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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                           ---------------------------
                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
              FOR THE TRANSITION PERIOD FROM _________ TO _________

                         Commission file number 0-21309
                         ------------------------------
                      CENCOM CABLE INCOME PARTNERS II, L.P.
             (Exact Name of Registrant as Specified in its Charter)

           Delaware                                      43-1456575
(State or Other Jurisdiction of                          (I.R.S. Employer
Incorporation or Organization)                           Identification No.)

12444 Powerscourt Drive Suite 400
St. Louis, Missouri                                      63131
(Address of Principal Executive Offices)                 (Zip Code)

       Registrant's telephone number, including area code: (314) 965-0555
                         ------------------------------
        Securities registered pursuant to Section 12(b) of the Act: None
                         ------------------------------
           Securities registered pursuant to Section 12(g) of the Act:
             Units of Limited Partnership Interests $1,000 per unit
                                (Title of Class)

           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 (or for such shorter period that the
Registrant was required to file such reports), 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 the Form 10-K or any
amendment to this Form 10-K. [|X|]

                       DOCUMENTS INCORPORATED BY REFERENCE

  The following documents are incorporated into this Report by reference: None



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<PAGE>   2
                      CENCOM CABLE INCOME PARTNERS II, L.P.
                          1998 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                               PART I
<S>      <C>                                                                                                            <C>
Item 1.  Business........................................................................................................3
Item 2.  Properties.....................................................................................................12
Item 3.  Legal Proceedings..............................................................................................13
Item 4.  Submission of Matters to a Vote of Security Holders............................................................13


                                                               PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters..........................................14
Item 6.  Selected Financial Data........................................................................................15
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations..........................16
Item 8.  Financial Statements and Supplementary Data....................................................................20
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........................20


                                                              PART III

Item 10.  Directors and Executive Officers of the Registrant............................................................21
Item 11.  Executive Compensation........................................................................................21
Item 12.  Security Ownership of Certain Beneficial Owners and Management................................................22
Item 13.  Certain Relationships and Related Transactions................................................................22


                                                               PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................................22
</TABLE>







                                      -2-

<PAGE>   3
                                     PART I



ITEM 1.  BUSINESS

GENERAL

Cencom Cable Income Partners II, L.P. (the "Partnership" or the "Registrant")
was formed as a Delaware limited partnership in 1987 pursuant to the terms of a
partnership agreement (the "Partnership Agreement"), to acquire, develop,
operate and ultimately sell cable television systems (the "Partnership Systems"
or the "Systems"). Cencom Properties II, Inc., a Delaware corporation, is the
general partner of the Registrant (the "General Partner") and acts as the
management company (the "Management Company") for the purpose of managing the
cable television systems. The principal executive offices of the General Partner
and the Partnership are located at 12444 Powerscourt Drive, Suite 400, St.
Louis, Missouri 63131 and their telephone number is (314) 965-0555.

As of December 31, 1998, the Partnership owned and operated cable television
systems in communities located in northeast Missouri and southwest Texas, and
served approximately 13,600 basic subscribers who subscribed to approximately
6,600 premium service subscriptions.

The Partnership also has invested in limited partnership interests of Cencom
Partners, L.P. ("CPLP"). The Partnership is allocated 84.03% of the net income
or losses of CPLP, based on its ownership interests. The Partnership accounts
for its investment in CPLP using the equity method.


PARTIAL LIQUIDATION OF ASSETS

The Partnership's term expired on December 31, 1995 and since that time, both
the Partnership and CPLP have been in the process of dissolution and winding up
through the sale of their respective assets. In March and April of 1997, the
Partnership sold certain of its cable television systems for an aggregate sales
price of approximately $66,000,000, and CPLP sold certain of its cable
television systems for an aggregate sales price of $52,500,000.

Each of the Partnership and CPLP have executed an Asset Purchase Agreement
providing for the sale of their respective Texas Systems, and it is anticipated
that these sales will close during the second quarter of 1999. The purchase
price for these systems will be $20,800,000 for the Partnership and $11,200,000
for CPLP.

CPLP will use the net proceeds from the sale of its Texas systems first to
satisfy the liabilities and expenses of CPLP with the remaining funds
distributed to its partners, of which 84.03% will be distributed to the
Partnership. The Partnership will use the net proceeds from the sale of its
Texas systems first to pay off outstanding indebtedness, and then to satisfy
other Partnership liabilities and expenses. The Partnership's remaining funds
received pursuant to the distribution from CPLP or as proceeds from the
Partnership's sale of its Texas systems, will be distributed to the partners in
accordance with the liquidation provisions of the Partnership Agreement.
Following these sales, the Partnership's only remaining cable assets will be the
Northeast Missouri systems and CPLP will have disposed of all of its cable
assets.

The Partnership entered into a non-binding letter of intent with an unaffiliated
third-party for the sale of its systems in northeast Missouri. Although
negotiations with respect to a sale agreement are on-going, there is no
assurance that a definitive sale agreement will be executed or that the sale
will be completed. If the General Partner does not execute a definitive
agreement to sell the Northeast Missouri systems as a result of this letter of
intent, it intends to continue to market and sell the systems.

It is also the General Partner's intention to repay the balance of the
Partnership's outstanding obligations, terminate the Partnership and distribute
all remaining proceeds thereof (subject to a holdback for contingencies) as
expeditiously as possible. At such time as all of the Partnership and the CPLP
systems are sold, and all available CPLP distributions are


                                      -3-
<PAGE>   4
received by the Partnership, the Partnership's outstanding obligations will be
paid and the Partnership will be terminated. Upon its termination, the
Partnership will cease to be a public entity and will no longer be subject to
the informational reporting requirements of the Securities Exchange Act of 1934,
as amended.


THE CABLE TELEVISION INDUSTRY

Most cable television systems offer a variety of channels and programming and
are distinguished from competitive technologies because they bring a hard wire
connection to each subscriber over a wide area. In recent years, technological
improvements used in new construction or to upgrade existing plant of cable
television systems have improved signal quality as well as increased channel
capacity, which, in turn, has increased the potential number of programming
offerings available to subscribers. See "Item 1. Marketing, Programming and
Rates."

A cable television system consists of two principal operating components: one or
more signal origination points called "headends" and a signal distribution
system. It may also include program origination facilities. Each headend
includes a tower, antennae or other receiving equipment at a location favorable
for receiving broadcast signals and one or more earth stations that receive
signals transmitted by satellite. The headend facility also houses the
electronic equipment which amplifies, modifies and modulates the signals,
preparing them for passage over the system's network of cables.

The signal distribution system consists of amplifiers and trunk lines which
originate at the headend and carry the signal to various parts of the system,
smaller distribution cable and distribution amplifiers which carry the signal to
the immediate vicinity of the subscriber and drop lines which carry the signal
into the subscriber's home. In the past several years, many cable operators have
utilized fiber optic (in place of, or in combination with, coaxial) technology
to transmit signals through the primary trunk lines.


DESCRIPTION OF THE PARTNERSHIP SYSTEMS

The following table sets forth a summary of subscriber data (rounded to the
nearest hundred) of the Partnership's Systems as of the dates indicated:

<TABLE>
<CAPTION>
                                                        As of December 31,
                                                        ------------------
                                                    1998              1997
                                                    ----              ----
<S>                                               <C>               <C>  
Basic Subscribers:
       Northeast Missouri Systems                   1,700             1,800
       Southeast Texas Systems                     11,900            11,600 
                                                   ------           -------
                                                   13,600            13,400
                                                   ======            ======

Premium Subscriptions:
       Northeast Missouri Systems                     700               800
       Southeast Texas Systems                      5,900             4,400
                                                  -------             -----
                                                    6,600             5,200
                                                  =======             =====
</TABLE>


The Northeast Missouri Systems

The Northeast Missouri Systems serve eight communities in the northeastern
section of Missouri. As of December 31, 1998, these systems consisted of seven
headends having approximately 70 miles of activated distribution plant passing
approximately 4,100 homes. The largest headend serves Canton and LaGrange,
Missouri. As of December 31, 1998, Canton and LaGrange subscribers accounted for
approximately 44.9% of the Northeast Missouri Systems' basic subscribers. The
remaining six headends each serve less than 400 basic subscribers. At December
31, 1998, the Partnership employed two full-time equivalent persons in
connection with the operation of the Northeast Missouri Systems.



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<PAGE>   5


The Southeast Texas Systems

As of December 31, 1998, the Southeast Texas Systems served approximately 11,900
basic subscribers in the communities of Kingsville, Angleton, Aqua Dolce,
Driscoll, Belleville, Hempstead and Sealy. These cable television systems
consisted of seven headends, of which Angleton and Kingsville serve 34.9% and
46.8% of the basic subscribers, respectively. At December 31, 1998, the
Partnership employed 21 full-time equivalent persons in connection with the
operation of these systems.


DESCRIPTION OF CPLP SYSTEMS

As of December 31, 1998, CPLP owned cable television systems that serve
communities in and around LaGrange, Texas, consisting of approximately 170 miles
of activated distribution plant which passed approximately 10,400 homes and
served customers subscribing to approximately 6,400 basic and 2,700 premium
units. The monthly basic fees at December 31, 1998, were $12.25 for the basic
service tier and $16.87 for the expanded basic tier. CPLP employed 10 full-time
equivalent persons at December 31, 1998.


MARKETING, PROGRAMMING AND RATES

The Partnership's marketing program is based upon offering various packages of
cable services designed to appeal to different market segments. The General
Partner performs and utilizes market research on selected systems, compares the
data to national research and tailors a marketing program for each individual
market. The General Partner utilizes a coordinated array of marketing techniques
to attract and retain subscribers, including door-to-door solicitation,
telemarketing, media advertising and direct mail solicitations. The Partnership
implements in the Partnership Systems the marketing efforts instituted by the
General Partner to gain new subscribers and increase basic and premium
penetration in the communities served by the Systems.

Although services vary from system to system because of differences in channel
capacity, viewer interests and community demographics, each of the individual
Systems offers a "basic service tier," consisting of local television channels
(network and independent stations) available over-the-air, local public channels
and governmental and leased access channels. The individual Systems also offer
an expanded basic tier of television stations relayed from distant cities,
specialized programming delivered via satellite and various alpha-numeric
channels providing information on news, time, weather and the stock market. In
addition to these services, the Systems typically provide one or more premium
services purchased from independent suppliers and combined in different formats
to appeal to the various segments of the viewing audience, such as Home Box
Office, Cinemax, Showtime, The Movie Channel and the Disney Channel. A "premium
service unit" is a single premium service for which a subscriber must pay an
additional monthly fee in order to receive the service. Subscribers may
subscribe for one or more premium service units. The Systems also receive
revenues from the sale or monthly use of certain equipment (e.g., converters,
wireless remote control devices, etc.) and from cable programming guides, with
some Systems offering enhanced audio services. Certain of the Systems also
generate revenues from the sale of advertising spots on one or more channels,
from the distribution and sale of pay-per-view movies and events, and from
commissions resulting from subscribers participating in home shopping.

Rates to subscribers vary from market to market and in accordance with the type
of service selected. The Partnership Systems' monthly basic fees, at December
31, 1998, ranged from $8.95 to $15.95 for the basic service tier and $15.57 to
$19.95 for the expanded basic tier. A one-time installation fee, which may be
partially waived during a promotional period, is charged to new subscribers. The
practices of the Registrant regarding rates are consistent with the current
practices in the industry. See "Regulation and Legislation" for a discussion of
rate setting.



                                      -5-
<PAGE>   6


MANAGEMENT AGREEMENT

Since July 15, 1994, the Partnership Systems have been managed by the General
Partner, which assumed the rights and obligations of the former manager under
the Management Agreement effective March 31, 1988, by and between the
Partnership and the Management Company (the "Management Agreement").
Consequently, the Management Company has the exclusive right, authorization and
responsibility to manage the Partnership Systems.

The Management Agreement provides that the Management Company will receive for
its services a management fee equal to 5% of the annual gross operating revenues
of the Partnership. Such fee is to be paid quarterly in arrears after the
Partnership pays quarterly distributions to the Limited Partners. Beginning in
1989, up to 50% of the management fee payment is subordinate to certain
quarterly distributions to the Limited Partners. Unpaid management fees accrue
without interest. During 1998, 1997 and 1996, the Registrant recorded
approximately $306,000, $462,000, and $905,000, respectively, of such management
fee expense although it ceased making such payments shortly thereafter.
Management fees of approximately $4,382,000, $4,076,000, and $3,614,000 were
included in Payables to General Partners and affiliates at December 31, 1998,
1997, and 1996, respectively. Although the General Partner is currently entitled
to collect 50% of its management fees pursuant to the terms of the Management
Agreement, the General Partner has decided to voluntarily defer receipt of such
fees (approximately $1,595,000 as of December 31, 1998) until such time as the
Partnership's outstanding indebtedness is reduced through a combination of
repayment and refinancing of such indebtedness.

Pursuant to its terms, the Management Agreement was to expire on the earlier of
December 31, 1995, or upon the dissolution of the Partnership. The General
Partner has agreed to extend the term of the Management Agreement through the
"winding-up" of the Partnership's business and affairs.

The Management Company manages all aspects of the daily operation of the
Partnership Systems including, but not limited to, providing the Registrant with
financial, marketing, engineering, technical and operational guidance;
negotiating programming and other contracts; reviewing, approving and processing
of accounting transactions; developing and maintaining administrative records,
Limited Partner investment and tax records, procedures and reports; developing
recommendations for, and negotiating the acquisition and maintenance of,
insurance coverage; reviewing and approving personnel and other management
policies and procedures; supervising the training of management personnel;
developing engineering strategies for the implementation of technical
improvements; reviewing and approving maintenance standards and capital
expenditures for plant and equipment; providing a centralized purchasing agent
to provide the benefit of quantity discounts; developing compensation policies
and maintaining individual personnel files with respect to employees; assisting
in the selection of, and consultation with, attorneys, consultants and
accountants; and providing in-house legal support and negotiating financing on
behalf of the Registrant. In addition, the Management Company is responsible for
preparing and monitoring annual operating budgets, Limited Partner
correspondence, cash management, monthly financial statements and such other
reports as may be required by the Registrant.


COMPETITION

Cable television systems compete with other providers of television signals and
other sources of home entertainment. The competitive environment has been
significantly affected both by technological developments as well as regulatory
changes enacted in the Telecommunications Act of 1996 ("1996 Telecom Act") which
were designed to enhance competition in the cable television and local telephone
markets (see "Regulation and Legislation" below). Key competitors today include:

Broadcast Television. Cable television has long competed with broadcast
television, which consists of television signals that the viewer is able to
receive without charge using a traditional "off-air" antenna. The extent of such
competition is dependent upon the quality and quantity of broadcast signals
available through "off-air" reception compared to the services provided by the
local cable system. Accordingly, cable operators in rural areas, where "off-air"
reception is more limited, generally achieve higher penetration rates than do
operators in major metropolitan areas, where numerous, high quality "off-air"
signals are available. The 1996 Telecom Act directed for digital television
("DTV") to incumbent television broadcast licenses. DTV is expected to deliver
high definition television pictures and multiple digital-quality programs
streams, as well as advanced digital services such as subscription video.



                                      -6-
<PAGE>   7

DBS. DBS has emerged as significant competition to cable television systems. The
DBS industry has grown rapidly over the last several years, and now serves
approximately 10 million subscribers nationwide. DBS service allows the
subscriber to receive video services directly via satellite using a relatively
small dish antenna. Moreover, video compression technology allows DBS providers
to offer more than 100 digital channels, thereby surpassing the typical cable
system. DBS providers offer most of the same programming as cable television,
but also offer certain sports packages not available through cable television
systems and a wide array of pay-per-view movies. DBS currently faces technical
and legal obstacles to providing this programming in certain major markets, and
Congress and the FCC are considering proposals that would remove existing legal
obstacles. DirecTV, Inc. ("DirecTV"), United States Satellite Broadcasting
Corporation, Inc. ("USSB") and EchoStar Communications Corporation currently
offer DBS programming. In addition, there are several companies licensed to
operate a DBS system who have yet to begin service. PrimeStar, Inc.
("PrimeStar") offers a medium-powered fixed satellite service that shares many
of the attributes of DBS operators. Additionally, several DBS companies have
recently announced mergers which should strengthen their position, including
DirecTV, whose parent announced its intention to acquire USSB and PrimeStar,
subject to regulatory and other approvals. DirecTV estimates that the
combination of DirecTV, PrimeStar and USSB will result in DBS business serving
more than seven million subscribers with more than 370 entertainment channels.
Others may announce intentions to enter the DBS market and may offer DBS
services within our service areas.

Traditional Overbuild. Cable television franchises are not exclusive, so that
more than one cable television system may be built in the same area (known as an
"overbuild"), with potential loss of revenue to the operator of the original
system. Overbuilds historically have been relatively rare, as constructing and
developing a cable television system is capital-intensive, and it is difficult
for the new operator to gain a marketing advantage over the incumbent operator.
Although a private competitor ordinarily would require a franchise from local
jurisdiction, municipalities themselves have sometimes built and operated their
own overbuild.

Telephone. Federal cross-ownership restrictions historically limited entry by
local telephone companies into the cable television business. The 1996 Telecom
Act eliminated this cross-ownership restriction, making it possible for
companies with considerable resources to overbuild existing cable systems.
Several telephone companies have begun seeking cable television franchises from
local governmental authorities and constructing cable television systems. The
entry of telephone companies as direct competitors is likely to continue and
could adversely affect the profitability and valuation of the Partnership's
systems. The entry of electric utility companies into the cable television
business, as now authorized by the 1996 Telecom Act, could have a similar
adverse effect.

Private Cable. Additional competition is posed by private cable television
systems, known as Satellite Master Antenna Television (SMATV), serving
multi-unit dwellings such as condominiums, apartment complex, and private
residential communities. These private cable systems may enter into exclusive
agreements with apartment owners and homeowners associations, which may preclude
operators of franchised systems from serving residents of such private
complexes. Private cable systems that do not cross public rights of way are free
from the federal, state and local regulatory requirements imposed on franchised
cable television operators.

Wireless Distribution. Cable television systems also compete with wireless
program distribution services such MMDS. MMDS uses low-power microwave
frequencies to transmit television programming over-the-air to paying
subscribers. Wireless distribution services generally provide many of the
programming services provided by cable systems, and digital compression
technology is likely to increase significantly the channel capacity of their
systems. However, most MMDS operators continue to program in analog technology
due to the significant capital cost in upgrading to digital technology, combined
with a high disconnect ratio for this service. Analog MMDS is limited to
approximately 33 channels. Additionally, both analog and digital MMDS services
require unobstructed "line of sight" transmission paths.

Cable television systems are also in competition, in various degrees with other
communications and entertainment media, including motion pictures and home video
cassette recorders.


                                      -7-
<PAGE>   8
REGULATION AND LEGISLATION.

The operation of a cable television system is extensively regulated by the
Federal Communications Commission ("FCC"), some state governments and most local
governments. The 1996 Telecom Act has altered the regulatory structure governing
the nation's telecommunications providers. It removes barriers to competition in
both the cable television market and the local telephone market. Among other
things, it also reduces the scope of cable rate regulation and encourages
additional competition in the video programming industry by allowing local
telephone companies to provide video programming in their own telephone service.

The 1996 Telecom Act requires the FCC to undertake a host of implementing
rulemakings, the final outcome of which cannot yet be determined. Moreover,
Congress and the FCC have frequently revisited the subject of cable regulation.
Future legislative and regulatory changes could adversely affect the
Partnership's operations, and there have been calls in Congress and at the FCC
to maintain or even tighten cable regulation in absence of widespread effective
competition.

Cable Rate Regulation. The Cable Television Consumer Protection and Competition
Act of 1992 (the"1992 Cable Act") imposed an extensive rate regulation regime on
the cable television industry. Under that regime, all cable systems are subject
to rate regulation, unless they face "effective competition" in their local
franchise area. Federal law now defines "effective competition" on a
community-specific basis as requiring either low penetration (less than 30%) by
the incumbent cable operator, appreciable subscriber penetration (more than 15%)
by competing multichannel video providers ("MVPs"), or the presence of a
competing MVP affiliated with a local telephone company offering service to the
community.

Although the FCC has established the underlying regulatory scheme, local
government units (commonly referred to as local franchising authorities or
"LFA's") are primarily responsible for administering the regulation of the
lowest level of cable -- the basic service tier ("BST"), which typically
contains local broadcast stations and public, educational, and government
("PEG") access channels. Before an LFA begins BST rate regulation, it must
certify to the FCC that it will follow applicable federal rules. Many LFA's have
voluntarily declined to exercise their authority to regulate BST rates. LFA's
also have primary responsibility for regulating cable equipment rates. Under
federal law, charges for various types of cable equipment must be unbundled from
each other and from monthly charges for programming services.

The FCC itself directly administers rate regulation of any cable programming
service tiers ("CPST"), which typically contain satellite-delivered programming.
Under the 1996 Telecom Act, the FCC can regulate CPST rates only if an LFA first
receives at least two rate complaints from local subscribers and then files a
formal complaint with the FCC. When new CPST rate complaints are filed, the FCC
now considers only whether the incremental increase is justified and will not
reduce the previously established CPST rate.

Under the FCC's rate regulations, most cable systems were required to reduce
their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or
per-program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. However, federal law requires
that the BST be offered to all cable subscribers and limits the ability of
operators to require purchase of any CPST if a customer seeks to purchase
premium services offered on a per-channel or per-program basis, subject to a
technology exception which sunsets in 2002.

At December 31, 1998, LFA's (covering approximately 30% of the Systems'
subscribers) were certified to regulate basic tier rates. The 1992 Cable Act
permits communities to certify and regulate rates at any time, so that
additional localities served by the systems may choose to certify and regulate
rates in the future.

The FCC and Congress have provided various forms of rate relief for smaller
cable systems owned by smaller operators. If requisite eligibility criteria are
satisfied, a cable operator may be allowed to rely on a vastly simplified
cost-of-service rate justification and/or may be allowed to avoid regulation of
CPST rates entirely. Under FCC regulations, cable systems


                                      -8-
<PAGE>   9

serving 15,000 or fewer subscribers, which are owned by or affiliated with a
cable company serving in the aggregate no more than 400,0000 subscribers, can
submit a simplified cost-of-service filing under which the regulated rate
(including equipment charges) will be presumed reasonable if it equates to no
more than $1.24 per channel. Eligibility for this relief continues if the small
cable system is subsequently acquired by a larger cable operator, but is lost
when and if the individual system serves in excess of 15,000 subscribers. With
regards to cable systems owned by small operators, the 1996 Telecom Act
immediately deregulated the CPST rates of cable systems serving communities with
fewer than 50,000 subscribers, which are owned by or affiliated with entities
serving, in the aggregate, no more than one percent of the nation's cable
customers (approximately 617,000) and having no more than $250 million in annual
revenues.

Significantly, FCC regulation of CPST rates for all systems (regardless of size)
will sunset pursuant to the 1996 Telecom Act on March 31, 1999. Certain
legislators, however, have called for the delay in that regulatory sunset and
even urged more rigorous rate regulation in the interim, including limits on
operators passing through to their customers increased programming costs and
bundling together multiple programming services. The 1996 Telecom Act also
relaxes existing "uniform rate" requirements by specifying that uniform rate
requirements do not apply where the operator faces "effective competition," and
by exempting bulk discounts to multiple dwelling units, although complains about
predatory pricing still may be made to the FCC.

Cable Entry Into Telecommunications. The 1996 Telecom Act provides that no state
or local laws or regulations may prohibit or have the effect of prohibiting any
entity from providing any interstate or intrastate telecommunications service.
States are authorized, however, to impose "competitively neutral" requirements
regarding universal service, public safety and welfare, service quality, and
consumer protection. State and local governments also retain their authority to
manage the public rights-of-way and may require reasonable, competitively
neutral compensation for management of the public rights-of-way when cable
operators provide telecommunications service. The favorable pole attachment
rates afforded cable operators under federal law can be gradually increased by
utility companies owning the poles (beginning in 2001) if the operator provided
telecommunications service, as well as cable service, over its plant. The FCC
recently clarified that a cable operator's favorable pole rates are not
endangered by the provision of Internet access.

Cable entry into telecommunications will be affected by the regulatory landscape
now being fashioned by the FCC and state regulators. One critical component of
the 1996 Telecom Act to facilitate the entry of new telecommunications providers
(including cable operators) is the interconnection obligation imposed on all
telecommunications carriers. In July 1997, the Eighth Circuit Court of Appeals
vacated certain aspects of the FCC's initial interconnection obligation order
but most of that decision was reversed by the U.S. Supreme Court in January
1999. The Supreme Court upheld most of the FCC's interconnection regulations.

Internet Service. Although there is at present no significant federal
regulations of cable system delivery of Internet services, and the FCC recently
issued a report to Congress finding no immediate need to impose such regulation,
this situation may change as cable systems expand their broadband delivery of
Internet services. In particular, proposals have been advanced at the FCC and
Congress that would require cable operators to provide access to unaffiliated
Internet service provider and online service providers. Certain Internet service
providers also are attempting to use existing commercial leased access
provisions to gain access to cable system delivery. Finally, some local
franchising authorities are considering the imposition of mandatory Internet
access requirements as part of cable franchise renewals or transfers.

Telephone Company Entry Into Cable Television. The 1996 Telecom Act allows
telephone companies to compete directly with cable operators by repealing the
historic telephone company/cable cross-ownership ban. Local exchange carriers
("LECs"), including the Bell Operating Companies, can now compete with cable
operators both inside and outside their telephone service areas. Because of
their resources, LECs could be formidable competitors to traditional cable
operators, and certain LECs have begun offering cable service.

Various LECs currently are seeking to provide video programming services within
their telephone service areas through a variety of distribution methods,
including both the deployment of broadband wire facilities and the use of
wireless (MMDS) transmission.

Under the 1996 Telecom Act, a LEC (or any other cable competitor) providing
video programming to subscribers through broadband wire should be regulated as a
traditional cable operator (subject to local franchising and federal regulatory



                                      -9-
<PAGE>   10

requirements), unless the LEC elects to deploy its broadband plant as an OVS. To
qualify for favorable OVS status, the competitor must reserve two-thirds of the
system's activated channels for unaffiliated entities. The Fifth Circuit Court
of Appeals recently reversed certain of the FCC's OVS rules, including the FCC's
preemption of local franchising. That decision may be subject to further appeal.
It is unclear what effect this ruling will have on the entities pursuing OVS
operation.

Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition remains on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures between
cable operators and LEC in the same market. The 1996 Telecom Act provides a few
limited exceptions to this buyout prohibition, including a carefully
circumscribed "rural exemption." The 1996 Telecom Act also provides the FCC with
the limited authority to grant waivers of the buyout prohibition (subject to LFA
approval).

Electric Utility Entry Into Telecommunications/Cable Television. The 1996
Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services (including cable television)
notwithstanding the Public Utility Holding Company Act. Electric utilities must
establish separate subsidiaries, known as "exempt telecommunications companies"
and must apply to the FCC for operating authority. Like telephone companies that
have substantial resources at their disposal, and could be formidable
competitors to traditional cable systems. Several such utilities have been
granted broad authority by the FCC to engage in activities which could include
the provision of video programming.

Additional Ownership Restrictions. The 1996 Telecom Act eliminates statutory
restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems.

Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable system
from devoting more than 40% of its activated channel capacity to the carriage of
affiliated national video program services. Although the 1992 Cable Act also
precluded any cable operator from serving more than 30% of all U.S. domestic
cable subscribers, this provision has been stayed pending further judicial
review and FCC rulemaking.

Must Carry/Retransmission Consent. The 1992 Cable Act contains broadcast signal
carriage requirements that, among other things, allow local commercial
television broadcast stations to elect once every three years between requiring
a cable system to carry the station ("must carry") or negotiating for payments
for granting permission to the cable operator to carry the station
("retransmission consent"). Less popular stations typically elect "must carry,"
and more popular stations (such as those affiliated with a national network)
typically elect "retransmission consent." Must carry requests can dilute the
appeal of a cable systems' programming offerings because a cable system with
limited channel capacity may be required to forego carriage of popular channels
in favor of less popular broadcasts stations electing must carry. Retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on the Partnership's business. The
burden associated with "must carry" may increase substantially if broadcasters
proceed with planned conversion to digital transmission and the FCC determines
that cable systems must carry all analog and digital broadcasts in their
entirety. A rulemaking is now pending at FCC shortly regarding the imposition of
dual digital and analog must carry.

Access Channels. LFA's can include franchise provisions requiring cable
operators to set aside certain channels for public, educational and governmental
access programming. Federal law also requires cable systems to designate a
portion of their channel capacity (up to 15% in some cases) for commercial
leased access by unaffiliated third parties. The FCC has adopted rules
regulating the terms, conditions and maximum rates a cable operator may charge
for commercial leased access use. We believe that requests for commercial leased
access carriages have been relatively limited.

Access to Programming. To spur the development of independent cable programmers
and competition to incumbent cable operators, the 1992 Cable Act imposed
restrictions on the dealings between cable operators and cable programmers. Of
special significance from a competitive business posture, the 1992 Cable Act
precludes video programmers affiliated with cable companies from favoring cable
operators over competitors and requires such programmers to sell their
programming to other multichannel video distributors. This provision limits the
ability of vertically integrated cable programmers to 


                                      -10-
<PAGE>   11

offer exclusive programming arrangements to cable companies. Recently, there has
been increased interest in further restricting the marketing practices of cable
programmers, including subjecting programmers who are not affiliated with cable
operators to all of the existing program access requirements, and subjecting
terrestrially-delivered programming to the program access requirements.

Inside Wiring; Subscriber Access. In a 1997 Order, the FCC established rules
that require an incumbent cable operator upon expiration of an multiple dwelling
unit ("MDU") service contract to sell, abandon, or remove "home run" wiring that
was installed by the cable operator in a MDU building. These inside wiring rules
are expected to assist building owners in their attempts to replace existing
cable operators with new programming providers who are willing to pay the
building owner a higher fee, where such fee is permissible. The FCC has also
proposed abrogating all exclusive MDU service agreements held by incumbent cable
operators, but allowing such contracts when held by new entrants. In another
proceeding, the FCC preempted restrictions on the deployment of private antenna
on rental property within the exclusive use of a tenant (such as balconies and
patios). This FCC ruling may limit the extent to which the Partnership along
with MDU owners may enforce certain aspects of MDU agreements which otherwise
prohibit, for example, placement of DBS receiver antennae in MDU areas under the
exclusive occupancy of a renter.

Other FCC Regulations. In addition to the FCC regulations noted above, there are
other FCC regulations covering such areas as equal employment opportunity,
subscriber privacy, programming practices (including, among other things,
syndicated program exclusivity, network program nonduplication, local sports
blackouts, indecent programming, lottery programming, political programming,
sponsorship identification, children's programming advertisements, and closed
captioning, registration of cable systems and facilities licensing, maintenance
of various records and public inspection files, aeronautical frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards, consumer electronics equipment capability and Emergency Alert
Systems). The FCC recently ruled that cable customers must be allowed to
purchase cable converters from third parties and established a multi-year
phase-in during which security functions (which would remain in the operator's
exclusive control) would be unbundled from basic converter functions (which
could then be satisfied by third party vendors). The FCC has the authority to
enforce its regulations through the imposition of substantial fines, the
issuance of cease and desist orders and / or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate certain transmission facilities used in connection with cable
operations.

Copyright. Cable television systems are subject to federal copyright licensing
covering carriage of television and radio broadcast signals. In exchange for
filing certain reports and contributing a percentage of their revenues to a
federal copyright royalty pool (that varies depending on the size of the system
and the number of distant broadcast television signals carried, and the location
of the cable system), cable operators can obtain blanket permission to
retransmit copyrighted material included in broadcast signals. The possible
modification or elimination of this compulsory copyright license is the subject
of continuing legislative review and could adversely affect the Partnership's
ability to obtain desired broadcast programming. The Partnership cannot predict
the outcome of this legislative activity. Copyright clearances for nonbroadcast
programming services are arranged through private negotiations.

Cable operators distribute locally originated programming and advertising that
use music controlled by the two principal major music performing rights
organizations, the Association of Songwriters, Composers, Artists and Producers
("ASCAP") and Broadcast Music, Inc. ("BMI"). The cable industry and BMI have
reached a standard licensing agreement, and negotiations with ASCAP are ongoing.
Although the Partnership cannot predict the ultimate outcome of these industry
negotiations or the amount of any license fees it may be required to pay for
past and future use of ASCAP-controlled music, it does not believe such license
fees will be significant to the Partnership's business and operations.

State and Local Regulation. Cable television systems generally are operated
pursuant to nonexclusive franchises granted by a municipality or other state or
local government entity in order to cross public rights-of-way. Federal law now
prohibits LFAs from granting exclusive franchises or from unreasonably refusing
to award additional franchises. Cable franchises generally are granted for fixed
terms and in many cases include monetary penalties for non-compliance and may be
terminable if the franchisee failed to comply with material provisions.

The specific terms and conditions of franchises vary materially between
jurisdictions. Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, 


                                      -11-
<PAGE>   12

system channel capacity, design and technical performance, customer service
standards, and indemnification protections. A number of states subject cable
television systems to the jurisdiction of centralized state governmental
agencies, some of which impose regulation of a character similar to that of a
public utility. Although local franchising authorities ("LFA's") have
considerable discretion in establishing franchise terms, there are certain
federal limitations. For example, LFA's cannot insist on franchise fees
exceeding 5% of the system's gross revenues, cannot dictate the particular
technology used by the system, and cannot specify video programming other than
identifying broad categories of programming.

Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the local franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and service or increased
franchise fees as a condition of renewal. Similarly, if local franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such LFA may attempt to impose more burdensome or onerous franchise
requirements in connection with a request for consent. Historically, franchises
have been renewed for cable operators that have provided satisfactory services
and have complied with the terms of their franchise.

Under the 1996 Telecom Act, cable operators are not required to obtain
franchises for the provision of telecommunications services, and LFAs are
prohibited from limiting, restricting, or conditioning the provision of such
services. In addition, LFAs may not require a cable operator to provide any
telecommunications service or facilities, other than institutional networks
under certain circumstances, as a condition of an initial franchise grant, a
franchise renewal, or a franchise transfer. The 1996 Telecom Act also provides
that franchising fees are limited to an operator's cable-related revenues and do
not apply to revenues that a cable operator derives from providing new
telecommunications services.


EMPLOYEES

As of December 31, 1998, the Registrant employed a total of approximately 21
full-time equivalent persons in the operation of its cable television systems.
None of the employees are represented by a union. The Registrant has never
experienced a work stoppage. The Registrant believes its employee relations are
generally good.


OTHER MATTERS

The Partnership owns and operates cable television systems and does not engage
in any other identifiable industry segments. The Partnership does not believe
that changes of a seasonal nature are material to the cable television business.
The Partnership has not expended material amounts during the last two years on
research and development activities. As the Partnership is a service-related
organization, little or no raw materials are utilized by the Partnership. The
necessary hardware, coaxial cable and electronics required for construction of
new cable plant are available from a variety of vendors and are generally
available in ample supply. There is no one customer or affiliated group of
customers to whom sales are made in amounts which exceed ten percent (10%) of
the Partnership's revenues. The Partnership believes it is not affected by
inflation except to the extent that the economy in general is affected thereby.



ITEM 2.  PROPERTIES

The Registrant's principal physical assets consist of the components of each of
its cable television systems, which include a central receiving apparatus,
distribution cables and local business offices. The receiving apparatus is
comprised of a tower and antennas for reception of over-the-air broadcast
television signals and one or more earth stations for reception of satellite
signals. Located near these receiving devices is a building that houses
associated electronic gear and processing equipment. The Registrant owns the
receiving and distribution equipment of each system and owns or leases small
parcels of real property for the receiving sites.

Cable is either buried in trenches or is attached to utility poles pursuant to
license agreements with the owners of the poles. As is typical in the cable
television industry, the Partnership maintains insurance on its above-ground
plant, but not for its 


                                      -12-
<PAGE>   13

underground plant. The Registrant owns or leases the local business office of
each system from which it dispatches service employees, monitors the technical
quality of the system, handles customer service and billing inquiries and
administers marketing programs. The office facilities of some systems include
certain equipment for program production, as required under certain of the
Partnership's franchises.

The Registrant believes that its properties are generally in good condition and
fully utilized. The Systems currently operate at between 220 and 330 megahertz,
whereas the General Partner believes the standard in the cable television
industry for cable television systems similar to those operated by the
Partnership to generally be a minimum of 450 megahertz. The physical components
of the Systems require maintenance and periodic upgrading to keep pace with
technological advances.



ITEM 3.  LEGAL PROCEEDINGS

Abeles v. Cencom Cable Entertainment, Inc., et. al.

On June 17, 1998, approximately 400 limited partners in CCIP II, filed a lawsuit
against the General, Cencom Cable Entertainment, Inc. (CCE), (collectively
"Cencom Defendants"), and three brokerage firms involved in the original sale of
limited partnership units in the Circuit Court of Jackson County, Missouri. CCE
provided management services to the Partnership and also owned all of the stock
of the General Partner prior to mid-1994.

Plaintiffs allege that the Cencom Defendants are liable for fraud, negligent
misrepresentation or omission, negligence, breach of fiduciary duty, breach of
implied covenants and violations of the Missouri Merchandising Practices Act in
connection with the sale of limited partnership interests in CCIP II commencing
in 1987. Plaintiffs seek recession of the purchase of the securities along with
ancillary damages, actual damages, punitive damages, costs and attorneys' fees.

On August 17, 1998, the Cencom Defendants filed a Motion to Dismiss. On November
5, 1998, the Court heard oral argument on that motion. Discovery has been stayed
during the pendency of the Motion to Dismiss.

Wallace v. Wood, et. al.

On June 10, 1997, four limited partners of the Partnership filed a putative
class action suit on behalf of the limited partners presently in Delaware
Chancery Court against the General Partner, Charter, certain other Charter
affiliates and four present or former officers of the General Partner. The
Plaintiffs subsequently amended their lawsuit and converted it to a Derivative
Action, thus adding the Partnership as a nominal defendant.

Plaintiffs allege that the Defendants breached the Partnership Agreement and
their fiduciary duties of loyalty and candor in connection with the management
of the Partnership and the sale of the Partnership assets to certain purchasing
affiliates. Plaintiffs seek a declaration that the distribution to the Limited
Partners is improper, request that defendants compensate the Partnership for all
damages suffered as a result of the actions and transactions, including
interest, costs, reasonable attorneys' fees, accountants' and experts' fees and
request an accounting for all monies earned by the properties after the
effective date of the sale to the purchasing affiliates.

On May 19, 1998, Defendants filed a Motion for Judgment on the Pleadings,
seeking dismissal of certain of the defendants from the lawsuit. That motion is
pending before the Court.

The Partnership is not a named defendant in the Jackson County litigation and is
a nominal defendant in the Delaware litigation.


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

No matters were submitted to a vote of security holders during the fourth
quarter of 1997.

                                      -13-
<PAGE>   14

                                     PART II



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

As of December 31, 1998, there were approximately 8,829 holders of 90,915
Limited Partnership Units of the Partnership (the "Units" or the "LP Units").
There is a very limited trading market for the Units and all transfers are
subject to approval of the General Partner. In 1996, 1997 and 1998, several
tender offers have been conducted for the acquisition of limited partnership
interests. In 1998, an aggregate of 3,426 limited partnership units were traded
in tender offer transfers submitted to the General Partner.

Pursuant to the terms of the Partnership Agreement, the Partnership is required
to distribute all cash available for distribution to the Limited Partners within
60 days after the end of each calendar quarter and, with respect to certain
available refinancing proceeds and certain available sales proceeds, as soon as
possible following completion of the relevant transaction. The Partnership
suspended regular quarterly distributions to Limited Partners in the fourth
quarter of 1993 to provide the Partnership with greater financial flexibility in
meeting its debt covenants and in making capital expenditures. In June 1997,
following the Partnership's sale of assets and refinancing of its credit
facility, the Partnership made a special distribution of $314 per Limited
Partnership Unit. From this aggregate distribution, certain amounts were
withheld from certain of the Limited Partners due to applicable state income
taxes. Distributions in arrears will be distributed in accordance with the
Partnership Agreement.

During January 1995, Charter acquired 1,746 Units of the Partnership as part of
a negotiated transaction for a sale of securities and assets. As of December 31,
1998, Charter held 1,746 Units of the Partnership, representing approximately
1.9% of the total outstanding limited partnership interests of the Partnership.


                                      -14-
<PAGE>   15
ITEM 6.  SELECTED FINANCIAL DATA

The following selected financial data has been derived from the audited
financial statements of the Partnership and should be read in conjunction with
the financial statements and notes thereto included pursuant to Item 8 of this
Form 10-K.


<TABLE>
<CAPTION>
                                                                   AS OF AND FOR THE YEAR ENDED DECEMBER 31,
                                     -------------------------------------------------------------------------------------
                                          1998               1997            1996           1995              1994
                                     ---------------- ----------------- --------------------------------------------------
<S>                                    <C>              <C>             <C>             <C>              <C>        
STATEMENT OF OPERATIONS DATA:
Service Revenues..................     $6,114,611        $9,246,156      $18,155,382     $17,046,419      $16,257,928
Net income (loss).................       2,291383        44,548,950       (1,447,153)     (2,292,563)      (5,256,210)
Net income (loss) per LP Unit.....          25.20            458.90           (15.76)         (24.96)          (57.24)
Cash distributions per LP Unit....             --            314.00               --              --               --

BALANCE SHEET DATA:
Total assets......................      7,897,700         7,029,589       20,845,510      24,960,260       30,517,928
Long-term obligations,  including
   current maturities.............      3,800,000         4,600,000       36,700,000      40,400,000       44,700,000
Partners' (deficit) capital.......     (3,534,984)       (5,826,367)     (21,828,007)    (20,380,854)     (18,088,291)

MISCELLANEOUS DATA:
Ratio of earnings to fixed
   charges(1)......................          6.66                34.52            --              --               --
Book value per LP Unit............        ($38.88)             ($64.09)     ($240.09)       ($224.17)        ($198.96)
</TABLE>


----------

(1)      Ratio of earnings to fixed charges is calculated using income from
continuing operations adding back fixed charges; fixed charges include interest
expense and amortization expense for debt issuance costs. Earnings for the years
ended December 31, 1996, 1995 and 1994 were insufficient to cover the fixed
charges by $1,447,153, $2,292,563, and $5,256,210, respectively. As a result of
such insufficiencies, these ratios are not presented above.



                                      -15-
<PAGE>   16

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

RESULTS OF OPERATIONS

GENERAL INFORMATION

The following table summarizes the amounts and the percentage of total revenues
for certain items for the periods indicated:

<TABLE>
<CAPTION>
                                                             FOR THE YEAR ENDED DECEMBER 31,                            
                               -----------------------------------------------------------------------------------------
                                         1998                            1997                             1996          
                               -----------------------        -----------------------        ---------------------------
                                     Amt.           %               Amt.           %               Amt.         %
<S>                             <C>             <C>           <C>             <C>            <C>             <C>     
Service Revenues:                                                                                                    
     Basic Service              $  4,688,399       76.7       $  6,916,999       74.8        $ 13,485,981       74.3 
     Premium Service                 697,063       11.4          1,070,210       11.6           2,241,316       12.3 
     Other Services                  729,149       11.9          1,258,947       13.6           2,428,085       13.4 
                                ------------    -------       ------------    -------        ------------    ------- 
                                                                                                                     
                                   6,114,611      100.0          9,246,156      100.0          18,155,382      100.0 
                                ------------    -------       ------------    -------        ------------    ------- 
                                                                                                                     
Operating Expenses:                                                                                                  
     Operating, General and                                                                                          
       Administrative              3,346,674       54.7          5,674,812       61.4          10,572,015       58.2 
     Depreciation and                                                                                                
       Amortization                  652,437       10.7          2,278,705       24.6           6,235,182       34.4 
                                ------------    -------       ------------    -------        ------------    ------- 
                                                                                                                     
                                   3,999,111       65.4          7,953,517       86.0          16,807,197       92.6 
                                ------------    -------       ------------    -------        ------------    ------- 
                                                                                                                     
Income from Operations             2,115,500       34.6          1,292,639       14.0           1,348,185        7.4 
                                ------------    -------       ------------    -------        ------------    ------- 
                                                                                                                     
Other Income (Expenses):                                                                                             
     Interest Income                  39,632        0.6            216,190        2.3              39,909        0.2 
     Interest Expense               (401,809)      (6.6)        (1,323,920)     (14.3)         (2,835,247)     (15.6)
     Equity in income of                                                                                             
       unconsolidated limited                                                                                        
       partnership                   538,060        8.8          8,133,748       88.0                --           --
                                                                                                                     
     Gain on sale of cable                                                                                           
       television systems               --           --         36,230,293      391.8                --           -- 
                                ------------    -------       ------------    -------        ------------    ------- 
                                                                                                                     
                                                                                                                     
                                                                                                                     
                                                                                                                     
                                     175,883        2.9         43,256,311      467.8          (2,795,338)     (15.4)
                                ------------    -------       ------------    -------        ------------    ------- 
                                                                                                                     
Net income (loss)               $  2,291,383       37.5       $ 44,548,950      481.8        ($ 1,447,153)      (8.0)
                                ============    =======       ============    =======        ============   ========
</TABLE>


Operating results of the Registrant's investment in CPLP are not consolidated as
the Registrant owns only limited partnership units of CPLP. The Registrant's
investment in CPLP is accounted for under the equity method and losses in excess
of its investment are not recorded. The amount of unrecorded losses in excess of
the equity investment were approximately $4.0 million for the year ended
December 31, 1996. As of December 31, 1996, the cumulative unrecorded losses in
excess of investment were approximately $14.9 million. For the years ended
December 31, 1998 and 1997, the Partnership recorded income from its investment
in CPLP totaling approximately $0.5 and $8.1 million net of previously
unrecorded losses. Also, in May 1997, the Partnership received a cash
distribution from CPLP in the amount of $5.5 million.


                                      -16-
<PAGE>   17

COMPARISON OF YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996.

Revenues

Partnership revenues decreased 49.1% from $18.2 million in 1996 to $9.2 million
in 1997, primarily as a result of the decrease in subscribers following the sale
of the Anderson County System on April 7, 1997 and the sales of approximately
47% of the Southeast Texas Systems on March 31, 1997. Partnership revenue
decreased 33.9% from $9.2 million in 1997 to $6.1 million in 1998, primarily as
a result of the decrease in subscribers following the sale of the Anderson
County System on April 7, 1997 and the sales of approximately 47% of the
Southeast Texas Systems on March 31, 1997. Overall, revenue per basic subscriber
(as determined for the fourth quarter of each fiscal year) has increased from
$34.56 for 1996 to $36.11 for 1997 to $37.46 for 1998.

The ratio of premium subscriptions per basic subscriber has decreased from .42
at December 31, 1996, to .39 at December 31, 1997, and is indicative of
historical trends. The ratio of premium subscriptions per basic subscriber has
increased from .39 at December 31, 1997, to .48 at December 31, 1998, primarily
as a result of the Partnership offering premium services to customers in a
packaged format, providing subscribers a discount from the combined individual
retail rates of these services.


Operating Expenses

Operating, general and administrative expenses decreased 46.3% from $10.6
million in 1996 to $5.7 million in 1997. This decrease was primarily a result of
the elimination of costs associated with the Anderson County System and certain
of the Southwest Texas Systems which were sold April 7, 1997 and March 31, 1997,
respectively.

Operating, general and administrative expenses decreased 42.1% from $5.7 million
in 1997 to $3.3 million in 1998. This decrease was primarily a result of the
elimination of costs associated with the Anderson County System and certain of
the Southwest Texas Systems which were sold April 7, 1997 and March 31, 1997,
respectively. Operating, general and administrative costs have increased as a
percent of revenue from 58.2% in 1996 to 61.4% in 1997. In addition to
programming cost increases, the Partnership has experienced increases in
copyright expense, property tax expense and liquidation costs. Operating,
general and administrative costs have decreased as a percent of revenues from
61.4% in 1997 to 54.7% of revenues in 1998, as a result of a decrease in
liquidation costs incurred during 1998.

Depreciation and amortization, in terms of percent of revenues, decreased during
the 1996-1998 period. The decrease is primarily the result of the completion of
amortization for certain franchises and deferred costs.


Other Income and Expenses

Interest expense decreased from $2,835,000 in 1996 to $1,324,000 in 1997 to
$402,000 in 1998 as a result of a lower weighted average outstanding balance due
to the reduction of indebtedness from the proceeds of the sale of cable
television systems.

Because the Partnership accounts for its investment in CPLP under the equity
method, allocated losses from CPLP in excess of the Partnership's investment in
CPLP are not recorded. During 1996, the unrecorded loss in excess of investment
was $4.0 million. During 1997, the sale of certain cable television systems by
CPLP resulted in the recognition by the Partnership of equity in income of $8.1
million from this unconsolidated limited partnership, net of previously
unrecorded losses, which as of December 31, 1996 were approximately $14.9
million. During 1998, the Partnership recorded income from its investment in
CPLP totaling $0.5 million.

During 1997, the Partnership recorded a gain of approximately $36.2 million
related to the sales of certain of its cable television systems.

                                      -17-


<PAGE>   18

Net Loss

The Partnership recorded net income of $44.5 million in 1997 compared to a loss
of $1.4 million in 1996. The increase in net income was primarily due to the
$36.2 million gain on the sale of cable television systems and the recognition
of $8.1 million of equity in the income of CPLP, an unconsolidated limited
partnership. Net income was reduced by 94.9% from $44.5 million in 1997 to $2.3
million in 1998, primarily attributable to the $36.2 million gain on the sale of
cable television systems and the recognition of $8.1 million of equity in the
income of CPLP recorded in 1997.


LIQUIDITY AND CAPITAL RESOURCES

The Partnership's initial capital resources have included the aggregate of
approximately $81.6 million (net of related expenses) raised through the sale of
LP Units and approximately $918,000 in General Partner contributions of cash and
notes. These sources of capital were used to fund the purchase of the
Partnership Systems and have since been supplemented with borrowings to finance
capital expenditures.

On May 23, 1997, the Partnership terminated its existing secured revolving line
of credit agreement and entered into a new bank credit agreement (the "Credit
Agreement") for borrowings up to $8,500,000. The Credit Agreement also provides
for borrowings up to $7,500,000 by CPLP, with each partnership held jointly and
severally liable in the event of default. At December 31, 1998, the Partnership
had $3,800,000 of indebtedness outstanding under the Credit Agreement and CPLP
had $-0- of indebtedness outstanding under the Credit Agreement. The debt bears
interest at rates, at the Partnership's option, based on the higher of the prime
rate of the Canadian Imperial Bank of Commerce (the agent bank) or the Federal
Funds Rate plus 3/4 of 1%, or the LIBOR plus applicable margins based upon the
Partnership's leverage ratio at the time of the borrowings. At December 31,
1998, the interest rate on this outstanding indebtedness was 7.31%.

Borrowings under the Credit Agreement are subject to certain financial and
nonfinancial covenants and restrictions, including the maintenance of a ratio of
total debt to annualized operating cash flow of 4.0 to 1.0 at December 31, 1998.
A quarterly commitment fee of .375% per annum is payable on the unused portion
of the Credit Agreement. Commencing March 31, 1999, and at the end of each
calendar quarter thereafter, the borrowing capacity shall be reduced by
$800,000. Quarterly reductions will continue until March 31, 2002, at which time
the borrowing capacity shall be reduced by $1,600,000, quarterly until December
31, 2002. If the sale of the Partnership's Texas system, is consummated pursuant
to the terms of the Asset Purchase Agreement (see "Item 1. Business"), the
Partnership's Credit Agreement will be fully repaid.

The Partnership made capital expenditures of approximately $1,783,000,
$1,240,000 and $2,108,000 during 1998, 1997, and 1996, respectively, in
connection with the improvement and upgrading of the Partnership Systems.

Pursuant to the terms of the Partnership Agreement, the Partnership is required
to distribute all cash available for distribution to the Partners within 60 days
after the end of each calendar quarter and, with respect to certain available
refinancing proceeds and certain available sales proceeds, as soon as possible
following completion of the relevant transaction. However, the Partnership
suspended distributions to Limited Partners in the fourth quarter of 1993 to
provide greater financial flexibility in meeting its debt covenants and in
making capital expenditures necessary to maintain the Partnership's assets, and
no additional distributions were made until a special distribution in June 1997
following the sale of assets.

Each of the Partnership and CPLP have executed an Asset Purchase Agreement
providing for the sale of their respective Texas Systems, and it is anticipated
that these sales will close during the second quarter of 1999. The purchase
price for these systems will be $20,800,000 for the Partnership and $11,200,000
for CPLP.

CPLP will use the net proceeds from the sale of its Texas systems first to
satisfy the liabilities and expenses of CPLP with the remaining funds
distributed to its partners, of which 84.03% will be distributed to the
Partnership. The Partnership will use the net proceeds from the sale of its
Texas systems first to pay off outstanding indebtedness, and then to satisfy
other Partnership liabilities and expenses. The Partnership's remaining funds
received pursuant to the distribution from CPLP or



                                      -18-
<PAGE>   19

as proceeds from the Partnership's sale of its Texas systems, will be
distributed to the partners in accordance with the liquidation provisions of the
Partnership Agreement. Following these sales, the Partnership's only remaining
cable assets will be the Northeast Missouri systems and CPLP will have disposed
of all of its cable assets.

The Partnership entered into a non-binding letter of intent with an unaffiliated
third-party for the sale of its systems in northeast Missouri. Although
negotiations with respect to a sale agreement are on-going, there is no
assurance that a definitive sale agreement will be executed or that the sale
will be completed. If the General Partner does not execute a definitive
agreement to sell the Northeast Missouri systems as a result of this letter of
intent, it intends to continue to market and sell the systems.

After the remaining Partnership assets, including the Partnership's investment
in CPLP, have been sold or liquidated for cash, all outstanding indebtedness,
other liabilities, and expenses have been paid and any remaining cash has been
distributed to the partners in accordance with the liquidation provisions of the
Partnership, the Partnership's existence will terminate.


YEAR 2000 IMPACT

Many existing computer systems and applications, and other control devices and
embedded computer chips use only two digits (rather than four) to identify a
year in the date field, failing to consider the impact of the upcoming change in
the century. As a result, such systems, applications, devices, and chips could
create erroneous results or might fail altogether unless corrected to properly
interpret data related to the year 2000 and beyond (the "Year 2000 Problem").
These errors and failures may result, not only from a date recognition problem
in the particular part of a system failing, but may also result as systems,
applications, devices and chips receive erroneous or improper data from
third-parties suffering from the Year 2000 Problem. In addition, two interacting
systems, applications, devices or chips, each of which has individually been
fixed so that it will properly handle the Year 2000 Problem, could nonetheless
suffer "integration failure" because their method of dealing with the problem is
not compatible.

These problems are expected to increase in frequency and severity as the Year
2000 approaches. This issue impacts our owned and licensed computer systems and
equipment used in connection with internal operations, including 
         -    information processing and financial reporting systems,
         -    customer billing systems, o customer service systems,
         -    telecommunication transmission and reception systems, and
         -    facility systems.

We also rely directly and indirectly, in the regular course of business, on the
proper operation and compatibility of third party systems. The Year 2000 Problem
could cause these systems to fail, err, or become incompatible with our systems.

If we or a significant third party on which we rely fails to become year 2000
ready, or if the Year 2000 Problem cause our systems to become internally
incompatible or incompatible with third party systems, our business could suffer
from material disruption, including the inability to process transactions, send
invoices, accept customer orders or provide customers with our cable services.
We could also face similar disruptions if the Year 2000 Problem causes general
widespread problems or an economic crisis. We cannot now estimate the extent of
these potential disruptions.

We are addressing the Year 2000 Problem with respect to our internal operations
in three stages: (1) inventory and evaluation of our systems, components and
other significant infrastructure to identify those elements that reasonably
could be expected to be affected by the Year 2000 Problem, (2) remediation and
replacement to address problems identified in stage one and (3) testing of the
remediation and replacement carried out in stage two. We formed an executive
Year 2000 Taskforce at the beginning of 1998, have completed stage one, and
anticipate that we will complete stages two and three by August 1999. We plan to
complete all stages for our existing systems by August 1999, but we cannot
determine when such stages would be completed in connection with systems we may
acquire in the near future.



                                      -19-
<PAGE>   20


Much of our assessment efforts in stage one have involved, and depend on,
inquiries to third party service providers, who are the suppliers and vendors of
various parts or components of our systems. Certain of these third parties that
have certified the readiness of their products will not certify their
interoperability within our fully integrated systems. We cannot assure you that
these technologies of third parties, on which we rely, we be year 2000 ready or
timely converted into year 2000 compliant systems compatible with our systems.
Moreover, because a full test of our systems, on an integrated basis, would
require a complete shut down of our operations, it is not practicable to conduct
such testing. We have been advised that a plan has been developed to utilize a
third party, in cooperation with other cable operators, to begin testing a
"mock-up" of our major billing and plant components (including pay-per-view
systems) as an integrated system. We are also evaluating the potential impact of
third party failure and integration failure on our systems.

We have incurred only immaterial costs to date directly related to addressing
the Year 2000 Problem. We have redeployed internal resources and have
selectively engaged outside vendors to meet the goals of our year 2000 program.
We currently do not estimate the total cost of our year 2000 remediation program
to be material.

In June 1998, the Financial Accounting Standards Board (FASB) adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. The Company has
not yet quantified the impacts of adopting SFAS No. 133 on its consolidated
financial statements nor has it determined the timing or method of its adoption
of SFAS No. 133.
However, SFAS No. 133 could increase volatility in earnings (loss).



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements and Schedules on Page F-1.



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
        
None.



                                      -20-
<PAGE>   21
                                    PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


The Partnership has no officers or directors. The General Partner manages and
controls substantially all of the Partnership's affairs and has general
responsibility and ultimate authority in all matters affecting the Partnership's
business. In addition, the General Partner is responsible for operating and
managing the Partnership's cable television systems.

Set forth below is the present principal occupation or employment and employment
history of the executive officers and directors of the General Partner:


<TABLE>
<CAPTION>

      NAME                  AGE               POSITION WITH GENERAL PARTNER

<S>                         <C>          <C>
Howard L. Wood              58           President, Chief Executive Officer and
                                             Director
Barry L. Babcock            51           Executive Vice President, Chief
                                             Operating Officer and Director
Jerald L. Kent              42           Executive Vice President, Chief
                                             Financial Officer and Director
</TABLE>


Mr. Wood has been affiliated with Charter Communications, Inc. (Charter), parent
of the General Partner, since 1993, now holding the position of Vice Chairman of
Charter, and has served as President of the General Partner since 1994. Mr. Wood
also co-founded Charter Communications Group ("CCG") in 1992. Prior to that
time, he was associated with Cencom Cable Associates, Inc. ("CCA"), which he
joined in July 1987 as Director; at CCA he held the position of President, Chief
Executive Officer and Director from January 1, 1989 to November 1992. Mr. Wood
also serves on the Board of Directors of Gaylord Entertainment Company, VanLiner
Group, Inc. and First State Bank.

Mr. Babcock has been affiliated with Charter since 1993 and now holds the
position of Vice Chairman of Charter, and has served as Executive Vice President
of the General Partner since 1994. Mr. Babcock also co-founded CCG in 1992.
Prior to that time, he was associated with CCA as the Executive Vice President
of CCA from February 1986 to November 1992, and as Chief Operating Officer of
CCA from May 1986 to November 1992. Mr. Babcock also serves on the Board of
Directors of the National Cable Television Association, Cable in the Classroom
and Mercantile Bank.

Mr. Kent has been affiliated with Charter since 1993 and now holds the position
of President and Chief Executive Officer and director of Charter, and has served
as Executive Vice President of the General Partner since 1994. Mr. Kent also
co-founded CCG in 1992. Prior to that time, he was associated with CCA as
Executive Vice President and Chief Financial Officer of CCA from 1987 through
November 1992. Mr. Kent also serves on the Board of Directors of HSAC and Cable
Television Laboratories.



ITEM 11.  EXECUTIVE COMPENSATION

The General Partner does not currently pay any remuneration to any of its
officers or directors. See Item 13 herein.


                                      -21-
<PAGE>   22

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of December 31, 1998, no Limited Partner was known to the General Partner to
be the beneficial owner of more than five percent (5%) of the outstanding LP
Units issued by the Partnership. Charter owns 1,746 LP Units, constituting
approximately 1.9% of the LP Units. Charter has no right to acquire additional
LP Units.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Item 1 - "Partial Liquidation of Assets"

See Item 1 - "Management Agreement"

The Registrant may be subject to various conflicts of interest arising out of
the relationships among it, the Management Company, their respective affiliates,
officers and directors (such persons shall hereinafter be collectively referred
to as the "Affiliates").

Affiliates have engaged and, in the future, will engage in other business
activities related to the cable television industry that may be in competition
with the business of the Registrant. Such activities may include the acquisition
of cable television systems. The Affiliates have no obligation to offer to the
Registrant the opportunity to participate in any other transactions in which
they participate.

The officers and directors of the Management Company will manage the Partnership
Systems, as well as other cable television systems currently owned or later
acquired by certain of its Affiliates. Conflicts of interest may arise in
managing the operations of more than one entity with respect to the allocation
of the Management Company's and its Affiliates' time, personnel, and other
resources among the Registrant. The Management Company will resolve such
conflicts in a manner deemed in its reasonable judgment to be fair and
appropriate.

                                     PART IV



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

(a)    1.  Financial Statements:
           See Index to Financial Statements and Schedules on page F-1 of this
           Report.

       2.  Financial Statement Schedules:
           See Index to Financial Statements and Schedules on page F-1 of this
           Report.

       3.  Exhibits:
           See Index on Page E-1 of this Report.

(b) Reports on Form 8-K:

       No reports on Form 8-K were filed during the fourth quarter of 1998.


                                      -22-
<PAGE>   23

                                   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, thereto duly authorized.

                                        CENCOM CABLE INCOME PARTNERS II, L.P.  

                                             By:   Cencom Properties II, Inc.
                                                   General Partner


                                             By:   /s/ Howard L. Wood
                                                -------------------------------
                                                   Howard L. Wood, President


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 (as to the General Partner) and on the date indicated.

<TABLE>
<CAPTION>
Signature and Title                                                                Date
-------------------                                                                ----


<S>                                                                                <C>
By:                    /s/    Howard L. Wood                                       March 29, 1999
       ---------------------------------------------------
       Howard L. Wood
       President, Chief Executive Officer and Director
       (Principal Executive Officer)



By:                     /s/    Barry L. Babcock                                    March 29, 1999
       ---------------------------------------------------
       Barry L. Babcock
       Executive Vice President,  Chief Operating Officer and
       Director



By:                      /s /    Jerald L. Kent                                    March 29, 1999
       ---------------------------------------------------
       Jerald L. Kent
       Executive Vice President,  Chief Financial Officer and
       Director
       (Principal Financial Officer and Principal Accounting
       Officer)
</TABLE>


                                      S-1
<PAGE>   24

                      CENCOM CABLE INCOME PARTNERS II, L.P.

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

   Exhibit
   Number                             Description                                   Page
   <S>         <C>                                                                   <C>
    3(a)       Agreement of Limited Partnership, filed as Exhibit 3(b) to the        N/A
               Registrant's Registration N/A Statement on Form S-1 (Registration
               No. 33-17174), incorporated herein by this reference.

    3(b)       Amended and Restated Agreement of Limited Partnership, filed as       N/A
               Exhibit 3(c) to the N/A Registrant's Registration Statement on
               Form S-1 (Registration No. 33-17174), incorporated
               herein by this reference.

    10(a)      Management Agreement between the Registrant and the Management        N/A
               Company filed as Exhibit 10(a) N/A to the Registrant's
               Registration Statement on Form S-1 (Registration No. 33-17174),
               incorporated herein by this reference.

    10(j)      Agreement of Limited Partnership of Cencom Partners, L.P., dated      N/A
               January 30, 1990, by and N/A between the Registrant and Cencom
               Cable Associates, Inc., filed as Exhibit 10(j) to the
               Registrant's Form 10-K for the year ended December 31, 1990,
               incorporated herein by this reference.

    10(r)      Assignment of shares of common stock of the General Partner,          N/A
               dated July 15, 1994, filed as N/A Exhibit 10(r) to the
               Registrant's Form 10-K for the year ended December 31, 1994,
               incorporated herein by reference.

    10(s)      Assignment of the Management Agreement, dated July 15, 1994,          N/A
               between the General Partner and N/A Cencom Cable Associates,
               Inc., filed as Exhibit 10(s) to the Registrant's Form 10-K for
               the year ended December 31, 1994, incorporated herein by
               reference.


    10(t)      Transfer of Limited Partnership Interest in the Registrant, dated     N/A
               January 18, 1995, filed as N/A Exhibit 10(t) to the Registrant's
               Form 10-K for the year ended December 31, 1994, incorporated
               herein by reference.

    10(u)      Assignment of Limited Partnership Interest in Cencom Partners,        N/A
               L.P., dated January 18, 1995, N/A filed as Exhibit 10(u) to the
               Registrant's Form 10-K for the year ended December 31, 1994,
               incorporated herein by reference.

    10(y)      Credit Agreement dated May 23, 1997 among Cencom Cable Income         N/A
               Partners II, L.P. and Cencom N/A Partners, L.P. as Borrowers and
               Canadian Imperial Bank of Commerce as the Lender and Agent, filed
               as Exhibit 10(y) to the Registrant's Form 10-Q for the quarter
               ended March 31, 1996 and incorporated herein by reference.

   *10(z)      Asset Purchase Agreement dated December 18, 1998, between the
               Registrant and Etan Industries, Inc.

  *10(aa)      Asset Purchase Agreement dated December 18, 1998, between Cencom
               Partners, L.P. and Etan Industries, Inc.

  *10(bb)      Amendment Letter dated December 3, 1998 amending Credit Agreement 
               dated May 23, 1995

     *12       Ratio of Earnings to Fixed Charges.

   *27.1       Financial Data Schedule.
</TABLE>


                                      E-1
<PAGE>   25
                      CENCOM CABLE INCOME PARTNERS II, L.P.

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES



<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>                                                                                  <C>
REGISTRANT'S FINANCIAL STATEMENTS:
   Report of Independent Public Accountants                                          F-2
   Balance Sheets as of December  31, 1998 and 1997                                  F-3
   Statements of Operations for the years ended December 31, 1998, 1997 and 1996     F-4 
   Statements of Partners' Deficit for the years ended December 31, 1998,
   1997 and 1996                                                                     F-5
   Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996     F-6 
   Notes to Financial Statements                                                     F-7

REGISTRANT'S FINANCIAL STATEMENT SCHEDULES:
   None required

FINANCIAL STATEMENTS OF CENCOM PARTNERS, L.P.:
   Report of Independent Public Accountants                                          F-17
   Balance Sheets as of December 31, 1998 and 1997                                   F-18
   Statements of Operations for the years ended December 31, 1998, 1997 and 1996     F-19
   Statements of Partners' Capital (Deficit) for the years ended December
   31, 1998, 1997 and 1996                                                           F-20
   Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996     F-21 
   Notes to Financial Statements                                                     F-22

CENCOM PARTNERS, L.P. FINANCIAL STATEMENT SCHEDULES:
   None required
</TABLE>


                                      F-1
<PAGE>   26
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To Cencom Cable Income Partners II, L.P.:


We have audited the accompanying balance sheets of Cencom Cable Income Partners
II, L.P. (a Delaware limited partnership) as of December 31, 1998 and 1997, and
the related statements of operations, partners' deficit and cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

As discussed in Note 2, the Partnership Agreement of Cencom Cable Income
Partners II, L.P. provides for the dissolution of the Partnership on or before
December 31, 1995. The General Partner is in the process of a complete and
orderly dissolution of the Partnership. Upon dissolution, the General Partner or
other authorized liquidating agent is required to liquidate the Partnership's
assets and distribute the proceeds thereof in accordance with the provisions of
the Partnership Agreement. Proceeds ultimately received upon liquidation could
differ substantially from the amounts recorded in the accompanying financial
statements.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cencom Cable Income Partners
II, L.P. as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.



ARTHUR ANDERSEN LLP /s/



St. Louis, Missouri,
   February 5, 1999



                                      F-2
<PAGE>   27




                      CENCOM CABLE INCOME PARTNERS II, L.P.


                   BALANCE SHEETS - DECEMBER 31, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                                              1998            1997
                                                                                          ------------    ------------

                                     ASSETS

<S>                                                                                       <C>             <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                              $    267,002    $    220,104
   Accounts receivable, net of allowance for doubtful accounts of $14,387 and
     $17,990, respectively                                                                      52,409          98,685
   Prepaid expenses and other                                                                   30,844          29,458
                                                                                          ------------    ------------
           Total current assets                                                                350,255         348,247

PROPERTY, PLANT AND EQUIPMENT, net                                                           4,156,583       3,003,525

FRANCHISE COSTS, net of accumulated amortization of $1,285,846 and $1,262,965,
   respectively                                                                                 10,521          33,402

DEBT ISSUANCE COSTS, net of accumulated amortization of $82,545 and $30,411,
   respectively                                                                                208,533         260,667

INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP                                             3,171,808       2,633,748

RESTRICTED FUNDS HELD IN ESCROW                                                                     --         750,000
                                                                                           -----------     -----------
                                                                                           $ 7,897,700     $ 7,029,589
                                                                                           ===========     ===========

                        LIABILITIES AND PARTNERS' DEFICIT

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                                   $ 1,310,831     $ 3,084,357
   Payables to General Partner and affiliates                                                6,291,552       5,141,521
   Subscriber deposits                                                                          10,527          11,542
                                                                                           -----------     -----------
           Total current liabilities                                                         7,612,910       8,237,420
                                                                                           -----------     -----------

DEFERRED REVENUE                                                                                19,774          18,536
                                                                                           -----------     -----------

LONG-TERM DEBT                                                                               3,800,000       4,600,000
                                                                                           -----------     -----------
PARTNERS' DEFICIT:
   General Partner                                                                                  --              --
   Limited Partners (250,000 units authorized; 90,915 units issued and outstanding)         (3,075,817)     (5,367,200)
   Note receivable from General Partner                                                       (459,167)       (459,167)
                                                                                           -----------     -----------
           Total Partners' deficit                                                          (3,534,984)     (5,826,367)
                                                                                           -----------     -----------
                                                                                           $ 7,897,700     $ 7,029,589
                                                                                           ===========     ===========
</TABLE>


      The accompanying notes are an integral part of these balance sheets.


                                      F-3


<PAGE>   28

                      CENCOM CABLE INCOME PARTNERS II, L.P.


                            STATEMENTS OF OPERATIONS
 

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                              1998            1997             1996
                                                                          -----------     ------------    ------------
<S>                                                                       <C>            <C>              <C>         
SERVICE REVENUES:
   Basic service                                                          $ 4,688,399     $  6,916,999    $ 13,485,981
   Premium service                                                            697,063        1,070,210       2,241,316
   Other                                                                      729,149        1,258,947       2,428,085
                                                                          -----------     -------------   ------------
                                                                            6,114,611        9,246,156      18,155,382
                                                                          -----------     -------------   ------------
OPERATING EXPENSES:
   Operating costs                                                          2,335,126        3,886,725       7,864,914
   General and administrative                                                 705,967          991,383       1,560,430
   Liquidation costs                                                               --          334,655         241,600
   Depreciation and amortization                                              652,437        2,278,705       6,235,182
   Management fees - related party                                            305,581          462,049         905,071
                                                                          -----------     -------------   ------------
                                                                            3,999,111        7,953,517      16,807,197
                                                                          -----------     -------------   ------------
           Income from operations                                           2,115,500        1,292,639       1,348,185
                                                                          -----------     -------------   ------------
OTHER INCOME (EXPENSE):
   Interest income                                                             39,632          216,190          39,909
   Interest expense                                                          (401,809)      (1,323,920)     (2,835,247)
   Equity in income of unconsolidated limited partnership                     538,060        8,133,748              --
   Gain on sale of cable television systems                                        --       36,230,293              --
                                                                          -----------     -------------   ------------
                                                                              175,883       43,256,311      (2,795,338)
                                                                          -----------     -------------   ------------
           Net income (loss)                                              $ 2,291,383     $ 44,548,950    $ (1,447,153)
                                                                          ===========     ============    ============
NET INCOME (LOSS) ALLOCATION TO PARTNERS' CAPITAL ACCOUNTS:

   General Partner                                                        $               $  2,828,374    $    (14,472)
   Limited Partner                                                          2,291,383       41,720,576      (1,432,681)
                                                                          -----------     -------------   ------------
                                                                          $ 2,291,383     $ 44,548,950    $ (1,447,153)
                                                                          ===========     ============    ============

NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT                            $     25.20     $     458.90    $     (15.76)
                                                                          ===========     ============    ============
</TABLE>



        The accompanying notes are an integral part of these statements.



                                      F-4
<PAGE>   29
                      CENCOM CABLE INCOME PARTNERS II, L.P.


                         STATEMENTS OF PARTNERS' DEFICIT

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



<TABLE>
<CAPTION>
                                                                                              Note
                                                                                           Receivable
                                                                                              From
                                                             General         Limited        General
                                                             Partner        Partners         Partner         Total
                                                            -----------    ------------    ---------      ------------
<S>               <C> <C>                                   <C>            <C>             <C>            <C>          
BALANCE, December 31, 1995                                  $(2,813,902)   $(17,107,785)   $(459,167)     $(20,380,854)

   Net loss                                                     (14,472)     (1,432,681)          --        (1,447,153)

BALANCE, December 31, 1996                                   (2,828,374)    (18,540,466)    (459,167)      (21,828,007)

   Net income                                                 2,828,374      41,720,576           --        44,548,950
   Distributions                                                     --     (28,547,310)          --       (28,547,310)
                                                            -----------    ------------    ---------      ------------
BALANCE, December 31, 1997                                           --      (5,367,200)    (459,167)       (5,826,367)

   Net income                                                        --       2,291,383           --         2,291,383
                                                            -----------    ------------    ---------      ------------
BALANCE, December 31, 1998                                  $        --    $ (3,075,817)   $(459,167)     $ (3,534,984)
                                                            ===========    ============    =========      ============
</TABLE>






        The accompanying notes are an integral part of these statements.



                                      F-5
<PAGE>   30
                      CENCOM CABLE INCOME PARTNERS II, L.P.


                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                            1998            1997            1996
                                                                        ------------    ------------    ------------
<S>                                                                     <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                    $  2,291,383    $ 44,548,950    $ (1,447,153)
   Adjustments to reconcile net income (loss) to net cash provided by
     operating activities-
       Depreciation and amortization                                         652,437       2,278,705       6,235,182
       Amortization of debt issuance costs                                    52,134         380,411              --
       Equity in income of unconsolidated limited partnership               (538,060)     (8,133,748)             --
       Gain on sale of cable television systems                                   --     (36,230,293)             --
       Changes in assets and liabilities-
         Accounts receivable, net                                             46,276        (207,812)        (31,740)
         Prepaid expenses and other                                           (1,386)        (29,421)         71,218
         Accounts payable and accrued expenses                            (1,773,526)      1,428,145         236,758
         Payables to General Partner and affiliates                        1,150,031       1,608,941         800,961
         Subscriber deposits                                                  (1,015)         (1,225)         (2,215)
         Deferred revenue                                                      1,238          (2,761)         (3,101)
                                                                        ------------    ------------    ------------
           Net cash provided by operating activities                       1,879,512       5,639,892       5,859,910
                                                                        ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property, plant and equipment                             (1,782,614)     (1,239,907)     (2,108,233)
   Proceeds from sale of cable television systems, net of cash sold               --      51,477,222              --
   Distribution from investment in unconsolidated limited partnership             --       5,500,000              --
   Restricted funds held in escrow                                           750,000        (750,000)             --
                                                                        ------------    ------------    ------------
           Net cash (used in) provided by investing activities            (1,032,614)     54,987,315      (2,108,233)
                                                                        ------------    ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions to Limited Partners                                         --     (26,330,542)             --
   Income taxes withheld related to distribution                                  --      (2,216,768)             --
   Borrowings under revolving line of credit                               2,500,000       6,125,000         200,000
   Payments of revolving line of credit                                   (3,300,000)    (38,225,000)     (3,900,000)
   Payments of debt issuance costs                                                --        (291,078)       (456,250)
                                                                        ------------    ------------    ------------
           Net cash used in financing activities                            (800,000)    (60,938,388)     (4,156,250)
                                                                        ------------    ------------    ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                                                              46,898        (311,181)       (404,573)

CASH AND CASH EQUIVALENTS, beginning of year                                 220,104         531,285         935,858
                                                                        ------------    ------------    ------------
CASH AND CASH EQUIVALENTS, end of year                                  $    267,002    $    220,104    $    531,285
                                                                        ============    ============    ============

CASH PAID FOR INTEREST                                                  $    418,353    $    932,499    $  2,868,914
                                                                        ============    ============    ============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                      F-6
<PAGE>   31

                      CENCOM CABLE INCOME PARTNERS II, L.P.


                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997 AND 1996


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization and Basis of Presentation

Cencom Cable Income Partners II, L.P. (the "Partnership" or "CCIP II"), was
formed on August 13, 1987, for the purpose of acquiring and operating existing
cable television systems. CC II Holdings, Inc. (CC II Holdings) acquired the
common stock of Cencom Properties II, Inc. (Cencom Properties II or the "General
Partner") from Cencom Cable Associates, Inc. in September 1994. CC II Holdings
is a wholly owned subsidiary of Charter Communications, Inc. (Charter). The
Partnership was to be dissolved no later than December 31, 1995, as provided in
the partnership agreement (the "Partnership Agreement"). As of December 31,
1998, the Partnership is in the process of a complete and orderly dissolution of
the Partnership (see Note 2).

Effective December 23, 1998, through a series of transactions, Paul G. Allen
acquired approximately 94% of Charter. No adjustments have been made to the
accompanying financial statements to reflect the push down and allocation of the
purchase price.

As of December 31, 1998, the Partnership provided cable television service to
approximately 17 franchises serving approximately 13,600 basic subscribers in
northeast Missouri and Texas.

Cash Equivalents

Cash equivalents consist primarily of repurchase agreements with original
maturities of 90 days or less. These investments are carried at cost, which
approximates market value.

Revenue Recognition

Cable service revenues are recognized in the period when the related services
are provided.

Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
average estimated period that customers are expected to remain connected to the
cable television system.

Fees collected from programmers to guarantee carriage are deferred and amortized
to income over the life of the contracts. Franchise fees collected from cable
subscribers and paid to local franchises are reported as revenues.

Depreciation and Amortization

The Partnership provides depreciation using the composite method of depreciation
on a straight-line basis over the estimated useful lives of the related
property, plant and equipment as follows:

<TABLE>
<CAPTION>
<S>                                                                   <C>     
         Trunk and distribution systems                               10 years
         Subscriber installations                                     10 years
         Buildings and headends                                     9-20 years
         Converters                                                  3-5 years
         Vehicles and equipment                                      4-8 years
         Office equipment                                           5-10 years
</TABLE>

                                        F-7
<PAGE>   32


Franchise costs are being amortized using the straight-line method over the term
of the individual franchise agreements. Debt issuance costs are being amortized
over the term of the debt.

The Partnership periodically reviews the carrying value of its long-lived
assets, identifiable intangibles and franchise costs in relation to historical
financial results, current business conditions and trends (including the impact
of existing legislation and regulation) to identify potential situations in
which the carrying value of such assets may not be recoverable. If a review
indicates that the carrying value of such assets may not be recoverable, the
carrying value of such assets in excess of their fair value would be recorded as
a reduction of the assets' cost as if a permanent impairment has occurred. No
impairments have occurred and no adjustments to the financial statements of the
Partnership have been recorded.

Investment in Unconsolidated Limited Partnership

The Partnership owns Limited Partnership units of Cencom Partners, L.P. (CPLP)
which provide the Partnership an 84.03% ownership interest in CPLP. The
Partnership accounts for its investment in CPLP using the equity method (see
Note 4).

Liquidation Costs

Certain liquidation costs which are not directly attributed to the Partnership
(i.e., accounting, legal, etc.) have been allocated between the Partnership and
CPLP based upon the number of total basic subscribers prior to the sale of any
systems.

Income Taxes

Income taxes are the responsibility of the partners and as such are not provided
for in the accompanying financial statements.

Net Income (Loss) Per Limited Partnership Unit

The net income (loss) per Limited Partnership unit has been calculated based on
90,915 weighted average Limited Partnership units outstanding each year.

Use of 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 and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

2.  LIQUIDATION, DISTRIBUTIONS AND ALLOCATIONS:

Distributions and Allocations

Profits and losses are generally allocated in proportion to the partners'
capital contributions. The Partnership is required to distribute all cash
available for distribution. Distributions are made within 60 days after the end
of each calendar quarter. The Limited Partners receive 100% of all cash
available for distribution until they receive a cumulative 11% per annum
preference return on their adjusted capital contributions. After the Limited
Partners have received the 11% preferred return, the General Partner will


                                      F-8
<PAGE>   33


receive 11% per annum on its capital contribution. Thereafter, the Limited
Partners will receive 99% and the General Partner will receive 1% of all
additional cash available for distribution. During the fourth quarter of 1993,
the Partnership suspended distributions to Limited Partners to meet its debt
covenants and allow for necessary capital expenditures. No distributions were
made in 1998 or 1996.

Liquidation of the Partnership and CPLP

The General Partner distributed a disclosure statement to the Limited Partners
on March 6, 1997, which described various transactions and requested consent for
certain proposed sales of cable television systems by the Partnership and CPLP
to affiliates of the General Partner. CPLP is seeking to dispose of its assets
to facilitate the liquidation of the Partnership. A majority of the Limited
Partners gave their consent for the sale of certain cable television systems to
affiliates of the General Partner. Following receipt of the Limited Partners'
consent, the Partnership and CPLP consummated the transactions with the
affiliates of the General Partner, in accordance with the disclosure statement.

On March 31, 1997, the Partnership consummated the sale of certain of the cable
television systems located in Texas in two separate asset sale transactions with
unaffiliated third parties. The sales price was approximately $15.3 million.

On April 7, 1997, the Partnership consummated the sale of certain cable
television systems serving Anderson County, South Carolina, to an affiliate of
Charter for approximately $36.7 million.

Proceeds from the sales of the Texas systems on March 31, 1997, and the South
Carolina systems on April 7, 1997, were used to reduce to zero the balance of
outstanding indebtedness, with the remaining funds of approximately $14.0
million placed in short-term investments.

Proceeds from the sale of certain cable television systems owned by CPLP on
April 7, 1997, to affiliates of the General Partner enabled CPLP to reduce the
balance of its outstanding indebtedness to zero and retire its special limited
partnership interests, with the remaining funds of approximately $6.6 million
placed in short-term investments. During May 1997, CPLP distributed $5.5 million
to the Partnership.

The Partnership utilized its short-term investments, the distribution received
from CPLP and funds available under its new credit facility (see Note 6) for the
purpose of making a distribution to the Limited Partners. During June 1997, the
Partnership made a total distribution to the Limited Partners of $314 per unit,
less $2.2 million withheld for state income taxes for a total net cash
distribution of approximately $26.3 million. No distribution was made by the
Partnership to the General Partner.

The General Partner has accepted a bid from a nonaffiliate for the Partnership's
remaining Southeast Texas systems for an aggregate purchase price of $20.8
million, subject to execution of the final sale agreement. CPLP's general
partner has accepted a bid from a nonaffiliate for CPLP's Texas systems for an
aggregate purchase price of $11.2 million, subject to execution of the final
sale agreement. The proceeds from the sale of the Partnership's Southeast Texas
systems will first be used to pay off the outstanding indebtedness of the
Partnership and to satisfy other liabilities and expenses with the remaining
funds to be distributed to the partners in accordance with the liquidation
provisions of the Partnership. The proceeds from the sale of CPLP's Texas
systems will first be used to satisfy its liabilities and expenses with the
remaining funds distributed to its partners, of which 84.03% will be distributed
to the Partnership. The Partnership will then distribute these funds to its
partners in accordance with the liquidation provisions of the Partnership
Agreement.

                                      F-9
<PAGE>   34


The Partnership entered into a non-binding letter of intent with an unaffiliated
third-party for the sale of its systems in northeast Missouri. Although
negotiations with respect to a sale agreement are on-going, there is no
assurance that a definitive sale agreement will be executed or that the sale
will be completed.

Upon dissolution, the General Partner or other liquidating agent is required to
liquidate partnership assets and to distribute all available proceeds as soon as
practicable after their receipt by the Partnership. After payment of the
Partnership's liabilities, these sales proceeds will be distributed as set forth
in the Partnership Agreement.

Upon finalization of a complete plan of liquidation and the determination of net
proceeds (in accordance with that prescribed in the Partnership Agreement) from
sales of all assets, the Partnership will change its basis of accounting from
the going-concern basis to the liquidation basis. Under the liquidation basis of
accounting, assets are recorded at their realizable values and liabilities are
recorded at their estimated settlement amounts.

3.  PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment is stated at cost and consists of the following at
December 31:


<TABLE>
<CAPTION>
                                                    1998             1997
                                              -------------     -------------

<S>                                           <C>               <C>          
     Trunk and distribution systems           $   7,852,693     $   6,434,524
     Subscriber installations                     2,747,376         2,520,807
     Land, buildings and headends                 2,102,725         2,068,982
     Converters                                   1,425,690         1,349,536
     Vehicles and equipment                         811,152           797,913
     Office equipment                               381,078           366,338
                                              -------------     -------------
                                                 15,320,714        13,538,100

     Less- Accumulated depreciation             (11,164,131)      (10,534,575)
                                              -------------     -------------
                                              $   4,156,583     $   3,003,525
                                              =============     =============
</TABLE>

4.  INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP:

The Partnership has invested approximately $25.0 million in CPLP. CPLP utilized
these funds to purchase cable television systems in North Carolina, South
Carolina and Texas. The Partnership's equity contribution consisted of the
balance of funds which had previously been restricted for investment in cable
television systems, plus approximately $18.1 million of allowable borrowings as
specified by the Partnership Agreement. The Partnership is allocated 84.03%
(based on ownership interest) of CPLP's net income or losses and accounts for
its investment in CPLP under the equity method. Losses in excess of its
investment in CPLP are not recorded. For the years ended December 31, 1998 and
1997, the Partnership recorded income from its investment in CPLP totaling
approximately $0.5 million and $8.1 million net of previously unrecorded losses
of approximately $-0- and $15.8 million. Also, during May 1997, the Partnership
received a cash distribution from CPLP in the amount of $5.5 million.

                                      F-10
<PAGE>   35


Summary financial information of CPLP as of December 31, 1998 and 1997, and for
each of the three years in the period ended December 31, 1998, which is not
consolidated with the operating results of the Partnership, is as follows:

<TABLE>
<CAPTION>
                                                                             1998         1997
                                                                          ----------   ----------
<S>                                                                       <C>          <C>
Current assets                                                            $2,047,167   $1,166,130
Noncurrent assets - primarily investment in cable television properties    2,489,572    2,448,493
                                                                          ----------   ----------
           Total assets                                                   $4,536,739   $3,614,623
                                                                          ==========   ==========

Current liabilities                                                       $  729,318   $  442,052
Deferred revenue                                                              32,810       38,279
Partners' capital                                                          3,774,611    3,134,292
                                                                          ----------   ----------
           Total liabilities and partners' capital                        $4,536,739   $3,614,623
                                                                          ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                               1998           1997            1996
                                           ------------   ------------    ------------

<S>                                        <C>            <C>             <C>         
Service revenues                           $  2,602,921   $  5,708,441    $ 13,748,224
                                           ============   ============    ============

Income (loss) from operations              $    650,456   $   (144,178)   $ (1,776,152)
                                           ============   ============    ============

Gain on sale of cable television systems   $         --   $ 32,614,343    $        --
                                           ============   ============    ============

Net income (loss)                          $    640,319   $ 31,598,553    $ (4,756,897)
                                           ============   ============    ============
</TABLE>

5.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

Accounts payable and accrued expenses consist of the following at December 31:

<TABLE>
<CAPTION>
                                                       1998             1997
                                                    -----------     -----------
<S>                                                <C>            <C>          
     Accounts payable                               $   285,485     $    84,943
     Capital expenditures                               192,226          17,634
     Accrued liquidation costs                               --          25,264
     Accrued salaries and related benefits               23,891          52,011
     Professional fees                                   62,614          63,457
     Property taxes                                     160,154          68,489
     Franchise fees                                     132,007         123,226
     Programming expenses                               171,169         176,609
     Accrued withholdings tax                                --       2,216,768
     Other                                              283,285         255,956
                                                    -----------     ------------
                                                    $ 1,310,831     $ 3,084,357
                                                    ===========     ===========
</TABLE>


                                      F-11
<PAGE>   36


6. LONG-TERM DEBT:

Prior to May 23, 1997, the Partnership maintained a secured revolving line of
credit agreement (the "Old Credit Agreement") with a consortium of banks for
borrowings up to $65,000,000. On December 31, 1996, the Partnership and the
banks amended the Old Credit Agreement to extend the maturity date to June 30,
1997. The Partnership paid $350,000 in amendment fees in connection with this
amendment which were recorded as debt issuance costs. Loans under the Old Credit
Agreement bore interest, with the base rate being at the Partnership's election,
at the Toronto Dominion's (the agent bank) prime rate of interest, Eurodollar or
certificates of deposit rate, plus a certain spread. The applicable spreads were
based on the ratio of debt to annualized operating cash flow. At December 31,
1996, the interest rates ranged from 6.81% to 8.50%. The weighted average
interest rates and borrowings for the period from January 1, 1997, to May 23,
1997, and for the year ended December 31, 1996, were 7.14% and 7.29%, and
approximately $24,108,000 and $38,889,000, respectively.

On May 23, 1997, the Partnership terminated its existing secured revolving line
of credit agreement and entered into a new credit agreement (the "Credit
Agreement") with a bank for borrowings up to $8,500,000. The Credit Agreement
also provides for borrowings up to $7,500,000 by CPLP, with each partnership
held jointly and severally liable in the event of default. At December 31, 1998
and 1997, CCIP II had $3,800,000 and $4,600,000, respectively, of indebtedness
outstanding under the Credit Agreement and CPLP had $-0- of indebtedness
outstanding under the Credit Agreement. The debt bears interest at rates, at the
Partnership's option, based on the higher of the prime rate of the Canadian
Imperial Bank of Commerce (the agent bank) or the Federal Funds Rate plus 0.75%,
or the LIBOR plus applicable margins based upon the Partnership's leverage ratio
at the time of the borrowings. At December 31, 1998 and 1997, the interest rates
on this outstanding indebtedness were 7.31% and 7.72%. The weighted average
interest rates and borrowings by CCIP II for the period from May 23, 1997, to
December 31, 1997, and for the year ended December 31, 1998, related to the
Credit Agreement were 8.68% and 8.89% and approximately $4,028,000 and
$4,509,000, respectively. As this debt instrument bears interest at current
market rates, its carrying amount approximates fair market value at December 31,
1998 and 1997.

Borrowings under the Credit Agreement are subject to certain financial and
nonfinancial covenants and restrictions, the most restrictive requires the
maintenance of a ratio of total debt to annualized operating cash flow of 4.0 to
1.0 at December 31, 1998. A quarterly commitment fee of 0.375% per annum is
payable on the unused portion of the Credit Agreement. Commencing March 31,
1999, and at the end of each calendar quarter thereafter, the borrowing capacity
shall be reduced by $800,000. Quarterly reductions will continue until March 31,
2002, at which time the borrowing capacity shall be reduced by $1,600,000,
quarterly until December 31, 2002.

7. RELATED-PARTY TRANSACTIONS:

During 1994, Cencom Cable Associates, Inc. assigned management services under
contract with the Partnership to the General Partner. The management service
contract provides for the payment of fees equal to 5% of the Partnership's
annual gross operating revenue. Expenses recorded under this contract by the
Partnership during 1998, 1997 and 1996 were $305,581, $462,049 and $905,071,
respectively. Up to 50% of the management fee payment is subordinated to certain
quarterly distributions to the Limited Partners. Since assumption of the
responsibilities under the contract, the General Partner has elected to defer
payment of all such management fees. Management fees of $4,381,881 and
$4,076,307 have been deferred and are included in Payables to General Partner
and Affiliates at December 31, 1998 and 1997, respectively. In addition to the
management fees, the Partnership reimburses the General Partner for expenses
incurred on behalf of the Partnership for performance of services under the
contract.

Payables to General Partner and Affiliates at December 31, 1998 and 1997,
include a $1,863,931 and $1,050,000, respectively, noninterest bearing payable
to CPLP.

The Partnership has a noninterest-bearing promissory note receivable due on
demand from the General Partner which represents one-half of its required
capital contribution.

                                      F-12
<PAGE>   37


The Partnership and all entities affiliated with Charter collectively utilize a
combination of insurance coverage and self-insurance programs for medical,
dental and workers' compensation claims. The Partnership is allocated charges
monthly based upon its total number of employees, historical claims and medical
cost trend rates. Management considers this allocation to be reasonable for the
operations of the Partnership. During 1998, 1997 and 1996, the Partnership
expensed approximately $55,000, $89,300 and $150,700, respectively, relating to
insurance allocations.

Affiliated entities maintain several regional offices. The regional offices
perform certain operational services on behalf of the Partnership and other
affiliated entities. The cost of these services is allocated to the Partnership
based on its number of subscribers. Management considers this allocation to be
reasonable for the operations of the Partnership. During 1998, 1997 and 1996,
the Partnership expensed approximately $85,000, $112,000 and $189,000,
respectively, relating to this allocation.

8.  COMMITMENTS AND CONTINGENCIES:

Leases

The Partnership leases certain facilities and equipment under noncancelable
operating leases. Rent expense incurred under these leases during 1998, 1997 and
1996 was approximately $41,400, $67,000 and $99,200, respectively.

Future minimum lease payments are as follows:

<TABLE>
           <S>                                                      <C>    
           1999                                                     $40,800
           2000                                                      37,500
           2001                                                      36,700
           2002                                                      31,200
           2003                                                      31,200
           Thereafter                                                26,900
</TABLE>

The Partnership rents utility poles in its operations. Generally, pole rental
agreements are short term, but the Partnership anticipates that such rentals
will continue to recur. Rent expense for pole attachments during 1998, 1997 and
1996 was approximately $77,500, $151,000 and $317,000, respectively.

Litigation

Abeles v. Cencom Cable Entertainment, Inc., et. al.

On June 17, 1998, approximately 400 limited partners in CCIP II filed a lawsuit
against the General Partner, Cencom Cable Entertainment, Inc. (CCE),
(collectively "Cencom Defendants"), and three brokerage firms involved in the
original sale of limited partnership units in the Circuit Court of Jackson
County, Missouri. CCE provided management services to the Partnership and also
owned all of the stock of the General Partner prior to mid-1994.

Plaintiffs allege that the Cencom Defendants are liable for fraud, negligent
misrepresentation or omission, negligence, breach of fiduciary duty, breach of
implied covenants and violations of the Missouri Merchandising Practices Act in
connection with the sale of limited partnership interests in CCIP II commencing
in 1987. Plaintiffs seek recession of the purchase of the securities along with
ancillary damages, actual damages, punitive damages, costs and attorneys' fees.

On August 17, 1998, the Cencom Defendants filed a Motion to Dismiss. On November
5, 1998, the Court heard oral argument on that motion. Discovery has been stayed
during the pendency of the Motion to Dismiss.

                                      F-13
<PAGE>   38


Wallace v. Wood, et. al.

On June 10, 1997, four limited partners of the Partnership filed a putative
class action suit on behalf of the limited partners presently in Delaware
Chancery Court against the General Partner, Charter, certain other Charter
affiliates and four present or former officers of the General Partner. The
Plaintiffs subsequently amended their lawsuit and converted it to a Derivative
Action, thus adding the Partnership as a nominal defendant.

Plaintiffs allege that the Defendants breached the Partnership Agreement and
their fiduciary duties of loyalty and candor in connection with the management
of the Partnership and the sale of the Partnership assets to certain purchasing
affiliates. Plaintiffs seek a declaration that the distribution to the Limited
Partners is improper, request that defendants compensate the Partnership for all
damages suffered as a result of the actions and transactions, including
interest, costs, reasonable attorneys' fees, accountants' and experts' fees and
request an accounting for all monies earned by the properties after the
effective date of the sale to the purchasing affiliates.

On May 19, 1998, Defendants filed a Motion for Judgment on the Pleadings,
seeking dismissal of certain of the defendants from the lawsuit. That motion is
pending before the Court.

The Partnership is not a named defendant in the Jackson County litigation and is
a nominal defendant in the Delaware litigation.

9. RATE REGULATION IN THE CABLE TELEVISION INDUSTRY:

The cable television industry is subject to extensive regulation at the federal,
local and, in some instances, state levels. The Cable Communications Policy Act
of 1984 (the "1984 Cable Act"), the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act" and together with the 1984 Cable
Act, the "Cable Acts"), and the Telecommunications Act of 1996 (the "1996
Telecom Act"), established a national policy to guide the development and
regulation of cable television systems. The Federal Communications Commission
(FCC) has principal responsibility for implementing the policies of the Cable
Acts. Many aspects of such regulation are currently the subject of judicial
proceedings and administrative or legislative proposals. Legislation and
regulations continue to change, and the Company cannot predict the impact of
future developments on the cable television industry.

The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.

The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. The Company may be
required to refund additional amounts in the future.

The Company believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous twelve-month period may be ordered upon
certification if the Company is unable to justify its basic rates. The Company
is unable to estimate at this time the amount of refunds, if any, that may be
payable by the Company in the event certain of its rates are successfully
challenged by franchising authorities or found to be unreasonable by the FCC.
The Company does not believe that the amount of any such refunds would have a
material adverse effect on the financial position or results of operations of
the Company.

The 1996 Telecom Act, among other things, immediately deregulated the rates for
certain small cable operators and in certain limited circumstances rates on the
basic service tier, and as of March 31, 1999,


                                      F-14
<PAGE>   39


deregulates rates on the cable programming service tier (CPST). The FCC is
currently developing permanent regulations to implement the rate deregulation
provisions of the 1996 Telecom Act. The Company cannot predict the ultimate
effect of the 1996 Telecom Act on the Company's financial position or results of
operations.

The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Company.

A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation. The Company is subject to state regulation in
Connecticut.

10.  401(k) PLAN:

The Partnership's employees may participate in the Charter Communications, Inc.
401(k) Plan (the "Plan"). All employees who have attained age 21 and completed
two months of employment are eligible to participate in the Plan. The Plan is a
tax-qualified retirement savings plan to which employees may elect to make
pretax contributions up to the lesser of 10% of their compensation or dollar
thresholds established under the Internal Revenue Code. The Partnership
contributes an amount equal to 50% of the first 5% contributed by each employee.
During 1998, 1997 and 1996, the Partnership contributed approximately $7,200,
$13,100 and $26,200, respectively.

11. NET INCOME (LOSS) FOR INCOME TAX PURPOSES:

The following reconciliation summarizes the differences between the
Partnership's net in income (loss) for financial reporting purposes and net
income (loss) for federal income tax purposes for the years ended December 31:


<TABLE>
<CAPTION>
                                                             1998            1997            1996
                                                         ------------    ------------    -----------
<S>                                                      <C>             <C>             <C>          
Net income (loss) for financial reporting purposes       $  2,291,383    $ 44,548,950    $ (1,447,153)
Depreciation differences between financial reporting
   and tax reporting                                          (34,678)        754,902       1,728,352
Equity in income (loss) of unconsolidated Limited
   Partnership differences between financial reporting
   and tax reporting                                           54,641      14,365,012      (2,853,381)
Differences in expenses recorded for financial
   reporting and for tax reporting                             14,932        (493,029)        224,167
Differences in revenue reported for financial
   reporting and tax reporting                                  1,239          (6,267)         (3,100)
Difference in gain on sale of cable television
  systems recorded for financial reporting and tax
  reporting                                                        --       5,933,357              --
Other                                                           1,525           2,392           4,144
                                                         ------------    ------------    ------------
Net income (loss) for federal income tax purposes
                                                         $  2,329,042    $ 65,105,317    $ (2,346,971)
                                                         ============    ============    ============
Net income (loss) per Limited Partnership unit for
   federal income tax purposes                           $      25.36    $     695.44    $     (25.82)
                                                         ============    ============    ============
</TABLE>


                                      F-15
<PAGE>   40


The following summarizes the Partnership's financial reporting basis of net
assets (in excess of) less than its income tax reporting basis as of December
31:

<TABLE>
<CAPTION>
                                                                                    1998            1997
                                                                               -------------   -------------

     <S>                                                                       <C>             <C>    
     Accounts receivable                                                         $    14,387     $    17,990
     Accrued expenses                                                                420,148         401,613
     Franchises and other assets                                                   4,074,354       4,107,755
     Deferred revenue                                                                 19,775          18,536
     Investment in unconsolidated Limited Partnership                              2,701,803       2,647,162
                                                                                 ------------    -----------
                                                                                 $ 7,230,467     $ 7,193,056
                                                                                 ===========     ===========

     Property, plant and equipment                                               $(1,090,959)    $(1,056,336)
                                                                                 ===========     ===========
</TABLE>

                                      F-16
<PAGE>   41
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To Cencom Partners, L.P.:


We have audited the accompanying balance sheets of Cencom Partners, L.P. (a
Delaware limited partnership) as of December 31, 1998 and 1997, and the related
statements of operations, partners' capital (deficit) and cash flows for each of
the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

As discussed in Note 2, Cencom Cable Income Partners II, L.P., an affiliate who
owns 84.03% of the Limited Partner units of Cencom Partners, L.P., is in the
process of dissolving its partnership. In connection with this process, the
assets of Cencom Partners, L.P. will be liquidated, in accordance with the
provisions of the Partnership Agreement.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cencom Partners, L.P. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.



ARTHUR ANDERSEN LLP /s/



St. Louis, Missouri,
   February 5, 1999



                                      F-17
<PAGE>   42


                              CENCOM PARTNERS, L.P.


                   BALANCE SHEETS - DECEMBER 31, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                                             1998              1997    
                                                                                        --------------    -------------

                                     ASSETS
<S>                                                                                     <C>               <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                            $    164,676      $      82,589
   Accounts receivable, net of allowance for doubtful accounts of $4,102 and $5,166,
     respectively                                                                             18,560            28,747
   Receivable from affiliate                                                               1,860,000         1,050,000
   Prepaid expenses and other                                                                  3,931             4,794
                                                                                        --------------    -------------

           Total current assets                                                            2,047,167         1,166,130

PROPERTY, PLANT AND EQUIPMENT                                                              1,985,093         1,812,830

FRANCHISE COSTS, net of accumulated amortization of $4,010,932 and $3,879,748,
   respectively                                                                              504,479           635,663
                                                                                        --------------    -------------

                                                                                         $ 4,536,739       $ 3,614,623
                                                                                        ==============    =============

                        LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                                $    504,830      $    383,667
   Payables to General Partner and affiliates                                                224,488            58,385
                                                                                        --------------    -------------

           Total current liabilities                                                         729,318           442,052
                                                                                        --------------    -------------

DEFERRED REVENUE                                                                              32,810            38,279
                                                                                        --------------    -------------

PARTNERS' CAPITAL:
   General Partner                                                                            57,185            47,580
   Limited Partners (293 units authorized, issued and outstanding)                         3,717,426         3,086,712
                                                                                        --------------    -------------

           Total Partners' capital                                                         3,774,611         3,134,292
                                                                                        --------------    -------------

                                                                                         $ 4,536,739       $ 3,614,623
                                                                                        ==============    =============
</TABLE>




      The accompanying notes are an integral part of these balance sheets.


                                      F-18
<PAGE>   43
                              CENCOM PARTNERS, L.P.


                            STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                       1998             1997                1996       
                                                                  --------------    ---------------     ---------------
<S>                                                                <C>               <C>                   <C>         
SERVICE REVENUES:
   Basic service                                                   $ 2,051,268       $   4,307,785         $ 10,176,306
   Premium service                                                     281,925             682,207            1,792,082
   Other                                                               269,728             718,449            1,779,836
                                                                  --------------    ---------------     ---------------

                                                                     2,602,921           5,708,441           13,748,224
                                                                  --------------    ---------------     ---------------

OPERATING EXPENSES:
   Operating costs                                                   1,035,388           2,371,549            5,841,053
   General and administrative                                          260,969             573,819            1,187,267
   Liquidation costs                                                        --             198,418              243,154
   Depreciation and amortization                                       525,962           2,423,543            7,565,531
   Management fees - related party                                     130,146             285,290              687,371
                                                                  --------------    ---------------     ---------------

                                                                     1,952,465           5,852,619           15,524,376
                                                                  --------------    ---------------     ---------------

           Income (loss) from operations                               650,456            (144,178)          (1,776,152)
                                                                  --------------    ---------------     ---------------

OTHER INCOME (EXPENSE):
   Interest income                                                       3,880              64,043               37,089
   Interest expense                                                         --            (973,769)          (2,634,834)
   Loss from Hurricane Fran                                                 --                  --             (383,000)
   Gain on sale of cable television systems                                 --          32,614,343                   --
   Other, net                                                          (14,017)             38,114                   --
                                                                  --------------    ---------------     ---------------

                                                                       (10,137)         31,742,731           (2,980,745)
                                                                  --------------    ---------------     ---------------

           Net income (loss)                                      $    640,319        $ 31,598,553        $  (4,756,897)
                                                                  ==============    ===============     ===============

NET INCOME (LOSS) ALLOCATION TO PARTNERS' CAPITAL ACCOUNTS:
     General Partner                                              $      9,605      $      415,294       $      (71,829)
     Limited Partner                                                   630,714          27,135,580           (4,685,068)
     Special Limited Partner                                                --           4,047,679                   --
                                                                  --------------    ---------------     ---------------

                                                                  $    640,319        $ 31,598,553        $  (4,756,897)
                                                                  ==============    ===============     ===============
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT                    $      2,153      $        92,613     $       (15,990)
                                                                  ==============    ===============     ===============
</TABLE>



        The accompanying notes are an integral part of these statements.

                                      F-19
<PAGE>   44

                              CENCOM PARTNERS, L.P.


                    STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996



<TABLE>
<CAPTION>
                                                                                        Special
                                                   General           Limited            Limited
                                                    Partner          Partners            Partner         
                                                                                                            Total      
                                                 ------------    ----------------    --------------     ---------------

<S>                                              <C>             <C>                 <C>                <C>
BALANCE, December 31, 1995                         $(197,051)      $(12,917,353)       $ 2,000,000        $(11,114,404)

   Net loss                                          (71,829)        (4,685,068)                --          (4,756,897)
                                                 ------------    ----------------    --------------     ---------------

BALANCE, December 31, 1996                          (268,880)       (17,602,421)         2,000,000         (15,871,301)

   Net income                                        415,294         27,135,580          4,047,679          31,598,553
   Distributions                                     (98,834)        (6,446,447)        (6,047,679)        (12,592,960)
                                                 ------------    ----------------    --------------     ---------------

BALANCE, December 31, 1997                            47,580          3,086,712                 --           3,134,292

   Net income                                          9,605            630,714                 --             640,319
                                                 ------------    ----------------    --------------     ---------------

BALANCE, December 31, 1998                        $   57,185      $   3,717,426      $          --       $   3,774,611
                                                 ============    ================    ==============     ===============
</TABLE>






        The accompanying notes are an integral part of these statements.


                                      F-20
<PAGE>   45
                              CENCOM PARTNERS, L.P.


                            STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                          1998            1997            1996
                                                                      ------------    ------------    ------------
<S>                                                                    <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                  $    640,319    $ 31,598,553    $ (4,756,897)
   Adjustments to reconcile net income (loss) to net cash provided
     by (used in) operating activities-
       Depreciation and amortization                                       525,962       2,423,543       7,565,531
       Amortization of debt issuance costs                                      --         199,800              --
       Gain on sale of cable television systems                                 --     (32,614,343)             --
       Changes in assets and liabilities-
         Accounts receivable, net                                           10,187        (286,807)        (32,101)
         Insurance receivables                                                  --         313,290        (313,290)
         Receivable from affiliate                                        (813,931)     (1,050,000)             --
         Prepaid expenses and other                                          4,794         (21,913)         77,636
         Accounts payable and accrued expenses                             121,163        (244,574)       (277,439)
         Payables to General Partner and affiliates                        166,103      (3,300,299)        615,459
         Subscriber deposits                                                    --          38,850         (11,905)
         Deferred revenue                                                   (5,469)         (7,765)        (21,849)
                                                                      ------------    ------------    ------------

           Net cash provided by (used in) operating activities             649,128      (2,951,665)      2,845,145
                                                                      ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property, plant and equipment                             (567,041)     (1,972,836)     (2,427,274)
   Proceeds from sale of cable television systems, net of cash sold             --      52,014,251              --
                                                                      ------------    ------------    ------------

           Net cash (used in) provided by investing activities            (567,041)     50,041,415      (2,427,274)
                                                                      ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions to partners                                              --     (12,592,960)              --
   Payments of long-term debt                                                  --     (34,957,500)              --
   Debt issuance costs                                                         --              --         (287,104)
                                                                      ------------    ------------    ------------

           Net cash used in financing activities                               --      (47,550,460)       (287,104)
                                                                      ------------    ------------    ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        82,087        (460,710)        130,767

CASH AND CASH EQUIVALENTS, beginning of year                                82,589         543,299         412,532
                                                                      ------------    ------------    ------------

CASH AND CASH EQUIVALENTS, end of year                                $    164,676    $     82,589    $    543,299
                                                                      ============    ============    ============

CASH PAID FOR INTEREST                                                $        --     $    766,668    $  2,981,421
                                                                      ============    ============    ============
</TABLE>



        The accompanying notes are an integral part of these statements.


                                      F-21
<PAGE>   46
                              CENCOM PARTNERS, L.P.


                          NOTES TO FINANCIAL STATEMENTS

                           DECEMBER 31, 1998 AND 1997


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization and Basis of Presentation

Cencom Partners, L.P. (the "Partnership") was formed on January 30, 1990, for
the purpose of acquiring and operating existing cable television systems. The
Partnership commenced operations effective March 1990, through the acquisition
of a cable television system in South Carolina. The Partnership will terminate
no later than June 30, 2001, as provided in the partnership agreement (the
"Partnership Agreement") (see Note 2). CC III Holdings, Inc. (CC III Holdings)
acquired the common stock of Cencom Partners, Inc. (Cencom Partners or the
"General Partner") from Cencom Cable Associates, Inc. in September 1994. The
General Partner owns 1.51% of total partner units. CC III Holdings is a wholly
owned subsidiary of Charter Communications, Inc. (Charter). Cencom Cable Income
Partners II, L.P. (CCIP II), an affiliate, owns 84.03% of total partner units
with the remaining 14.46% owned by Charter.

Effective December 23, 1998, through a series of transactions, Paul G. Allen
acquired approximately 94% of Charter. No adjustments have been made to the
accompanying financial statements to reflect the push down and allocation of the
purchase price.

As of December 31, 1998, the Partnership provided cable television service to
approximately five franchises serving basic subscribers in Texas.

Cash Equivalents

Cash equivalents consist primarily of repurchase agreements with original
maturities of 90 days or less. These investments are carried at cost, which
approximates market value.

Revenue Recognition

Cable service revenues are recognized when the related services are provided.

Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
average estimated period that customers are expected to remain connected to the
cable television system.

Fees allocated from programmers to guarantee carriage are deferred and amortized
to income over the life of the contracts. Franchise fees collected from cable
subscribers and paid to local franchises are reported as revenues.

Depreciation and Amortization

The Partnership provides depreciation using the composite method on a
straight-line basis over the estimated useful lives of the related property,
plant and equipment as follows:

<TABLE>
           <S>                                                    <C>
           Trunk and distribution systems                            10 years
           Subscriber installations                                  10 years
           Buildings and headends                                  9-20 years
           Converters                                               3-5 years
           Vehicles and equipment                                   4-8 years
           Office equipment                                        5-10 years
</TABLE>

                                      F-22
<PAGE>   47


Franchise costs are being amortized using the straight-line method over the term
of the individual franchise agreements. Subscriber lists were amortized using
the straight-line method over seven years. Debt issuance costs were amortized
over the term of the debt.

The Partnership periodically reviews the carrying value of its long-lived
assets, identifiable intangibles and franchise costs in relation to historical
financial results, current business conditions and trends (including the impact
of existing legislation and regulation) to identify potential situations in
which the carrying value of such assets may not be recoverable. If a review
indicates that the carrying value of such assets may not be recoverable, the
carrying value of such assets in excess of their fair value would be recorded as
a reduction of the assets' costs as if a permanent impairment has occurred. No
impairments have occurred and no adjustments to the financial statements of the
Partnership have been recorded.

Liquidation Costs

Certain liquidation costs which are not directly attributed to the Partnership
(i.e., accounting, legal, etc.) have been allocated between the Partnership and
CCIP II based upon the number of total basic subscribers prior to the sale of
any systems.

Income Taxes

Income taxes are the responsibility of the partners and as such are not provided
in the accompanying financial statements.

Net Income (Loss) Per Limited Partnership Unit

The net income (loss) per Limited Partnership unit has been calculated based on
293 weighted average Limited Partnership units outstanding in each year. In
accordance with the Partnership Agreement, no losses have been allocated to the
Special Limited Partner units.

Use of 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

2.  LIQUIDATION, DISTRIBUTIONS AND ALLOCATIONS:

The Partnership is comprised of the General Partner and 293 Limited Partnership
units. Under terms of the Partnership Agreement, allocation of Partnership
profits is as follows: (i) to partners with deficit capital balances, until such
deficits are reduced to zero; (ii) to the Special Limited Partner, until its
account has been allocated all unrecovered preference return amounts, as defined
in the Partnership Agreement; and (iii) to the General Partner and Limited
Partners in proportion to their capital contributions.

Partnership losses are allocated among the General Partner and Limited Partners
in proportion to their capital contributions. Any distributions made by the
Partnership are to be made as follows: (i) to all partners to the extent of any
tax liabilities; (ii) to the Special Limited Partner to the extent of any unpaid
preference returns as defined in the Partnership Agreement; and (iii) to the
General Partner and Limited Partners in proportion to their capital
contributions. The Special Limited Partner's preference return is equal to its
adjusted capital balance, as defined, plus an amount equal to 15% per annum,
compounded quarterly, on such amount through June 30, 1993. Thereafter, the
preference return shall increase to 18% per annum, compounded quarterly in
accordance with the Partnership Agreement. During 1997, the Special Limited
Partner units were redeemed at their accreted value.

                                      F-23
<PAGE>   48


Liquidation of the Partnership

CCIP II's partnership agreement provides for the dissolution of CCIP II on or
before December 31, 1995. The general partner of CCIP II is in the process of a
complete and orderly dissolution of CCIP II.

Concurrent with the disposition of CCIP II's assets, including its entire
ownership interest in the Partnership, the Partnership has sought to dispose of
its assets through the sale of its cable television systems to facilitate the
liquidation of CCIP II. Additionally, the asset sale was being effected to
satisfy the requirements by the Partnership's senior bank lenders that the old
credit facility be repaid.

To dispose of the assets of the Partnership, the General Partner obtained
appraisals as of March 31, 1995, from Daniels & Associates ("Daniels") and
Western Cablesystems, Inc., who jointly reached a valuation of $60,900,000 for
all of the Partnership systems. Thereafter, Daniels was retained to market the
Partnership systems using an auction process. As a result of the auction
process, the General Partner executed sale agreements with two affiliated
entities of CCIP II for the Partnership's South Carolina and North Carolina
Systems for an aggregate price of $52,450,000. The accepted bids represented
approximately 83% of the Partnership's basic subscribers as of December 31,
1996.

Following the above sales, the Partnership used the available sale proceeds to
pay outstanding indebtedness and expenses (including the payment of accrued and
unpaid management fees, which were $3,087,053 as of the date of the sales, to
the General Partner and repayment of its senior bank credit facility), with the
remaining proceeds distributed in accordance with the terms of the Partnership
Agreement, which included distributions of $7,092,960 to Charter in its capacity
as parent of the General Partner, the Special Limited Partner and a Limited
Partner, and distributions of $5,500,000 to CCIP II in its capacity as a Limited
Partner of the Partnership.

The Partnership has accepted a bid from a nonaffiliate for the Partnership's
remaining Texas systems for an aggregate purchase price of $11.2 million,
subject to execution of the final sale agreement. The proceeds from the sale of
the Texas systems will first be used to satisfy the Partnership's liabilities
and expenses with the remaining proceeds distributed in accordance with the
terms of the Partnership Agreement.

Upon finalization of a plan of liquidation, the Partnership will change its
basis of accounting from the going-concern basis to the liquidation basis. Under
the liquidation basis of accounting, assets are recorded at their estimated
realizable values and liabilities are recorded at their estimated settlement
amounts.

3.  PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment is stated at cost and consists of the following at
December 31:

<TABLE>
<CAPTION>
                                                1998           1997
                                            -----------    -----------  
<S>                                         <C>            <C>          
          Trunk and distribution systems    $ 2,796,563    $ 2,351,018  
          Subscriber installations              954,595        864,879  
          Land, buildings and headends        1,185,282      1,158,285  
          Converters                            288,212        288,212  
          Vehicles and equipment                230,720        227,151  
          Office equipment                       93,989         92,775  
                                            -----------    -----------  
                                              5,549,361      4,982,320  
                                                                        
          Less-  Accumulated depreciation    (3,564,268)    (3,169,490) 
                                            -----------    -----------  
                                            $ 1,985,093    $ 1,812,830  
                                            ===========    ===========  
</TABLE>

                                      F-24
<PAGE>   49


4.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

Accounts payable and accrued expenses consist of the following at December 31:

<TABLE>
<CAPTION>
                                  1998       1997
                                --------   --------
<S>                             <C>         <C>
Accounts payable                $115,684   $ 41,206
Property taxes                     9,877      5,559
Salaries and related benefits     23,694     17,518
Capital expenditures              81,254     23,034
Franchise fees                    39,788     37,766
Professional fees                 34,788     47,929
Programming expenses              93,514     99,192
Other                            106,231    111,463
                                --------   --------
                                $504,830   $383,667
                                ========   ========
</TABLE>

5. LONG-TERM DEBT:

Prior to May 23, 1997, the Partnership maintained a credit agreement (the "Old
Credit Agreement") in the form of a term loan with a consortium of banks. Loans
under the Old Credit Agreement bore interest, with the base rate being at the
Partnership's election, at the Toronto Dominion's (the agent bank) prime rate of
interest, Eurodollar or certificates of deposit rate, plus a certain spread. The
weighted average interest rate and borrowings for the period from January 1,
1997, to May 23, 1997, was 8.25% and approximately $23,712,000, respectively.

On May 23, 1997, the Partnership terminated its existing Old Credit Agreement
and entered into a new credit agreement (the "Credit Agreement") with a bank for
borrowings up to $7,500,000. The Credit Agreement also provides for borrowings
up to $8,500,000 by CCIP II, with each partner held jointly and severally liable
in the event of default. At December 31, 1998, the Partnership and CCIP II had
$-0- and $3,800,000 of indebtedness outstanding under the Credit Agreement,
respectively. The debt bears interest at rates, at the Partnership's option,
based on the higher of the prime rate of the Canadian Imperial Bank of Commerce
(the agent bank) or the Federal Funds Rate plus 0.75%, or the LIBOR plus
applicable margins based upon the Partnership's leverage ratio at the time of
the borrowings.

Borrowings under the Credit Agreement are subject to certain financial and
nonfinancial covenants and restrictions, the most restrictive requires the
maintenance of a ratio of total debt to annualized operating cash flow of 4.0 to
1.0 at December 31, 1998. A quarterly commitment fee of 0.375% per annum is
payable on the unused portion of the Credit Agreement. Commencing March 31,
1999, and at the end of each calendar quarter thereafter, the borrowing capacity
shall be reduced by $800,000. Quarterly reductions will continue until March 31,
2002, at which time the borrowing capacity shall be reduced by $1,600,000,
quarterly until December 31, 2002.

6. RELATED-PARTY TRANSACTIONS:

During 1994, Cencom Cable Associates, Inc. assigned management services under
contract with the Partnership to the General Partner. The management service
provides for the payment of fees equal to 5% of the Partnership's gross
operating revenues. The Partnership was allowed to defer 60% of all such fees
through December 31, 1995. Since the assumption of the responsibilities under
the contract, the General Partner deferred payment of all management fees until
the debt outstanding under the Old Credit Agreement was repaid. At which time,
all deferred management fees were paid. Currently, the General

                                      F-25
<PAGE>   50


Partner continues to defer payment of all management fees. Expenses recognized
by the Partnership under this contract during 1998, 1997 and 1996 were $130,146,
$285,290 and $687,371, respectively. Management fees payable of $224,488 and
$94,442 are included in Payables to General Partner and affiliates at December
31, 1998 and 1997, respectively. In addition to the management fees, the
Partnership reimburses the General Partner for expenses incurred on behalf of
the Partnership for performance of services under the contract.

As of December 31, 1998 and 1997, receivable from affiliate is comprised
primarily of a noninterest receivable from CCIP II of $1,860,000 and $1,050,000,
respectively.

The Partnership and all entities affiliated with Charter collectively utilize a
combination of insurance coverage and self-insurance programs for medical,
dental and workers' compensation claims. The Partnership is allocated charges
monthly based upon its total number of employees, historical claims and medical
cost trend rates. During 1998, 1997 and 1996, the Partnership expensed
approximately $27,000, $59,300 and $144,600, respectively, relating to insurance
allocations.

Affiliated entities maintain several regional offices. The regional offices
perform certain operational services on behalf of the Partnership and other
affiliated entities. Generally, the costs of these services are allocated to the
Partnership based on the number of subscribers. During 1997 and 1996, certain
costs which should have been allocated to the Partnership were borne by Charter
on behalf of the Partnership. Charter is not obligated to make such payments in
the future. The amount of the costs which were paid by Charter during 1997 and
1996 was approximately $22,000 and $122,000, respectively.

7.  COMMITMENTS AND CONTINGENCIES:

Leases

The Partnership leases certain facilities and equipment under noncancelable
operating leases. Rent expense incurred under these leases during 1998, 1997 and
1996 was approximately $4,000, $21,000 and $64,000, respectively.

Future minimum lease payments are as follows:

<TABLE>
<S>       <C>                                      <C>   
          1999                                     $3,800
          2000                                      3,800
          2001                                      3,800
          2002                                      4,100
          2003                                      4,100
          Thereafter                               24,800
</TABLE>

The Partnership rents utility poles in its operations. Generally, pole rental
agreements are short term, but the Partnership anticipates that such rentals
will recur. Rent expense for pole attachments during 1998, 1997 and 1996 was
approximately $16,000, $75,000 and $220,000, respectively.

Litigation

Abeles v. Cencom Cable Entertainment, Inc., et. al.

On June 17, 1998, approximately 400 limited partners in CCIP II filed a lawsuit
against its General Partner, Cencom Cable Entertainment, Inc. (CCE),
(collectively "Cencom Defendants"), and three brokerage firms involved in the
original sale of limited partnership units in CCIP in the Circuit Court of
Jackson County, Missouri. CCE provided management services to both CCIP II and
CPLP and also owned all of the stock of the Cencom Properties II, Inc.
prior to mid-1994.

                                      F-26
<PAGE>   51
Plaintiffs allege that the Cencom Defendants are liable for fraud, negligent
misrepresentation or omission, negligence, breach of fiduciary duty, breach of
implied covenants and violations of the Missouri Merchandising Practices Act in
connection with the sale of limited partnership interests in CCIP II commencing
in 1987. Plaintiffs seek recession of the purchase of the securities along with
ancillary damages, actual damages, punitive damages, costs and
attorneys' fees.

On August 17, 1998, the Cencom Defendants filed a Motion to Dismiss. On November
5, 1998, the Court heard oral argument on that motion. Discovery has been stayed
during the pendency of the Motion to Dismiss.

Wallace v. Wood, et. al.

On June 10, 1997, four limited partners of CCIP II filed a putative class action
suit on behalf of the limited partners presently in Delaware Chancery Court
against CCIP II's General Partner, Charter, certain other Charter affiliates and
four present or former officers of the CCIP II. The Plaintiffs subsequently
amended their lawsuit and converted it to a Derivative Action, thus adding CCIP
II as a nominal defendant.

Plaintiffs allege that the Defendants breached the Partnership Agreement and
their fiduciary duties of loyalty and candor in connection with the management
of CCIP II and CPLP and the sale of the Partnership assets to certain Purchasing
Affiliates. Plaintiffs seek a declaration that the distribution to the Limited
Partners of CCIP II is improper, request that defendants compensate CCIP II for
all damages suffered as a result of the actions and transactions, including
interest, costs, reasonable attorneys' fees, accountants' and experts' fees and
request an accounting for all monies earned by the properties after the
effective date of the sale to the purchasing affiliates.

On May 19, 1998, Defendants filed a Motion for Judgment on the Pleadings,
seeking dismissal of certain of the defendants from the lawsuit. That motion is
pending before the Court.

The Partnership is not a named defendant in the Delaware litigation.

8. RATE REGULATION IN THE CABLE TELEVISION INDUSTRY:

The cable television industry is subject to extensive regulation at the federal,
local and, in some instances, state levels. The Cable Communications Policy Act
of 1984 (the "1984 Cable Act"), the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act" and together with the 1984 Cable
Act, the "Cable Acts"), and the Telecommunications Act of 1996 (the "1996
Telecom Act"), established a national policy to guide the development and
regulation of cable television systems. The Federal Communications Commission
(FCC) has principal responsibility for implementing the policies of the Cable
Acts. Many aspects of such regulation are currently the subject of judicial
proceedings and administrative or legislative proposals. Legislation and
regulations continue to change, and the Partnership cannot predict the impact of
future developments on the cable television industry.

The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.

The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. The Partnership may
be required to refund additional amounts in the future.

                                      F-27
<PAGE>   52
The Partnership believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous twelve-month period may be ordered upon
certification if the Partnership is unable to justify its basic rates. The
Partnership is unable to estimate at this time the amount of refunds, if any,
that may be payable by the Partnership in the event certain of its rates are
successfully challenged by franchising authorities or found to be unreasonable
by the FCC. The Partnership does not believe that the amount of any such refunds
would have a material adverse effect on the financial position or results of
operations of the Partnership.

The 1996 Telecom Act, among other things, immediately deregulated the rates for
certain small cable operators and in certain limited circumstances rates on the
basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Partnership cannot predict the ultimate effect of the 1996 Telecom Act
on the Partnership's financial position or results of operations.

The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Partnership.

A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation. The Partnership is subject to state regulation
in Connecticut.

9.  401(k) PLAN:

The Partnership's employees may participate in the Charter Communications, Inc.
401(k) Plan (the "Plan"). All employees who have attained age 21 and completed
two months of employment are eligible to participate in the Plan. The Plan is a
tax-qualified retirement savings plan to which employees may elect to make
pretax contributions up to the lesser of 10% of their compensation or dollar
thresholds established under the Internal Revenue Code. The Partnership
contributes an amount equal to 50% of the first 5% contributed by each employee.
During 1998, 1997 and 1996, the Partnership contributed approximately $4,400,
$9,300 and $20,500, respectively.


                                      F-28
<PAGE>   53
10. NET INCOME (LOSS) FOR INCOME TAX PURPOSES:

The following reconciliation summarizes the differences between the
Partnership's net income (loss) for financial reporting purposes and net income
(loss) for federal income tax purposes for the years ended December 31:

<TABLE>
<CAPTION>
                                                              1998            1997            1996
                                                          ------------    ------------    ------------

<S>                                                       <C>             <C>             <C>          
Net income (loss) for financial reporting purposes        $    640,319    $ 31,598,553    $ (4,756,897)
Depreciation differences between financial reporting
   and tax reporting                                            84,434        (483,060)       (302,210)
Amortization differences between financial reporting
   and tax reporting                                             2,482         464,431       1,501,067
Difference in gain on sale of cable television systems
   for financial reporting and tax reporting
                                                                  --          (196,950)           --
Differences in expenses recorded for financial
   reporting and tax reporting                                 (17,257)       (423,984)        181,261
Differences in revenue reported financial reporting and
   tax reporting                                                (5,468)       (136,513)        (21,849)
Other                                                              804             606           2,959
                                                          ------------    ------------    ------------
Net income (loss) for federal income tax purposes         $    705,314    $ 30,823,083    $ (3,395,669)
                                                          ------------    ------------    ------------
Net income (loss) per Limited Partnership unit for
   federal income tax purposes                            $      2,371    $     90,005    $    (11,414)
                                                          ============    ============    ============
</TABLE>

The following summarizes the Partnership's financial reporting basis of net
assets (in excess of) less than its income tax reporting basis as of December
31:

<TABLE>
<CAPTION>
                                                 1998          1997
                                             -----------    -----------   
          <S>                                <C>            <C>
          Accounts receivable                $     4,102    $     5,166   
          Franchise costs and other assets     2,277,893      2,275,411   
          Accrued expenses                       177,502        193,695   
          Deferred revenue                        32,810         38,278   
                                             -----------    -----------   
                                             $ 2,492,307    $ 2,512,550   
                                             ===========    ===========   
                                                                          
          Property, plant and equipment      $  (871,511)   $  (955,946)  
                                             ===========    ===========   
</TABLE>


11.  INSURANCE SETTLEMENT:

In September 1996, Hurricane Fran caused damage to certain of the Partnership's
North Carolina system. The estimated total damage to the system was
approximately $955,000. During 1997 and 1996, the Partnership incurred
approximately $214,000 and $855,000 in repairs, respectively. The Partnership
received insurance proceeds of approximately $536,000 and $150,000 during 1997
and 1996, respectively. In 1996, the Partnership recorded a $383,000
nonoperating loss for its portion of the insurance deductible.


                                      F-29