<PAGE>


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

                                   FORM 10-K

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

     For the fiscal year ended December 31, 1998
                                   Commission file number: 333-1024

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

     For the transition period from ______________ to ________________

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
               (exact name of registrant as specified in charter)

         Maryland                                        13-1424080      
-------------------------------                     --------------------
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                     Identification No.)

 9110 E. Nichols Avenue, Suite 200
 Englewood, CO                                                    80112      
----------------------------------                             -----------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code (303) 792-3600

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

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

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

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. N/A.

The number of shares outstanding of $1.00 par value common stock at March 26,
1999 was 100 shares.


<PAGE>


                      UNITED ARTISTS THEATRE CIRCUIT, INC.

                           Annual Report on Form 10-K

                                December 31, 1998

                                TABLE OF CONTENTS

                                     PART I

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     -----
<S>                                                                                  <C>
Item 1     -  Business                                                                  3

Item 2     -  Properties                                                               13

Item 3     -  Legal Proceedings                                                        13

Item 4     -  Submission of Matters to a Vote of Security Holder                       13

                                PART II

Item 5     -  Market for Registrant's Common Equity and Related Stockholder
                       Matters                                                         14

Item 6     -  Selected Financial Data                                                  14

Item 7     -  Management's Discussion and Analysis of Financial Condition and
                       Results of Operations                                           15

Item 7(A)  -  Quantitative and Qualitative Disclosures About Market Risk               25

Item 8     -  Financial Statements and Supplementary Data                              25

Item 9     -  Changes in and Disagreements with Accountants on Accounting
                       and Financial Disclosure                                        25

                                    PART III

Item 10    -  Directors and  Executive Officers of the Registrant                      44

Item 11    -  Executive Compensation                                                   45

Item 12    -  Security Ownership of Certain Beneficial Owners and Management           49

Item 13    -  Certain  Relationships and Related Transactions                          51

                                     PART IV

Item 14    -  Exhibits, Financial Statement Schedules, and 
                       Reports on Form 8-K                                             52

Signatures

</TABLE>


<PAGE>


                         CAUTIONARY STATEMENT REGARDING
                           FORWARD LOOKING STATEMENTS

CERTAIN OF THE MATTERS DISCUSSED IN THIS FORM 10-K MAY CONSTITUTE 
FORWARD-LOOKING STATEMENTS FOR PURPOSES OF THE SECURITIES ACT OF 1993, AS 
AMENDED AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH 
FORWARD-LOOKING STATEMENTS INVOLVE UNCERTAINTIES AND OTHER FACTORS AND THE 
ACTUAL RESULTS AND PERFORMANCE OF UATC MAY BE MATERIALLY DIFFERENT FROM 
FUTURE RESULTS OR PERFORMANCE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. 
CAUTIONARY STATEMENTS REGARDING THE RISKS ASSOCIATED WITH SUCH 
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, THOSE STATEMENTS 
INCLUDED UNDER "BUSINESS", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS" AND "QUANTITATIVE AND QUALITATIVE 
DISCLOSURES ABOUT MARKET RISK." CERTAIN OF SUCH RISKS AND UNCERTAINTIES 
RELATE TO THE HIGHLY LEVERAGED NATURE OF UATC, THE RESTRICTIONS IMPOSED ON 
UATC BY CERTAIN INDEBTEDNESS, THE SENSITIVITY OF UATC TO ADVERSE TRENDS IN 
THE GENERAL ECONOMY, THE HIGH DEGREE OF COMPETITION IN UATC'S INDUSTRY, THE 
VOLATILITY OF UATC'S QUARTERLY RESULTS AND UATC'S SEASONALITY, THE DEPENDENCE 
OF UATC ON FILMS AND DISTRIBUTORS AND ON ITS ABILITY TO OBTAIN POPULAR MOTION 
PICTURES, THE CONTROL OF UATC BY THE MERRILL LYNCH CAPITAL PARTNERS, INC. AND 
THE DEPENDENCE OF UATC ON KEY PERSONNEL, AMONG OTHERS.

ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO UATC ARE 
EXPRESSLY QUALIFIED BY THE FOREGOING CAUTIONARY STATEMENTS.

                                     PART I

ITEM 1.  BUSINESS

(a)  GENERAL DEVELOPMENT OF BUSINESS

United Artists Theatre Company ("the Parent") (formerly known as OSCAR I 
Corporation), a Delaware corporation and an affiliated company OSCAR II 
Corporation ("OSCAR II") were formed in February 1992 for the purpose of 
acquiring United Artists Theatre Circuit, Inc. ("UATC") and United Artists 
Realty Company ("UAR") from an affiliate of Tele-Communications, Inc. 
("TCI"). OSCAR II was subsequently merged into OSCAR I Corporation.

United Artists is owned by Merrill Lynch Capital Partners, Inc. ("MLCP"), a 
private equity investment fund managed by Stonington Partners, Inc., certain 
institutional investors, and certain members of United Artists' management. 
On May 12, 1992, the Parent purchased all of the outstanding common stock of 
UATC from the affiliate of TCI (the "Acquisition").

UATC, a Maryland corporation, was initially founded in 1926 by shareholders 
including Mary Pickford, Douglas Fairbanks, Sam Goldwyn and Joe Schenck. In 
addition to the development of its theatre operations, in the early 1960s 
UATC, through a separate subsidiary, invested in the cable television 
business.

In 1986, an affiliate of TCI acquired a controlling interest in UATC's then 
parent company, United Artists Communications, Inc. ("UACI"), which owned 
both the theatre and cable businesses. To separately finance its significant 
real estate holdings to provide capital for reinvestment, UAR and two of its 
subsidiaries, United Artists Properties I Corp. ("Prop I") and United Artists 
Properties II Corp. ("Prop II"), were formed and several all of UATC's 
fee-owned theatre properties were transferred to those entities and then 
leased back to UATC. The theatre land and buildings were then mortgaged as 
part of various mortgage bond financings.

From 1986 through 1989, UATC's growth was the result of the acquisition of 
several regional theatre circuits predominately in Pennsylvania, Georgia, 
North and South Carolina, Louisiana, Arkansas, Mississippi, Arizona, Nevada 
and Colorado. Subsequent to these acquisitions UATC was the largest operator 
of theatres in North America with 2,695 screens. From 1989 to the present 
UATC has continued to consolidate the previously acquired operations through 
the construction of new facilities and the sale or closure of several older, 
smaller theatres.

In 1989 UATC changed its name to United Artists Entertainment Company ("UAE") 
in conjunction with the acquisition of United Cable Television Corporation. 
In December 1991, TCI's affiliate acquired the remaining outstanding shares 
of UAE and pursued divestiture of UATC and UAR which was completed in May 
1992.

                                    3
<PAGE>

Subsequent to the Acquisition by MLCP, UATC increased its investments in new 
domestic theatres, invested internationally and invested in certain 
businesses that it believed were synergistic with its theatre operations. 
These new businesses included virtual reality entertainment centers and the 
Satellite Theatre Network-TM-, a network of theatres that can be used for 
business meetings during non-peak theatrical business hours.

In December of 1996, subsequent to the departure of UATC's then CEO, UATC 
initiated a more focused operating and capital investment strategy. This 
strategy was designed to improve the efficiency and quality of its core 
operating theatre business and increase its market share within its key 
domestic markets. As part of this strategy, substantially all of its 
international operations were sold, its entertainment center business were 
discontinued and certain domestic markets and theaters that were 
underperforming or non-strategic were sold or earmarked for sale. The 
proceeds from the sale of the international and domestic assets have been 
used to repay debt and reinvested into new theatres and the expansion or 
renovation of existing successful theatres in key markets. In conjunction 
with this change in focus in 1996 and 1997, UATC restructured its corporate 
functions and has reduced its running rate corporate expenses by over $13.5 
million per annum, or 37%.

The current corporate structure of the Parent and UATC are as follows:

                         UNITED ARTISTS THEATRE COMPANY
                                    (Parent)
                                       |
                                       |
                -------------------------------------------
                |                                          |
               UAR ------------------------------------- UATC
                |          Affiliate Leases               |
              Prop I ----------------------------------   |

(b)  NARRATIVE DESCRIPTION OF BUSINESS

UATC is a leading motion picture exhibitor in North America and, in the 
United States, operates 2,184 screens at 319 theatres located in 24 states. 
UATC licenses films from all major and substantially all independent film 
distributors and derives revenues primarily from theatre admissions and 
concession sales. UATC operates screens in eight of the ten largest 
demographic market areas ("DMAs") in the United States and approximately 
45.4% of its screens are located in the top 20 DMAs. Approximately 31.1% of 
UATC's screens (680 screens) have been constructed since January 1, 1992. 
UATC believes that it is one of the largest single exhibitors, based on 
number of screens, in many of its core areas of operation and that this 
market position provides several operating benefits. Theatre operations in 
six states (California, New York, Pennsylvania, Florida, Texas, and Colorado) 
accounted for approximately 58.3% and 56.6% of UATC's total theatres and 
screens, respectively, at December 31, 1998 and 61.6% of UATC's theatrical 
revenue for the year ended December 31, 1998.

In December 1996, UATC implemented a corporate restructuring and refocused 
its investment strategy on its core U.S. business. Since that time UATC has: 
(i) reduced its corporate general and administrative expenses; (ii) improved 
its operations in its core areas of operation through the development of new 
theatres and the refurbishing or expansion of certain existing key theatres; 
(iii) implemented operational improvements; and (iv) accelerated the 
divestitures of underperforming and non-strategic theatres.

UATC has invested more than $430.9 million since January 1, 1992 toward 
improving the quality of its asset base by, among other things, renovating 
existing theatres and constructing new state-of-the-art theatres. 
Approximately 31.1% of UATC screens have been constructed since January 1, 
1992. Virtually all of the theatres UATC has built since 1997 are 
state-of-the-art, 10 to 16 screen multiplex theatres with stadium seating, 
high-backed rocking seats, digital sound, expanded concession areas and other 
state-of-the-art design features and amenities and many existing theatres are 
being, or will be, upgraded with stadium seating and other state-of-the-art 
features. All new theatres currently planned will also include these 
state-of-the-art amenities. As compared to the prior generation of 
non-stadium theatres, UATC believes that these theatres provide a higher 
quality entertainment experience for 

                                       4
<PAGE>

patrons and significant operating efficiencies and improved economics for 
UATC. At December 31, 1998, UATC operated 24 theatres (245 screens) which 
offered stadium seating. At December 1998, approximately 87.9% of UATC's 
screens were located in theatres with five or more screens. UATC's average 
number of screens per theatre has increased 41.7% from 4.8 at January 1, 1992 
to 6.8 at December 31, 1998.

INDUSTRY OVERVIEW

More than 530 participants in the domestic motion picture theatre exhibition 
business operate approximately 34,000 screens in North America. In 1998, the 
top ten companies operated approximately 53.0% of the total screens as 
compared to 31.0% in 1986. The remainder of the domestic motion picture 
theatre exhibition industry is highly fragmented, with the remaining 47.0% of 
the screens being operated by approximately 520 exhibitors. UATC has one of 
the largest shares of total screens with approximately 6.4% of all screens in 
North America.

Exhibitors have generally turned to multi-screen formats with smaller 
auditoriums. Typically, multi-screen theatres ("multiplexes") have six or 
more screens per theatre, although in some instances multiplexes may have as 
many as 30 screens in a single theatre. The multiplex format provides 
numerous benefits for theatre operators, including allowing facilities 
(concession stands and restrooms) and operating costs (lease rentals, 
utilities and personnel) to be allocated over a larger base of screens and 
patrons. Multiplexes have varying seating capacities (typically from 100 to 
500 seats) that allow for multiple showtimes of the same film and a variety 
of films with differing audience appeal to be shown. They also provide the 
flexibility to shift films to larger or smaller auditoriums depending on 
their popularity. To limit crowd congestion and maximize the efficiency of 
floor and concession staff, the starting times of films at multiplexes are 
staggered. The growth in the number of screens operated nationally has 
accelerated significantly over the past years with a 7.2% increase in each of 
1997 and 1998. In contrast, the annual average rate of increase since 1978 
was only approximately 4.9%. Because auditorium size is generally smaller in 
a multi-plex theatre, the number of seats has increased at a much slower rate 
than screens.

Certain trends in the theatre exhibition industry favor larger, better 
capitalized companies, creating an environment for new construction and 
consolidation. Foremost among these trends is larger exhibitors actively 
seeking and building multiplexes or megaplexes. Moreover, many smaller 
theatre owners who operate older cinemas without state-of-the-art stadium 
seating and projection and sound equipment may not have the capital required 
to maintain or upgrade their circuits. The growth of the number of screens, 
strong domestic consumer demand and growing foreign theatrical and domestic 
and foreign ancillary revenue opportunities have led to an increase in the 
volume of major film releases. The greater number of screens has allowed 
films to be produced for and marketed to specific audience segments (e.g., 
horror films for teenagers) without using capacity required for mainstream 
product.

The greater number of screens has also prompted distributors to increase 
promotion of new films. Not only are there more films in the market at any 
given time, but the multiplex format allows for much larger simultaneous 
national theatrical release. In prior years a studio might have released 
1,000 prints of a major film, initially releasing the film only in major 
metropolitan areas, then gradually releasing it in smaller cities and towns 
nationwide. Today studios might release over 3,000 prints of a major film and 
open it nationally in one weekend. These national openings have made up-front 
promotion of films critical to attract audiences and stimulate word of mouth 
advertising.

Motion pictures are generally made available through various distribution 
methods at various dates after the theatrical release date. The release dates 
of motion pictures in these other "distribution windows" begin four to six 
months after the theatrical release date with video cassette rentals, 
followed generally by off-air or cable television programming including 
pay-per-view, pay television, other basic cable and broadcast network 
syndicated programming. These new distribution windows have given producers 
the ability to generate a greater portion of a film's revenues through 
channels other than theatrical release. This increased revenue potential 
after a film's initial domestic release has enabled major studios and certain 
independent producers to increase film production and theatrical advertising. 
The additional non-theatrical revenue has also allowed for higher individual 
film production and marketing costs. The total cost of producing and 
distributing a picture averaged approximately $52.7 million in 1998 compared 
with approximately $17.5 million in 1986. The average cost to advertise and 
promote a picture averaged approximately $25.3 million in 1998 as compared 
with $6.7 million in 1986.

These higher costs have made a large successful theatrical release more 
important. Distributors strive for a successful opening run at the theatre to 
establish a film and substantiate the film's revenue potential both 
internationally and through other release windows. The value of home video 
and pay cable distribution agreements

                                       5
<PAGE>

frequently depends on the success of a film's theatrical release. 
Furthermore, the studios' revenue-sharing percentage and ability to control 
who views the product within each of the distribution windows generally 
declines as one moves farther from the theatrical release window. Because 
theatrical distribution remains the cornerstone of a film's financial 
success, it is the focal distribution window for the public's evaluation of 
films and motion picture promotion.

Although it cannot provide any assurance, management expects that the overall 
supply of films will continue to increase. Over the past four years there has 
been an increase of approximately 8.6% in the number of motion pictures rated 
by the Classification and Rating Administration. There has also been an 
increase in the number of major studios and reissues of films as well as an 
increased popularity of films made by independent producers. During the past 
four years the number of large budget films and the level of marketing 
support provided by the production companies has risen, as evidenced by the 
increase in average production costs and average advertising costs per film 
of 53.7% and 57.5%, respectively, from 1994 to 1998.

BUSINESS AND OPERATING STRATEGY 

UATC's operating and capital investment strategy is to focus on improving the 
quality of its key operating theatres and the quality of its daily 
operations. Key elements include:

REFOCUS OVERHEAD AND CAPITAL INVESTMENT STRATEGY: In December 1996, UATC 
implemented a corporate restructuring and refocused its investment strategy 
on its core U.S. business. UATC's core business strategy focuses management's 
attention and capital resources on those geographic areas where UATC intends 
to strengthen and defend its current position. UATC has also implemented 
operational improvements and overhead reductions intended to increase UATC's 
results of operations and has sold or closed several underperforming or 
non-strategic theatres. The corporate restructuring plan resulted in a higher 
level of focus by UATC on its domestic theatrical business and a reduction of 
corporate general and administrative expenses of 37.1% from a running rate of 
$36.4 million for the year ended December 31, 1997 to $22.9 million for the 
year ended December 31, 1998.

REBUILD OR EXPAND EXISTING KEY THEATRE LOCATIONS AND DEVELOP NEW THEATRES: 
UATC plans to continue increasing its number of screens and operating margins 
by focusing its capital investment activities on the renovation or expansion 
of existing theatres in its core areas of operation. All currently planned 
theatre renovations and expansions will include, among other things, the 
addition of stadium seating. The theatres selected for renovation and 
expansion will be those that have favorable historical operating results and 
for which a renovation or expansion will provide the theatre with a 
competitive advantage.

UATC will also build several new state-of-the-art theatres within its core 
areas of operation. UATC is developing higher margin multiplexes of 12 to 18 
screens and is seeking to increase concession sales through, among other 
things, more efficient theatre design. UATC is also constructing its new 
theatres with stadium seating, digital sound, more comfortable seats and 
other popular design features and amenities. UATC believes that these 
theatres will have an optimal relationship between the number of screens (12 
to 18) and the size of the auditoriums (125 to 400 seats). These theatres are 
designed to increase the revenue per square foot generated by the facility 
and reduce the cost per square foot of constructing and operating the 
theatres. This multiplex strategy, in combination with an emphasis on 
concession sales, is designed to improve revenue and profitability by 
enhancing attendance and concession sales, theatre utilization and operating 
efficiencies and provide more efficient clustering around regional and 
district management centers. UATC believes that theatres which are larger 
than 18 screens tend to have a higher level of return risk because they 
require a larger capital investment and require a larger drawing area (thus, 
more potential competition) to be successful, generally resulting in a 
diminishing return on capital investment for the incremental screens.

During 1998, UATC opened 13 new theatres (157 screens), added stadium seating 
to two theatres (22 screens), and renovated two additional theatres. Seven of 
its new theatres (83 screens) opened were expansions, rebuilds or 
replacements of existing theatres that contained 30 screens. During 1999, 
UATC currently plans to open five new theatres (68 screens), and renovate and 
add stadium seating to three existing theatres (36 screens).

MANAGE INDIVIDUAL THEATRE CAPITAL REQUIREMENTS: Even though UATC plans to 
continue to develop several new state-of-the-art theatres each year, it 
intends to reduce individual theatre financial leverage and capital 
requirements by focusing on expanding, renovating and rebuilding many of its 
key locations. In many cases, these existing key locations can be transformed 
into state-of-the-art multiplex stadium seating theatres without competing 
against other operators for the location and incurring higher rent and 
excessive preconstruction costs. Furthermore, existing 

                                       6
<PAGE>

structures can be utilized while being refurbished to help reduce overall 
construction costs. UATC's renovation of theatres in successful locations 
eliminates much of the geographic and location risk related to a project's 
success.

In order to reduce the overall investment in new theatres, UATC has entered 
into "build to suit" and other landlord leasing arrangements or sale and 
leaseback transactions. UATC also intends to continue to sell non-strategic 
and underperforming assets and expects to redeploy capital to its core U.S. 
business. This strategy is intended to provide increased liquidity from the 
disposal of non-cash flow producing investments and theatres with limited 
growth potential.

DIVEST OR FIND ALTERNATE USES FOR UNDERPERFORMING THEATRES. UATC's 1996 
corporate restructuring was also designed to rationalize underperforming or 
non-strategic assets by: (i) terminating leases for underperforming theatres; 
(ii) selling real estate underlying non-strategic or underperforming 
theatres; (iii) divesting theatres in non-core areas; (iv) exchanging 
theatres in non-core areas for theatres in core areas; and (v) finding new 
operating techniques or alternative uses for underperforming theatres. During 
1998, UATC sold the majority of its remaining international theatrical 
exhibition assets for $3.0 million of cash, $0.5 million of stock of the 
acquiring company and a $3.0 million note. In addition, UATC sold certain 
non-operating real estate assets and closed or sold 32 underperforming or 
non-strategic theatres (137 screens) for which net cash proceeds of $7.0 
million were received. Many of the theatres closed or sold were not 
profitable or were located in areas that are not part of UATC's long-term 
strategic plans. UATC has identified 63 operating theatres and owned real 
estate (434 screens) that are not considered strategically important or are 
underperforming. UATC plans to sell or close these theatres during the next 
several years, although there can be no assurance that UATC will be able to 
accomplish such divestitures or closings.

IMPLEMENT OPERATIONAL IMPROVEMENTS. UATC has recognized theatre and 
concession operating efficiencies through a heightened focus on increasing 
concession sales, managing theatre payrolls and other variable costs and 
increased staff training. Concession sales per capita increased by 
approximately 7.2% in 1998 versus 1997 and 5.6% annually from 1993 to 1998. 
Management believes that there are opportunities to achieve additional 
operating efficiencies by disposing of underperforming theatres, renovating 
and expanding certain existing theatres, developing new multiplex stadium 
theatres, and continuing to control theatre level operating expenses. The 
area of focus for 1999 for those theatres identified as underperforming or 
non-strategic will primarily be to implement operating techniques to improve 
their operating results as a theatre, find other uses or divestiture.

ENHANCE STUDIO/DISTRIBUTOR RELATIONSHIPS. Management intends to continue to 
enhance and balance its studio relationships to obtain the optimal number of 
marketable motion pictures at film rental percentages that are consistent 
with prior results. UATC believes that it will continue to increase the 
number of prints it obtains from each studio as it increases the number of 
its screens in selected key locations and leverages its attractive theatre 
locations through the renovation and expansion of certain existing theatres 
and the development of new, larger (in terms of screens), higher margin 
theatres. To the extent that theatrical exhibition remains the primary 
distribution channel for new motion picture releases and the overall number 
of movies produced continues to increase, management believes that UATC's 
focus on its core areas will provide it with access to more prints of each 
motion picture.

DEVELOP ANCILLARY REVENUE OPPORTUNITIES. UATC believes that there are 
opportunities to increase its ancillary revenue from its Satellite Theatre 
Network-TM- by renting theatres on a networked and non-networked basis for 
corporate meetings, seminars, product and customer research and other 
entertainment uses. Through its VIP/Premier program, UATC seeks to enhance 
theatre attendance by selling large groups of tickets to businesses and 
groups through coupon books as well as gift certificates. On-screen 
advertising also provides an additional opportunity to increase revenue and 
profitability.

OPERATIONS

OVERVIEW

The following table summarizes the screens and theatres in which UATC owned 
more than a 50% interest at the end of each of the last five years:

<TABLE>
<CAPTION>

                                                            December 31, 
                                      ---------------------------------------------------------
                                        1994        1995         1996         1997         1998
                                       -----       -----        -----        -----        -----
<S>                                   <C>         <C>          <C>          <C>          <C>
Number of Theatres                      413          406          366          338         319
Number of Screens                     2,254        2,310        2,203        2,172       2,184
Average Screens per Theatre             5.5          5.7          6.0          6.4         6.8
</TABLE>


                                       7

<PAGE>

UATC also manages four other theatres (11 screens) in the United States in 
which it owns a 50% or less interest and owns 10% interests in each of two 
corporate entities, one of which operates two theatres (seven screens) in 
Singapore and the other of which operates two theatres (14 screens) in 
Thailand.

Almost all of UATC's theatres are multiplexes, with an average of 6.8 screens 
per theatre. In comparison to a single screen theatre, multiplex theatres 
allocate facilities such as concession stands and restroom facilities, and 
operating costs such as rent, utilities and personnel, over a larger base of 
screens and patrons. Multiplexes allow for a variety of films with different 
audience appeal to be shown in the same theatre and permit multiple showtimes 
of popular films. Multiplexes also provide the flexibility to shift films to 
larger or smaller auditoriums depending on the film's popularity. To limit 
crowd congestion and maximize staff efficiency, UATC's theatres stagger the 
starting times of films. UATC believes that multiplex and "megaplex" theatres 
designed with 12 to 18 screens generally provide the optimal balance of 
return on invested capital and adequate screen numbers for patrons and film 
distribution companies, as compared to theatres with more than 18 screens.

As set forth in the following table, although UATC operates several smaller 
theatres (in terms of number of screens), approximately 87.9% of UATC's 
screens as of December 31, 1998 were in theatres containing five or more 
screens:

<TABLE>
<CAPTION>

            Number of Screens   Number of         % of              % of
              per Theatre       Theatres      Total Screens    Total Revenue
            -----------------   ---------     -------------    -------------
<S>         <C>                 <C>           <C>              <C> 
            Greater than 10         35           20.3%             21.4%
                9 - 10              56           24.7              26.8
                 7 - 8              61           21.5              20.0
                 5 - 6              81           21.4              19.8
                 3 - 4              58           10.1               9.0
                 1 - 2              28            2.0               3.0
</TABLE>

REVENUE

UATC's principal sources of revenue from its theatres are derived from 
theatrical admissions and concession sales. For the year ended December 31, 
1998, theatrical admissions and concession sales comprised approximately 
68.7% and 28.5% of UATC's revenue, respectively. The remaining 2.8% of 
revenue for this period was derived primarily from on-screen advertising, the 
Satellite Theatre Network-TM-, electronic video games located in theatre 
lobbies and other miscellaneous sources.

UATC's admissions revenue is based on the level of theatrical attendance and 
the mix of tickets sold. Theatre attendance is dependent primarily upon the 
ability to license the most popular films. UATC's ticket prices vary 
throughout the circuit depending upon such things as local competition, 
whether the theatre is showing first run or second run movies and the local 
economy in which the theatre operates. Reduced ticket prices are typically 
charged for senior citizens, children and matinee showings. The mix of 
tickets sold is primarily related to the types of movies available to and 
exhibited by UATC. Admission prices are typically evaluated on a semi-annual 
basis and are adjusted after taking into consideration such things as the 
prices at competitive theatres, the nature of the theatre and the local 
economy. Admissions revenue is recorded net of applicable sales taxes.

Concession sales are a significant factor in the overall profitability of a 
theatre. UATC's primary concession products are varying sizes of popcorn, 
soft drinks, candy and certain other products such as nachos and hot dogs. 
UATC also sells specialty foods such as pizza, pretzels, cookies, ice cream, 
bottled water and fruit juices in many of its theatres. Popcorn, soft drinks 
and packaged candy are generally sold in three or four (including children's) 
sizes. Retail prices for concession items vary by the size of the offering 
and are generally market sensitive. Concession sales are recorded net of 
applicable sales taxes.

To further increase its concession sales, UATC has introduced new products 
and initiated programs intended to increase both the percentage of patrons 
who purchase concessions and the amount of concessions purchased by each 
patron. To achieve these goals UATC has implemented training programs for all 
concession employees, remodeled concession stands at certain existing 
theatres to make them more visible, attractive and efficient, constructed new 
theatres with increased concession capacity, expanded concession menus in 
selected locations, installed bulk candy stands in most theatres and adopted 
certain seasonal and event-oriented promotional programs. Theatre managers 
and assistant managers are motivated to increase concession sales through 
concession commission programs that represent a significant portion of their 
total compensation.

                                       8
<PAGE>

FILM LICENSING

UATC obtains licenses to exhibit films by directly negotiating with film 
distributors on a film-by-film and theatre-by-theatre basis. UATC licenses 
films through its booking offices located in New York and Los Angeles. 
Individuals in the booking offices are responsible for booking films for 
theatres in their assigned regions. This regional film booking structure 
allows UATC to maintain better relationships with the film distributors' 
regional representatives and provides better insight to the regional film 
tastes of its patrons. UATC licenses films from all of the major and 
independent film distributors and is not overly dependent on any one film 
distributor for film product.

UATC licenses the majority of its first run films from distributors owned by 
the major and independent film production companies. Each film distributor 
establishes geographic areas known as "film zones," and typically allocates 
each of its films to only one theatre within each film zone. In most cases 
where there is more than one exhibitor in a film zone this allocation process 
is based on long standing relationships between the distributor and exhibitor 
with respect to that theatre or is done on an alternating basis. In certain 
very limited cases where several exhibitors operate in a single film zone, 
films are allocated based on an exhibitor bidding process. The size of a film 
zone is based primarily upon population density. UATC operates in a total of 
262 film zones and believes that it is the only exhibitor in 118 of these 
zones and, therefore, does not currently compete with other exhibitors for 
licensing specific film product at a given time in such film zones.

Film licenses typically specify rental fees equal to the higher of a 
percentage of (i) gross box office receipts or (ii) adjusted box office 
receipts. Under the gross box office receipts formula, the film distributor 
receives a specified weekly percentage of the gross box office receipts. 
Under the adjusted box office receipts formula, the film distributor receives 
a specified percentage of the excess of box office receipts over a 
periodically negotiated amount of theatre "house" expenses. In a very limited 
number of cases, UATC may be required to pay a non-refundable guarantee or 
make film rental advances in order to obtain certain film licenses.

The terms of the film licenses (and hence the film rental costs) with many 
film distributors are historically finalized after exhibition of the film in 
a process known as "settlement." The settlement process considers, among 
other things, the actual success of a film relative to original expectations, 
an exhibitor's commitment to the film and the exhibitor's relationship with 
the film distributor. UATC has historically been able to license a majority 
of the motion pictures available; however, there is no guarantee that this 
will continue.

MARKETING AND ADVERTISING 

UATC relies principally upon newspaper advertisements, newspaper film 
schedules and word of mouth to inform its patrons of film titles and 
exhibition times. UATC utilizes local newspaper advertisements to promote its 
theatres and inform its patrons of the films being played and show times. 
UATC typically pays for this type of advertisement. In most areas, 
multi-media advertisements for upcoming film releases are paid by the film's 
distributor. In many areas there is a "co-op" arrangement whereby the 
exhibitors and distributors share in the cost of film advertisement in 
newspapers. Film distributors will also typically pay for radio and 
television spots to promote certain motion pictures and special events.

Prior to the opening of a new theatre, UATC typically initiates a marketing 
campaign that advertises and promotes the new theatre for several weeks to 
several months prior to the theatre's opening date. When a theatre is 
performing below management's expectations, UATC may also initiate a 
newspaper marketing campaign with the objective of increasing attendance at 
the theatre.

THEATRE PROPERTIES

The majority of UATC's theatres are located in free-standing buildings or are 
"anchor" tenants in regional malls or strip centers. Typically, UATC's 
third-party leases have remaining terms ranging from 10 to 25 years and 
provide for options to extend for up to 20 additional years at UATC's 
election. The leases provide for annual base rent and many require additional 
rent based upon a percentage of the leased theatres' revenue over a certain 
breakpoint. Certain of the leases provide for escalating minimum annual 
rentals. The leases typically require UATC to pay for property taxes, 
insurance and certain of the lessors' overhead costs. UATC expects that in 
the normal course of business, desirable leases that expire will be renewed 
or replaced by other leases, although such renewals or replacements may be on 
different terms. UATC owns directly or through its subsidiaries substantially 
all of the theatre equipment used in all of its theatres.

CONSTRUCTION. UATC intends to devote significant resources to adding 
additional screens to existing theatres and refurbishing or rebuilding 
existing theatres to strengthen its position in existing areas. UATC believes 
that 

                                       9
<PAGE>

renovating, expanding or completely rebuilding certain of its existing 
theatre locations provides it with a significant competitive advantage in 
many of the large metropolitan areas where the availability of suitable 
theatre sites is limited. The capital costs associated with renovating or 
expanding an existing theatre are usually significantly less than for 
constructing a new theatre.

UATC's new theatre construction strategy focuses on selecting sites in its 
existing core areas of operation and enhancing the theatre-goer's experience 
by building state-of-the-art theatres. Each new location is selected after 
considering UATC's relative strength in the particular area, the number of 
existing competitive screens, growth potential of the area and the minimum 
threshold population within a certain radius of the theatre. As part of its 
construction strategy, UATC intends to construct or lease stadium theatres 
that have a favorable balance between the number of screens (12 to 18) and 
the size of the auditoriums (125 to 400 seats). UATC believes that this 
balance will allow UATC to provide an adequate number of screens for film 
distributors and increased entertainment value to patrons afforded by larger 
auditoriums. In addition to increasing the number of screens in certain 
locations, UATC is also constructing all of its new theatres with stadium 
seating, more comfortable seats, analog and digital stereo sound systems and 
other state-of-the-art design features and amenities.

As a result of new construction and the sale or closure of older, smaller 
theatres, approximately 31.1% of UATC's screens have been constructed since 
January 1, 1992 and approximately 50.7% of theatres operated on January 1, 
1992 have been sold or closed. As a result of this new construction and the 
sale or closure of older, smaller theatres, UATC's average number of screens 
per theatre has increased 41.7% from 4.8 screens at January 1, 1992 to 6.8 
screens at December 31, 1998.

UATC has historically financed, and plans to continue to finance, a 
significant portion of the cost of construction of new theatres by entering 
into long-term leases or sale and leaseback transactions. UATC's long-term 
leases typically have initial terms of 15 to 25 years with renewal options 
and require the landlord to provide a significant portion of the up-front 
construction costs. As a result, capital expenditures are often only required 
for equipment and certain tenant finishes, thereby reducing the required net 
capital expenditures.

GEOGRAPHIC POSITIONING. Geographic positioning and operating efficiencies are 
key elements of UATC's operating strategy. Geographic clustering at both the 
regional and local levels is important in providing UATC with access to 
attractive new theatre development opportunities and enhancing film buying 
and operating efficiencies. UATC achieves operating efficiencies by 
concentrating regional corporate operations around fewer strategic markets 
and reducing its number of less profitable, non-strategic theatres.

Theatrical exhibitors depend upon strong geographic positioning to obtain the 
most attractive film rental arrangements because film bookings are negotiated 
on a theatre-by-theatre basis. Strong geographic positioning in terms of both 
number of screens and locations enhances the attractiveness of a theatre 
exhibitor to film distributors, in part because of the exhibitor's ability to 
influence the local success of a film release.

UATC's theatres are located in large and medium sized metropolitan areas in 
California, southern New York (primarily New York City and Long Island), New 
Jersey, Florida, Texas, eastern Pennsylvania (including Philadelphia), 
Louisiana, Colorado (primarily Denver), and Georgia. UATC believes that it 
has strong positions in many of these major metropolitan areas. The six 
states that represent the largest geographic concentration of theatres and 
screens operated accounted for approximately 58.3% and 56.6% of UATC's total 
theatres and screens, respectively, at December 31, 1998 and generated 
approximately 61.6% of UATC's theatrical revenue for the year ended December 
31, 1998 were as follows:

<TABLE>
<CAPTION>

                           Total Number      Total Number              % of
                           of Theatres        of Screens      Theatrical Revenue
                           ------------      ------------     ------------------
<S>                        <C>               <C>              <C> 
California                      55              327                 18.7%
New York                        31              205                 14.1
Pennsylvania                    26              146                  8.4
Florida                         25              217                  7.5
Texas                           24              190                  7.0
Colorado                        25              151                  5.9

</TABLE>

COMPETITION

UATC competes for the public's leisure time and disposable income with all 
forms of entertainment including sporting events, concerts, live theatre and 
restaurants. UATC is also subject to varying degrees of competition from 
other theatre circuits and independent theatres, some of which may have 
greater access to capital resources. 

                                       10
<PAGE>

The motion picture exhibition industry is highly competitive, particularly 
with respect to film licensing, attracting patrons and acquiring or leasing 
new theatre sites. Some of UATC's competitors may be better established in 
certain areas where UATC's theatres are located. Competition for patrons 
occurs locally and depends upon factors such as: (i) which films a particular 
theatre is showing; (ii) location of theatres; (iii) comfort and quality of 
theatres; and (iv) ticket prices. Film patrons are not "brand" conscious and 
generally choose a theatre because of film selection, location and quality of 
the theatre.

Competition among theatre circuits for licensing popular films occurs locally 
and is based on the prestige and location of an exhibitor's theatres, quality 
of the theatres (especially projection and sound quality), seating capacity 
and the exhibitor's ability and willingness to promote the films. UATC 
believes that promoting good relations with film distribution and production 
companies is important to consistently obtain the best mix of available films.

Where real estate is readily available there are few barriers preventing 
competitors from opening theatres near one of UATC's theatres, which may have 
a material adverse effect on UATC's theatre. In addition, "megaplexes" 
(theatres with 14 or more screens) have been built or are planned to be built 
by competitors in certain areas in which UATC operates which may result in 
excess capacity and adversely affect attendance and pricing at existing 
theatres in these areas.

Alternative motion picture exhibition delivery systems, including cable 
television, video cassettes, satellite and pay per view, also exhibit filmed 
entertainment after its theatrical release. While the further expansion of 
such delivery systems (such as video on demand) could have a material adverse 
effect upon UATC's business and results of operations, no such adverse effect 
has yet been experienced.

Recent consolidation in the industry has included the merger of Sony Corp.'s 
Loews Theatres Exhibit Group with Cineplex Odeon Corp. and the merger of Act 
III Cinemas Inc. with Regal Cinemas Inc. Such consolidation could increase 
the level of competition for the industry.

SATELLITE THEATRE NETWORK-TM- 

In an effort to utilize its existing theatres more effectively during periods 
of low attendance (such as mornings and weekdays), UATC has developed a 
business unit called the Satellite Theatre Network-TM-. The Satellite Theatre 
Network-TM- rents theatre auditoriums for seminars, corporate training, 
business meetings and other educational or communication uses, product and 
customer research and other entertainment uses. Theatre auditoriums are 
rented individually or on a networked basis. To provide the "broadcasting" 
network or "teleconferencing" equipment, a network of theatres has been 
created by installing high quality (high definition-like) video projection 
equipment within theatres that are networked via the combination of satellite 
delivery from a single location or multiple locations and telephonic 
communication.

As of December 31, 1998, the Satellite Theatre Network-TM- included 31 
theatres permanently equipped with electronic video capability and an 
additional 288 theatres that were being rented for individual non-networked 
uses. All of UATC's theatres can be "networked" through the use of temporary 
equipment. Because the Satellite Theatre Network-TM- utilizes existing 
theatre facilities and its operations within the theatre are managed by 
existing personnel, very little incremental capital or personnel expenditures 
are required. Marketing and sales of the Satellite Theatre Network-TM- 
services is performed on a national basis by staff located in the corporate 
headquarters in Englewood, Colorado. UATC recorded $5.5 million, $6.2 
million, and $6.0 million of revenue from the Satellite Theatre Network-TM- 
for the years ended December 31, 1998, 1997, and 1996, respectively.

As of September 1, 1998 UATC was issued a United States Patent (No. 
5,801,754) with respect to the inter-active theatre network system.

MANAGEMENT

UATC operates its theatres from its Englewood, Colorado corporate 
headquarters, two regional operating offices, fourteen district operating 
offices and two film booking offices. All of UATC's district offices and 
regional operating offices are located within theatres.

There is active communication between the theatres and division management 
and corporate management, which allows management to react on a daily basis 
to revenue and staffing information. Division management provides guidance in 
scheduling, staffing, screen allocation and other operating decisions. 
Management personnel with UATC's marketing and concessions operations are 
also continually involved with theatre management to promote strong 
performance in those areas. This structure allows the theatre manager to 
focus solely on the daily operations

                                       11
<PAGE>

of the theatre. A primary responsibility of the theatre manager is improving 
efficiency and managing costs at the local theatre level.

Corporate and divisional management assists in the daily operations of UATC's 
theatres by booking and settling films, training new and existing employees, 
setting admission and concessions pricing policies, selecting concession 
products, advertising theatres and showtimes, selecting new theatre sites and 
negotiating national purchasing contracts. Corporate management also assists 
in theatre development and construction and capital raising activities and 
provides cash management, accounting, tax and management information services.

UATC's reporting systems provide management and each theatre manager with 
daily, weekly and monthly operating reports for individual theatres. This 
allows management to monitor theatre manager performance and progress in 
attaining certain identifiable goals. UATC's computer system, installed in 
all of its theatres, allows UATC to centralize all theatre-level 
administrative functions at its two regional operating offices and corporate 
headquarters. The system allows regional and corporate management to monitor 
ticket revenue and concession sales on a daily basis. All accounting, 
reporting and management information systems are centralized at the corporate 
headquarters.

As of December 31, 1998, UATC employed approximately 10,000 employees, of 
whom approximately 1,200 were full-time. Approximately 30.6% of UATC's 
employees (substantially all of who are part-time employees who work in the 
theatres) are paid based on the applicable state and Federal minimum wage 
regulations. Approximately 125 employees (primarily consisting of film 
projectionists) are covered by two collective bargaining agreements.

SEASONALITY

UATC's theatrical results of operations are subject to seasonal fluctuations 
in theatre attendance, which corresponds to holiday school vacation periods 
and a greater availability of popular motion pictures during the period from 
Memorial Day through Labor Day and during the Easter, Thanksgiving and 
Christmas holiday seasons.

GOVERNMENT REGULATION

The distribution of motion pictures is regulated by Federal and state 
anti-trust laws and has been the subject of numerous anti-trust cases. 
Consent decrees resulting from one of the most significant cases, to which 
UATC was not a party, have an impact on the theatrical exhibition business. 
Those consent decrees bind certain major film distributors and require the 
films of such distributors to be offered and licensed to exhibitors, 
including UATC, on a theatre-by-theatre basis. Consequently, UATC cannot 
assure itself of a supply of films by entering into long-term agreements with 
major film distributors, but must compete for its film licenses on a 
film-by-film and theatre-by-theatre basis.

The Americans With Disabilities Act of 1990 ("ADA") and certain state 
statutes, among other things, require that places of public accommodation, 
including theatres (both existing and newly constructed), be accessible to 
and that assistive listening devices be available for use by certain patrons 
with disabilities. With respect to access to theatres, the ADA may require 
that certain modifications be made to existing theatres to make such theatres 
accessible to certain theatre patrons and employees who are disabled. The ADA 
requires that theatres be constructed in such a manner that persons with 
disabilities have full use of the theatre and its facilities and reasonable 
access to work stations. The ADA provides for a private right of action and 
reimbursement of plaintiff's attorneys' fees and expenses under certain 
circumstances. UATC has established a program to review and evaluate UATC's 
theatres and to make any changes that may be required by the ADA. In 1995, 
UATC settled the lawsuit styled CONNIE ARNOLD ET AL. VS. UATC, filed in 1991. 
This lawsuit involved allegations that certain of UATC's theatres lacked 
accessibility to persons with mobility disabilities in violation of the ADA. 
In the settlement agreement, UATC, the plaintiffs and the Department of 
Justice established standards of modifications that must be made to UATC's 
theatres throughout the United States to make them more accessible to persons 
with disabilities. UATC believes that the cost of complying with the ADA and 
the settlement agreement in the CONNIE ARNOLD case will not have a material 
adverse effect on UATC's financial position, liquidity or results of 
operations.

OTHER

UATC has not expended material amounts on research and development during the 
past three years.

There is no customer or affiliated group of customers to which sales are made 
in an amount that exceeds 10% of UATC's consolidated revenue.

                                       12
<PAGE>

Compliance with Federal, state and local laws and regulations which have been 
enacted or adopted regulating the discharge of materials into the 
environment, or otherwise relating to the protection of the environment, has 
had no material effect upon UATC's financial position, liquidity or results 
of operations.

ITEM 2.  PROPERTIES

UATC leases its executive office located in Englewood, Colorado and certain 
of its regional operating and film booking offices. The following table 
summarizes the theatres operated by UATC at December 31, 1998:

<TABLE>
<CAPTION>

                                                     Total Number    Total Number
                                                      of Theatres     of Screens 
                                                     ------------    ------------
<S>                                                  <C>             <C>  
Owned and Operated Theatres:
     Owned                                                 9              39
     Leased:
       From third parties                                281           1,960
       From UAR and Prop I                                29             185
                                                       -----           -----
          Total owned and leased theatres                319           2,184
Managed theatres                                           4              11
                                                           -              --
          Total theatres operated                        323           2,195
                                                       -----           -----
                                                       -----           -----
</TABLE>

Of the 319 owned and operated theatres, five theatres (11 screens) are held 
through a corporation that is owned 75% by UATC and four theatres (33 
screens) are held by three partnerships, each owned 51% by UATC. The 
remaining owned and operated theatres are held directly by UATC or its 
wholly-owned subsidiaries. The managed theatres include four theatres (11 
screens) located in the United States. As of December 31, 1998, UATC also had 
a 10% interest in two Asian theatre exhibition joint venture companies that 
operate four theatres (21 screens) in Singapore and Thailand.

UATC leases the land, building and equipment in the theatres owned by UAR and 
Prop I in accordance with two master affiliate leases. The UAR and Prop I 
master leases expire in 2003 and provide for options to extend the leases at 
UATC's option for up to an additional ten years.

UATC owns directly or through its subsidiaries substantially all of the 
theatre equipment used in its fee-owned theatres and theatres leased from 
unaffiliated third parties.

ITEM 3. LEGAL PROCEEDINGS

UATC is involved in various pending and threatened legal proceedings 
involving allegations concerning contract breaches, torts, employment 
matters, environmental issues, anti-trust violations, local tax disputes and 
miscellaneous other matters. In addition, there are other various claims 
against UATC relating to certain of the leases held by UATC. Although it is 
not possible to predict the outcome of these proceedings, UATC believes that 
such legal proceedings will not have a material adverse effect on UATC's 
financial position, liquidity or results of operations.

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

There were no matters submitted to a vote of the security holder during the 
quarter ended December 31, 1998.

                                      13
<PAGE>

                                     PART II

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

UATC's common stock is held entirely by the Parent and there is no market for 
the common stock.

UATC has not paid a cash dividend on its common stock during the past two 
years. UATC is restricted by certain debt covenants as to the amount of 
dividends that it can declare and pay on its common stock.

ITEM 6.  SELECTED FINANCIAL DATA

The following table presents selected financial data relating to the results 
of operations for the years ended December 31, 1998, 1997, 1996, 1995 and 
1994, and balance sheets as of December 31, 1998, 1997, 1996, 1995 and 1994 
(dollars in millions, except revenue per weighted average operating theatre):

<TABLE>
<CAPTION>

                                                                               Years Ended December 31,
                                                                               -------------------------
                                                             1998          1997*        1996*          1995*        1994
                                                            -----          ------       ------         ------       -----
<S>                                                        <C>             <C>          <C>           <C>          <C>  
SUMMARY OF OPERATIONS DATA:
Revenue                                                    $ 661.3          682.7        675.6          648.0       623.1
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
EBITDA (1)                                                 $  79.6           85.2         73.6           74.9        81.6
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Depreciation and amortization                              $  51.1           56.3         71.4           65.4        63.1
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Operating income before provision
  for asset impairments                                    $  28.5           28.9          2.2            9.5        18.5
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Provision for asset impairments                            $  32.9           30.4          8.7           21.0          --
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Operating income (loss)                                    $  (4.4)          (1.5)        (6.5)         (11.4)       18.5
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Gain (loss) on disposition of assets                       $   0.2           21.9          1.3          (13.9)       (9.7)
                                                           -------          -----        -----          -----       ----- 
                                                           -------          -----        -----          -----       ----- 
Discontinued operations                                    $  19.5            5.3          1.4            0.6          -- 
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Extraordinary loss                                         $  (7.9)            --           --             --          --   
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Net loss                                                   $ (65.0)         (27.8)       (46.6)         (68.9)      (27.9)
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Net loss available to common stockholder                   $ (74.0)         (51.6)       (67.5)         (87.2)      (44.0)
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Net loss available to common stockholder
  before provisions for impairments, gain (loss)
  on disposition of assets, discontinued
  operations, and extraordinary loss                       $ (13.9)         (37.8)       (58.7)         (51.7)      (34.3)
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Capital expenditures                                       $ 115.4           65.8         65.8           89.3        47.0
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
BALANCE SHEET DATA AT YEAR END:
  Total assets                                             $ 568.2          506.0        548.1          594.2        602.6
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
  Total debt                                               $ 376.5          362.2        389.0          383.2        320.2
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
  Preferred stock
                                                           $    --          193.9        170.1          149.2       130.9
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Weighted avg. operating screens(2)                           2,160          2,204        2,299          2,270       2,202
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Weighted avg. operating theatres(2)                            327            354          395            409         414
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Weighted avg. operating screens
  Per operating theatre                                        6.6            6.2          5.8            5.6         5.3
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
Revenue per weighted average
      operating theatre (000's)                            $ 2,022          1,929        1,710          1,584       1,505
                                                           -------          -----        -----          -----       -----
                                                           -------          -----        -----          -----       -----
</TABLE>

(1)  Earnings before interest, taxes, depreciation and amortization plus 
     other non-recurring or non-cash operating credits or charges.
(2)  Weighted average operating theatres and screens represent the number of
     theatres and screens operated weighted by the number of days operated
     during the period.

*Restated to reflect the entertainment business center business segment as
 discontinued operations.


                                      14
<PAGE>


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

The following discussion and analysis of UATC's financial condition and results
of operations should be read in conjunction with UATC's Consolidated Financial
Statements and related notes thereto. Such financial statements provide
additional information regarding UATC's financial activities and condition.

                              RESULTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

The following table summarizes certain operating data of UATC's theatres 
(dollars in millions, except admissions per weighted average operating 
theatre, admissions per weighted average operating screen and concession 
sales per weighted average operating theatre):

<TABLE>
<CAPTION>

                                                 Years Ended                        Years Ended          
                                                 December 31,            %          December 31,              %    
                                               ---------------       Increase     -----------------       Increase 
                                               1998       1997*     (Decrease)     1997*      1996*      (Decrease)
                                               ----       -----      --------     ------      -----       ---------
<S>                                       <C>           <C>          <C>        <C>        <C>            <C>
Operating theatres (1) 
Revenue:
   Admissions                                 $454.4        473.9      (4.1%)      473.9       466.5         1.6%
   Concession sales                            188.5        189.6      (0.6)       189.6       185.1         2.4
   Other                                        18.4         19.2      (4.2)        19.2        24.0       (20.0)
Operating expenses:
   Film rental and advertising expenses        248.5        262.5      (5.3)       262.5       257.2         2.1
   Concession costs                             28.0         30.2      (7.3)        30.2        29.3         3.1
   Other operating expenses:
     Personnel expense                          96.2         95.5       0.7         95.5        96.4        (0.9)
     Occupancy expense:
       Rent excluding sale and leaseback        77.7         77.4       0.4         77.4        74.6         3.8
       Sale and leaseback rentals               15.1         13.4      12.7         13.4        11.6        15.5
     Misc. operating expenses                   93.3         94.0      (0.7)        94.0        96.5        (2.6)
Weighted avg. operating theatres(2)              327          354      (7.6)         354         395       (10.4)
Weighted avg. operating screens(2)             2,160        2,204      (2.0)       2,204       2,299        (4.1)
Weighted avg. screens per
  avg. theatre                                   6.6          6.2       6.1          6.2         5.8         6.9
Admissions per weighted avg.
  operating theatre                       $1,389,602    1,338,701       3.8    1,338,701   1,181,013        13.4
Admissions per weighted avg.
  operating screen                          $210,370      215,018      (2.2)     215,018     202,914         6.0
Concession sales per weighted
  avg. operating theatre                    $576,453      535,593       7.6      535,593     468,608        14.3
</TABLE>

(1)  The operating theatres include revenue and expenses of all theatres
     operated by UATC that are more than 50% owned.
(2)  Weighted average operating theatres and screens represent the number of
     theatres and screens operated weighted by the number of days operated
     during the period.

*Restated to reflect the entertainment center business segment as discontinued
 operations.


                                      15
<PAGE>

      REVENUE FROM OPERATING THEATRES FOR THE YEAR ENDED DECEMBER 31, 1998
                  COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

ADMISSIONS: Admissions revenue decreased 4.1% during 1998 as compared to 
1997. This decrease was primarily due to a 7.2% decline in attendance, 
partially offset by a 3.4% increase in the average ticket price. The decrease 
in attendance was primarily due to decreases in the number of weighted 
average theatres and screens operated, and the effect of new competitive 
theatre openings in certain areas. The increase in the average ticket price 
was primarily due to certain selective price increases in late 1997 and the 
summer of 1998. Admissions per weighted average operating theatre increased 
3.8% during 1998, while admissions per weighted average operating screen 
decreased 2.2% during 1998. These admissions fluctuations were due primarily 
to the opening of several new theatres which have higher admissions and more 
screens per theatre, the sale or closure of several less productive theatres 
and the increases in ticket prices, partially offset by a decrease in average 
screen size and the increased number of total new screens in certain areas.

CONCESSION SALES: Concession sales revenue decreased 0.6% during 1998 as 
compared to 1997. This decrease was primarily due to the decreased attendance 
discussed above, partially offset by a 7.2% increased in the average 
concession sale per patron. Concession sales per weighted average operating 
theatre increased 7.6% during 1998 as compared to 1997. The increases in the 
average concession sale per patron and concession sales per weighted average 
operating theatre were primarily due to certain selective price increases 
during 1998, UATC's increased emphasis on sales staff training, the opening 
of several new theatres with more efficient concession operations and the 
sale or closure of several less productive theatres.

The following table sets forth the admissions and concession sales revenue 
for theatres operated throughout all of 1998 and 1997 (dollars in millions):

<TABLE>
<CAPTION>

                                               Theatres     Screens        1998        1997     % Decrease
                                               --------     -------        ----        ----     ----------
<S>                                            <C>          <C>            <C>         <C>      <C>
Theatres operated throughout
   both periods                                   296        1,914
         Admissions                                                         $389.5     423.7       (8.1)%
         Concession sales                                                    160.7     168.5       (4.6)
</TABLE>

This "same theatre" analysis eliminates the effect of new theatre openings, 
sales or closures during 1998 or 1997.

OTHER: Other revenue is derived primarily from on-screen advertising, revenue 
generated by the Satellite Theatre Network-TM-, electronic video games 
located in theatre lobbies, theatre rentals, and other miscellaneous sources. 
Other revenue decreased 4.2% during 1998 as compared to 1997 primarily as a 
result of UATC operating 7.6% fewer theatres and a 2.5% decrease in revenue 
from on-screen advertising and an 11.4% decrease in Satellite Theatre 
Network-TM- revenue.

      REVENUE FROM OPERATING THEATRES FOR THE YEAR ENDED DECEMBER 31, 1997
                  COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

ADMISSIONS: Admissions revenue increased 1.6% during 1997 as compared to 
1996, despite a 10.4% decline in the average number of theatres operated. 
This increase was primarily due to a 7.0% increase in the average ticket 
price, partially offset by a 5.0% decrease in attendance. The increase in the 
average ticket price for 1997 was primarily due to an increase in the 
percentage of full priced tickets purchased and certain selective increases 
in ticket prices during 1997 and late 1996. The decrease in attendance for 
1997 was primarily due to decreases in the number of weighted average 
theatres and screens operated during the year. Admissions per weighted 
average operating theatre and screen increased 13.4% and 6.0%, respectively, 
during 1997 as compared to 1996. These admissions increases were primarily 
due to an increase in the number of films released, the success of those 
films and the opening of several new theatres which have higher admissions 
per theatre and screen, the sale or closure of several less productive 
theatres, and the 1997 and late 1996 increases in ticket prices, partially 
offset by decreased attendance.

CONCESSION SALES: Concession sales revenue increased 2.4% during 1997 as 
compared to 1996. This increase was primarily due to a 7.8% increase in the 
average concession sale per patron, partially offset by the decreased 
attendance discussed above. Concession sales per weighted average operating 
theatre increased 14.3% during 1997 as compared to 1996. The increases in the 
average concession sale per patron and concession sales per weighted average 
operating theatre were primarily due to certain selective price increases 
during 1997 and late 

                                      16
<PAGE>

1996, UATC's increased emphasis on sales staff training, the opening of 
several new theatres with more efficient concession operations, the sale or 
closure of several less productive theatres and the introduction of new 
concession menu items at certain theatres.

The following table sets forth the admissions and concession sales revenue 
for theatres operated throughout all of 1997 and 1996 (dollars in millions):

<TABLE>
<CAPTION>

                                               Theatres     Screens        1997        1996     % Increase
                                               --------     -------        ----        ----     ----------
<S>                                            <C>          <C>            <C>         <C>      <C> 
Theatres operated throughout
   both periods                                   312        1,922
         Admissions                                                         $412.1     410.8        0.3%
         Concession sales                                                    162.0     160.5        0.9
</TABLE>


This "same theatre" analysis eliminates the effect of new theatre openings, 
sales or closures during 1997 or 1996.

OTHER: Other revenue decreased 20.0% during 1997 as compared to 1996 
primarily as a result of UATC operating fewer weighted average operating 
theatres and a decrease in revenue from on-screen advertising.

            OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1998
                  COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

FILM RENTAL AND ADVERTISING EXPENSES: Film rental and advertising expenses 
decreased 5.3% during 1998 as compared to 1997. Film rental and advertising 
expenses as a percentage of admissions revenue were 54.7% for 1998 and 55.4% 
for 1997 primarily due to the reduced admissions revenues discussed above. 
The decrease in film rental and advertising expenses as a percentage of 
admissions revenue for 1998 was primarily due to the longer run of several 
major films released in late 1997 and during 1998. Typically, film rental as 
a percentage of admissions revenue increases when a higher percentage of a 
film's total admissions is collected in the opening weeks of a film's run.

CONCESSION COSTS: Concession costs include direct concession product costs 
and concession promotional expenses. Such costs decreased 7.3% during 1998 as 
compared to 1997 primarily due to the reduced concession sales discussed 
above. Concession costs as a percentage of concession sales were 14.9% for 
1998 and 15.9% for 1997. The decrease in concession costs as a percentage of 
concessions revenue for 1998 was primarily due to the rebidding or 
restructuring of the product and distribution contracts associated with many 
of UATC's concession supply products and slightly lower promotional expenses.

PERSONNEL EXPENSE: Personnel expense includes the salary and wages of the 
theatre manager and all theatre staff, commissions on concession sales, 
payroll taxes and employee benefits. Personnel expense increased 0.7% during 
1998 as compared to 1997. This increase in personnel expense in 1998 was 
primarily due to an increase in the Federal (and certain state) minimum wage 
in late 1997, which increased the average wage paid to theatre staff by 7.5% 
during 1998. This increase in the average wage rate was partially offset by 
the decrease in attendance discussed above, fewer weighted average operating 
theatres and screens and more efficient theatre staffing. Personnel expense 
as a percentage of admissions and concession sales revenue was 15.0% in 1998 
and 14.4% for 1997, reflecting the effect of the higher minimum wage rate and 
only moderate concession and ticket price increases.

OCCUPANCY EXPENSE: UATC's typical theatre lease arrangement provides for a 
base rental as well as contingent rental that is a function of the underlying 
theatre's revenue over an agreed upon breakpoint. Total occupancy expense 
increased 2.2% during 1998 as compared to 1997. This increase in 1998 relates 
to higher rentals on newly opened theatres, partially offset by the decrease 
in the number of weighted average operating theatres. Occupancy expense 
includes non-cash charges relating to the effect of escalating leases which 
have been "straight lined" for accounting purposes of $4.0 million and $3.7 
million for 1998 and 1997, respectively.

MISCELLANEOUS OPERATING EXPENSES: Miscellaneous operating expenses consist of 
utilities, repairs and maintenance, insurance, real estate and other taxes, 
supplies and other miscellaneous operating expenses. Miscellaneous operating 
expenses decreased 0.7% during 1998 as compared to 1997. This decrease in 
1998 relates primarily to reductions in utility and insurance costs and fewer 
weighted average theatres, partially offset by slightly higher repairs and 
maintenance, supplies, and real estate taxes.

                                      17
<PAGE>

             OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1997
                  COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

FILM RENTAL AND ADVERTISING EXPENSES: Film rental and advertising expenses 
increased 2.1% during 1997 as compared to 1996 primarily due to the increased 
admissions revenue discussed above. Film rental and advertising expenses as a 
percentage of admissions revenue were 55.4% for 1997 and 55.1% for 1996. The 
increase in film rental and advertising expenses as a percentage of 
admissions revenue for 1997 was primarily due to the shorter run of several 
major films released in the second quarter of 1997, partially offset by 
slightly lower advertising expenses. Advertising expenses were lower as a 
result of more efficient buying of print advertising by UATC and distributors 
and to fewer number of theatres operated.

CONCESSION COSTS: Concession costs increased 3.1% during 1997 as compared to 
1996 primarily due to the increased concession sales discussed above. 
Concession costs as a percentage of concession sales were 15.9% for 1997 and 
15.8% for 1996. The slight increase in concession costs as a percentage of 
concession sales for 1997 was primarily due to an increase in the cost of 
certain commodity priced items such as corn seed and oil.

PERSONNEL EXPENSE: Personnel expense decreased 0.9% during 1997 as compared 
to 1996. This decrease in personnel expense in 1997 was primarily due to more 
efficient theatre staffing and fewer weighted average operating theatres, 
partially offset by the increases in the Federal (and certain state) minimum 
wage in late 1996 and late 1997. These minimum wage increases resulted in a 
7.4% increase in the average hourly wage paid to theatre staff in 1997 versus 
1996. Despite the increases in the Federal minimum wage in 1997 and 1996, 
personnel expense as a percentage of admissions and concession sales revenue 
decreased to 14.4% in 1997 from 14.8% in 1996. These improved payroll 
statistics relate to more efficient staffing and some increases in ticket and 
concession sales. UATC's personnel expense efficiencies have also been 
positively impacted by the closure or sale of several less efficient theatres 
and the opening of several new larger, more efficient multiplex theatres and 
reduced expenses for fringe benefits.

OCCUPANCY EXPENSE: Total occupancy expense increased 5.3% during 1997 as 
compared to 1996. This increase in 1997 relates to higher contingent rentals, 
rentals on newly opened theatres and rentals related to the sale and 
leaseback transaction completed in late 1996, partially offset by the 
decrease in the number of weighted average operating theatres. Occupancy 
expense includes non-cash charges relating to the effect of escalating leases 
which have been "straight lined" for accounting purposes of $3.7 million and 
$3.1 million for 1997 and 1996, respectively.

MISCELLANEOUS OPERATING EXPENSES: Miscellaneous operating expenses decreased 
2.6% during 1997 as compared to 1996. This decrease in 1997 relates primarily 
to reduced utilities, repairs and maintenance and insurance associated with 
fewer weighted average theatres, partially offset by additional expenses 
associated with the Satellite Theatre Network-TM-.

         OTHER EXPENSES FOR THE YEARS ENDED DECEMBER 1998, 1997 AND 1996

GENERAL AND ADMINISTRATIVE EXPENSE AND RESTRUCTURING CHARGE 

General and administrative expense consists primarily of costs associated 
with corporate theatre administrative and operating personnel, Satellite 
Theatre Network-TM- sales and marketing staff and other support functions 
located at UATC's corporate headquarters, two film booking and regional 
operating offices and 14 district theatre operations offices (generally 
located in theatres). At the end of 1996, UATC initiated a corporate 
restructuring plan intended to provide a higher level of focus on UATC's 
domestic theatrical business at a lower annual cost. As a result of this 
corporate restructuring plan which was substantially completed in January 
1997, general and administrative expenses decreased $0.8 million for 1998 as 
compared to 1997 and $10.8 million for 1997 as compared to 1996. During 1997 
and 1996, UATC recorded $0.8 million and $1.9 million, respectively, of 
restructuring charges relating to severance and other expenses related to 
UATC's corporate restructuring.

DEPRECIATION AND AMORTIZATION AND PROVISIONS FOR IMPAIRMENTS 

Depreciation and amortization expense includes the depreciation of theatre 
buildings and equipment, the amortization of theatre lease costs and certain 
non-compete agreements. Depreciation and amortization decreased $5.2 million 
for 1998 as compared to 1997, and $15.1 million for 1997 as compared to 1996. 
These decreases were primarily due to lower amortization from non-compete 
agreements which were fully amortized during 1997 and changing the useful 
lives of certain assets during 1998, partially offset by increased 
depreciation on newly opened theatres. UATC recorded approximately $9.0 
million and $24.0 million of amortization expense during 

                                       18
<PAGE>

1997 and 1996, respectively, on non-compete agreements and certain other 
assets acquired as part of the Acquisition which were fully amortized in May 
1997.

Provisions for impairments relates to non-cash charges for the differences 
between the historical book value of individual theatres (in some cases 
groups of theatres) and the discounted cash flow expected to be received from 
the operation or future sale of the individual theatre (or groups of 
theatres). UATC recorded non-cash provisions for asset impairments of $32.9 
million, $30.4 million, and $8.7 million during the years ended December 31, 
1998, 1997, and 1996, respectively.

OPERATING INCOME (LOSS)

UATC incurred operating losses of $4.4 million, $1.5 million and $6.5 million 
during 1998, 1997 and 1996, respectively. The increase in the operating loss 
during 1998 was primarily due to reduced revenue, partially offset by reduced 
general and administrative expenses and depreciation and amortization. The 
decrease in the operating loss during 1997 was primarily due to increased 
revenue, reduced general and administrative expenses and depreciation and 
amortization, partially offset by increased provisions for impairments.

INTEREST, NET

Interest, net decreased $6.4 million in 1998 as compared to 1997 and 
decreased $0.3 million in 1997 as compared to 1996. The 1998 decrease was 
primarily due to lower average debt balances as a result of the 1998 
refinancing of UATC's senior secured notes with senior subordinated notes 
issued by the Parent. The 1997 decrease was primarily due to a slightly lower 
average outstanding debt balance. UATC capitalized $1.5 million of interest 
during 1998 to various construction projects.

GAIN ON DISPOSITION OF ASSETS, NET 

In 1998, UATC sold the majority of its remaining international theatrical 
exhibition assets for $3.0 million of cash, $0.5 million of stock of the 
acquiring company and a $3.0 million note. In addition, UATC sold certain 
other operating theatres and non-operating real estate for which net cash 
proceeds of $7.0 million were received. In conjunction with these sales, UATC 
recognized $0.2 million of gains. During April 1997, UATC sold its 50% 
interest in a Hong Kong theatre company to its partner for approximately 
$17.5 million and during September 1997, UATC sold its theatre investments in 
Mexico and the majority of its theatre assets in Argentina for approximately 
$25.0 million. In addition, various non-strategic or underperforming 
operating theatres and real estate assets were sold for net cash proceeds of 
approximately $17.0 million. As a result of these 1997 sales UATC recognized 
$21.9 million of gains. During 1996, UATC sold certain theatres for which 
cash proceeds of $20.5 million were received and $1.3 million of gains were 
recognized.

INCOME TAX EXPENSE

Income tax expense consists of current state and Federal income taxes of 
UATC's is less than 80%-owned consolidated subsidiaries. On February 10, 
1998, the Parent filed a private letter ruling with the Internal Revenue 
Service (the "IRS") requesting an extension of time to file a Section 197 
election. This election allows for the amortization of various intangible 
assets over 15 years. On June 8, 1998, the IRS granted the Parent's request 
and, on August 6, 1998, the Parent filed a Section 197 election along with 
its amended 1993 income tax return. As the Parent and UATC had previously 
been amortizing certain intangible assets acquired as part of the Acquisition 
over a five year period, the effect of the Section 197 election was to reduce 
the Parent's and UATC's net operating loss carryforward and increase the basis 
of certain intangible assets, which will be amortized, and provide for future 
tax deductions. The Section 197 election also enabled the Parent to conclude 
the IRS audit for the years ending December 31, 1992, 1993 and 1994. As a 
result of the audit the net operating loss was reduced further by various 
items which were reclassified as Section 197 assets. These items will be 
amortized and will provide the Parent and UATC with additional future 
deductions. As UATC had fully reserved the deferred tax asset associated with 
its net operating loss carryforward, there is no financial statement impact 
associated with the reduction in its net operating loss carryforward. At 
December 31, 1998, UATC has a net operating loss carryforward of 
approximately $175.4 million. The Parent's income tax returns for the years 
ended December 31, 1995, 1996 and 1997 are currently being audited by the 
IRS. The outcome of this audit may reduce the amount of the Parent's and 
UATC's net operating loss carryforward and/or change the basis (and thus 
future tax depreciation) related to certain assets. The Parent and UATC 
believe that the result of the audit will not have a material adverse effect 
on their financial condition or results of operation.

DISCONTINUED OPERATIONS

During 1998, UATC established a plan to dispose of its entertainment center 
business operations. The net loss from the discontinued operations was $13.8 
million, $5.3 million, and $1.4 million for 1998, 1997, and 1996, 
respectively. Included in the net loss from discontinued operations was 
interest expense of $1.1 million, $1.2 

                                       19
<PAGE>

million, and $0.7 million for 1998, 1997, and 1996, respectively. The 
anticipated loss from disposition was $5.7 million during 1998 which 
represents future losses. Additionally, the net loss from discontinued 
operations included non-cash provisions for asset impairments is $10.2 
million and $1.0 million for 1998 and 1997, respectively.

EXTRAORDINARY ITEM

As a result of the repayment of UATC's existing bank credit facility (the 
"Bank Credit Facility") and senior secured notes (the "Senior Secured Notes") 
during 1998, UATC recognized an extraordinary loss on the early 
extinguishment of debt of $7.9 million, consisting of a $3.6 million 
prepayment premium on the Senior Secured Notes and approximately $4.3 million 
of unamortized deferred loan costs.

NET LOSS AVAILABLE TO COMMON STOCKHOLDER

UATC incurred a net loss available to common stockholder of $74.0 million 
compared to net losses available to common stockholder of $51.6 million and 
$67.5 million for 1997 and 1996 respectively. The increase in the 1998 net 
loss relates primarily to charges for the discontinuance of the entertainment 
center operations, the extraordinary expense for the early extinguishment of 
debt, and the gain on the disposition of assets during 1997. The decrease in 
the 1997 net loss relates primarily to the gain on the disposition of assets 
during 1997, partially offset by increased non-cash provisions for asset 
impairments and reduced operating results for the discontinued operations. 
Excluding these unusual items, the net losses available to common 
stockholders for 1998, 1997, and 1996 would have been as follows (dollars in 
millions):

<TABLE>
<CAPTION>
                                                                          1998            1997            1996
                                                                          ----            ----            ----
<S>                                                                   <C>               <C>             <C>
         Net loss available to common stockholder...........          $  (74.0)          (51.6)          (67.5)
         Provisions for impairment..........................              32.9            30.4             8.7
         Gain on disposition of assets......................              (0.2)          (21.9)           (1.3)
         Discontinued operations............................              19.5             5.3             1.4
         Loss on early extinguishment of debt...............               7.9               -               - 
                                                                          ----            ----            ----
                                                                      $  (13.9)          (37.8)          (58.7)
                                                                          ----            ----            ----
                                                                          ----            ----            ----
</TABLE>

                         LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 1998, net cash provided by UATC's operating 
activities was $56.2 million. This net cash provided by operating activities 
in addition to $62.9 million of cash provided by financing activities and 
$2.7 million of cash on hand was used to fund $115.4 million of capital 
expenditures for 1997 and 1998 theatre openings and future projects and 
on-going maintenance expenditures and $6.4 million of other investing 
activities.

Substantially all of UATC's admissions and concession sales revenue is 
collected in cash. Due to the unfavorable interest rate spread between bank 
facility borrowings and cash investments, UATC seeks to use all of its 
available cash to repay its revolving bank borrowings and borrow under those 
facilities as cash is required. UATC benefits from the fact that film 
expenses (except for films that require advances) are usually paid 15 to 45 
days after the admissions revenue is collected.

On April 21, 1998, the Parent completed the offering of $225.0 million of its 
9.75% senior subordinated notes due April 15, 2008, and the offering of $50.0 
million of its floating rate senior subordinated notes due October 15, 2007 
(collectively, the "Senior Subordinated Notes"), and entered into a $450.0 
million bank credit facility (the "New Bank Credit Facility") with a final 
maturity of April 21, 2007.

The proceeds from the offerings of the Senior Subordinated Notes and a 
portion of the borrowings under the New Bank Credit Facility were used to 
repay the outstanding borrowings of $272.5 million under UATC's Bank Credit 
Facility and to fund the redemption of the Parent's preferred stock 
(approximately $159.2 million) and the redemption of UATC's $125.0 million 
Senior Secured Notes at 102.875% of par value plus accrued but unpaid 
interest of $0.8 million.

The net proceeds from the offerings of the Senior Subordinated Notes in 
excess of the redemption value of the Parent's preferred stock (approximately 
$108.1 million) was contributed to UATC as additional common equity by the 
Parent. Additionally, UATC's preferred stock (which was held by the Parent) 
was converted into additional common equity.

                                       20
<PAGE>

As a result of the repayment of the Bank Credit Facility and the redemption 
of the Senior Secured Notes, UATC recognized an extraordinary loss on the 
early extinguishment of debt during 1998 of $7.9 million, consisting of the 
$3.6 million prepayment premium on the Senior Secured Notes and approximately 
$4.3 million of unamortized deferred loan costs.

On November 1, 1998, borrowings of approximately $45.7 million under the New 
Bank Credit Facility were used to repay and retire the Prop I mortgage notes. 
The annual interest savings attributable to the differential interest rates 
on the 11.15% Prop I mortgage notes and the current borrowing rate of 
approximately 8.0% will be approximately $1.5 million.

In December 1996, UATC initiated a new investment strategy that focuses on 
the development of new theatres and renovations (including stadium seating 
retrofits) and expansions of existing high revenue theatres in the U.S. where 
UATC has a significant operating presence. As part of this increased focus on 
its U.S. operations, UATC has restructured and realigned its corporate 
overhead functions and has sold substantially all of its international 
theatre exhibition investments. The proceeds received from the sale of 
international investments and corporate overhead savings were redeployed into 
new theatre developments and the renovation and expansion of existing key 
theatres in UATC's core areas of operation and used to repay existing debt.

As part of its strategic plan, UATC intends to continue to dispose of, 
through sale or lease terminations, certain of its non-strategic or 
underperforming operating theatres and real estate in the United States. Net 
proceeds, if any, from these increased disposition efforts are also expected 
to be used to repay existing debt or to be redeployed into the renovation 
and/or expansion of existing theatres and development of new, larger (in 
terms of screens), higher margin theatres. While there can be no assurance 
that such sales or lease termination efforts will be successful, negotiations 
are ongoing with respect to several theatres and parcels of real estate. 
During 1998, UATC closed or sold 32 theatres (137 screens). During 1998, UATC 
sold the majority of its remaining international theatrical exhibition assets 
for $3.0 million of cash, $0.5 million of stock in the acquiring company and 
a $3.0 million note. The note earns interest at various rates between 15% and 
20%, and matures December 2001. The domestic theatres that were closed or 
sold were primarily smaller, older theatres that were not part of UATC's long 
term strategic plans or were underperforming.

In an effort to limit the amount of investment exposure on any one project, 
UATC typically develops theatre projects where both the land and building are 
leased through long-term operating leases. Where such lease transactions are 
unavailable, however, UATC will invest in the land and development of the 
entire theatre facility (fee owned) and then seek to enter into a sale and 
leaseback transaction. Regardless of whether the theatre is leased or fee 
owned, in most cases the equipment and other theatre fixtures are owned by 
UATC. During 1998, UATC invested approximately $7.1 million on five theatres 
(52 screens) which opened in 1997, $87.7 million on the development of 13 new 
theatres (157 screens) that opened in 1998, the addition of stadium seating 
to two theatres (22 screens), and the renovation of two existing theatres 
which opened during the period, and $1.0 million on construction of five new 
theatres (68 screens) and the renovation of three theatres (36 screens) 
expected to open during 1999 and $19.6 million on theatre point-of-sale 
systems, corporate computer systems and recurring maintenance on certain 
existing theatres.

In December 1995, UATC and UAR entered into a sale and leaseback transaction 
(the "1995 Sale and Leaseback") whereby the land and buildings underlying 27 
of their operating theatres and four theatres and a screen addition under 
development were sold to and leased back from an unaffiliated third party. In 
conjunction with the 1995 Sale and Leaseback, the buyer of the properties 
issued certain publicly traded bonds. The lease of the properties by UATC 
required UATC to enter into a Participation Agreement that requires UATC to 
comply with certain covenants including limitations on indebtedness and 
restricted payments.

In November 1996, UATC entered into a sale and leaseback transaction whereby 
the building and land underlying three of its operating theatres and two 
theatres under development were sold to and leased back from an unaffiliated 
third party.

In December 1997, UATC entered into a sale and leaseback transaction (the 
"1997 Sale and Leaseback") whereby two theatres under development were sold 
to and leased back from an unaffiliated third party for approximately $18.1 
million. At December 31, 1998, approximately $9.1 million of the sales 
proceeds were held in escrow and will be paid under the terms of the sale and 
leaseback to fund certain of the construction costs associated with the two 
theatres.

                                       21
<PAGE>

At December 31, 1998, UATC had entered into construction or lease agreements 
for five new theatres (68 screens), and for renovations and the addition of 
stadium seating to three existing theatres (36 screens) which UATC intends to 
open (or reopen) during 1999. UATC estimates that capital expenditures 
associated with these theatres and on-going theatre maintenance will 
aggregate approximately $39.0 million, exclusive of the cash received from 
the 1997 Sale and Leaseback. Such amounts relate only to projects in which 
UATC has executed a definitive lease and all significant lease contingencies 
have been satisfied. UATC expects additional capital expenditures to be made 
as UATC's internally generated available cash from improved operating results 
and proceeds from various asset sales becomes available. Because a 
significant portion of UATC's future capital spending plans relate to the 
renovation and/or expansion of existing key locations, the timing of such 
commitments and expenditures are much more flexible and thus can be matched 
to net cash provided by operating activities.

At December 31, 1998, UATC had approximately $365.3 million of indebtedness 
outstanding under its bank credit facility and approximately $83.0 million of 
unused revolving loan commitments thereunder (of which $4.1 million of which 
had been used for the issuance of letters of credit).

UATC is party to interest rate collar agreements on $225.0 million of 
floating rate debt which provide for a LIBOR interest rate cap ranging 
between 6% and 7 1/2% per annum and LIBOR interest rate floors ranging 
between 5 1/4% and 5 1/2% and expire at various dates through August 2001. 
The terms of the New Bank Credit Facility require UATC to obtain interest 
rate hedges on a certain portion of its indebtedness thereunder. Amounts paid 
to the counterparties to the interest rate collar agreements are recorded as 
an increase to interest expense and amounts received from the counterparties 
to the interest rate collar agreements are recorded as a reduction of 
interest expense.

The level of continued investing activities by UATC is dependent on, among 
other factors, its on-going operating liquidity and other sources of 
liquidity. One measure commonly used in the theatrical industry to measure 
operating liquidity is referred to as "Interest Coverage." Interest Coverage 
is the ratio of Operating Cash Flow (defined as EBITDA - earnings before 
interest, taxes, depreciation, amortization - plus other non-recurring or 
non-cash operating credits or charges) to interest expense (excluding 
amortization of deferred loan costs). Following is a calculation of Operating 
Cash Flow and Interest Coverage for each of the last three years, including a 
reconciliation of Operating Income to Operating Cash Flow. Additionally, 
information from the statements of cash flow is presented for each of the 
last three years in the following table (dollars in millions):

<TABLE>
<CAPTION>

                                                                     1998         1997          1996
                                                                    -----        -----         -----
<S>                                                               <C>            <C>           <C>
   Operating loss from continuing operations................      $  (4.4)        (1.5)         (6.5)
   Depreciation and amortization............................         51.1         56.3          71.4
   Provisions for asset impairments.........................         32.9         30.4           8.7
   Non-cash rent............................................          4.0          3.7           3.1
   Severance, litigation and restructuring expenses.........          0.3          0.8           1.9
                                                                    -----        -----         -----
     Operating Cash Flow....................................      $  83.9         89.7          78.6
                                                                    -----        -----         -----
                                                                    -----        -----         -----

   Interest Expense.........................................      $  31.2         35.7          35.4
                                                                    -----        -----         -----
                                                                    -----        -----         -----

   Interest Coverage Ratio..................................          2.7          2.5           2.2
                                                                    -----        -----         -----
                                                                    -----        -----         -----

Statements of Cash Flow Information:
  Net cash provided by operating activities.................      $  56.2         48.7          28.4
  Net cash used in investing activities.....................       (121.8)       (14.7)        (57.9)
  Net cash provided by (used in) financing
    activities..............................................         62.9        (33.0)          6.7
                                                                    -----        -----         -----
  Net cash flow.............................................      $  (2.7)         1.0         (22.8)
                                                                    -----        -----         -----
                                                                    -----        -----         -----
</TABLE>

As shown above, UATC's Interest Coverage Ratio increased from 2.5 times for 
1997 to 2.7 times for 1998 primarily due to decreased interest expense 
associated with the 1998 refinancing of UATC's Senior Subordinated Notes with 
the Parent's Senior Subordinated Notes. The Interest Coverage Ratio increased 
from 2.2 times for 1996 to 2.5 times for 1997 primarily due to increased 
Operating Cash Flow.

Operating Cash Flow set forth above is one measure of value and borrowing 
capacity commonly used in the theatrical exhibition industry and is not 
intended to be a substitute for Operating Cash Flow as defined in UATC's 

                                       22
<PAGE>

debt agreements or for cash flows provided by operating activities, a measure 
of performance provided herein in accordance with generally accepted 
accounting principles, and should not be relied upon as such. The Operating 
Cash Flow as set forth above does not take into consideration certain costs 
of doing business, and as such, should not be considered in isolation to 
other measures of performance.

Another measure of liquidity is net cash provided by operating activities as 
set forth above. Net cash provided by operating activities was $56.2 million, 
$48.7 million and $28.4 million for 1998, 1997 and 1996, respectively. This 
measurement sets forth the net cash from the operations provided by UATC's 
operations which was available for UATC's liquidity needs after taking into 
consideration certain additional costs of doing business which are not 
reflected in the Operating Cash Flow calculations discussed above.

UATC believes that the net cash provided by operations and borrowings 
available under the New Bank Credit Facility will be sufficient to fund its 
future cash requirements. UATC expects that future cash requirements will 
principally be for repayments of indebtedness, working capital requirements 
and capital expenditures. UATC's future operating performance and ability to 
service its current indebtedness will be subject to future economic 
conditions and to financial, business and other factors, many of which are 
beyond UATC's control. Additionally, UATC's ability to incur additional 
indebtedness may be limited by covenants contained in the Participation 
Agreement relating to the 1995 Sale and Leaseback discussed above.

                                      OTHER

UATC's revenues have been seasonal, coinciding with the timing of releases of 
motion pictures by the major distributors. Generally, the most successful 
motion pictures have been released during the summer extending from Memorial 
Day to Labor Day and the holiday season extending from Thanksgiving through 
year-end. The unexpected emergence of a hit film during other periods can 
alter this traditional trend. The timing of such film releases can have a 
significant effect on UATC's results of operations, and the results of one 
quarter are not necessarily indicative of results for the next quarter or for 
the same period in the following year.

Historically, the principal impact of inflation and changing prices upon UATC 
has been with respect to the construction of new theatres, the purchase of 
theatre equipment and the utility and labor costs incurred in connection with 
continuing theatre operations. Film rental fees, which are the largest 
operating expense incurred by UATC, are customarily paid as a percentage of 
admissions revenue and hence while the film rental fees may increase on an 
absolute basis the percentages are not directly affected by inflation. 
Inflation and changing prices have not had a significant impact on UATC's 
total revenues and results of operations.

                                    YEAR 2000

UATC has initiated a review of its internal information systems for potential 
year 2000 transition problems. There exists the possibility that some 
equipment reliant upon computer chips that have a date sensitive component 
will not operate correctly after December 31, 1999 and that system failures 
could occur. UATC's review encompasses this type of equipment, segmented into 
three broad areas: computer based systems in UATC's theatres; computer based 
systems at UATC's administrative offices; and products and services provided 
by outside vendors.

COMPUTER BASED SYSTEMS IN UATC'S THEATRES: UATC's theatres utilize a number 
of computerized systems that may encounter year 2000 problems. Some of the 
systems that experience year 2000 problems include the point-of-sale ("POS") 
system, the projection and sound system, the energy management system and 
other ancillary systems. The POS system records sales transactions, issues 
admission tickets and relays the daily operational information to UATC's 
corporate computer system. UATC initiated a plan to replace its outdated POS 
system in 1993. The new POS system has been tested and is expected to be year 
2000 compliant. At December 31, 1998, replacement of UATC's POS system was 
approximately 50% complete. UATC expects that by December 31, 1999 all of its 
operating theatres will be equipped with the new POS system. If the new POS 
system were to malfunction or fail, manual backup systems currently in place 
at the theatres could be utilized.

                                       23
<PAGE>

Most all of the UATC's theatres are equipped with projection and sound 
systems and energy management systems which are automated. If either the 
projection and sound systems or energy management systems were to malfunction 
or fail as a result of a year 2000 problem, manual backup systems currently 
in place at the theatres could be utilized.

Certain theatres utilize other systems that may experience a malfunction or 
failure as a result of a year 2000 problem. These systems include elevators, 
escalators and fire and sprinkler systems. Failure of any of these systems 
should not be material to the operations of the theatres taken as a whole.

Computer based systems at UATC's administrative offices: UATC's corporate 
administrative offices utilize a number of computerized systems that may 
encounter year 2000 problems. The most significant of these systems are the 
financial information systems (i.e. general ledger, accounts payable, payroll 
and management information systems), and the telecommunications systems. 
During 1998 UATC purchased and implemented a new general ledger and accounts 
payable system. An upgrade to the existing payroll system will be implemented 
during 1999. These financial information systems have been tested and appear 
to be year 2000 compliant. A failure of any of these systems could impact the 
ability of UATC to provide accurate financial information. Such failure or 
malfunction could also delay payments to both vendors and employees. While 
manual systems of information gathering and monetary disbursements are 
available, these backup manual systems would be very expensive to utilize.

The telecommunications systems allow UATC to obtain the daily operational 
information for each of its theatres and to communicate with the theatres and 
all vendors and suppliers. The telecommunication systems have been tested and 
appears to be year 2000 compliant.

PRODUCTS AND SERVICES PROVIDED BY OUTSIDE VENDORS: UATC is very dependent 
upon products and services provided by outside vendors. Year 2000 compliance 
by these vendors is voluntary and outside of the control of UATC. The major 
products and services that UATC is dependent upon vendors for are film 
supply, concessions inventory and utilities. If any of these vendors were to 
experience year 2000 problems, that could result in material and adverse 
consequences for UATC. UATC has been advised by its major vendors that they 
expect to be year 2000 compliant.

UATC is very dependent upon the banking industry for depositing daily cash 
receipts and making vendor and payroll disbursements. UATC primarily utilizes 
large, national banks and generally anticipates no material and adverse year 
2000 problems by then. If, however, the banking industry were to experience 
year 2000 problems, that could result in material and adverse consequences 
for UATC.

Although this review is still in progress, UATC believes that conversion 
requirements will not result in significant disruption of UATC's business 
operations or have a material adverse effect on its future liquidity or 
results of operations. UATC's cost associated with year 2000 upgrades and 
preventative measures is expected to be less than $0.5 million. At December 
31, 1998, approximately $0.1 million had been spent on year 2000 compliance 
by UATC.

                          NEW ACCOUNTING PRONOUNCEMENTS

During 1998, the Emerging Issues Task Force (EITF) released No. 97-10, The 
Effect of Leasee Involvement in Asset Construction. Issue No. 97-10 is 
applicable to entities involved on behalf of an owner-lessor with the 
construction of an asset that will be leased to the lessee when construction 
of the asset is completed. In certain construction projects, UATC is 
responsible for directly paying project costs that are in excess of an agreed 
upon amount to be paid for by the owner-lessor. Generally, these project 
costs paid by UATC include elements that are considered to be structural in 
nature as defined by Issue No. 97-10. As a result, UATC believes it would be 
considered the owner of these projects during construction. The consensus 
reached in Issue No. 97-10 applies to construction projects committed to 
after May 21, 1998 and also to those projects that were committed to on May 
21, 1998 if construction does not commence by December 31, 1999. Unless UATC 
changes the manner in which it contracts for the construction of theatres, 
UATC believes that Issue No. 97-10 will require certain of its future 
operating leases to be recorded as lease financing obligations. UATC is in 
the process of evaluating the impact of Issue No. 97-10 on its consolidated 
financial position, results of operation and cash flows.

During 1998, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting 
for Derivative Instruments and Hedging Activities. The Statement expands the 
definition of derivatives and requires that derivative instruments be 
recorded at fair market value on 

                                       24
<PAGE>

the balance sheet and changes in the fair value be recognized in the 
calculation of net income unless specific hedge accounting criteria are met. 
Qualifying financial instruments to which UATC is a party include borrowings 
under the New Bank Credit Facility, interest rate swap agreements and 
interest rate collar agreements. The effective date for SFAS No. 133 is for 
fiscal years beginning after June 15, 1999. UATC has not quantified the 
impact of adopting SFAS No. 133 on its financial position, results of 
operation or cash flow and has not determined the timing of adoption of SFAS 
No. 133. However, SFAS No. 133 could increase volatility in net income and 
comprehensive income.

During 1998, the American Institute of Certified Public Accountants issued 
Statement of Position 98-1 ("SOP 98-1"), Reporting on Internal Use Software 
and Statement of Position 98-5 ("SOP 98-5") Reporting on Start-up Costs. SOP 
98-1 provides guidance on accounting for the cost of computer software 
obtained for internal use and requires that certain costs of internally 
generated computer software be capitalized rather than expensed. SOP 98-5 
requires that entities expense the costs of start-up activities as they are 
incurred. The effective date for SOP 98-1 and SOP 98-5 is for fiscal years 
beginning after December 15, 1998. Adoption of SOP 98-1 and SOP 98-5 is not 
expected to materially effect UATC's consolidated financial position, results 
of operation or cash flow.

During 1998, FASB issued Statement of Financial Accounting Standard No. 131 
("SFAS 131"), Disclosures about Segments of an Enterprise and Related 
Information. SFAS 131 requires new disclosures of certain operation segments. 
The effective date for SFAS 131 is for fiscal years beginning after December 
15, 1997.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

UATC is subject to market risk associated with changes in interest rates on 
its debt obligations. UATC manages its interest rate risk through a 
combination of fixed and floating rate debt obligations and by selectively 
entering into interest rate cap and interest rate collar agreements. The 
table presented below provides information about UATC's financial instruments 
that are sensitive to changes in interest rates (amounts in millions):

<TABLE>
<CAPTION>
                                                                                                             FAIR
                              1999      2000      2001     2002     2003      THEREAFTER       TOTAL        VALUE
                              ----      ----      ----     ----     ----      ----------       -----       --------
<S>                          <C>       <C>       <C>      <C>      <C>       <C>              <C>          <C>
Long-Term Debt
  Fixed Rate                  $2.9      2.9       1.2       0.4      0.4          3.4            11.2          11.2
  Avg. Interest Rate           9.4%     9.4       8.9       7.8      7.8          7.8             8.7

  Floating Rate               $3.5      3.5       5.6      15.8     23.8        313.1           365.3         365.3
  Avg. Interest Rate          (1)       (1)       (1)       (1)      (1)          (1)            (1)
Interest Rate Collars
  (notional amount)          $75.0       -       150.0       -        -            -            225.0          (3.1)
Avg. Interest Rate
  Interest Rate Cap           (2)       (2)       (2)       (2)      (2)          (2)            (2)
  Interest Rate Floor         (3)       (3)       (3)       (3)      (3)          (3)            (3)

</TABLE>


(1)  The weighted average floating interest rate at December 31, 1998 was 8.3%.

(2)  The average interest rate cap was 6.5% through July 1999 and 6.0% through
     August 2001.

(3)  The average interest rate floor was 5.4% through July 1999 and 5.5% through
     August 2001.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of UATC are filed under this item 
beginning on page 26.

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

None.

                                       25
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO UNITED ARTISTS THEATRE CIRCUIT, INC.:

We have audited the accompanying consolidated balance sheets of United 
Artists Theatre Circuit, Inc. and subsidiaries ("UATC") as of December 31, 
1998 and 1997, and the related consolidated statements of operations, 
stockholder's equity (deficit) and cash flow for each of the three years in 
the period ended December 31, 1998. These consolidated financial statements 
are the responsibility of UATC's management. Our responsibility is to express 
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. 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 consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of United 
Artists Theatre Circuit, Inc. and subsidiaries as of December 31, 1998 and 
1997 and the results of their operations and their cash flow for each of the 
three years in the period ended December 31, 1998 in conformity with 
generally accepted accounting principles.



                                          ARTHUR ANDERSEN LLP


Denver, Colorado
March 31, 1999

                                       26
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets
                              (Amounts in Millions)

<TABLE>
<CAPTION>
                                  ASSETS                                                            December 31,   
                                                                                           -----------------------------
                                                                                             1998                 1997* 
                                                                                           --------             --------
<S>                                                                                      <C>                    <C>
Current assets:
  Cash and cash equivalents.............................................................   $   7.9                10.6
  Receivables, net:
    Notes...............................................................................       2.4                 0.9
    Other...............................................................................      18.0                13.5
                                                                                           --------             --------
                                                                                              20.4                14.4

  Prepaid expenses and concession inventory..............................................     15.2                18.4
  Other assets...........................................................................      0.6                 0.3
                                                                                           --------             --------
    Total current assets.................................................................     44.1                43.7

  Investments and related receivables....................................................      8.3                15.4
  Property and equipment, at cost (note 14):
    Land.................................................................................     20.6                26.0
    Theatre buildings, equipment and other...............................................    538.0               443.8
                                                                                           --------             --------
                                                                                             558.6               469.8
    Less accumulated depreciation and
      amortization (note 5)..............................................................   (200.1)             (162.2)
                                                                                           --------             --------
                                                                                             358.5               307.6
  Intangible assets, net (note 14).......................................................     81.3               101.5
  Assets held for sale - discontinued
      operations (note 15)...............................................................      3.1                13.7
  Other assets, net (note 2).............................................................     72.9                24.1
                                                                                           --------             --------
                                                                                           $ 568.2               506.0
                                                                                           --------             --------
                                                                                           --------             --------
                 LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current Liabilities:
  Accounts Payable:
    Film rentals.........................................................................  $  28.7                29.8
    Other................................................................................     65.0                57.2
                                                                                           --------             --------
                                                                                              93.7                87.0
  Accrued liabilities:
    Salaries and wages...................................................................      6.1                 6.7
    Interest.............................................................................      2.3                 5.0
    Other................................................................................     30.1                16.9
                                                                                           --------             --------
                                                                                              38.5                28.6
  Current portion of long-term debt (notes 2 and 7)......................................      6.2                32.3
                                                                                           --------             --------
    Total current liabilities............................................................    138.4               147.9
Other liabilities........................................................................     29.7                30.2
Debt (notes 2 and 7).....................................................................    370.3               329.9
Liabilities related to discontinued
      operations (note 15)...............................................................      4.9                   -
                                                                                           --------             --------
    Total liabilities....................................................................    543.3               508.0
Minority interests in equity of
  consolidated subsidiaries..............................................................      5.6                 7.2
Stockholder's equity (deficit) (note 2):
  Preferred stock (note 9)...............................................................      -                 193.9
  Common stock (note 10).................................................................      -                   -
  Additional paid-in capital.............................................................    318.0                29.0
  Accumulated deficit....................................................................   (295.3)             (230.3)
  Cumulative foreign currency translation adjustment.....................................      -                  (0.4)
  Intercompany account ..................................................................     (3.4)               (1.4)
                                                                                           --------             --------
    Total stockholder's equity (deficit).................................................     19.3                (9.2)
                                                                                           --------             --------
                                                                                           $ 568.2               506.0
                                                                                           --------             --------
                                                                                           --------             --------
</TABLE>

*Restated 

See accompanying notes to consolidated financial statements.

                                       27
<PAGE>


                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES


                      Consolidated Statements of Operations
                             (Amounts in Millions)

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                       -------------------------------------
                                                                        1998            1997*         1996*
                                                                       ------           ------        ------
<S>                                                                    <C>             <C>            <C>
Revenue:
    Admissions.....................................................   $ 454.4            473.9         466.5
    Concession sales...............................................     188.5            189.6         185.1
    Other..........................................................      18.4             19.2          24.0
                                                                       ------           ------        ------
                                                                        661.3            682.7         675.6
                                                                       ------           ------        ------

Costs and expenses:
    Film rental and advertising expenses...........................     248.5            262.5         257.2
    Direct concession costs........................................      28.0             30.2          29.3
    Other operating expenses ......................................     259.7            257.3         257.5
    Sale and leaseback rentals (note 3)............................      15.1             13.4          11.6
    Affiliate lease rentals (note 11)..............................       7.5              9.6          10.0
    General and administrative (notes 11
      and 13)......................................................      22.9             23.7          34.5
    Restructuring charge (note 12).................................       -                0.8           1.9
    Depreciation and amortization (note 5).........................      51.1             56.3          71.4
    Provisions for impairment (note 14)............................      32.9             30.4           8.7
                                                                       ------           ------        ------
                                                                        665.7            684.2         682.1
                                                                       ------           ------        ------
       Operating loss from continuing operations...................      (4.4)            (1.5)         (6.5)

Other income (expense):
    Interest, net (notes 2, 7 and 11):
       Interest expense............................................     (31.2)           (35.7)        (35.4)
       Amortization of deferred loan costs.........................      (1.1)            (2.1)         (2.2)
       Interest income.............................................       2.8              1.9           1.4
                                                                       ------           ------        ------
                                                                        (29.5)           (35.9)        (36.2)
    Gain on disposition of assets, net (note 16)...................       0.2             21.9           1.3
    Share of losses of affiliates, net.............................      (0.3)            (1.6)         (0.5)
    Minority interests in earnings of consolidated subsidiaries....      (1.3)            (1.3)         (0.8)
    Other, net.....................................................      (1.7)            (2.6)         (1.4)
                                                                       ------           ------        ------
                                                                        (32.6)           (19.5)        (37.6)
                                                                       ------           ------        ------
    Loss from continuing operations before income tax
      expenses, discontinued operations and extraordinary item.....     (37.0)           (21.0)        (44.1)
Income tax expense (note 17).......................................     ( 0.6)            (1.5)         (1.1)
                                                                       ------           ------        ------
    Loss from continuing operations................................     (37.6)           (22.5)        (45.2)
Discontinued operations (note 15)..................................     (19.5)            (5.3)         (1.4)
                                                                       ------           ------        ------
    Loss before extraordinary item.................................     (57.1)           (27.8)        (46.6)
Extraordinary item - loss on early
  extinguishment of debt (note 2)..................................      (7.9)               -             -    
                                                                       ------           ------        ------
    Net loss.......................................................     (65.0)           (27.8)        (46.6)
Dividend on preferred stock (note 9)...............................      (9.0)           (23.8)        (20.9)
                                                                       ------           ------        ------
    Net loss available to common stockholder.......................   $ (74.0)           (51.6)        (67.5)
                                                                       ------           ------        ------
                                                                       ------           ------        ------
</TABLE>

* Restated

See accompanying notes to consolidated financial statements

                                       28
<PAGE>


                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES

            Consolidated Statements of Stockholder's Equity (Deficit)
                              (Amounts in Millions)

<TABLE>
<CAPTION>
                                                                                                        Cumulative
                                                                                                      foreign currency
                                                 Preferred  Common       Additional     Accumulated    translation     
                                                   stock    stock     paid-in capital     deficit       adjustment      
                                                 ---------  ------    ---------------   -----------   ----------------
<S>                                             <C>         <C>       <C>               <C>           <C>
Balance at January 1, 1996......................  $ 149.2      -           73.7           (155.9)         (0.1)        
  Accretion of dividends on preferred stock.....     20.9      -          (20.9)             -              -          
  Net increase in intercompany account..........      -        -            -                -              -          
  Foreign currency translation adjustment.......      -        -            -                -            (0.4)        
  Net loss......................................      -        -            -              (46.6)           -          
                                                 ---------  ------    ---------------   -----------   ----------------
Balance at December 31, 1996....................    170.1      -           52.8           (202.5)         (0.5)        
  Accretion of dividends on preferred stock.....     23.8      -          (23.8)             -              -          
  Net decrease in intercompany account..........      -        -            -                -              -          
  Foreign currency translation adjustment.......      -        -            -                -             0.1         
  Net loss......................................      -        -            -              (27.8)           -          
                                                 ---------  ------    ---------------   -----------   ----------------
Balance at December 31, 1997....................    193.9      -           29.0           (230.3)         (0.4)        
  Accretion of dividends on preferred stock.....      9.0      -           (9.0)             -              -          
  Dividend to parent............................      -        -          (13.0)             -              -          
  Equity contribution...........................      -        -          108.1              -              -          
  Conversion of preferred stock.................   (202.9)     -          202.9              -              -          
Net decrease in intercompany account............      -        -            -                -              -          
  Foreign currency translation adjustment.......      -        -            -                -             0.4         
  Net loss......................................      -        -            -              (65.0)           -          
                                                 ---------  ------    ---------------   -----------   ----------------
Balance at December 31, 1998....................  $   -        -          318.0           (295.3)           -          
                                                 ---------  ------    ---------------   -----------   ----------------
                                                 ---------  ------    ---------------   -----------   ----------------
</TABLE>

<TABLE>
<CAPTION>
                                                                              Total       
                                                        Intercompany       stockholder's  
                                                           account       equity (deficit) 
                                                        ------------     ---------------- 
<S>                                                     <C>              <C>
Balance at January 1, 1996......................            0.2               67.1          
  Accretion of dividends on preferred stock.....             -                  -           
  Net increase in intercompany account..........            0.4                0.4          
  Foreign currency translation adjustment.......             -                (0.4)         
  Net loss......................................             -               (46.6)         
                                                        ------------     ---------------- 
Balance at December 31, 1996....................            0.6               20.5          
  Accretion of dividends on preferred stock.....             -                  -           
  Net decrease in intercompany account..........           (2.0)              (2.0)         
  Foreign currency translation adjustment.......             -                 0.1          
  Net loss......................................             -               (27.8)         
                                                        ------------     ---------------- 
Balance at December 31, 1997....................           (1.4)              (9.2)         
  Accretion of dividends on preferred stock.....                                -           
  Dividend to parent............................             -               (13.0)        
  Equity contribution...........................             -               108.1         
  Conversion of preferred stock.................             -                  -           
Net decrease in intercompany account............           (2.0)              (2.0)        
  Foreign currency translation adjustment.......             -                 0.4         
  Net loss......................................             -               (65.0)        
                                                        ------------     ---------------- 
Balance at December 31, 1998....................          (3.4)               19.3         
                                                        ------------     ---------------- 
                                                        ------------     ---------------- 
</TABLE>


   See accompanying notes to consolidated financial statements.

                                       29
<PAGE>


                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flow
                             (Amounts in Millions)

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                                 -----------------------------------
                                                                                  1998          1997*         1996*
                                                                                 ------        ------        -------
<S>                                                                             <C>           <C>            <C>
Net cash provided by operating activities..................................     $  56.2          48.7          28.4
                                                                                 ------        ------        -------

Cash flow from investing activities:
   Capital expenditures....................................................      (115.4)        (65.8)        (65.8)
   Increase in receivable from sale and
     leaseback escrow......................................................       (11.0)        (12.8)        (19.5)
   Proceeds from sale and leaseback transaction
     and escrow............................................................         2.7          23.2          22.9
   Proceeds from disposition of assets, net................................         7.0          59.5          20.5
   Change in investments and receivables from
     theatre joint ventures, net...........................................         2.7         (18.3)        (14.3)
   Other, net..............................................................        (7.8)         (0.5)         (1.7)
                                                                                 ------        ------        -------
    Net cash used in investing activities..................................      (121.8)        (14.7)        (57.9)
                                                                                 ------        ------        -------

Cash flow from financing activities:
   Equity contribution by Parent...........................................       108.1           -             -
   Dividend to Parent......................................................       (13.0)          -             -
   Debt borrowings.........................................................       630.6         150.9         129.8
   Debt repayments.........................................................      (500.1)       (179.2)       (126.3)
   Repurchase of senior secured notes......................................      (128.6)          -             -
   Increase (decrease) in intercompany account.............................        (2.0)         (2.0)          0.4
   Increase (decrease) in cash overdraft...................................        10.5          (2.8)          6.2
   (Increase) decrease in related party
     receivables...........................................................       (41.5)          0.4          (2.8)
   Other, net..............................................................        (1.1)         (0.3)         (0.6)
                                                                                 ------        ------        --------
    Net cash provided by (used in) financing
     activities............................................................        62.9         (33.0)          6.7
                                                                                 ------        ------        --------

    Net increase (decrease) in cash and cash
     equivalents...........................................................        (2.7)          1.0         (22.8)

Cash and cash equivalents:
   Beginning of period.....................................................        10.6           9.6          32.4
                                                                                 ------        ------        --------
   End of period ..........................................................     $   7.9          10.6           9.6
                                                                                 ------        ------        --------
                                                                                 ------        ------        --------
Reconciliation of net loss to net cash provided by
     operating activities:
   Net loss................................................................     $ (65.0)        (27.8)        (46.6)
   Non-cash expense associated with
     discontinued operations...............................................        16.0           2.7           0.7
   Extraordinary item......................................................         7.9           -             -
   Effect of leases with escalating minimum
     annual rentals........................................................         4.0           3.7           3.1
   Depreciation and amortization...........................................        51.1          56.3          71.4
   Provision for impairment................................................        32.9          30.4           8.7
   Gain on disposition of assets, net......................................        (0.2)        (21.9)         (1.3)
   Share of losses of affiliates, net......................................         0.3           1.6           0.5
   Minority interests in earnings of
     consolidated subsidiaries.............................................         1.3           1.3           0.8
   Change in assets and liabilities:
    Receivables............................................................         5.1           2.3          (4.7)
    Prepaid expenses and concession inventory..............................         2.5          (3.0)          4.0
    Other assets...........................................................        (0.5)          1.6           1.1
    Accounts payable.......................................................         7.6           3.2          (8.4)
    Accrued and other liabilities..........................................        (6.8)         (1.7)         (0.9)
                                                                                 ------        ------        --------
Net cash provided by operating activities..................................     $  56.2          48.7          28.4
                                                                                 ------        ------        --------
                                                                                 ------        ------        --------
</TABLE>

*Restated

  See accompanying notes to consolidated financial statements.

                                       30
<PAGE>


                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998, 1997 AND 1996

(1)      ORGANIZATION

         On May 12, 1992, United Artists Theatre Circuit, Inc. and substantially
         all of its then existing subsidiaries ("UATC") were acquired (the
         "Acquisition") by United Artists Theatre Company (the "Parent") from an
         indirect subsidiary of Tele-Communications, Inc. ("TCI"). The Parent is
         owned by an investment fund managed by affiliates of Merrill Lynch
         Capital Partners, Inc., ("MLCP") and certain institutional investors
         (collectively the "Non-Management Investors"), certain institutional
         investors and certain members of UATC's management.

         In addition to owning all of the outstanding capital stock of UATC, the
         Parent also owns all of the outstanding capital stock of United Artists
         Realty Company ("UAR"). UAR and its subsidiary United Artists
         Properties I Corp. ("Prop I") are the owners and lessors of certain
         operating theatre properties leased to and operated by UATC. Prior to
         December 13, 1995, UAR's other subsidiary, United Artists Properties II
         Corp. ("Prop II") was also the owner and lessor of certain theatre
         properties leased to and operated by UATC.

(2)      RECAPITALIZATION

         On April 21, 1998, the Parent completed the offering of $225.0 million
         of its 9.75% senior subordinated notes due April 15, 2008 and the
         offering of $50.0 million of its floating rate senior subordinated
         notes due October 15, 2007 (collectively, the "Senior Subordinated
         Notes"), and entered into a $450.0 million bank credit facility (the
         "New Bank Credit Facility") with a final maturity of April 21, 2007.

         The proceeds from the offerings of the Senior Subordinated Notes and a
         portion of the borrowings under the New Bank Credit Facility were used
         to repay the outstanding borrowings under UATC's existing bank credit
         facility (the "Bank Credit Facility") (approximately $272.5 million),
         and to fund the redemption of the Parent's preferred stock
         (approximately $159.2 million) and the redemption of UATC's $125.0
         million senior secured notes (the "Senior Secured Notes") at 102.875%
         of par value plus accrued, but unpaid interest of $0.8 million.

         Included in the New Bank Credit Facility was a delayed draw term loan
         that was used to facilitate the repayment of certain Prop I mortgage
         notes upon their maturity. On November 1, 1998, approximately $45.7
         million of this delayed draw facility was used to repay and retire
         these Prop I mortgage notes. (See Note 7, Debt.)

         The net proceeds from the offering of the Senior Subordinated Notes in
         excess of the redemption value of the Parent's preferred stock
         (approximately $108.1 million) was contributed to UATC as additional
         common equity by the Parent. Additionally, UATC's preferred stock
         (which was held by the Parent) was converted into additional common
         equity.

         As a result of the repayment of the Bank Credit Facility and redemption
         of the Senior Secured Notes, UATC recognized an extraordinary loss on
         the early extinguishment of debt during 1998 of approximately $7.9
         million, consisting of the $3.6 million prepayment premium on the
         Senior Secured Notes and approximately $4.3 million of unamortized
         deferred loan costs.

                                       31
<PAGE>


                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED

(3)      SALE AND LEASEBACK TRANSACTIONS

         In December 1995, UATC and UAR entered into a sale and leaseback
         transaction (the "1995 Sale and Leaseback") whereby the buildings and
         land underlying 27 of their operating theatres and four theatres under
         development were sold to and leased back from the 1995-A United Artists
         Pass Through Trust (the "Pass Through Trust"), an unaffiliated third
         party. The 1995 Sale and Leaseback requires UATC to lease the
         underlying theatres for a period of 21 years and one month, with the
         option to extend for up to an additional 10 years. The lease of the
         properties by UATC requires UATC to enter into a Participation
         Agreement that requires UATC to comply with certain covenants including
         limitations on indebtedness and restrictions on payments.

         In November 1996, UATC entered into a sale and leaseback transaction
         whereby the buildings and land underlying three of its operating
         theatres and two theatres under development were sold to and leased
         back from an unaffiliated third party. The lease has a term of 20 years
         and nine months with options to extend for an additional 10 years.

         In December 1997, UATC entered into a sale and leaseback transaction
         whereby two theatres under development were sold to and leased back
         from an unaffiliated third party for approximately $18.1 million. At
         December 31, 1998, approximately $9.1 million of the sales proceeds
         were deposited into an escrow account and are to be paid under the
         terms of the sale and leaseback to fund certain of the construction
         costs associated with the two theatres. The lease has a term of 22
         years with options to extend for an additional 10 years.

(4)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      PRINCIPLES OF CONSOLIDATION 
                  The consolidated financial statements include the accounts of
                  UATC and its majority owned subsidiaries. All significant
                  intercompany accounts and transactions have been eliminated in
                  consolidation.

         (b)      NATURE OF OPERATIONS 
                  UATC is principally engaged in the operation of motion picture
                  theatres.

         (c)      CASH AND CASH EQUIVALENTS 
                  UATC considers investments with initial maturities of three
                  months or less to be cash equivalents.

         (d)      INVESTMENTS 
                  Investments in which UATC's ownership is 20% to 50% are
                  accounted for using the equity method. Under this method, the
                  investment, originally recorded at cost, is adjusted to
                  recognize dividends received and UATC's share of net earnings
                  or losses of the investee as they occur. Investments in which
                  UATC's ownership is less than 20% are accounted for using the
                  cost method. Under this method, the investments are recorded
                  at cost and any dividends received are recorded as income.

         (e)      PROPERTY AND EQUIPMENT
                  Property and equipment are stated at cost, including
                  acquisition costs allocated to tangible assets acquired.
                  Construction costs, including applicable direct overhead and
                  interest, are capitalized. During the year ended December 31,
                  1998, UATC capitalized $1.5 million of interest related to its
                  various construction projects. Repairs and maintenance are
                  charged to operations.

                                       32
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(4)               SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

                  Depreciation is calculated using the straight-line method over
                  the estimated useful lives of the assets, which range from 3
                  to 40 years. Leasehold improvements are amortized over the
                  terms of the leases, including certain renewal periods or, in
                  the case of certain improvements, the estimated useful lives
                  of the assets, if shorter. Costs associated with new theatre
                  construction are depreciated once such theatres are placed in
                  service.

         (f)      INTANGIBLE ASSETS
                  Intangible assets consist of theatre lease acquisition costs
                  and non-compete agreements. Amortization of theatre lease
                  acquisition costs and non-compete agreements is calculated on
                  a straight-line basis over the terms of the underlying leases
                  including certain renewal periods (weighted average life of
                  approximately 17 years) and non-compete agreements (primarily
                  5 years). Intangible assets and related accumulated
                  amortization are summarized as follows (amounts in millions):

<TABLE>
<CAPTION>

                                                                                    December 31, 
                                                                             -------------------------
                                                                                1998            1997
                                                                             ----------      ---------
<S>                                                                         <C>              <C>
                  Theatre lease acquisition costs...................        $  145.5            156.9

                  Non-compete agreements............................             -                3.0
                                                                             ----------      ---------
                                                                               145.5            159.9
                  Accumulated amortization..........................           (64.2)           (58.4)
                                                                             ----------      ---------
                                                                            $   81.3            101.5
                                                                             ----------      ---------
                                                                             ----------      ---------
</TABLE>

         (g)      OTHER ASSETS
                  Other assets primarily consist of deferred loan costs, long
                  term receivables and other assets. Amortization of the
                  deferred loan costs is calculated on a straight-line basis
                  over the terms of the underlying loan agreements (average life
                  of approximately seven years) and is included as a component
                  of interest expense. Amortization of the deferred acquisition
                  costs is calculated on a straight line basis over five years.
                  Other assets and related accumulated amortization are
                  summarized as follows (amounts in millions):

<TABLE>
<CAPTION>
                                                                                 December 31,    
                                                                            ----------------------
                                                                              1998          1997
                                                                            --------      --------
<S>                                                                        <C>            <C>
                  Deferred loan costs...............................        $  7.0          14.9
                  Long term receivablefrom UAR .....................          60.1          17.6
                  Other long term receivables ......................           6.0           0.3
                  Other.............................................           0.4           1.2
                                                                            --------      --------
                                                                              73.5          34.0
                  Accumulated amortization..........................          (0.6)         (9.9)
                                                                            --------      --------
                                                                            $ 72.9          24.1
                                                                            --------      --------
                                                                            --------      --------
</TABLE>

         (h)      OPERATING COSTS AND EXPENSES
                  Film rental and advertising expenses include film rental and
                  co-op and directory advertising costs. Film advertising costs
                  are expensed as incurred. Direct concession costs include
                  direct concession product costs and concession promotional
                  expenses. Concession promotional expenses are expensed as
                  incurred. Other operating expenses include joint facility
                  costs such as employee costs, theatre rental and utilities,
                  which are common to both ticket sales and concession
                  operations. As such, other operating expenses are reported as
                  a combined amount as the allocation of such costs to
                  exhibition and concession activities would be arbitrary and
                  not meaningful. Rental expense for operating leases which
                  provide for escalating minimum annual rentals during the term
                  of the lease are accounted for on a straight-line basis over
                  the terms of the underlying leases.

                                       33
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(4)               SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

                  (i)      ESTIMATES 
                           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 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.

                  (j)      RECLASSIFICATION
                           Certain prior year amounts have been
                           reclassified for comparability with the 1998
                           presentation.

(5)      CHANGE IN ESTIMATED USEFUL LIVES

         During 1998, UATC revised the estimated useful lives of certain
         equipment and leasehold improvements to more closely reflect the actual
         lives of these assets. The effect of this change in estimated useful
         lives was to decrease depreciation and amortization expense for the
         year ended December 31, 1998 by approximately $2.9 million.

(6)      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

         Cash payments for interest for the years ended December 31, 1998, 1997
         and 1996, were $35.3 million, $36.3 million, and $37.3 million,
         respectively.

         Cash payments by certain less than 80% owned entities for income taxes
         for the years ended December 31, 1998, 1997 and 1996, were $1.8
         million, $1.4 million, and $1.2 million, respectively.

         UATC accrued $9.0 million, $23.8 million and $20.9 million of dividends
         during the years ended December 31, 1998, 1997 and 1996, respectively,
         on its preferred stock (see note 9).

         During 1998, 1997 and 1996, UATC incurred $0.7 million, $1.1 million
         and $1.4 million, respectively, of capital lease obligations relating
         to new equipment.

(7)      DEBT

         Debt is summarized as follows (amount in millions):

<TABLE>
<CAPTION>

                                                                          December 31, 1998       December 31, 1997
                                                                          -----------------       -----------------
                           <S>                                            <C>                     <C>
                           New Bank Credit Facility (a)..................   $    365.3                      -
                           Bank Credit Facility (b)......................          -                      226.5
                           Senior Secured Notes (b)......................          -                      125.0
                           Other (c).....................................         11.2                     10.7
                                                                                 -----                    -----
                                                                                 376.5                    362.2
                                                                                                     
                           Less current position.........................         (6.2)                   (32.3)
                                                                                 -----                    -----
                                                                            $    370.3                    329.9
                                                                                 -----                    -----
                                                                                 -----                    -----
</TABLE>

                  (a)      The New Bank Credit Facility provides for delayed
                           draw term loans aggregating $350.0 million (the "Term
                           Loans") and a reducing revolving loan and standby
                           letters of credit aggregating $100.0 million (the
                           "Revolving Facility"). The Term Loans consist of the

                                       34
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(7)      DEBT, CONTINUED

                  following (i) a $70.0 million delayed draw term loan (the
                  "Tranche A Term Loan"); (ii) a $118.0 million delayed draw
                  term loan (the "Tranche B Term Loan"); and (iii) a $162.0
                  million delayed draw term loan (the "Tranche C Term Loan").
                  All of the term loans were fully funded at December 31, 1998.

                  Commitments available for borrowing under the Revolving
                  Facility reduce semi-annually commencing December 31, 2001
                  through April 21, 2005. The Tranche A Term Loan requires
                  semi-annual principal payments commencing December 31, 1998
                  through June 30, 2001 of 1/2% of the December 31, 1998
                  outstanding balance and then in escalating semi-annual
                  payments through April 21, 2005. The Tranche B Term Loan
                  requires semi-annual principal payments commencing December
                  31, 1998 through June 30, 2005 of 1/2% of the December 31,
                  1998 outstanding balance and two payments of 46.5% of the
                  December 31, 1998 outstanding balance on December 31, 2005 and
                  April 21, 2006. The Tranche C Term Loan requires semi-annual
                  principal payments commencing December 31, 1998 through June
                  30, 2006 of 1/2% of the December 31, 1998 outstanding balance
                  and two payments of 46% of the December 31, 1998 outstanding
                  balance on December 31, 2006 and April 21, 2007.

                  Borrowings under the New Bank Credit Facility provide for
                  interest to be accrued at varying rates depending on the ratio
                  of indebtedness to annualized operating cash flow, as defined.
                  Interest is payable at varying dates depending on the type of
                  rate selected by the Parent, but no less frequently than once
                  each 90 days.

                  The New Bank Credit Facility is guaranteed, on a joint and
                  several basis, by UATC and by certain of the Parent's other
                  subsidiaries, those being UAR and Prop I. The New Bank Credit
                  Facility is secured by, among other things, the capital stock
                  of UATC, UAR, Prop I and certain other subsidiaries of the
                  Parent and UATC and by an intercompany note from UATC to the
                  Parent established with respect to borrowings by UATC from the
                  Parent.

                  The New Bank Credit Facility contains certain provisions that
                  require the Parent to maintain certain financial ratios and
                  places limitations on, among other things, additional
                  indebtedness, disposition of assets and restricted payments.

          (b)     As discussed in Note (2), Recapitalization, the Bank Credit
                  Facility and the Senior Secured Notes were repaid during 1998
                  from proceeds of the Senior Subordinated Notes and the New 
                  Bank Credit Facility.

         (c)      Other debt at December 31, 1998, consists of various term 
                  loans, mortgage notes, capital leases and other
                  borrowings. This other debt carries interest rates ranging
                  from 7% to 12%. Principal and interest are payable at
                  various dates through March 1, 2006.

          At December 31, 1998, UATC was party to interest rate collar
          agreements on $225.0 million of floating rate debt which provide for a
          LIBOR interest rate cap ranging between 6% and 7 1/2% and LIBOR
          interest rate floors ranging between 5 1/4% and 5 1/2% that expire at
          various dates through August 2001. UATC is subject to credit risk
          exposure from non-performance of the counterparties to the interest
          rate cap agreements. As UATC has historically received payments
          relating to its various interest hedge agreements, it does not
          anticipate such non-performance in the future. Amounts paid to the
          counterparties to the interest collar agreements are recorded as an
          increase to interest expense and amounts received from the
          counterparties to the interest rate collar agreements are recorded as
          a reduction of interest expense.

                                       35
<PAGE>


                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(7)       DEBT, CONTINUED

          At December 31, 1998, the Parent had approximately $83.0 million of
          Revolving Facility commitments, $4.1 million of which has been used
          for the issuance of letters of credit. The Parent pays commitment fees
          of 1/2% per annum on the average unused commitments.

          The primary source of principal and interest payments related to the
          New Bank Credit Facility and the Senior Subordinate Notes will come
          from payments by UATC to the Parent. The amount of payments by UATC to
          the Parent may be limited from time to time by covenants included in
          the Participation Agreement relating to the 1995 Sale and Leaseback.
          See Note (3), Sale and Leaseback Transactions.

          Annual maturities of debt for each of the next five years and
          thereafter are summarized as follows (amounts in millions):

<TABLE>
                          <S>                                                     <C>
                           1999................................................   $  6.4
                           2000................................................      6.4
                           2001................................................      6.8
                           2002................................................     16.2
                           2003................................................     24.2
                           Thereafter..........................................    316.5
                                                                                 -------
                                                                                  $376.5
                                                                                 -------
                                                                                 -------
</TABLE>

(8)      DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         CASH AND CASH EQUIVALENTS
         The carrying amount of cash and cash equivalents approximates fair
         value because of its short maturity.

         FINANCIAL INSTRUMENTS
         The carrying amount and estimated fair value of UATC's financial 
         instruments at December 31, 1998 are summarized as
         follows (amounts in millions):

<TABLE>
<CAPTION>

                                                                    Carrying       Estimated
                                                                     Amount       Fair Value
                                                                    --------      ----------
                                                                    <S>           <C>
         New Bank Credit Facility and Other Debt................... $  376.5        376.5  
                                                                    --------      ----------
                                                                    --------      ----------
         Interest Rate Collar Agreements........................... $      -         (3.1)  
                                                                    --------      ----------
                                                                    --------      ----------
</TABLE>

         New Bank Credit Facility and Other Debt: The carrying amount of UATC's
         borrowings under the New Bank Credit Facility and other debt
         approximates fair value because the interest rates on the majority of
         this debt floats with market interest rates.

         Interest Rate Collar Agreements: The fair value of UATC's interest rate
         collar agreements is estimated based upon dealer quotes for similar
         agreements at December 31, 1998.

(9)      PREFERRED STOCK

         As part of the recapitalization discussed in Note (2),
         Recapitalization, the UATC preferred stock (which was held by the
         Parent) was converted into additional common equity. At the May 1, 1998
         conversion date, the carrying amount was approximately $202.9 million.
         Dividends on the preferred stock had been accrued at a 14% per annum
         rate for all periods since issuance in 1992 rather than the stated
         rate of 8% through December 31, 1995, 9% through December 31, 1996 and
         14% thereafter.

                                       36
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED

(10)     COMMON STOCK

         UATC is authorized to issue 1,000 shares of its $1.00 par value common
         stock. At December 31, 1998 and 1997, UATC had 100 shares of common
         stock outstanding, all of which were held by the Parent.

         At December 31, 1998, the Parent had three stock-based compensation
         plans. UATC applies the provisions of Accounting Principles Board
         Opinion No. 25 "Accounting for Stock Issued to Employees," and related
         Interpretations in accounting for the Parent's stock option plans. No
         compensation cost has been recognized by UATC for any of the Parent's
         stock option plans. UATC's compensation expense would not have been
         materially different had UATC recorded compensation expense for these
         three stock option plans in accordance with SFAS No. 123, "Accounting
         for Stock Based Compensation."

(11)     RELATED PARTY TRANSACTIONS

         UATC leases certain of its theatres from UAR and Prop I in accordance
         with two master leases. The master leases provide for basic monthly
         rentals and may require additional rentals, based on the revenue of the
         underlying theatre. The lease arrangements with Prop I were entered
         into in conjunction with the placement of mortgage debt financing in
         1988. On November 1, 1998, the mortgage debt was repaid via a term loan
         borrowing under the New Bank Credit Facility. UATC has reflected this
         additional borrowing as a receivable from an affiliate at December 31,
         1998.

         In order to fund the cost of additions and/or renovations to the
         theatres leased by UATC from UAR or Prop I, UATC has periodically made
         advances to UAR. Interest on these advances, as well the borrowings
         under the New Bank Credit Facility utilized to repay the Prop I
         mortgage debt, accrues at the prime rate and amounted to $2.0 million,
         $1.4 million, and $1.1 million for the years ended December 31, 1998,
         1997 and 1996, respectively.

         During 1998, UATC exchanged one fee-owned theatre property with Prop I
         in return for two fee-owned theatre properties and a $1.1 million note.
         During 1997, UATC exchanged two fee-owned theatre properties with Prop
         I in return for a fee-owned theatre property and a $2.7 million note.
         During 1996, UATC exchanged a fee-owned theatre property with Prop I in
         return for two fee-owned theatre properties and a $1.5 million note.
         The notes bear interest at the prime rate plus 1 1/2% and are due upon
         demand.

         In conjunction with the Acquisition, UATC entered into a management
         agreement with UAR. Such management agreement provides for a fee to be
         paid to UATC in return for certain accounting and management services.
         These fees are recorded as a reduction of general and administrative
         expenses in the accompanying consolidated financial statements and
         approximated $0.5 million, $0.6 million, and $0.6 million for the years
         ended December 31, 1998, 1997 and 1996, respectively.

(12)     RESTRUCTURING CHARGE

         At the end of 1996, UATC initiated a corporate restructuring plan
         intended to provide a higher level of focus on UATC's domestic
         theatrical business at a lower annual cost. This corporate
         restructuring was substantially completed in January 1997. In
         conjunction with this corporate restructuring plan, UATC recorded $0.8
         million and $1.9 million of restructuring charges in 1997 and 1996,
         respectively, for severance and other related expenses.

                                       37
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(13)     EMPLOYEE BENEFIT PLANS

         The UATC 401(k) Savings Plan (the "Savings Plan") provides that
         employees may contribute up to 10% of their compensation, subject to
         Internal Revenue Service (the "IRS") limitations, to the Savings Plan. 
         Employee contributions are invested in various investment funds based 
         upon elections made by the employee. Depending on the amount of each 
         employee's level of contribution, the Savings Plan currently matches 
         up to 4% of their compensation.

         Effective January 1, 1993, UATC established the UATC Supplemental
         401(k) Savings Plan (the "Supplemental Plan") for certain employees who
         are highly compensated as defined by the IRS and whose elective
         contributions to the Savings Plan exceed the IRS limitations. Effective
         January 1, 1997, UATC suspended the Supplemental Plan.

         Contributions to the various employee benefit plans for the years ended
         December 31, 1998, 1997 and 1996 were $0.6 million, $0.6 million, and
         $2.3 million, respectively.

(14)     PROVISIONS FOR IMPAIRMENT

         UATC accounts for its long lived assets in accordance with SFAS No.
         121, "Accounting for the Impairment of Long-Lived Assets and for
         Long-Lived Assets to be Disposed Of." During 1998, 1997 and 1996, UATC
         recorded non-cash charges for the impairment of its long-lived assets
         of $32.9 million, $30.4 million and $8.7 million, respectively. These
         non-cash charges relate to the difference between the historical book
         value of the individual theatres (in some cases groups of theatres) and
         the discounted cash flow expected to be received from the operation or
         future sale of the individual theatres (or groups of theatres).

(15)     DISCONTINUED OPERATIONS

         During 1998, UATC established a plan to dispose of its entertainment
         center business operations. Current and prior period results for the
         entertainment center business operations have been classified
         separately in the accompanying statements of operations as discontinued
         operations.

         Net assets of the discontinued operations were $3.1 million and $13.7
         million at December 31, 1998 and 1997, respectively. Liabilities
         related to the discontinued operations were $4.9 million at December
         31, 1998. The net loss from discontinued operations was $13.8 million,
         $5.3 million, and $1.4 million, for the years ended December 31, 1998,
         1997, and 1996 respectively. The anticipated loss from disposition 
         was $5.7 million during 1998 which represents future losses. Revenue 
         generated by the discontinued operations was $1.0 million, $2.4 
         million and $1.9 million, for the years ended December 31, 1998, 
         1997 and 1996, respectively. Included in the net loss from 
         discontinued operations was interest expense of $1.1 million, $1.2 
         million and $0.7 million for the years ended December 31, 1998, 1997 
         and 1996, respectively. Interest expense was allocated to the 
         discontinued operations based upon the average fixed asset balance 
         and UATC's average borrowing rate. The net loss from discounted 
         operations included non-cash provisions for asset impairments of 
         $10.2 million and $1.0 million for the years ended December 31, 1998 
         and 1997, respectively. 

(16)     GAIN ON DISPOSITION OF ASSETS

         In 1998, UATC sold the majority of its remaining international
         theatrical exhibition assets for $3.0 million of cash, $0.5 million of
         stock of the acquiring company and a $3.0 million note. In addition,
         UATC sold certain other operating theatres for which net cash proceeds
         of $7.0 million were received. During April 1997, UATC sold its 50%
         interest in Hong Kong theatre company to its partner

                                       38
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(16)     GAIN ON DISPOSITION OF ASSETS, CONTINUED

         for approximately $17.5 million and, during September 1997, UATC sold
         its theatre investments in Mexico and the majority of its theatre
         assets in Argentina for approximately $25.0 million. During the year
         ended December 31, 1997, UATC sold various other non-strategic or
         underperforming theatres for net cash proceeds of approximately $17.0
         million. During the year ended December 31, 1996, UATC sold certain
         theatres for which cash proceeds of $20.5 million were received.

(17)     INCOME TAXES

         UATC and each of its 80% or more owned subsidiaries are included in the
         Parent's consolidated federal income tax return. Pursuant to a tax
         sharing agreement with the Parent, UATC and each of its 80% or more
         owned consolidated subsidiaries are allocated a portion of the Parent's
         current federal income tax expense (benefit). Such allocations are
         determined as if UATC and each of its 80% or more owned consolidated
         subsidiaries were separate tax paying entities within the consolidated
         group. For the years ended December 31, 1998, 1997 and 1996 UATC and
         each of its 80% or more owned consolidated subsidiaries were allocated
         no current federal income tax expense (benefit) pursuant to such tax
         sharing agreement as a result of the group's overall net loss position.

         On February 10, 1998, the Parent filed a private letter ruling with the
         IRS requesting an extension of time to file a Section 197 election. 
         This election allows for the amortization of various intangible assets 
         over 15 years. On June 8, 1998, the IRS granted the Parent's request 
         and, on August 6, 1998, the Parent filed a Section 197 election along 
         with its amended 1993 income tax return. As the Parent had previously 
         been amortizing certain intangible assets acquired as part of the 
         Acquisition over a five year period, the effect of the Section 197 
         election was to reduce the Parent's net operating loss carryforward 
         and to increase the basis of certain intangible assets, which will 
         be amortized, and provide for future tax deductions. The Section 197 
         election also enabled the Parent to conclude the IRS audit for the 
         years ending December 31, 1992, 1993 and 1994. As a result of the 
         audit the net operating loss was reduced further by various items 
         which were reclassified as Section 197 assets. These items will be 
         amortized and will provide the Parent and UATC with additional future 
         deductions. As the Parent had fully reserved the deferred tax asset 
         associated with its net operating loss carryforward, there is no 
         financial statement impact associated with the reduction in its net 
         operating loss carryforward.

         The current state income tax expense of UATC and federal income tax
         expense of UATC's less than 80%-owned consolidated subsidiaries and
         deferred state and federal income tax expense are as follows (amounts
         in millions):

<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                              ----------------------------
                                                              1998       1997        1996
                                                              -----      -----       -----
        <S>                                                  <C>        <C>         <C>
         Current income taxes:
           State expense...................................  $ 0.2         0.2        0.1

           Federal expense.................................    0.4         1.3        1.0
                                                               ---         ---        ---
                                                               0.6         1.5        1.1
         Deferred income taxes:
           State expense...................................     -           -          -
           Federal expense.................................     -           -          - 
                                                               ---         ---        ---
                                                             $ 0.6         1.5        1.1
                                                               ---         ---        ---
                                                               ---         ---        ---
</TABLE>

                                       39
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(17)     INCOME TAXES, CONTINUED

         Income tax expense differed from the amount computed by applying the
         U.S. federal income tax rate (35% for all periods) to loss before
         income tax expense as a result of the following (amounts in millions):


<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                              ----------------------------
                                                              1998       1997        1996
                                                              -----      -----       -----
        <S>                                                  <C>        <C>         <C>
         Expected tax benefit........................        $(22.5)      (9.2)      (15.9)
         Change in valuation allowance...............          31.7       12.9        13.3
         Adjustment of net operating loss
           carryforward..............................         (34.2)      (2.4)        0.7
         Changes in basis of assets..................          29.3         -           -
         Other.......................................          (3.7)       0.2         3.0
                                                             ------      -----       -----
                                                             $  0.6        1.5         1.1
                                                             ------      -----       -----
                                                             ------      -----       -----

</TABLE>

         The tax effects of temporary differences that give rise to significant
         portions of the deferred tax assets and liabilities at December 31,
         1998 and 1997 are as follows (amounts in millions):

<TABLE>
<CAPTION>
                                                                      1998         1997
        <S>                                                          <C>          <C>
         Deferred tax assets:
           Net operating loss carryforwards.....................     $ 66.6         75.0
           Intangible and other assets..........................       32.2          3.7
           Accrued liabilities..................................        6.4          3.6
           Deferred revenue.....................................        4.5           -
           Other................................................        1.5          1.2
                                                                     ------        -----
                                                                      111.2         83.5

           Less: valuation allowance............................     (110.0)       (78.3)
                                                                     ------        -----
             Net deferred tax assets............................        1.2          5.2
                                                                     ------        -----
         Deferred tax liabilities:

           Property and equipment...............................        -            3.7
           Other................................................        1.2          1.5
                                                                     ------        -----
             Net deferred tax liabilities.......................        1.2          5.2
                                                                     ------        -----
         Net....................................................     $  -             -
                                                                     ------        -----
                                                                     ------        -----

</TABLE>

         At December 31, 1998, UATC had a net operating loss carryforward for
         federal income tax purposes of approximately $175.4 million.

         The Parent's income tax returns for the years ended December 31, 1995,
         1996 and 1997 are currently being audited by the IRS. The outcome of
         this audit may reduce the amount of the Parent's and UATC's net
         operating loss carryforward and/or change the basis (and thus future
         tax depreciation) related to certain assets. The Parent and UATC
         believe that the result of the audit will not have a material adverse
         effect on the financial condition or results of operation.

(18)     SEGMENT INFORMATION

         UATC's operations are classified into two business segments; theatre
         operations and the Satellite Theatre Network-TM-. The Satellite Theatre
         Network-TM- rents theatre auditoriums for seminars, corporate training,
         business meetings and other educational or communication uses product
         and consumer research and other entertainment uses. Theatre auditoriums
         are rented individually or on networked basis.

                                       40

<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(18)     SEGMENT INFORMATION, CONTINUED

         The following table presents certain information relating to the
         theatre operations and Satellite Theatre Network-TM- segments for each
         of the last three years (amounts in millions):

<TABLE>
<CAPTION>
                                                                 THEATRE        SATELLITE
                                                                OPERATIONS    THEATRE NETWORK      TOTAL
                                                                ----------    ---------------     -------
         <S>                                                    <C>           <C>                 <C>
                                1998
         Revenue............................................    $   655.8          5.5               661.3
         Operating income (loss)............................         (4.8)         0.4               (4.4)
         Depreciation and amortization......................         51.0          0.1                51.1
         Assets.............................................        564.3          3.9               568.2
         Capital expenditures...............................        115.4          -                 115.4
                                                                                                  
                                1997                                                              
         Revenue............................................        676.5          6.2               682.7
         Operating income (loss)............................         (2.1)         0.6                (1.5)
         Depreciation and amortization......................         56.2          0.1                56.3
         Assets.............................................        502.1          3.9               506.0
         Capital expenditures...............................         65.8          -                  65.8
                                                                                                  
                                1996                                                              
         Revenue............................................        669.6          6.0               675.6
         Operating income (loss)............................         (5.4)        (1.1)               (6.5)
         Depreciation and amortization......................         71.4          -                  71.4
         Assets.............................................        544.2          3.9               548.1
         Capital expenditures...............................         65.8          -                  65.8

</TABLE>

(19)     COMPREHENSIVE INCOME

         Separate statements of comprehensive income have not been presented in
         these financial statements as the only reconciling item between net
         loss as reflected in the statements of operations and comprehensive
         income would be the change in UATC's cumulative foreign currency
         translation adjustment. For the years ended December 31, 1998, 1997 and
         1996, the change in the cumulative foreign currency translation
         adjustment was $0.4 million, $0.1 million, and $0.4 million,
         respectively.

(20)     COMMITMENTS AND CONTINGENCIES

         UATC conducts a significant portion of its theatre and corporate
         operations in leased premises. These leases have noncancelable terms
         expiring at various dates after December 31, 1998. Many leases have
         renewal options. Most of the leases provide for contingent rentals
         based on the revenue results of the underlying theatre and require the
         payment of taxes, insurance, and other costs applicable to the
         property. Also, certain leases contain escalating minimum rental
         provisions that have been accounted for on a straight-line basis over
         the initial term of the leases.

                                       41

<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED


(20)     COMMITMENTS AND CONTINGENCIES, CONTINUED

         Rent expense for theatre and corporate operations is summarized as
         follows (amounts in millions):

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                              --------------------------------
                                                               1998          1997*       1996*
                                                              ------         -----       -----
         <S>                                                  <C>             <C>         <C>
         Minimum rental.....................................  $ 87.6          85.6        82.4
         Contingent rental..................................     3.0           3.8         3.5
         Effect of leases with escalating
           minimum annual rentals...........................     4.0           3.7         3.1
         Rent tax...........................................     0.6           0.5         0.6
                                                              ------         -----       -----
                                                              $ 95.2          93.6        89.6
                                                              ------         -----       -----
                                                              ------         -----       -----

</TABLE>

         *Restated

         Approximately $15.1 million, $13.4 million and $11.6 million of the
         minimum rentals reflected in the preceding table for the years ended
         December 31, 1998, 1997 and 1996, respectively, were incurred pursuant
         to the sale and leaseback transactions (see note 3).

         Approximately $7.5 milllion, $9.5 million and $9.9 million of the
         minimum rentals reflected in the preceding table for the years ended
         December 31, 1998, 1997 and 1996, respectively, were incurred pursuant
         to operating leases between UATC and UAR and Prop I. Additionally, $0.1
         million of the contingent rentals reflected in the preceding table for
         the years ended December 31, 1997 and 1996 were incurred pursuant to
         such leases.

         Future minimum lease payments under noncancelable operating leases for
         each of the next five years and thereafter are summarized as follows
         (amounts in millions):

<TABLE>
<CAPTION>
                                          Third Party      Affiliate
                                            Leases           Leases 
                                          -----------      ---------
         <S>                              <C>              <C>
         1999..........................   $  88.6            2.5
         2000..........................      85.8            2.5
         2001..........................      84.0            2.5
         2002..........................      81.5            2.5
         2003..........................      79.7            1.9
         Thereafter....................     580.7            -

</TABLE>

         Included in the future minimum lease payments table above are lease
         payments relating to theatres which UATC intends to sell or close. To
         the extent UATC is successful in disposing of these theatres, the
         future minimum lease payments will be decreased.

         It is expected that in the normal course of business, desirable leases
         that expire will be renewed or replaced by other leases.

         At December 31, 1998, UATC had entered into theatre construction and
         equipment commitments aggregating approximately $39.0 million for five
         new theatres (68 screens) for renovations and stadium seating to three
         existing theatres (36 screens) which UATC intends to open or renovate
         during 1999. Such amount relates only to projects in which UATC has
         executed a definitive lease agreement and all significant lease
         contingencies have been satisfied.

         UATC is involved in various pending and threatened legal proceedings
         involving allegations concerning contract breaches, torts, employment
         matters, environmental issues, anti-trust violations, local tax
         disputes and miscellaneous other matters. In addition, there are other
         various claims against UATC relating to certain of the leases held by
         UATC. Although it is not possible to predict the

                                       42
<PAGE>

                      UNITED ARTISTS THEATRE CIRCUIT, INC.
                                AND SUBSIDIARIES
                         NOTES TO CONSOLIDATED FINANCIAL
                              STATEMENTS, CONTINUED



(20)    COMMITMENTS AND CONTINGENCIES, CONTINUED

         outcome of these proceedings, UATC believes that such legal proceedings
         will not have a material adverse effect on UATC's financial position,
         liquidity or results of operations.

         The Americans with Disabilities Act of 1990 (the "ADA") and certain
         state statutes, among other things, require that places of public
         accommodation, including theatres (both existing and newly
         constructed), be accessible to and that assistive listening devices be
         available for use by certain patrons with disabilities. With respect to
         access to theatres, the ADA may require that certain modifications be
         made to existing theatres to make such theatres accessible to certain
         theatre patrons and employees who are disabled. The ADA requires that
         theatres be constructed in such a manner that persons with disabilities
         have full use of the theatre and its facilities and reasonable access
         to work stations. The ADA provides for a private right of action and
         reimbursement of plaintiff's attorneys' fees and expenses under certain
         circumstances. UATC has established a program to review and evaluate
         UATC's theatres and to make any changes that may be required by the
         ADA. In 1995, UATC settled the lawsuit styled CONNIE ARNOLD ET AL. VS.
         UATC, filed in 1991. This lawsuit involved allegations that certain of
         UATC's theatres lacked accessibility to persons with mobility
         disabilities in violation of the ADA. In the settlement agreement,
         UATC, the plaintiffs and the Department of Justice established
         standards of modifications that must be made to UATC's theatres
         throughout the United States to make them more accessible to persons
         with disabilities. UATC believes that the cost of complying with the
         ADA and the settlement agreement in the CONNIE ARNOLD case will not
         have a material adverse effect on UATC's financial position, liquidity
         or results of operations.

                                       43

<PAGE>

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant

Information regarding members of UATC's and the Parent's Board of Directors as
of March 19, 1999 is set forth below. Directors will serve until the next annual
meeting and until his successor is duly elected and qualified.

<TABLE>
<CAPTION>
Name                      Age        Business Experience During Past Five Years           Other Public Directorships
----                      ---        ------------------------------------------           --------------------------
<S>                       <C>        <C>                                                  <C>
Kurt C. Hall................39       President and Chief Executive Officer since          Mr. Hall is a director of Showscan
                                     March 6, 1998. Chief Operating Officer since         Entertainment, Inc. 
                                     February 24, 1997 and Executive Vice President 
                                     and Director since May 12, 1992. Mr. Hall was 
                                     Chief Financial Officer from May 12, 1992 to 
                                     March 5, 1998.

John W. Boyle...............70       Named Chairman of the Board on March 6, 1998.        Mr. Boyle is a director of
                                     Director since March 5, 1997. Mr. Boyle was          Supermarkets General Holdings Corp.
                                     Chief Financial Officer of Eckerd Corporation
                                     from 1983 to 1995 and Vice Chairman from
                                     1992 to 1995.

James J. Burke, Jr..........47       Director since May 12, 1992. Director of Merrill     Mr. Burke is a director of AnnTaylor
                                     Lynch Capital Partners, Inc. ("MLCP"), since 1985    Stores Corporation, Borg-Warner
                                     and Partner and Director of Stonington Partners,     Security Corporation, Education
                                     Inc. ("SP"), since July 1993 and Partner and         Management Corporation, Pathmark
                                     Director of Stonington Partners, Inc. II ("SPII")    Stores, Inc. and Supermarkets General
                                     since  1994. Prior to July 1994, Mr. Burke was       Holdings Corp.
                                     President and Chief Executive Officer of
                                     MLCP from 1987 to 1994, a Managing Director
                                     of the Investment Banking Division of
                                     Merrill Lynch & Co. ("ML&Co.") from 1985 to
                                     1994 and a First Vice President of Merrill
                                     Lynch Pierce Fenner and Smith, Inc. from
                                     1988 to 1994.

Albert J. Fitzgibbons, III..53       Director since May 12, 1992. Director of MLCP        Mr. Fitzgibbons is a director of
                                     since 1988 and a Partner and a Director of SP        Borg-Warner Security Corporation,
                                     since July 1993 and a Partner and a Director of      Dictaphone Corporation and Merisel,
                                     SPII since 1994. Prior to July 1994, Mr.             Inc.
                                     Fitzgibbons was a Partner of MLCP from 1993 to
                                     1994 and an Executive Vice President of MLCP from
                                     1988 to 1993. Mr. Fitzgibbons was also a Managing
                                     Director of the Investment Banking Division of
                                     ML&Co. from 1978 to July 1994.


Robert F. End...............43       Director since February 17, 1993. Director of        Mr. End is a director of Goss Graphic
                                     MLCP since 1993 and a Partner and a Director         Systems, Inc. and Packard BioScience
                                     of SP since July 1993 and a Partner and a            Company.
                                     Director of SPII since 1994. Prior to July 1994,  
                                     Mr. End was a Partner of MLCP from 1993 to 1994  
                                     and a Vice President of MLCP from 1989 to 1993.  
                                     Mr. End was also a Managing Director of the 
                                     Investment Banking Division of ML&Co. from 1993 
                                     to July 1994.

Scott M. Shaw...............36       Director since February 17, 1993. Partner and        Mr. Shaw is a director of Dictaphone
                                     Director of SP since February 1999. Prior to         Corporation and Goss Graphic Systems, 
                                     becoming a Partner and Director, Mr. Shaw was        Inc.
                                     Principal of SP since July 1993. Mr. Shaw has 
                                     also been a Partner and Director of SPII since 
                                     February 1999. Prior to July 1994, Mr. Shaw was 
                                     a Vice President of MLCP from January 1994,
                                     an Associate of MLCP from 1991 to 1994 and
                                     an Analyst of MLCP from 1986 to 1989. Mr.
                                     Shaw was also a Vice President of the
                                     Investment Banking Division of ML&Co. from
                                     January to July 1994 and an Associate of
                                     the Investment Banking Division of ML&Co.
                                     from 1991 to 1994 and an Analyst of the
                                     Investment Banking Division of ML&Co. from
                                     1986 to 1989.

</TABLE>

                                       44
<PAGE>

Information regarding executive officers of UATC who are not directors of 
UATC as of March 19, 1999 is set forth below. Executive officers will hold 
office for such term as may be prescribed by the Board of Directors and until 
such person's successor is chosen and qualified or until such person's death, 
resignation, or removal.

<TABLE>
<CAPTION>
Name                   Age         Business Experience During Past Five Years
----                   ---         ------------------------------------------
<S>                    <C>         <C>
Neil Pinsker............43         Executive Vice President. Mr. Pinsker was promoted to Executive Vice President of
                                   UATC in charge of theatre operations in January 1999. Mr. Pinsker was most recently
                                   Vice President of the Western region operations, and has previously directed the
                                   east and central regional operations of UATC. Joining UATC in May of 1970, as a
                                   third generation theatre operator, Mr. Pinsker has four decades of theatre
                                   experience.

Gene Hardy..............48         Executive Vice President and General Counsel. Mr. Hardy was promoted to Executive
                                   Vice President of UATC in charge of legal affairs and general counsel in September
                                   1994. Mr. Hardy was previously the Senior Vice President and general counsel of UATC.

Michael Pade............49         Executive Vice President. Mr. Pade became Executive Vice President of UATC in
                                   February 1997 in charge of film operations. Mr. Pade joined UATC in October 1994 as
                                   a Senior Vice President of film operations. Prior to joining UATC, Mr. Pade worked
                                   for Mann Theatres as the Senior Vice President in charge of domestic film booking.

Jim Ruybal..............53         Executive Vice President. Mr. Ruybal became Executive Vice President of UATC in
                                   1992. Mr. Ruybal's duties include supervision of UATC's Satellite Theatre Network-TM-.

Bruce M. Taffet.........51         Executive Vice President. Mr. Taffet was promoted to Executive Vice President in
                                   January 1995 and is responsible for purchasing, marketing and national concession
                                   operations of UATC. Prior to February 1995, Mr. Taffet was the Senior Vice
                                   President in charge of national concession operations of UATC.

Trent J. Carman.........38         Senior Vice President. Chief Financial Officer since March 6, 1998. Mr. Carman was
                                   previously the Senior Vice President and Treasurer of UATC from September 1997 to
                                   March 6, 1998 and was Vice President of Finance from June 1992 to September 1997.
</TABLE>

There are no family relationships between any of the directors and executive 
officers named above. During the past five years, none of the directors and 
executive officers named above were involved in any legal proceedings that 
would be material to an evaluation of his ability or integrity.

ITEM 11. EXECUTIVE COMPENSATION

(a)      COMPENSATION

The following table sets forth all compensation paid to the president and 
chief executive officer and the four next most highly paid executive officers 
of UATC for the years ended December 31, 1998, 1997 and 1996.

                                       45

<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                    Long-Term
                                                                   Compensation
                                                                      Awards/
                                        Annual Compensation          Securities         Other
                                   ----------------------------      Underlying         Annual          All Other
     Name and                                 Salary    Bonus      Stock Options     Compensation     Compensation
Principal Positions                Year       ($) (1)   ($) (2)          #              ($) (3)          ($) (4)
-------------------                ----       -------   -------     -------------     ------------     ------------
<S>                                 <C>       <C>       <C>         <C>               <C>              <C>
Kurt C. Hall                        1998      304,866       --         50,000            3,960              4,800
  President and                     1997      283,103       --         80,000            2,877              4,684
  Chief Executive Officer           1996      220,514       --             --              920             22,182

Michael Pade                        1998      258,998    7,500         20,000            3,795                 --
Executive Vice President            1997      253,846       --         12,000            6,083             41,079
                                    1996      220,080       --             --            5,426                 --

Ralph ("Gene") Hardy                1998      195,154    5,640         12,000               --              4,800
Executive Vice President            1997      193,361       --         12,000               --              4,800
                                    1996      188,136       --             --            2,222             18,811

Jim Ruybal                          1998      186,314    1,863         10,000              989              4,800
Executive Vice President            1997      193,481       --         12,000            1,073              4,800
                                    1996      186,300       --             --               --              18,630

Dennis R. Daniels (5)               1998      207,980    5,925         12,000            3,229              4,800
Executive Vice President            1997      205,130       --         12,000            2,287              4,800
                                    1996      195,473       --             --            2,500             14,723


Thomas C. Elliot (6)                1998      218,462                      --              395                 --
Executive Vice President            1997      215,029       --             --            4,603              4,800
                                    1996      204,244       --         15,300            4,845             20,765

</TABLE>

(1) Represents annual salary, including compensation deferred by the Named
    Executive Officer pursuant to the UATC 401(k) Savings Plan and the UATC
    Supplemental 401(k) Savings Plan (prior to January 1, 1997).

(2) The executive officers were entitled to receive bonuses depending on the
    Parent's achievement of certain performance criteria. Bonus amounts are
    reflected in the year paid but relate to the performance of the previous
    year.

(3) Other annual compensation consists of reimbursement of membership dues.

(4) Consists primarily of matching contributions to employee benefit plans
    except for the amount attributable to Mr. Pade which was related to a loan
    which was forgiven.

(5) Effective January 1999, Mr. Daniels no longer worked for UATC.

(6) Mr. Elliot resigned from UATC in 1998. Amounts received by Mr. Elliot in
    1998 are in connection with his severance arrangements with UATC.

                                       46
<PAGE>

(b)      STOCK OPTION GRANTS

The following table sets forth all of the Parent's stock options granted during
1998 to the president and chief executive officer and the four next most highly
paid executive officers of UATC.

<TABLE>
<CAPTION>
                                                                                                  Potential Realizable  
                                                                                                    Value at Assumed    
                                Number of          % of Total                                     Annual Rates of Stock 
                               Securities            Options                                     Price Appreciation for 
                               Underlying          Granted to       Exercise                           Option Term      
                                 Options          Employees in      Price Per     Expiration     -----------------------
       Name                      Granted              1998            Share          Date           5%            10%
       ----                      -------              ----            -----          ----        ---------     ---------
<S>                            <C>                <C>               <C>           <C>            <C>           <C>
Kurt C. Hall                      50,000              18.1%          $22.50           2008        $707,506     1,792,960
Michael Pade                      20,000               7.2%           22.50           2008         283,003       717,184
Gene Hardy                        12,000               4.3%           22.50           2008         169,802       430,310
Jim Ruybal                        10,000               3.6%           22.50           2008         141,501       358,592
Dennis R. Daniels (1)             12,000               4.3%           22.50           2008         169,802       430,310

</TABLE>

(1) Effective January 1999, Mr. Daniels no longer worked for UATC.

(c)      YEAR-END STOCK OPTION TABLE

The following table sets forth all of the Parent's stock options held by the 
president and chief executive officer and the four next most highly paid 
executive officers of UATC as of December 31, 1998.

<TABLE>
<CAPTION>
                                                       Number of
                                                   Share Underlying                        Value of
                                                Unexercised Options at             In-the-Money Options at
                                                at December 31, 1998                 December 31, 1998 (1)
                            Option          --------------------------------      ------------------------------
      Name                   Type           Exercisable        Unexercisable      Exercisable      Unexercisable
      ----                  ------          -----------        -------------      -----------      -------------
<S>                      <C>                <C>                <C>                <C>              <C>
Kurt C. Hall             Incentive            30,250                  --            $378,125                --
                         Performance          75,000              82,500             525,000          $658,750
                         Premium                  --              13,750                  --                --

Michael Pade             Incentive             7,750                  --               90,752               --
                         Performance          17,500              21,250               78,750          126,292
                         Premium                  --               3,375                  --                --

Gene Hardy               Incentive             7,750                  --               96,875               --
                         Performance          13,500              17,250               78,750          131,625
                         Premium                  --               3,375                   --               --

Jim Ruybal               Incentive            13,850                  --              173,125               --
                         Performance          12,500               22,000              78,750          203,500
                         Premium                  --                6,250                  --               --

Dennis R. Daniels (2)    Incentive            10,000                   --             125,000               --
                         Performance          13,500               19,625              78,750          161,312
                         Premium                  --                6,063                  --               --

</TABLE>

(1)  As the Common Stock of the Parent is not publicly held, UATC has valued the
     unexercised stock options using the value attributable to the stock options
     granted closest to, but not after, December 31, 1998 ($22.50).

(2)  Effective January 1999, Mr. Daniels no longer worked for UATC.

                                       47

<PAGE>

(d)      LONG-TERM INCENTIVE AWARDS

No long-term incentive awards were granted to executive officers of UATC 
during 1998.

(e)      COMPENSATION OF DIRECTORS

Mr. Boyle received 25,000 performance options ($22.50 strike price) and 
$120,000 for his services as a director during 1998 and 10,000 performance 
options ($12.00 strike price) and $20,000 for his services as a director 
during 1997. No other directors of the Parent or UATC received compensation 
for their services as directors or committee members.

(f)      EMPLOYEE BENEFITS PLAN

UATC established the United Artists Theatre Circuit, Inc. 401(k) Savings Plan 
(the "Savings Plan") which allows electing employees to contribute up to 
10.0% of their compensation, subject to certain IRS limitations. Depending on 
the amount of each employees level of contribution, the Savings Plan 
currently matches up to 4.0% of their compensation.

Effective January 1, 1993, UATC established the United Artists Theatre 
Circuit, Inc. Supplemental 401(k) Savings Plan (the "Supplemental Plan") for 
certain employees who are highly compensated as defined by the IRS and whose 
elective contributions to the Savings Plan exceed the IRS limitations. 
Through December 31, 1996, such employees were allowed to contribute to the 
Supplemental Plan, provided that the aggregate contributions to the Savings 
Plan and Supplemental Plan did not exceed 10.0% of their compensation. 
Effective January 1, 1997, UATC suspended the Supplemental Plan.

Matching contributions to the Savings Plan and the Supplemental Plan for the 
president and chief executive officer and the four other highest paid 
executives have been included in the summary compensation table.

During 1998, UATC's board established a bonus plan for all non-commissioned 
corporate employees that is based upon UATC achieving its operating budgets 
and other financial and operating goals and the employee achieving certain 
specified goals.

(g)      EMPLOYMENT AGREEMENTS

UATC entered into employment agreements (each an "Employment Agreement" and 
collectively, the "Employment Agreements") with each of Kurt C. Hall, 
Edward C. Cooper, Gene Hardy, Robert A. McCormick, Michael L. Pade, Jim Ruybal, 
Bruce M. Taffet, Trent J. Carman, Charles Fogel and Darrell C. Taylor. The 
Employment Agreements with Messrs. Hardy, Ruybal and Taffet expire on 
May 12, 2000.

Under the Employment Agreements, the employee receives a base salary (as 
defined in the Employment Agreements) and certain customary benefits, 
including health and disability insurance, participation in employee benefit 
plans and certain perquisites. Each Employment Agreement provides that the 
employee will be eligible to receive annual bonuses during the term of 
employment, as determined by the Board of Directors.

In the event that Mr. Hall or Mr. Pade is terminated without cause, such 
individual will be entitled to his base salary for two years and annual 
bonuses for two years, in an amount based upon the average of the annual 
bonuses awarded to him over the preceding two fiscal years.

In the event that Mr. McCormick, Mr. Cooper, Mr. Carman, Mr. Fogel or Mr. 
Taylor is terminated without cause, such individual will be entitled to his 
base salary for the remainder of the term of his employment agreement 
following his termination but not less than 12 months and annual bonuses for 
the remainder of the term of his employment agreement but not less than 12 
months, in an amount based upon the average bonuses paid to him over the 
preceding two fiscal years.

                                       48

<PAGE>

In the event that Mr. Ruybal, Mr. Hardy or Mr. Taffet is terminated without 
cause, such individual will be entitled to his base salary for the lesser of 
two years or the remainder of the term of his employment agreement following 
termination, but not less than 12 months and annual bonuses for the lesser of 
two years or the remainder of the term of his employment agreement following 
termination, but not less than 12 months, in an amount based upon the average 
bonuses paid to him over the preceding two fiscal years.

It is expected that the Employment Agreements will be amended and/or extended 
prior to their expiration dates. The terms of the Employment Agreements, as 
amended or extended, may be different from those currently in place.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Parent owns 100% of the issued and outstanding shares of UATC's capital 
stock. The Parent is a Delaware corporation whose only business interest is 
its ownership of UATC and UAR. The Parent's principal executive offices are 
located at 9110 E. Nichols Avenue, Englewood, Colorado 80112.

The Parent has three classes of capital stock outstanding: the United Artists 
Theatre Company Class A Shares, the United Artists Theatre Company Class B 
Shares, and the United Artists Theatre Company Class C Shares (collectively 
the "United Artists Shares"). The United Artists Shares are held of record by 
416 holders. The following tables set forth certain information concerning 
the beneficial ownership of United Artists Shares known to the Parent to own 
beneficially in excess of 5% of the outstanding United Artists Shares and the 
president and chief executive officer and the four other highest paid 
executive officers of UATC, for each director and all executive officers and 
directors of UATC as a group as of March 19, 1999. Except as otherwise 
indicated, all of the persons listed below have (i) sole voting power and 
investment power with respect to their United Artists Shares, except to the 
extent that authority is shared by spouses under applicable law and (ii) 
record and beneficial ownership with respect to their United Artists Shares.

                                       49

<PAGE>

                    UNITED ARTISTS THEATRE COMPANY COMMON STOCK
<TABLE>
<CAPTION>

NAME AND ADDRESS                       BENEFICIAL     PERCENTAGE OF      BENEFICIAL     PERCENTAGE OF    
INTEREST                                INTEREST      UNITED ARTISTS      INTEREST      UNITED ARTISTS   
BENEFICIAL OWNER                     CLASS A SHARES   CLASS A SHARES   CLASS B SHARES   CLASS B SHARES   
----------------                     --------------   --------------   --------------   --------------   
<S>                                  <C>              <C>              <C>              <C>              
MLCP(1)(5)(7)......................    8,409,761          72.8%                0                -        
Merrill Lynch & Co, Inc.(2)(5).....    2,082,205          18.0%                0                -        
Institutional Investors(8).........    1,059,417           9.2%                0                -        
Kurt C. Hall(3)(6).................            0             -           116,750             31.9%       
Michael Pade(3)(6).................            0             -            25,825              7.1%       
Gene Hardy(3)(6)...................            0             -            23,850              6.5%       
Jim Ruybal(3)(6)...................            0             -            33,350              9.1%       
James J. Burke, Jr.(4)(7)..........            0             -                0                 -        
Albert J. Fitzgibbons, III(4)(7)...            0             -                0                 -        
Robert F. End(4)(7)................            0             -                0                 -        
Scott Shaw(4)......................            0             -                0                 -        
John W. Boyle(9)...................            0             -           18,750               5.1%       
Directors and Executive Officers 
  as a group (12 persons)(6).......            0             -          265,575              72.6%       

<CAPTION>
NAME AND ADDRESS                       BENEFICIAL     PERCENTAGE OF    PERCENTAGE OF   
INTEREST                                INTEREST      UNITED ARTISTS   UNITED ARTISTS  
BENEFICIAL OWNER                     CLASS C SHARES   CLASS C SHARES       SHARES      
----------------                     --------------   --------------   --------------  
<S>                                  <C>              <C>              <C>             
MLCP(1)(5)(7)......................          0               -            70.5%        
Merrill Lynch & Co, Inc.(2)(5).....          0               -            17.5%        
Institutional Investors(8).........          0               -             8.9%        
Kurt C. Hall(3)(6).................          0               -             1.0%        
Michael Pade(3)(6).................      1,622            15.4%            0.2%        
Gene Hardy(3)(6)...................          0               -             0.2%        
Jim Ruybal(3)(6)...................          0               -             0.3%        
James J. Burke, Jr.(4)(7)..........          0               -               -         
Albert J. Fitzgibbons, III(4)(7)...          0               -               -         
Robert F. End(4)(7)................          0               -               -         
Scott Shaw(4)......................          0               -               -         
John W. Boyle(9)...................          0               -             0.2%        
Directors and Executive Officers                                                       
  as a group (12 persons)(6).......      1,622            15.4%            2.2%        

</TABLE>

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

(1)  United Artists Theatre Company Class A Shares beneficially owned by MLCP 
     are held as follows: 5,049,958.2 by Merrill Lynch Capital Appreciation 
     Partnership No. B-XIX, L.P. ("MLCAP B-XIX"); 46,396.0 by Merrill Lynch 
     Capital Appreciation Partnership No. B-XX, L.P. ("MLCAP B-XX"); 
     3,229,723.5 by Roman Nineteen Offshore Fund N..V. ("Roman Holdings") and 
     83,683.3 by MLCP Associates L.P. No. 11. ("MLCP 11"). MLCP is the 
     indirect managing general partner of MLCAP B-XIX and MLCAP B-XX and the 
     general partner of MLCP 11. Affiliates of MLCP are the sole stockholders 
     of Roman Holdings. The address of MLCP and each of the aforementioned 
     record holders is South Tower, World Financial Center, New York, New 
     York 10080.

(2)  United Artists Theatre Company Class A Shares beneficially owned by 
     Merrill Lynch & Co., Inc. are owned of record as follows: 1,932,204.7 by 
     ML IBK Positions, Inc.; 150,000.0 by Merrill Lynch KECALP L.P. 1991. The 
     address for ML IBK Positions, Inc. is North Tower, World Financial 
     Center, New York, New York 10281. The address of Merrill Lynch KECALP 
     L.P. 1991 is South Tower, World Financial Center, New York, New York 
     10080.

(3)  The address for each of Messrs. Hall, Pade, Hardy, and Ruybal is 9110 
     East Nichols Avenue, Englewood, Colorado 80112.

(4)  The address for each of Messrs. Burke, Fitzgibbons, End and Shaw is c/o 
     Stonington Partners, Inc., 767 Fifth Avenue, New York, New York  10153.

(5)  Entities affiliated with Merrill Lynch & Co., Inc. own approximately 
     10,491,966 of the outstanding United Artists Theatre Company Shares, 
     which represents approximately 88.0% of the outstanding United Artists 
     Theatre Company Shares.

(6)  Includes vested incentive options and Class C shares that are 
     exercisable within 60 days.

(7)  Each of Messrs. Burke, Fitzgibbons and End are members of the Board of 
     Directors of MLCP, but each disclaims beneficial ownership of the United 
     Artists Theatre Company Shares.

(8)  To the knowledge of United Artists, none of the Institutional Investors 
     beneficially owns 5% or more of the United Artists Theatre Company Class 
     A Shares.

(9)  The address for Mr. Boyle is 7 North Pine Circle, Belleair, Florida 34616.

                                       50

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

UATC leases four theatres from UAR and 25 theatres from Prop I. The common 
stock of UAR is owned 100% by the Parent.

The lease agreement between UATC and UAR provides for an annual base rental 
of approximately $2.5 million, as well as taxes, insurance, maintenance and 
other related charges. Effective November 1, 1998, the lease agreement 
between UATC and Prop I provides for an annual base rental of $1, as well as 
taxes, insurance, maintenance and other related charges. Prior to November 1, 
1998, the lease agreement between UATC and Prop I provided for an annual base 
rental of approximately $5.9 million. In addition to the annual base rental 
amounts, the leases provide for additional rentals based upon a percentage of 
the leased theatres' revenue. The leases between UATC and UAR and Prop I 
expire on October 4, 2003 and October 31, 2003, respectively, and provide for 
options to extend the leases at UATC's option for up to ten years.

In order to fund the cost of additions and/or renovations to the theatres 
leased by UATC from UAR or Prop I, UATC has periodically made advances to 
UAR. In addition, a portion of the New Bank Credit Facility was advanced to 
UAR for the repayment of the Prop I mortgage notes which matured on November 
1, 1998. Interest on the advances accrues at the prime rate and amounted to 
$2.0 million, $1.4 million and $1.1 million for the years ended December 31, 
1998, 1997 and 1996, respectively.

During 1998, UATC exchanged on fee-owned theatre property with Prop I in 
return for two fee-owned theatre properties and a $1.1 million note. During 
1997, UATC exchanged two fee-owned theatre properties with Prop I in return 
for a fee-owned theatre property and a $2.7 million note. During 1996, UATC 
exchanged a fee-owned theatre with Prop I in return for two fee-owned theatre 
properties and a $1.5 million note. The note bears interest at the prime rate 
plus 1 1/2% and are due upon demand.

Pursuant to a management agreement entered into between UATC and UAR on May 
12, 1992, UATC charges UAR a management fee. This management fee represents 
the cost of managing and accounting for UAR's properties. For each of the 
years ended December 31, 1998, 1997 and 1996, such management fees were 
approximately $0.5 million, $0.6 million and $0.6 million, respectively.

Entities affiliated with MLCP own approximately 88.0% of the United Artists 
Shares. Through a management agreement with MLCP, Stonington Partners, Inc. 
manages the portfolio of companies owned by MLCP, including the Parent.

                                       51

<PAGE>

<TABLE>
<CAPTION>
                                                                                Page Number
                                                                                -----------
<S>                                                                            <C>
                                  PART IV

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

(a)  1.  Financial Statements Included in Part II of this Report:

     United Artists Theatre Circuit, Inc. and Subsidiaries

         Report of Independent Public Accountants                                    26

         Consolidated Balance Sheets                                                 27
         December 31, 1998 and 1997

         Consolidated Statements of Operations                                       28
         Years Ended December 31, 1998, 1997 and 1996

         Consolidated Statements of Stockholder's Equity (Deficit)                   29
         Years Ended December 31, 1998, 1997 and 1996

         Consolidated Statements of Cash Flow                                        30
         Years Ended December 31, 1998, 1997 and 1996

         Notes to Consolidated Financial Statements                                  31

     2.  Financial Statements Schedules

         All financial statement schedules are omitted as they are not required
         or are not applicable, or the required information is included in the
         Consolidated Financial Statements or notes thereto.

     3.  Exhibits

         The following exhibits are filed herewith or incorporated by 
         reference herein (according to the number assigned to them in Item 601
         of Regulation S-K) as noted:
</TABLE>

<TABLE>
<CAPTION>
<S>              <C>                                                            <C>
         3.1     Restated Articles of Incorporation of United Artists Theatre 
                 Circuit, Inc. (1)

         3.2     By-laws of United Artists Theatre Circuit, Inc. (1)

         10.1    Credit Agreement, dated as of April 21, 1998, among United 
                 Artists Theatre Company and Bank of America National Trust 
                 and Savings Association, BankBoston, N.A., NationsBank 
                 Texas, N.A. and Merrill Lynch Capital Corporation and Morgan 
                 Stanley Senior Funding, Inc. and the leaders party thereto. 
                 (5)

         10.2    Trust Indenture and Security Agreement dated as of December 
                 13, 1995, between Wilmington Trust Company, William J. Wade 
                 and Fleet National Bank of Connecticut, and Alan B. Coffey. 
                 (3)

         10.3    Pass Through Certificates, Series 1995-A Registration Rights 
                 Agreement, dated as of December 13, 1995 among United 
                 Artists Theatre Circuit, Inc., Morgan Stanley & Co. 
                 Incorporated and Merrill Lynch, Pierce, Fenner & Smith 
                 Incorporated. (3)

         10.4    Participation Agreement, dated as of December 13, 1995, 
                 among United Artists Theatre Circuit, Inc., Wilmington Trust 
                 Company, William J. Wade, Theatre Investors, Inc., Northway 
                 Mall Associates, LLC, Wilmington Trust Company, William J. 
                 Wade, Fleet National 

</TABLE>

                                       52

<PAGE>

<TABLE>
<CAPTION>
                                                                                Page Number
                                                                                -----------
<S>              <C>                                                            <C>

                 Bank of Connecticut, Alan B. Coffey and Fleet National Bank 
                 of Connecticut. (3)

         10.5    Pass Through Trust Agreement, dated as of December 13, 1995, 
                 between United Artists Theatre Circuit, Inc. and Fleet 
                 National Bank of Connecticut. (3)

         10.6    Lease Agreement, dated as of December 13, 1995, between 
                 Wilmington Trust Company and William J. Wade and United 
                 Artists Theatre Circuit, Inc. (3)

         10.7    Lease Agreement, dated as of October 1, 1988, between United 
                 Artists Properties I Corporation and United Artists Theatre 
                 Circuit, Inc. (1)

         10.8    United Artists Theatre Company Stock Incentive Plan. (5)

         10.9    Stockholders' Agreement, dated as of May 12, 1992, by and 
                 among United Artists Theatre Company, Merrill Lynch Capital 
                 Appreciation Partnership No. B-XIX, L.P., Roman Nineteen 
                 Offshore Fund B.V., ML IBK Positions, Inc., MLCP Associates 
                 L.P. No. II, Equitable Capital Private Income and Equity 
                 Partnership II, L.P. and Equitable Deal Flow Fund, L.P. and 
                 the holders of Options or Restricted Stock awards under the 
                 Management Stock Option Plan. (1)

         10.10   Amendment No. 1, dated as of July 15, 1992, to the 
                 Stockholders' Agreement, dated as of May 12, 1992, by and 
                 among United Artists Theatre Company, Merrill Lynch Capital 
                 Appreciation Partnership No. B-XIX, L.P., Roman Nineteen 
                 Offshore Fund B.V., ML IBK Positions, Inc., MLCP Associates 
                 L.P. No. II, Equitable Capital Private Income and Equity 
                 Partnership II, L.P. and Equitable Deal Flow Fund, L.P. and 
                 the holders of Options or Restricted Stock awards under the 
                 Management Stock Option Plan. (1)

         10.11   Stock Subscription Agreement, dated as of May 12, 1992, by 
                 and among United Artists Theatre Company, Merrill Lynch 
                 Capital Appreciation Partnership No. B-XIX, L.P., Roman 
                 Nineteen Offshore Fund B.V., ML IBK Positions, Inc., MLCP 
                 Associates L.P. No. II, Equitable Capital Private Income and 
                 Equity Partnership II, L.P. and Equitable Deal Flow Fund, 
                 L.P. (1)

         10.12   Non-Competition Agreement, dated as of May 12, 1992, by and 
                 among Tele-Communications, Inc., United Artists Theatre 
                 Circuit, Inc. and United Artists Theatre Company. (1)

         10.13   Trademark Agreement as of May 12, 1992 by United Artists 
                 Entertainment Company, United Artists Holdings, Inc., United 
                 Artists Cable Holdings, Inc., United Artists Theatre Holding 
                 Company, on the one hand and United Artists Theatre Circuit, 
                 Inc., United Artists Realty Company, UAB, Inc., and UAB II, 
                 Inc., on the other hand. (1)

         10.14   United Artists Theatre Circuit 401(k) Savings Plan. (1)

         10.15   United Artists Theatre Circuit Supplemental 401(k) Savings 
                 Plan. (2)

         10.16   Tax Sharing Agreement, dated as of May 12, 1992, between 
                 United Artists Theatre Company and United Artists Theatre  
                 Circuit, Inc. (1)

</TABLE>

                                       53

<PAGE>

<TABLE>
<CAPTION>
                                                                                Page Number
                                                                                -----------
<S>              <C>                                                            <C>
         10.17   Form of Employment Agreement, dated as of May 12, 1992, 
                 between UATC and Kurt C. Hall. (1)

         10.18   Amendment to the United Artists Theatre Circuit, Inc. 401(K) 
                 savings Plan dated as of January 1, 1997. (4)

         10.19   Employment Agreement Extension Letter dated as of May 12, 
                 1998, between United Artists Theatre Circuit, Inc. and Kurt 
                 C. Hall. (4)

         21.1    Subsidiaries of United Artists Theatre Circuit, Inc. (4)

         27.1    Financial Data Schedule.

</TABLE>

(1)  Incorporated herein by reference from Form S-1 dated October 5, 1992.

(2)  Incorporated herein by reference from Form 10-K for the year ended 
     December 31, 1993.

(3)  Incorporated herein by reference from Form S-2 dated January 31, 1996.

(4)  Incorporated herein by reference to Form 10-K for the year ended 
     December 31, 1996.

(5)  Incorporated herein by reference to Form S-4 for United Artists Theatre 
     Company, dated June 16, 1998.

                                       54

<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.

                                       UNITED ARTISTS THEATRE CIRCUIT, INC.
                                                 (Registrant)


Director, President and Chief          /S/ Kurt C. Hall
Executive Officer                      -------------------------
Dated: March 26, 1999                  Kurt C. Hall


Chief Financial Officer                /S/ Trent J. Carman
Dated: March 26, 1999                  -------------------------
                                       Trent J. Carman

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated.


Chairman of the Board and Director          /S/ John W. Boyle
Dated: March 26, 1999                       ------------------------------
                                            John W. Boyle


Director                                    /S/ James J. Burke, Jr.
Dated: March 26, 1999                       ------------------------------
                                            James J. Burke, Jr.


Director                                    /S/ Albert J. Fitzgibbons, III 
Dated: March 26, 1999                       ------------------------------
                                            Albert J. Fitzgibbons, III


Director                                    /S/ Robert F. End
Dated: March 26, 1999                       ------------------------------
                                            Robert F. End


Director                                    /S/ Scott M. Shaw
Dated: March 26, 1999                       ------------------------------
                                            Scott M. Shaw

                                       55