                                 Valerie L. Cover
                                                 Controller and Vice President


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has caused this Report to be signed by the following  persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
                                         Title of Position
Signature                                Held With the Registrant
---------                                ------------------------
<S>                                      <C>                                         <C> 

     *
---------------------------------
Gene W. Schneider                        Chairman of the Board, President and
                                           Chief Executive Officer                   May 14, 1999
     *
---------------------------------
Albert M. Carollo                        Director                                    May 14, 1999

     *
---------------------------------
John P. Cole, Jr.                        Director                                    May 14, 1999

/s/ Valerie L. Cover
---------------------------------        Controller (Principal Accounting Officer)
Valerie L. Cover                           and Vice President                        May 14, 1999

     *
---------------------------------
Lawrence F. DeGeorge                     Director                                    May 14, 1999

     *
---------------------------------
Lawrence J. DeGeorge                     Director                                    May 14, 1999

     *
---------------------------------
Antony P. Ressler                        Director                                    May 14, 1999

     *
---------------------------------
John F. Riordan                          Director                                    May 14, 1999

     *
---------------------------------
Curtis W. Rochelle                       Director                                    May 14, 1999

     *
---------------------------------
Mark L. Schneider                        Director and Executive Vice President       May 14, 1999

     *
---------------------------------
Bruce H. Spector                         Director                                    May 14, 1999

*  By:   /s/ Valerie L. Cover
      ---------------------------
         Valerie L. Cover
         Attorney-in-fact
</TABLE>


                                      194