<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K


(MARK ONE)

[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

                                       OR

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

For the transition period from ______________________ to ______________________

                         Commission File Number:   0-18495
                                                 ----------

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

         GEORGIA                                              58-1754588
-------------------------------                          ----------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                           Identification Number)

10900 WILSHIRE BOULEVARD - 15TH FLOOR
    LOS ANGELES, CALIFORNIA                                      90024
----------------------------------------                 ----------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code:  (310) 824-9990
                                                    -----------------

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

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

                                                          Name of each exchange
      Title of Each Class                                 on which registered
----------------------------------------                 ----------------------
UNITS OF LIMITED PARTNERSHIP INTEREST                            NONE

           Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (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 this Form 10-K or any
amendment to this Form 10-K. [X]

           State the aggregate market value of the voting equity securities held
by non-affiliates of the registrant -- all of the registrant's 36,626 units of
limited partnership interests, its only class of equity securities, are held by
non-affiliates. There is no public trading market for the units, and transfers
of units are subject to certain restrictions; accordingly, the registrant is
unable to state the market value of the units held by non-affiliates.



                    The Exhibit Index is located at Page E-1.


<PAGE>   2

                                     PART I



ITEM 1.              BUSINESS

INTRODUCTION

           Enstar Income/Growth Program Six-B, L.P., a Georgia limited
partnership (the "Partnership"), is engaged in the ownership, operation and
development, and, when appropriate, sale or other disposition, of cable
television systems in small to medium-sized communities. The Partnership was
formed on September 23, 1987. The general partners of the Partnership are Enstar
Communications Corporation, a Georgia corporation (the "Corporate General
Partner"), and Robert T. Graff, Jr. (the "Individual General Partner" and,
together with the Corporate General Partner, the "General Partners"). On
September 30, 1988, ownership of the Corporate General Partner was acquired by
Falcon Cablevision, a California limited partnership that has been engaged in
the ownership and operation of cable television systems since 1984 ("Falcon
Cablevision"). The general partner of Falcon Cablevision was Falcon Holding
Group, L.P., a Delaware limited partnership ("FHGLP"), until September 1998. On
September 30, 1998, FHGLP acquired ownership of the Corporate General Partner
from Falcon Cablevision. Simultaneously with the closing of that transaction,
FHGLP contributed all of its existing cable television system operations to
Falcon Communications, L.P. ("FCLP"), a California limited partnership and
successor to FHGLP. FHGLP serves as the managing partner of FCLP, and the
general partner of FHGLP is Falcon Holding Group, Inc., a California corporation
("FHGI"). The Corporate General Partner has contracted with FCLP to provide
corporate management services for the Partnership. See Item 13., "Certain
Relationships and Related Transactions." The General Partner, FCLP and
affiliated companies are responsible for the day to day management of the
Partnership and its operations. See "Employees" below.

           A cable television system receives television, radio and data signals
at the system's "headend" site by means of over-the-air antennas, microwave
relay systems and satellite earth stations. These signals are then modulated,
amplified and distributed, primarily through coaxial and fiber optic
distribution systems, to customers who pay a fee for this service. Cable
television systems may also originate their own television programming and other
information services for distribution through the system. Cable television
systems generally are constructed and operated pursuant to non-exclusive
franchises or similar licenses granted by local governmental authorities for a
specified term of years.

           The Partnership's cable television systems (the "systems") offer
customers various levels (or "tiers") of cable services consisting of broadcast
television signals of local network, independent and educational stations, a
limited number of television signals from so-called "super stations" originating
from distant cities (such as WGN), various satellite-delivered, non-broadcast
channels (such as Cable News Network ("CNN"), MTV: Music Television ("MTV"), the
USA Network ("USA"), ESPN, Turner Network Television ("TNT") and The Disney
Channel), programming originated locally by the cable television system (such as
public, educational and governmental access programs) and informational displays
featuring news, weather, stock market and financial reports, and public service
announcements. A number of the satellite services are also offered in certain
packages. For an extra monthly charge, the systems also offer "premium"
television services to their customers. These services (such as Home Box Office
("HBO") and Showtime) are satellite channels that consist principally of feature
films, live sporting events, concerts and other special entertainment features,
usually presented without commercial interruption. See "Legislation and
Regulation."

           A customer generally pays an initial installation charge and fixed
monthly fees for basic, expanded basic, other tiers of satellite services and
premium programming services. Such monthly service fees constitute the primary
source of revenues for the systems. In addition to customer revenues, the
systems receive revenue from additional fees paid by customers for pay-per-view
programming of movies and special events and from the sale of available
advertising spots on advertiser-supported programming. The systems also offer to
their customers home shopping services, which pay the systems a share of
revenues from sales of



                                      -2-
<PAGE>   3

products in the systems' service areas, in addition to paying the systems a
separate fee in return for carrying their shopping service. Certain other
channels have also offered the cable systems managed by FCLP, including those of
the Partnership, fees in return for carrying their service. Due to a general
lack of channel capacity available for adding new channels, the Partnership's
management cannot predict the impact of such potential payments on the
Partnership's business. See Item 7., "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."

           During January 1990, the Partnership began its cable television
business operations with the acquisition of a small cable television system
providing service to approximately 200 customers in the city of Ivins, Utah.
During 1990, two additional acquisitions were completed serving the communities
in and around Fisk, Missouri and Villa Rica, Georgia. As of December 31, 1998,
the Partnership served approximately 7,500 basic subscribers. The Partnership
does not expect to make any additional material acquisitions during the
remaining term of the Partnership.

           FCLP receives a management fee and reimbursement of expenses from the
Corporate General Partner for managing the Partnership's cable television
operations. See Item 11., "Executive Compensation."

           The Chief Executive Officer of FHGI is Marc B. Nathanson. Mr.
Nathanson has managed FCLP or its predecessors since 1975. Mr. Nathanson is a
veteran of more than 30 years in the cable industry and, prior to forming FCLP's
predecessors, held several key executive positions with some of the nation's
largest cable television companies. The principal executive offices of the
Partnership, the Corporate General Partner and FCLP are located at 10900
Wilshire Boulevard, 15th Floor, Los Angeles, California 90024, and their
telephone number is (310) 824-9990. See Item 10., "Directors and Executive
Officers of the Registrant."

RECENT DEVELOPMENTS

           As reported in the Partnership's previous reports, the Partnership
has concluded that it is not able to obtain the appropriate amount of capital to
make the necessary upgrades to its cable systems. The Partnership engaged a
business broker to solicit offers for its cable systems, but received only two
preliminary offers (the "Initial Offers"), each of which excluded the Ivins,
Utah and Fisk, Missouri cable systems and contained material closing conditions
and potential material purchase price adjustments. The Partnership concluded
that it was not in the best interests of unitholders to accept either of the
Initial Offers because, among other things, neither Initial Offer constituted an
offer to purchase all of the cable systems, and each Initial Offer was subject
to material closing conditions and potential material purchase price
adjustments. Subsequent to the Partnership's receipt of the Initial Offers, the
Partnership received an offer (the "Falcon Offer") from certain of its
affiliates (the "Purchasers") to purchase all of the Partnership's cable systems
for $10,473,200 in cash. The Falcon Offer includes a price for the Villa Rica
cable system which exceeds the highest of the Initial Offers by approximately
2.5%, contains no potential purchase price adjustments and only limited closing
conditions. After the Partnership received the Falcon Offer, the Partnership
received an additional offer solely for the Fisk, Missouri cable system (the
"Fisk Offer"). The Partnership concluded that it was not in the best interests
of the unitholders to accept the Fisk Offer because, among other things, the
Fisk Offer did not constitute an offer to purchase all of the cable systems, and
the Falcon Offer includes a price for the Fisk, Missouri cable system that
exceeds the Fisk Offer by approximately 15%.

           The General Partner believes that accepting the Falcon Offer is in
the best interests of the Partnership and the unitholders. Accordingly, the
Partnership and the Purchasers entered into an Asset Purchase Agreement, dated
November 6, 1998 (the "Purchase Agreement"), for the purchase and sale of all of
the Partnership's assets, subject to limited partner approval as discussed
below. If the sale is consummated, the General Partner will make one or more
liquidating distributions to the partners and, after providing for the payment
of the Partnership's obligations, cause the Partnership to dissolve, terminate
and be liquidated. After repayment of the Partnership's existing obligations,
the Partnership presently estimates that liquidating distributions to
unitholders would total between $220 and $230 per unit, less applicable taxes,
if any. The sale




                                      -3-
<PAGE>   4

will require the holders of at least a majority of the Partnership's limited
partnership units to consent to the sale, to certain amendments to the
Partnership's partnership agreement and to the liquidation. See Item 7.,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."

BUSINESS STRATEGY

           Historically, the Partnership has followed a systematic approach to
acquiring, operating and developing cable television systems based on the
primary goal of increasing operating cash flow while maintaining the quality of
services offered by its cable television systems. The Partnership's business
strategy has focused on serving small to medium-sized communities. The
Partnership believes that given a similar rate, technical, and channel
capacity/utilization profile, its cable television systems generally involve
less risk of increased competition than systems in large urban cities. In the
Partnership's markets, consumers have access to only a limited number of
over-the-air broadcast television signals. In addition, these markets typically
offer fewer competing entertainment alternatives than large cities. Nonetheless,
the Partnership believes that all cable operators will face increased
competition in the future from alternative providers of multi-channel video
programming services. See "Competition."

           Adoption of rules implementing certain provisions of the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act") by the Federal Communications Commission (the "FCC") has had a negative
impact on the Partnership's revenues and cash flow. These rules are subject to
further amendment to give effect to the Telecommunications Act of 1996 (the
"1996 Telecom Act"). Among other changes, the 1996 Telecom Act provides that the
regulation of certain cable programming service tier ("CPST") rates will
terminate on March 31, 1999. There can be no assurance as to what, if any,
further action may be taken by the FCC, Congress or any other regulatory
authority or court, or the effect thereof on the Partnership's business. See
"Legislation and Regulation" and Item 7., "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

           Clustering

           The Partnership has sought to acquire cable television operations in
communities that are proximate to other owned or affiliated systems in order to
achieve the economies of scale and operating efficiencies associated with
regional "clusters." The Partnership believes clustering can reduce marketing
and personnel costs and can also reduce capital expenditures in cases where
cable service can be delivered through a central headend reception facility.

           Capital Expenditures

           As noted in "Technological Developments", the Partnership's systems
have almost no available channel capacity with which to add new channels or to
further expand their use of pay-per-view offerings to customers. As a result,
significant amounts of capital for future upgrades will be required in order to
increase available channel capacity, improve quality of service and facilitate
the expansion of new services such as advertising, pay-per-view, new unregulated
tiers of satellite-delivered services and home shopping, so that the systems
remain competitive within the industry.

           The Partnership's management has selected a technical standard that
incorporates the use of fiber optic technology where applicable in its
engineering design for the majority of its systems that are to be rebuilt. A
system built with this type of architecture can provide for future channels of
analog service as well as new digital services. Such a system will also permit
the introduction of high speed data transmission/Internet access and telephony
services in the future after incurring incremental capital expenditures related
to these services. The Partnership is also evaluating the use of digital
compression technology in its systems. See "Technological Developments" and
"Digital Compression."




                                      -4-
<PAGE>   5

           The Partnership's 1998 capital expenditures approximated $753,400 to
extend its systems passed new serviceable homes in their franchise areas and to
upgrade certain equipment. The Partnership's future capital expenditure plans
are, however, all subject to the availability of adequate capital on terms
satisfactory to the Partnership, of which there can be no assurance. The
Partnership's upgrade program is estimated to require aggregate capital
expenditures of approximately $7.5 million. These upgrades cover seven franchise
areas and are currently required in three existing franchise agreements. The
cost to upgrade the three franchise areas is estimated to be approximately $2.9
million and must be completed in 1999. Two of the remaining four franchise
agreements are under negotiation for renewal.

           The Partnership is party to a loan agreement with an affiliate which
provides for a revolving loan facility of $2,528,900 (the "Facility"). The
Partnership has insufficient borrowing capacity remaining under the Facility and
would require additional sources of capital to undertake its upgrade program.
The partnership agreement, however, contains certain limitations on the
Partnership's indebtedness. The partnership agreement provides that without the
approval of the holders of a majority of the Partnership's limited partnership
units, the Partnership may not incur any borrowings unless the amount of such
borrowings together with all outstanding borrowings does not exceed 33% of the
original capital raised by the Partnership, or a maximum of $3,052,500 permitted
debt outstanding. In order to obtain the appropriate amount of capital to
upgrade the Partnership's systems as discussed above, this provision of the
partnership agreement would need to be amended to increase the Partnership's
leverage. The Partnership does not intend to seek such an amendment to the
partnership agreement. As discussed in prior reports, the Partnership postponed
a number of rebuild and upgrade projects because of the uncertainty related to
implementation of the 1992 Cable Act and the negative impact thereof on the
Partnership's business and access to capital. As a result, the Partnership's
systems are significantly less technically advanced than had been expected prior
to the implementation of reregulation. The Partnership believes that the delays
in upgrading its systems have had an adverse effect on the value of those
systems compared to systems that have been rebuilt to a higher technical
standard. See "Legislation and Regulation" and Item 7., "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."

           Decentralized Management

           The Corporate General Partner manages the Partnership's systems on a
decentralized basis. The Corporate General Partner believes that its
decentralized management structure, by enhancing management presence at the
system level, increases its sensitivity to the needs of its customers, enhances
the effectiveness of its customer service efforts, eliminates the need for
maintaining a large centralized corporate staff and facilitates the maintenance
of good relations with local governmental authorities.

           Marketing

           The Partnership's marketing strategy is to provide added value to
increasing levels of subscription services through "packaging". In addition to
the basic service package, customers in substantially all of the systems may
purchase an expanded group of regulated services, additional unregulated
packages of satellite-delivered services, and premium services. The Partnership
has employed a variety of targeted marketing techniques to attract new customers
by focusing on delivering value, choice, convenience and quality. The
Partnership employs direct mail, radio and local newspaper advertising,
telemarketing and door-to-door selling utilizing demographic "cluster codes" to
target specific messages to target audiences. In certain systems, the
Partnership offers discounts to customers who purchase premium services on a
limited trial basis in order to encourage a higher level of service
subscription. The Partnership also has a coordinated strategy for retaining
customers that includes televised retention advertising to reinforce the initial
decision to subscribe and encourage customers to purchase higher service levels.






                                      -5-
<PAGE>   6


           Customer Service and Community Relations

           The Partnership places a strong emphasis on customer service and
community relations and believes that success in these areas is critical to its
business. FCLP has developed and implemented a wide range of monthly internal
training programs for its employees, including its regional managers, that focus
on the Partnership's operations and employee interaction with customers. The
effectiveness of FCLP's training program as it relates to the employees'
interaction with customers is monitored on an ongoing basis, and a portion of
the regional managers' compensation is tied to achieving customer service
targets. FCLP conducts an extensive customer survey on a periodic basis and uses
the information in its efforts to enhance service and better address the needs
of the Partnership's customers. A quarterly newsletter keeps customers up to
date on new service offerings, special events and company information. In
addition, the Partnership is participating in the industry's Customer Service
Initiative which emphasizes an on-time guarantee program for service and
installation appointments. FCLP's corporate executives and regional managers
lead the Partnership's involvement in a number of programs benefiting the
communities the Partnership serves, including, among others, Cable in the
Classroom, Drug Awareness, Holiday Toy Drive and the Cystic Fibrosis Foundation.
Cable in the Classroom is the cable television industry's public service
initiative to enrich education through the use of commercial-free cable
programming. In addition, a monthly publication, Cable in the Classroom magazine
provides educational program listings by curriculum area, as well as feature
articles on how teachers across the country use the programs.




                                      -6-
<PAGE>   7


DESCRIPTION OF THE PARTNERSHIP'S SYSTEMS

           The table below sets forth certain operating statistics for the
Partnership's cable systems as of December 31, 1998.


<TABLE>
<CAPTION>
                                                                                                           Average
                                                                                                           Monthly
                                                                           Premium                       Revenue Per
                          Homes            Basic            Basic          Service          Premium         Basic
System                  Passed(1)       Subscribers     Penetration(2)     Units(3)     Penetration(4)   Subscriber(5)
------                  --------        -----------     -------------      -------      -------------    -------------
<S>                     <C>            <C>              <C>               <C>           <C>                <C>      
Ivins, UT                   998              467             46.8%             59             12.6%         $   26.79

Fisk, MO                    770              308             40.0%             69             22.4%         $   22.99

Villa Rica, GA            9,869            6,701             67.9%          1,790             26.7%         $   35.45
                         ------            -----                            -----                                    

Total                    11,637            7,476             64.2%          1,918             25.7%         $   34.39
                         ======            =====                            =====                                    
</TABLE>



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

           (1) Homes passed refers to estimates by the Partnership of the
approximate number of dwelling units in a particular community that can be
connected to the distribution system without any further extension of principal
transmission lines. Such estimates are based upon a variety of sources,
including billing records, house counts, city directories and other local
sources.

           (2) Basic subscribers to cable service as a percentage of homes
passed by cable.

           (3) Premium service units include only single channel services
offered for a monthly fee per channel and do not include tiers of channels
offered as a package for a single monthly fee.

           (4) Premium service units as a percentage of homes subscribing to
cable service. A customer may purchase more than one premium service, each of
which is counted as a separate premium service unit. This ratio may be greater
than 100% if the average customer subscribes for more than one premium service.

           (5) Average monthly revenue per basic subscriber has been computed
based on revenue for the year ended December 31, 1998.




                                      -7-
<PAGE>   8

CUSTOMER RATES AND SERVICES

           The Partnership's cable television systems offer customers packages
of services that include the local area network, independent and educational
television stations, a limited number of television signals from distant cities,
numerous satellite-delivered, non-broadcast channels (such as CNN, MTV, USA,
ESPN, TNT and The Disney Channel) and certain information and public access
channels. For an extra monthly charge, the systems provide certain premium
television services, such as HBO and Showtime. The Partnership also offers other
cable television services to its customers, including pay-per-view programming.
For additional charges, in most of its systems, the Partnership also rents
remote control devices and VCR compatible devices (devices that make it easier
for a customer to tape a program from one channel while watching a program on
another).

           The service options offered by the Partnership vary from system to
system, depending upon a system's channel capacity and viewer interests. Rates
for services also vary from market to market and according to the type of
services selected.

           Pursuant to the 1992 Cable Act, most cable television systems are
subject to rate regulation of the basic service tier, the non-basic service
tiers other than premium (per channel or program) services, the charges for
installation of cable service, and the rental rates for customer premises
equipment such as converter boxes and remote control devices. These rate
regulation provisions affect all of the Partnership's systems not deemed to be
subject to effective competition under the FCC's definition. Currently, none of
the Partnership's systems are subject to effective competition. See "Legislation
and Regulation."

           At December 31, 1998, the Partnership's monthly rates for basic cable
service for residential customers, including certain discounted rates, ranged
from $14.62 to $20.96 and premium service rates ranged from $5.00 to $11.95,
excluding special promotions offered periodically in conjunction with the
Partnership's marketing programs. A one-time installation fee, which the
Partnership may wholly or partially waive during a promotional period, is
usually charged to new customers. Commercial customers, such as hotels, motels
and hospitals, are charged a negotiated, non-recurring fee for installation of
service and monthly fees based upon a standard discounting procedure. Most
multi-unit dwellings are offered a negotiated bulk rate in exchange for
single-point billing and basic service to all units. These rates are also
subject to regulation.

EMPLOYEES

           The Partnership has no employees. The various personnel required to
operate the Partnership's business are employed by the Corporate General
Partner, its subsidiary corporation and FCLP. The cost of such employment is
allocated and charged to the Partnership for reimbursement pursuant to the
partnership agreement and management agreement. Other personnel required to
operate the Partnership's business are employed by affiliates of the Corporate
General Partner. The cost of such employment is allocated and charged to the
Partnership. The amounts of these reimbursable costs are set forth below in Item
11., "Executive Compensation."

TECHNOLOGICAL DEVELOPMENTS

           As part of its commitment to customer service, the Partnership seeks
to apply technological advances in the cable television industry to its cable
television systems on the basis of cost effectiveness, capital availability,
enhancement of product quality and service delivery and industry-wide
acceptance. Currently, the Partnership's systems have an average channel
capacity of 12 in systems that serve 4% of its customers and an average channel
capacity of 35 in systems that serve 96% of its customers and on average utilize
100% of such systems' respective channel capacity. The Partnership believes that
system upgrades would enable it to provide customers with greater programming
diversity, better picture quality and



                                      -8-
<PAGE>   9

alternative communications delivery systems made possible by the introduction of
fiber optic technology and by the possible future application of digital
compression. The implementation of the Partnership's capital expenditure plans
is, however, dependent in part on the availability of adequate capital on terms
satisfactory to the Partnership. The Corporate General Partner has concluded
that the Partnership is not able to obtain the necessary capital and, thus, has
entered into the Purchase Agreement pursuant to which the Partnership has agreed
to sell substantially all of its assets to affiliates. See Item 1., "Recent
Developments," "Business Strategy - Capital Expenditures," "Legislation and
Regulation," and Item 7., "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources."

           The use of fiber optic cable as an alternative to coaxial cable is
playing a major role in expanding channel capacity and improving the performance
of cable television systems. Fiber optic cable is capable of carrying hundreds
of video, data and voice channels and, accordingly, its utilization is essential
to the enhancement of a cable television system's technical capabilities. The
Partnership's current policy is to utilize fiber optic technology where
applicable in rebuild projects which it undertakes. The benefits of fiber optic
technology over traditional coaxial cable distribution plant include lower
ongoing maintenance and power costs and improved picture quality and
reliability.

           As of December 31, 1998, approximately 6% of the customers of the
Partnership's systems were served by systems that utilize addressable
technology. Addressable technology permits the cable operator to activate from a
central control point the cable television services to be delivered to a
customer if that customer has also been supplied with an addressable converter
box. To date, the Partnership has supplied addressable converter boxes to
customers of the systems utilizing addressable technology who subscribe to one
or more premium services and, in selected regions, to customers who subscribe to
certain new product tiers. As a result, if the system utilizes addressable
technology and the customer has been supplied with an addressable converter box,
the Partnership can upgrade or downgrade services immediately, without the delay
or expense associated with dispatching a technician to the home. Addressable
technology also reduces pay service theft, is an effective enforcement tool in
collecting delinquent payments and allows the Partnership to offer pay-per-view
services.

DIGITAL COMPRESSION

           The Partnership has been closely monitoring developments in the area
of digital compression, a technology that will enable cable operators to
increase the channel capacity of cable television systems by permitting a
significantly increased number of video signals to fit in a cable television
system's existing bandwidth. Depending on the technical characteristics of the
existing system, the Partnership believes that the utilization of digital
compression technology will enable its systems to increase channel capacity in
certain systems in a manner that could, in the short term, be more cost
efficient than rebuilding such systems with higher capacity distribution plant.
However, the Partnership believes that unless the system has sufficient unused
channel capacity and bandwidth, the use of digital compression to increase
channel offerings is not a substitute for the rebuild of the system, which will
improve picture quality, system reliability and quality of service. The use of
digital compression will expand the number and types of services these systems
offer and enhance the development of current and future revenue sources. This
technology is under frequent management review.

PROGRAMMING

           The Partnership purchases basic and premium programming for its
systems from FCLP. In turn, FCLP charges the Partnership for these costs based
on an estimate of what the Corporate General Partner could negotiate for such
services for the 15 partnerships managed by the Corporate General Partner as a
group (approximately 91,000 basic subscribers at December 31, 1998), which is
generally based on a fixed fee per customer or a percentage of the gross
receipts for the particular service. Certain other channels have also offered
FCLP and the Partnership's systems fees in return for carrying their service.
Due to a lack of channel



                                      -9-
<PAGE>   10

capacity available for adding new channels, the Partnership's management cannot
predict the impact of such potential payments on its business. In addition, the
FCC may require that such payments from programmers be offset against the
programming fee increases which can be passed through to subscribers under the
FCC's rate regulations. FCLP's programming contracts are generally for a fixed
period of time and are subject to negotiated renewal. FCLP does not have
long-term programming contracts for the supply of a substantial amount of its
programming. Accordingly, no assurance can be given that its, and
correspondingly the Partnership's, programming costs will not continue to
increase substantially in the near future, or that other materially adverse
terms will not be added to FCLP's programming contracts. Management believes,
however, that FCLP's relations with its programming suppliers generally are
good.

           The Partnership's cable programming costs have increased in recent
years and are expected to continue to increase due to additional programming
being provided to basic customers, requirements to carry channels under
retransmission carriage agreements entered into with certain programming
sources, increased costs to produce or purchase cable programming generally
(including sports programming), inflationary increases and other factors. The
1996 retransmission carriage agreement negotiations resulted in the Partnership
agreeing to carry one new service in its Villa Rica system, for which it expects
to receive reimbursement of certain costs related to launching the service. All
other negotiations were completed with essentially no change to the previous
agreements. Under the FCC's rate regulations, increases in programming costs for
regulated cable services occurring after the earlier of March 1, 1994, or the
date a system's basic cable service became regulated, may be passed through to
customers. See "Legislation and Regulation - Federal Regulation - Carriage of
Broadcast Television Signals." Generally, programming costs are charged among
systems on a per customer basis.

FRANCHISES

           Cable television systems are generally constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
franchises typically contain many conditions, such as time limitations on
commencement and completion of construction; conditions of service, including
number of channels, types of programming and the provision of free service to
schools and certain other public institutions; and the maintenance of insurance
and indemnity bonds. The provisions of local franchises are subject to federal
regulation under the Cable Communications Policy Act of 1984 (the "1984 Cable
Act"), the 1992 Cable Act and the 1996 Telecom Act. See "Legislation and
Regulation."

           As of December 31, 1998, the Partnership held 10 franchises. These
franchises, all of which are non-exclusive, provide for the payment of fees to
the issuing authority. Annual franchise fees imposed on the Partnership systems
range up to 5% of the gross revenues generated by a system. The 1984 Cable Act
prohibits franchising authorities from imposing franchise fees in excess of 5%
of gross revenues and also permits the cable system operator to seek
renegotiation and modification of franchise requirements if warranted by changed
circumstances.



                                      -10-
<PAGE>   11

           The following table groups the franchises of the Partnership's cable
television systems by date of expiration and presents the number of franchises
for each group of franchises and the approximate number and percentage of homes
subscribing to cable service for each group as of December 31, 1998.


<TABLE>
<CAPTION>
                                                Number of      Percentage of
            Year of              Number of        Basic           Basic
     Franchise Expiration       Franchises     Subscribers      Subscribers
     --------------------       ----------     -----------     -------------
<S>                            <C>            <C>             <C> 
     Prior to 2000                    2           2,301            30.8%
     2000-2004                        4           3,071            41.1%
     2005 and after                   4           1,981            26.5%
                                  -----           -----           -----

     Total                           10           7,353            98.4%
                                  =====           =====           =====
</TABLE>

           The Partnership operates cable television systems which serve
multiple communities and, in some circumstances, portions of such systems extend
into jurisdictions for which the Partnership believes no franchise is necessary.
In the aggregate, approximately 123 customers, comprising approximately 1.6% of
the Partnership's customers, are served by unfranchised portions of such
systems. In certain instances, where a single franchise comprises a large
percentage of the customers in an operating region, the loss of such franchise
could decrease the economies of scale achieved by the Partnership's clustering
strategy. The Partnership has never had a franchise revoked for any of its
systems and believes that it has satisfactory relationships with substantially
all of its franchising authorities.

           The 1984 Cable Act provides, among other things, for an orderly
franchise renewal process in which franchise renewal will not be unreasonably
withheld or, if renewal is denied and the franchising authority acquires
ownership of the system or effects a transfer of the system to another person,
the operator generally is entitled to the "fair market value" for the system
covered by such franchise, but no value may be attributed to the franchise
itself. In addition, the 1984 Cable Act, as amended by the 1992 Cable Act,
establishes comprehensive renewal procedures which require that an incumbent
franchisee's renewal application be assessed on its own merit and not as part of
a comparative process with competing applications. See "Legislation and
Regulation."

COMPETITION

           Cable television systems compete with other communications and
entertainment media, including over-the-air television broadcast signals which a
viewer is able to receive directly using the viewer's own television set and
antenna. The extent to which a cable system competes with over-the-air
broadcasting depends upon the quality and quantity of the broadcast signals
available by direct antenna reception compared to the quality and quantity of
such signals and alternative services offered by a cable system. Cable systems
also face competition from alternative methods of distributing and receiving
television signals and from other sources of entertainment such as live sporting
events, movie theaters and home video products, including videotape recorders
and videodisc players. In recent years, the FCC has adopted policies providing
for authorization of new technologies and a more favorable operating environment
for certain existing technologies that provide, or may provide, substantial
additional competition for cable television systems. The extent to which cable
television service is competitive depends in significant part upon the cable
television system's ability to provide an even greater variety of programming
than that available over the air or through competitive alternative delivery
sources.

           Individuals presently have the option to purchase home satellite
dishes, which allow the direct reception of satellite-delivered broadcast and
nonbroadcast program services formerly available only to cable



                                      -11-
<PAGE>   12

television subscribers. Most satellite-distributed program signals are being
electronically scrambled to permit reception only with authorized decoding
equipment for which the consumer must pay a fee. The 1992 Cable Act enhances the
right of cable competitors to purchase nonbroadcast satellite-delivered
programming. See "Legislation and Regulation-Federal Regulation."

           Television programming is now also being delivered to individuals by
high-powered direct broadcast satellites ("DBS") utilizing video compression
technology. This technology has the capability of providing more than 100
channels of programming over a single high-powered DBS satellite with
significantly higher capacity available if, as is the case with DIRECTV,
multiple satellites are placed in the same orbital position. Unlike cable
television systems, however, DBS satellites are limited by law in their ability
to deliver local broadcast signals. One DBS provider, EchoStar, has announced
plans to deliver a limited number of local broadcast signals in a limited number
of markets and has initiated efforts to have the practice legalized. Legislation
has been introduced in Congress which would permit DBS operators to elect to
provide local broadcast signals to their customers under the Copyright Act. If
DBS providers are ultimately permitted to deliver local broadcast signals, cable
television systems would lose a significant competitive advantage. DBS service
can be received virtually anywhere in the continental United States through the
installation of a small rooftop or side-mounted antenna, and it is more
accessible than cable television service where cable plant has not been
constructed or where it is not cost effective to construct cable television
facilities. DBS service is being heavily marketed on a nationwide basis by
several service providers. In addition, medium-power fixed-service satellites
can be used to deliver direct-to-home satellite services over small home
satellite dishes, and one provider, PrimeStar, currently provides service to
subscribers using such a satellite. DIRECTV has recently agreed to purchase
PrimeStar.

           Multichannel multipoint distribution systems ("wireless cable")
deliver programming services over microwave channels licensed by the FCC and
received by subscribers with special antennas. Wireless cable systems are less
capital intensive, are not required to obtain local franchises or to pay
franchise fees, and are subject to fewer regulatory requirements than cable
television systems. To date, the ability of wireless cable services to compete
with cable television systems has been limited by channel capacity (35-channel
maximum) and the need for unobstructed line-of-sight over-the-air transmission.
Although relatively few wireless cable systems in the United States are
currently in operation or under construction, virtually all markets have been
licensed or tentatively licensed. The use of digital compression technology, and
the FCC's recent amendment to its rules, which permits reverse path or two-way
transmission over wireless facilities, may enable wireless cable systems to
deliver more channels and additional services.

           Private cable television systems compete to service condominiums,
apartment complexes and certain other multiple unit residential developments.
The operators of these private systems, known as satellite master antenna
television ("SMATV") systems, often enter into exclusive agreements with
apartment building owners or homeowners' associations which preclude franchised
cable television operators from serving residents of such private complexes.
However, the 1984 Cable Act gives franchised cable operators the right to use
existing compatible easements within their franchise areas upon
nondiscriminatory terms and conditions. Accordingly, where there are preexisting
compatible easements, cable operators may not be unfairly denied access or
discriminated against with respect to the terms and conditions of access to
those easements. There have been conflicting judicial decisions interpreting the
scope of the access right granted by the 1984 Cable Act, particularly with
respect to easements located entirely on private property. Under the 1996
Telecom Act, SMATV systems can interconnect non-commonly owned buildings without
having to comply with local, state and federal regulatory requirements that are
imposed upon cable systems providing similar services, as long as they do not
use public rights of way.

           The FCC has initiated a new interactive television service which will
permit non-video transmission of information between an individual's home and
entertainment and information service providers. This service, which can be used
by DBS systems, television stations and other video programming distributors
(including cable television systems), is an alternative technology for the
delivery of interactive



                                      -12-
<PAGE>   13

video services. It does not appear at the present time that this service will
have a material impact on the operations of cable television systems.

           The FCC has allocated spectrum in the 28 GHz range for a new
multichannel wireless service that can be used to provide video and
telecommunications services. The FCC recently completed the process of awarding
licenses to use this spectrum via a market-by-market auction. It cannot be
predicted at this time whether such a service will have a material impact on the
operations of cable television systems.

           Cable systems generally operate pursuant to franchises granted on a
non-exclusive basis. In addition, the 1992 Cable Act prohibits franchising
authorities from unreasonably denying requests for additional franchises and
permits franchising authorities to build and operate their own cable systems.
Municipally-owned cable systems enjoy certain competitive advantages such as
lower-cost financing and exemption from the payment of franchise fees.

           The 1996 Telecom Act eliminates the restriction against ownership
(subject to certain exceptions) and operation of cable systems by local
telephone companies within their local exchange service areas. Telephone
companies are now free to enter the retail video distribution business through
any means, such as DBS, wireless cable, SMATV or as traditional franchised cable
system operators. Alternatively, the 1996 Telecom Act authorizes local telephone
companies to operate "open video systems" (a facilities-based distribution
system, like a cable system, but which is "open," i.e., also available for use
by programmers other than the owner of the facility) without obtaining a local
cable franchise, although telephone companies operating such systems can be
required to make payments to local governmental bodies in lieu of cable
franchise fees. Up to two-thirds of the channel capacity on an "open video
system" must be available to programmers unaffiliated with the local telephone
company. As a result of the foregoing changes, well financed businesses from
outside the cable television industry (such as public utilities that own the
poles to which cable is attached) may become competitors for franchises or
providers of competing services. The 1996 Telecom Act, however, also includes
numerous provisions designed to make it easier for cable operators and others to
compete directly with local exchange telephone carriers in the provision of
traditional telephone service and other telecommunications services.

           Other new technologies, including Internet-based services, may become
competitive with services that cable television systems can offer. The 1996
Telecom Act directed the FCC to establish, and the FCC has adopted, regulations
and policies for the issuance of licenses for digital television ("DTV") to
incumbent television broadcast licensees. DTV is expected to deliver high
definition television pictures, multiple digital-quality program streams, as
well as CD-quality audio programming and advanced digital services, such as data
transfer or subscription video. The FCC also has authorized television broadcast
stations to transmit textual and graphic information useful both to consumers
and businesses. The FCC also permits commercial and noncommercial FM stations to
use their subcarrier frequencies to provide nonbroadcast services including data
transmission. The cable television industry competes with radio, television,
print media and the Internet for advertising revenues. As the cable television
industry continues to offer more of its own programming channels, e.g.,
Discovery and USA Network, income from advertising revenues can be expected to
increase.

           Recently a number of Internet service providers, commonly known as
ISPs, have requested local authorities and the FCC to provide rights of access
to cable television systems' broadband infrastructure in order that they be
permitted to deliver their services directly to cable television systems'
customers. In a recent report, the FCC declined to institute a proceeding to
examine this issue, and concluded that alternative means of access are or soon
will be made to a broad range of ISPs. The FCC declined to take action on ISP
access to broadband cable facilities, and the FCC indicated that it would
continue to monitor this issue. Several local jurisdictions also are reviewing
this issue.



                                      -13-
<PAGE>   14

           Telephone companies are accelerating the deployment of Asymmetric
Digital Subscriber Line Technology, know as ADSL. These companies report that
ADSL technology will allow Internet access to subscribers at peak data
transmission speeds equal or greater than that of modems over conventional
telephone lines. Several of the Regional Bell Operating Companies have requested
the FCC to fully deregulate packet-switched networks (a type of data
communication in which small blocks of data are independently transmitted and
reassembled at their destination) to allow them to provide high-speed broadband
services, including interactive online services, without regard to present
service boundaries and other regulatory restrictions. The Partnership cannot
predict the likelihood of success of the online services offered by these
competitors, (ISP attempts to gain access to the cable industry's broadband
facilities), or the impact on the Partnership's business.

           Premium programming provided by cable systems is subject to the same
competitive factors which exist for other programming discussed above. The
continued profitability of premium services may depend largely upon the
continued availability of attractive programming at competitive prices.

           Advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environment, are constantly
occurring. Thus, it is not possible to predict the competitive effect that
ongoing or future developments might have on the cable industry. See
"Legislation and Regulation."



                                      -14-
<PAGE>   15

                           LEGISLATION AND REGULATION


           The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
Congress and various federal agencies have in the past materially affected, and
may in the future materially affect, the Partnership and the cable television
industry. The following is a summary of federal laws and regulations affecting
the growth and operation of the cable television industry and a description of
certain state and local laws. The Partnership believes that the regulation of
its industry remains a matter of interest to Congress, the FCC and other
regulatory authorities. There can be no assurance as to what, if any, future
actions such legislative and regulatory authorities may take or the effect
thereof on the Partnership.

FEDERAL REGULATION

           The primary federal statute dealing with the regulation of the cable
television industry is the Communications Act of 1934 (the "Communications
Act"), as amended. The three principal amendments to the Communications Act that
shaped the existing regulatory framework for the cable television industry were
the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act.

           The FCC, the principal federal regulatory agency with jurisdiction
over cable television, has promulgated regulations to implement the provisions
contained in the Communications Act. The FCC has the authority to enforce these
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 often used in connection with cable operations. A brief summary of
certain of these federal regulations as adopted to date follows.

           RATE REGULATION

           The 1992 Cable Act replaced the FCC's previous standard for
determining "effective competition," under which most cable systems were not
subject to local rate regulation, with a statutory provision that resulted in
nearly all cable television systems becoming subject to local rate regulation of
basic service. The 1996 Telecom Act, however, expanded the definition of
effective competition to include situations where a local telephone company or
an affiliate, or any multichannel video provider using telephone company
facilities, offers comparable video service by any means except DBS. A finding
of effective competition exempts both basic and nonbasic tiers from regulation.
Additionally, the 1992 Cable Act required the FCC to adopt a formula,
enforceable by franchising authorities, to assure that basic cable rates are
reasonable; allowed the FCC to review rates for nonbasic service tiers (other
than per-channel or per-program services) in response to complaints filed by
franchising authorities and/or cable customers; prohibited cable television
systems from requiring subscribers to purchase service tiers above basic service
in order to purchase premium services if the system is technically capable of
doing so; required the FCC to adopt regulations to establish, on the basis of
actual costs, the price for installation of cable service, remote controls,
converter boxes and additional outlets; and allowed the FCC to impose
restrictions on the retiering and rearrangement of cable services under certain
limited circumstances. The 1996 Telecom Act limits the class of complainants
regarding nonbasic tier rates to franchising authorities only and ends FCC
regulation of nonbasic tier rates on March 31, 1999.

           The FCC's regulations contain standards for the regulation of basic
and nonbasic cable service rates (other than per-channel or per-program
services). Local franchising authorities and/or the FCC are empowered to order a
reduction of existing rates which exceed the maximum permitted level for either
basic and/or nonbasic cable services and associated equipment, and refunds can
be required. The rate regulations adopt a benchmark price cap system for
measuring the reasonableness of existing basic and nonbasic service rates.
Alternatively, cable operators have the opportunity to make cost-of-service
showings which, in some cases, may justify rates above the applicable
benchmarks. The rules also require that charges for cable-related equipment
(e.g., converter boxes and remote control devices) and installation services be
unbundled from the provision of



                                      -15-
<PAGE>   16

cable service and based upon actual costs plus a reasonable profit. The
regulations also provide that future rate increases may not exceed an
inflation-indexed amount, plus increases in certain costs beyond the cable
operator's control, such as taxes, franchise fees and increased programming
costs. Cost-based adjustments to these capped rates can also be made in the
event a cable operator adds or deletes channels. In addition, new product tiers
consisting of services new to the cable system can be created free of rate
regulation as long as certain conditions are met, such as not moving services
from existing tiers to the new tier. These provisions currently provide limited
benefit to the Partnership's systems due to the lack of channel capacity
previously discussed. There is also a streamlined cost-of-service methodology
available to justify a rate increase on basic and regulated nonbasic tiers for
"significant" system rebuilds or upgrades.

           Franchising authorities have become certified by the FCC to regulate
the rates charged by the Partnership for basic cable service and for
installation charges and equipment rental. The Partnership has had to bring its
rates and charges into compliance with the applicable benchmark or equipment and
installation cost levels in substantially all of its systems. This has had a
negative impact on the Partnership's revenues and cash flow.

           FCC regulations adopted pursuant to the 1992 Cable Act require cable
systems to permit customers to purchase video programming on a per channel or a
per program basis without the necessity of subscribing to any tier of service,
other than the basic service tier, unless the cable system is technically
incapable of doing so. Generally, an exemption from compliance with this
requirement for cable systems that do not have such technical capability is
available until a cable system obtains the capability, but not later than
December 2002. At the present time, most of the Partnership's systems are unable
to comply with this requirement.

           CARRIAGE OF BROADCAST TELEVISION SIGNALS

           The 1992 Cable Act adopted new television station carriage
requirements. These rules allow commercial television broadcast stations which
are "local" to a cable system, i.e., the system is located in the station's Area
of Dominant Influence, to elect every three years whether to require the cable
system to carry the station, subject to certain exceptions, or whether the cable
system will have to negotiate for "retransmission consent" to carry the station.
Local non-commercial television stations are also given mandatory carriage
rights, subject to certain exceptions, within the larger of: (i) a 50-mile
radius from the station's city of license; or (ii) the station's Grade B contour
(a measure of signal strength). Unlike commercial stations, noncommercial
stations are not given the option to negotiate retransmission consent for the
carriage of their signal. In addition, cable systems must obtain retransmission
consent for the carriage of all "distant" commercial broadcast stations, except
for certain "superstations," i.e., commercial satellite-delivered independent
stations, such as WGN. The Partnership has thus far not been required to pay
cash compensation to broadcasters for retransmission consent or been required by
broadcasters to remove broadcast stations from the cable television channel
line-ups. The Partnership has, however, agreed to carry some services in
specified markets pursuant to retransmission consent arrangements which it
believes are comparable to those entered into by most other large cable
operators, and for which it pays monthly fees to the service providers, as it
does with other satellite providers. The second election between must-carry and
retransmission consent for local commercial television broadcast stations was
October 1, 1996, and the Partnership has agreed to carry one new service in
specified markets pursuant to these retransmission consent arrangements. The
next election between must-carry and retransmission consent for local commercial
television broadcast stations will be October 1, 1999.

           The FCC is currently conducting a rulemaking proceeding regarding the
carriage responsibilities of cable television systems during the transition of
broadcast television from analog to digital transmission. Specifically, the FCC
is exploring whether to amend the signal carriage rules to accommodate the
carriage of digital broadcast television signals. The Partnership is unable to
predict the ultimate outcome of this proceeding or the impact of new carriage
requirements on the operations of its cable systems.




                                      -16-
<PAGE>   17

           NONDUPLICATION OF NETWORK PROGRAMMING

           Cable television systems that have 1,000 or more customers must, upon
the appropriate request of a local television station, delete the simultaneous
or nonsimultaneous network programming of certain lower priority distant
stations affiliated with the same network as the local station.

           DELETION OF SYNDICATED PROGRAMMING

           FCC regulations enable television broadcast stations that have
obtained exclusive distribution rights for syndicated programming in their
market to require a cable system to delete or "black out" such programming from
certain other television stations which are carried by the cable system. The
extent of such deletions will vary from market to market and cannot be predicted
with certainty. However, it is possible that such deletions could be substantial
and could lead the cable operator to drop a distant signal in its entirety.

           PROGRAM ACCESS

           The 1992 Cable Act contains provisions that are intended to foster
the development of competition to traditional cable systems by regulating the
access of competing multichannel video providers to vertically integrated,
satellite-distributed cable programming services. Consequently, with certain
limitations, the federal law generally precludes any satellite distributed
programming service affiliated with a cable company from favoring an affiliated
company over competitors; requires such programmers to sell their programming to
other multichannel video providers; and limits the ability of such satellite
program services to offer exclusive programming arrangements to their
affiliates.

           FRANCHISE FEES

           Franchising authorities may impose franchise fees, but such payments
cannot exceed 5% of a cable system's annual gross revenues. Under the 1996
Telecom Act, franchising authorities may not exact franchise fees from revenues
derived from telecommunications services.

           RENEWAL OF FRANCHISES

           The 1984 Cable Act established renewal procedures and criteria
designed to protect incumbent franchisees against arbitrary denials of renewal.
While these formal procedures are not mandatory unless timely invoked by either
the cable operator or the franchising authority, they can provide substantial
protection to incumbent franchisees. Even after the formal renewal procedures
are invoked, franchising authorities and cable operators remain free to
negotiate a renewal outside the formal process. Nevertheless, renewal is by no
means assured, as the franchisee must meet certain statutory standards. Even if
a franchise is renewed, a franchising authority may impose new and more onerous
requirements such as upgrading facilities and equipment, although the
municipality must take into account the cost of meeting such requirements.

           The 1992 Cable Act makes several changes to the process under which a
cable operator seeks to enforce his renewal rights, which could make it easier
in some cases for a franchising authority to deny renewal. While a cable
operator must still submit its request to commence renewal proceedings within
thirty to thirty-six months prior to franchise expiration to invoke the formal
renewal process, the request must be in writing and the franchising authority
must commence renewal proceedings not later than six months after receipt of
such notice. The four-month period for the franchising authority to grant or
deny the renewal now runs from the submission of the renewal proposal, not the
completion of the public proceeding. Franchising authorities may consider the
"level" of programming service provided by a cable operator in deciding whether
to renew. For alleged franchise violations occurring after December 29, 1984,
franchising authorities are no longer precluded from denying renewal based on
failure to substantially comply with the material terms of the franchise where
the franchising authority has "effectively acquiesced" to such past violations.
Rather, the franchising authority is estopped if,



                                      -17-
<PAGE>   18

after giving the cable operator notice and opportunity to cure, it fails to
respond to a written notice from the cable operator of its failure or inability
to cure. Courts may not reverse a denial of renewal based on procedural
violations found to be "harmless error."

           CHANNEL SET-ASIDES

           The 1984 Cable Act permits local franchising authorities to require
cable operators to set aside certain channels for public, educational and
governmental access programming. The 1984 Cable Act further requires cable
television systems with thirty-six or more activated channels to designate a
portion of their channel capacity for commercial leased access by unaffiliated
third parties. While the 1984 Cable Act allowed cable operators substantial
latitude in setting leased access rates, the 1992 Cable Act requires leased
access rates to be set according to a formula determined by the FCC.

           COMPETING FRANCHISES

           The 1992 Cable Act prohibits franchising authorities from
unreasonably refusing to grant franchises to competing cable television systems
and permits franchising authorities to operate their own cable television
systems without franchises.

           OWNERSHIP

           The 1996 Telecom Act repealed the 1984 Cable Act's prohibition
against local exchange telephone companies ("LECs") providing video programming
directly to customers within their local telephone exchange service areas.
However, with certain limited exceptions, a LEC may not acquire more than a 10%
equity interest in an existing cable system operating within the LEC's service
area. The 1996 Telecom Act also authorized LECs and others to operate "open
video systems". A recent judicial decision overturned various parts of the FCC's
open video rules, including the FCC's restriction preventing local governmental
authorities from requiring open video system operators to obtain a franchise.
The Partnership expects the FCC to modify its open video rules to comply with
the federal court's decision, but is unable to predict the impact any rule
modifications may have on the Partnership's business and operations. See
"Business-Competition."

           The 1984 Cable Act and the FCC's rules prohibit the common ownership,
operation, control or interest in a cable system and a local television
broadcast station whose predicted grade B contour (a measure of a television
station's signal strength as defined by the FCC's rules) covers any portion of
the community served by the cable system. The 1996 Telecom Act eliminates the
statutory ban and directs the FCC to review its rule within two years. Such a
review is presently pending. Finally, in order to encourage competition in the
provision of video programming, the FCC adopted a rule prohibiting the common
ownership, affiliation, control or interest in cable television systems and
wireless cable facilities having overlapping service areas, except in very
limited circumstances. The 1992 Cable Act codified this restriction and extended
it to co-located SMATV systems. Permitted arrangements in effect as of October
5, 1992 are grandfathered. The 1996 Telecom Act exempts cable systems facing
effective competition from the wireless cable and SMATV restriction. In
addition, a cable operator can purchase a SMATV system serving the same area and
technically integrate it into the cable system. The 1992 Cable Act permits
states or local franchising authorities to adopt certain additional restrictions
on the ownership of cable television systems.

           Pursuant to the 1992 Cable Act, the FCC has imposed limits on the
number of cable systems which a single cable operator can own. In general, no
cable operator can have an attributable interest in cable systems which pass
more than 30% of all homes nationwide. Attributable interests for these purposes
include voting interests of 5% or more (unless there is another single holder of
more than 50% of the voting stock), officerships, directorships, general
partnership interests and limited partnership interests (unless the limited
partners have no material involvement in the limited partnership's business.)
These rules are under review by the



                                      -18-
<PAGE>   19

FCC. The FCC has stayed the effectiveness of these rules pending the outcome of
the appeal from a U.S. District Court decision holding the multiple ownership
limit provision of the 1992 Cable Act unconstitutional.

           The FCC has also adopted rules which limit the number of channels on
a cable system which can be occupied by programming in which the entity which
owns the cable system has an attributable interest. The limit is 40% of the
first 75 activated channels.

           The FCC also recently commenced a rulemaking proceeding to examine,
among other issues, whether any limitations on cable-DBS cross-ownership are
warranted in order to prevent anticompetitive conduct in the video services
market.

           FRANCHISE TRANSFERS

           The 1992 Cable Act requires franchising authorities to act on any
franchise transfer request submitted after December 4, 1992 within 120 days
after receipt of all information required by FCC regulations and by the
franchising authority. Approval is deemed to be granted if the franchising
authority fails to act within such period.

           TECHNICAL REQUIREMENTS

           The FCC has imposed technical standards applicable to the cable
channels on which broadcast stations are carried, and has prohibited franchising
authorities from adopting standards which are in conflict with or more
restrictive than those established by the FCC. Those standards are applicable to
all classes of channels which carry downstream National Television System
Committee (the "NTSC") video programming. The FCC also has adopted additional
standards applicable to cable television systems using frequencies in the
108-137 MHz and 225-400 MHz bands in order to prevent harmful interference with
aeronautical navigation and safety radio services and has also established
limits on cable system signal leakage. Periodic testing by cable operators for
compliance with the technical standards and signal leakage limits is required
and an annual filing of the results of these measurements is required. The 1992
Cable Act requires the FCC to periodically update its technical standards to
take into account changes in technology. Under the 1996 Telecom Act, local
franchising authorities may not prohibit, condition or restrict a cable system's
use of any type of subscriber equipment or transmission technology.

           The FCC has adopted regulations to implement the requirements of the
1992 Cable Act designed to improve the compatibility of cable systems and
consumer electronics equipment. Among other things, these regulations generally
prohibit cable operators from scrambling their basic service tier. The 1996
Telecom Act directs the FCC to set only minimal standards to assure
compatibility between television sets, VCRs and cable systems, and to rely on
marketplace competition to best determine which features, functions, protocols,
and product and service options meet the needs of consumers.

           Pursuant to the 1992 Cable Act, the FCC has adopted rules to assure
the competitive availability to consumers of customers premises equipment, such
as converters, used to access the services offered by cable television systems
and other multichannel video programming distributions ("MVPD"). Pursuant to
those rules, consumers are given the right to attach compatible equipment to the
facilities of their MVPD so long as the equipment does not harm the network,
does not interfere with the services purchased by other customers, and is not
used to receive unauthorized services. As of July 1, 2000, MVPDs (other than DBS
operators) are required to separate security from non-security functions in the
customer premises equipment which they sell or lease to their customers and
offer their customers the option of using component security modules obtained
from the MVPD with set-top units purchased or leased from retail outlets. As of
January 1, 2005, MVPDs will be prohibited from distributing new set-top
equipment integrating both security and non-security functions to their
customers.



                                      -19-
<PAGE>   20

           POLE ATTACHMENTS

           The FCC currently regulates the rates and conditions imposed by
certain public utilities for use of their poles unless state public service
commissions are able to demonstrate that they regulate the rates, terms and
conditions of cable television pole attachments. The state of Utah, in which the
Partnership operates a cable system, has certified to the FCC that it regulates
the rates, terms and conditions for pole attachments. In the absence of state
regulation, the FCC administers such pole attachment rates through use of a
formula which it has devised. The 1996 amendments to the Communications Act
modified the FCC's pole attachment regulatory scheme by requiring the FCC to
adopt new regulations. These regulations become effective in 2001 and govern the
charges for pole attachments used by companies, including cable operators, that
provide telecommunications services by immediately permitting certain providers
of telecommunications services to rely upon the protections of the current law
until the new rate formula becomes effective in 2001, and by requiring that
utilities provide cable systems and telecommunications carriers with
nondiscriminatory access to any pole, conduit or right-of-way controlled by the
utility. In adopting its new attachment regulations, the FCC concluded, in part,
that a cable operator providing Internet service on its cable system is not
providing a telecommunications service for purposes of the new rules.

           The new rate formula adopted by the FCC and which is applicable for
any party, including cable systems, which offer telecommunications services will
result in significantly higher attachment rates for cable systems which choose
to offer such services. Any resulting increase in attachment rates as a result
of the FCC's new rate formula will be phased in over a five-year period in equal
annual increments, beginning in February 2001. Several parties have requested
the FCC to reconsider its new regulations and several parties have challenged
the new rules in court. A federal district court recently upheld the
constitutionality of the new statutory provision, and the utilities involved in
that litigation have appealed the lower court's decision. The FCC also has
initiated a proceeding to determine whether it should adjust certain elements of
the current rate formula. If adopted, these adjustments could increase rates for
pole attachments and conduit space. The Partnership is unable to predict the
outcome of this current litigation or the ultimate impact of any revised FCC
rate formula or of any new pole attachment rate regulations on its business and
operations.

           OTHER MATTERS

           Other matters subject to FCC regulation include certain restrictions
on a cable system's carriage of local sports programming; rules governing
political broadcasts; customer service standards; obscenity and indecency; home
wiring; equal employment opportunity; privacy; closed captioning; sponsorship
identification; system registration; and limitations on advertising contained in
nonbroadcast children's programming.

           COPYRIGHT

           Cable television systems are subject to federal copyright licensing
covering carriage of broadcast signals. In exchange for making semi-annual
payments to a federal copyright royalty pool and meeting certain other
obligations, cable operators obtain a statutory license to retransmit broadcast
signals. The amount of this royalty payment varies, depending on the amount of
system revenues from certain sources, the number of distant signals carried, and
the location of the cable system with respect to over-the-air television
stations. Any future adjustment to the copyright royalty rates will be done
through an arbitration process supervised by the U.S. Copyright Office.

           Cable operators are liable for interest on underpaid and unpaid
royalty fees, but are not entitled to collect interest on refunds received for
overpayment of copyright fees.

           Copyrighted music transmitted in programming supplied to cable
television systems by pay cable networks (such as HBO) and basic cable networks
(such as USA Network) is licensed by the networks through private agreements
with the American Society of Composers and Publishers ("ASCAP") and BMI, Inc.



                                      -20-
<PAGE>   21

("BMI"), the two major performing rights organizations in the United States. As
a result of extensive litigation, both ASCAP and BMI now offer "through to the
viewer" licenses to the cable networks which cover the retransmission of the
cable networks' programming by cable systems to their customers. Payment for
music performed in programming offered on a per program basis remains unsettled.
The Company recently participated in a settlement with BMI for payment of fees
in connection with the Request pay-per-view network. Industry litigation of this
issue with ASCAP is likely.

           Copyrighted music transmitted by cable systems themselves, e.g., on
local origination channels or in advertisements inserted locally on cable
networks, must also be licensed. Cable industry negotiations with ASCAP, BMI and
SESAC, Inc. (a third and smaller performing rights organization) are in
progress.

LOCAL REGULATION

           Because a cable television system uses local streets and
rights-of-way, cable television systems generally are operated pursuant to
nonexclusive franchises, permits or licenses granted by a municipality or other
state or local government entity. Franchises generally are granted for fixed
terms and in many cases are terminable if the franchise operator fails to comply
with material provisions. Although the 1984 Cable Act provides for certain
procedural protections, there can be no assurance that renewals will be granted
or that renewals will be made on similar terms and conditions. Upon receipt of a
franchise, the cable system owner usually is subject to a broad range of
obligations to the issuing authority directly affecting the business of the
system. The terms and conditions of franchises vary materially from jurisdiction
to jurisdiction, and even from city to city within the same state, historically
ranging from reasonable to highly restrictive or burdensome. The specific terms
and conditions of a franchise and the laws and regulations under which it was
granted directly affect the profitability of the cable television system. Cable
franchises generally contain provisions governing charges for basic cable
television services, fees to be paid to the franchising authority, length of the
franchise term, renewal, sale or transfer of the franchise, territory of the
franchise, design and technical performance of the system, use and occupancy of
public streets and the number and types of cable services provided. The 1996
Telecom Act prohibits a franchising authority from either requiring or limiting
a cable operator's provision of telecommunications services.

           The 1984 Cable Act places certain limitations on a franchising
authority's ability to control the operation of a cable system operator, and the
courts have from time to time reviewed the constitutionality of several general
franchise requirements, including franchise fees and access channel
requirements, often with inconsistent results. On the other hand, the 1992 Cable
Act prohibits exclusive franchises, and allows franchising authorities to
exercise greater control over the operation of franchised cable television
systems, especially in the area of customer service and rate regulation.
Moreover, franchising authorities are immunized from monetary damage awards
arising from regulation of cable television systems or decisions made on
franchise grants, renewals, transfers and amendments.

           Existing federal regulations, copyright licensing and, in many
jurisdictions, state and local franchise requirements, currently are the subject
of a variety of judicial proceedings, legislative hearings and administrative
and legislative proposals which could change, in varying degrees, the manner in
which cable television systems operate. Neither the outcome of these proceedings
nor their impact upon the cable television industry can be predicted at this
time.



                                      -21-
<PAGE>   22

ITEM 2.              PROPERTIES

           The Partnership owns or leases parcels of real property for signal
reception sites (antenna towers and headends), microwave facilities and business
offices, and owns or leases its service vehicles. The Partnership believes that
its properties, both owned and leased, are in good condition and are suitable
and adequate for the Partnership's business operations.

           The Partnership owns substantially all of the assets related to its
cable television operations, including its program production equipment, headend
(towers, antennae, electronic equipment and satellite earth stations), cable
plant (distribution equipment, amplifiers, customer drops and hardware),
converters, test equipment and tools and maintenance equipment.


ITEM 3.              LEGAL PROCEEDINGS

           The Partnership is periodically a party to various legal proceedings.
Such legal proceedings are ordinary and routine litigation proceedings that are
incidental to the Partnership's business and management believes that the
outcome of all pending legal proceedings will not, in the aggregate, have a
material adverse effect on the financial condition of the Partnership.


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

           None.



                                      -22-
<PAGE>   23

                                     PART II


ITEM 5.              MARKET FOR THE REGISTRANT'S EQUITY SECURITIES AND RELATED
                     SECURITY HOLDER MATTERS

LIQUIDITY

           While the Partnership's equity securities, which consist of units of
limited partnership interests, are publicly held, there is no established public
trading market for the units and it is not expected that a market will develop
in the future. The approximate number of equity security holders of record was
977 as of December 31, 1998. In addition to restrictions on the transferability
of units contained in the partnership agreement, the transferability of units
may be affected by restrictions on resales imposed by federal or state law.

           Pursuant to documents filed with the Securities and Exchange
Commission on February 8, 1999, Madison Liquidity Investors 104, LLC ("Madison")
initiated a tender offer to purchase up to approximately 9.9% of the outstanding
units for $110 per unit. On February 22, 1999, the Partnership filed a
Recommendation Statement on Schedule 14D-9 and distributed a letter to
unitholders recommending that unitholders reject Madison's offer.

DISTRIBUTIONS

           The amended Partnership Agreement generally provides that all cash
distributions, as defined, be allocated 1% to the general partners and 99% to
the limited partners until the limited partners have received aggregate cash
distributions equal to their original capital contributions. The Partnership
Agreement also provides that all Partnership operating profits be allocated to
the partners in the same proportion as cash flow distributions are made.
However, even after the limited partners have received cash flow equal to their
initial investment, the general partners will only receive a 1% distribution of
proceeds from a disposition or refinancing of a system until the limited
partners have received an annual simple interest return of at least 8% of their
initial investment less any distributions from previous dispositions or
refinancing of systems. Thereafter, proceeds from a disposition or refinancing
of a system shall be distributed 80% to the limited partners and 20% to the
general partners. Gains from dispositions of systems are first allocated in the
same manner as the proceeds from such dispositions. This occurs until the
dispositions result in the aggregate fair market value of the Partnership's
remaining system(s) being less than or equal to 50% of the aggregate
contributions to the capital of the Partnership by the partners. Once this level
of dispositions has occurred, gain is allocated to the partners so that
distributions upon liquidation of the Partnership in accordance with capital
account balances will result in the same amounts being distributed to the
partners as if distributions were made in the same manner as they are prior to a
liquidation.

           Any losses, whether resulting from operations or the sale or
disposition of a system, are allocated 99% to the limited partners and 1% to the
general partners until the limited partners' capital account balances are equal
to or less than zero. Thereafter, all losses are allocated to the Corporate
General Partner.

           Upon dissolution of the Partnership, distributions are to be made to
the partners in accordance with their capital account balances. No partners
other than general partners shall be obligated to restore any negative capital
account balance existing upon dissolution of a partnership. All allocations to
individual limited partners will be based on their respective limited
partnership ownership interests.

           The policy of the Corporate General Partner (although there is no
contractual obligation to do so) is to cause the Partnership to make cash
distributions on a monthly basis throughout the operational life of the
Partnership, assuming the availability of sufficient cash flow from Partnership
operations. The amount of such distributions, if any, will vary from month to
month depending upon the Partnership's results of



                                      -23-
<PAGE>   24

operations and the Corporate General Partner's determination of whether
otherwise available funds are needed for the Partnership's ongoing working
capital and other liquidity requirements. On February 22, 1994, the FCC
announced significant amendments to its rules implementing certain provisions of
the 1992 Cable Act. Compliance with these rules has had a negative impact on the
Partnership's revenues and cash flow.

           The Partnership began making periodic cash distributions from
operations in January 1990 and discontinued distributions in July 1994. No
distributions were made during 1996, 1997 and 1998.

           The Partnership's ability to pay distributions, the actual level of
distributions and the continuance of distributions, if any, will depend on a
number of factors, including the amount of cash flow from operations, projected
capital expenditures, provision for contingent liabilities, availability of bank
financing, regulatory or legislative developments governing the cable television
industry, and growth in customers. Some of these factors are beyond the control
of the Partnership, and consequently, no assurance can be given regarding the
level or timing of future distributions, if any. The Partnership's present
Facility does not restrict the payment of distributions to partners unless an
event of default exists thereunder or the Partnership's ratio of debt to cash
flow is greater than 4 to 1. However, due to the Partnership's pending rebuild
requirements, management does not anticipate paying distributions at any time in
the foreseeable future except in connection with a liquidation of the
Partnership as described elsewhere in this Report. See Item 1., "Recent
Developments" and Item 7., "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."




                                      -24-
<PAGE>   25

ITEM 6.              SELECTED FINANCIAL DATA

           Set forth below is selected financial data of the Partnership for the
five years ended December 31, 1998. This data should be read in conjunction with
the Partnership's financial statements included in Item 8 hereof and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7.


<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                -------------------------------------------------------------------------------
OPERATIONS STATEMENT DATA                           1994             1995             1996             1997             1998
                                                -----------      -----------      -----------      -----------      -----------
<S>                                             <C>              <C>              <C>              <C>              <C>        
   Revenues                                     $ 2,007,800      $ 2,211,900      $ 2,524,700      $ 2,917,600      $ 3,030,600
   Costs and expenses                            (1,293,600)      (1,291,200)      (1,461,100)      (1,675,100)      (1,729,800)
   Depreciation and amortization                 (1,004,200)        (976,400)      (1,054,200)      (1,118,800)      (1,143,400)
                                                -----------      -----------      -----------      -----------      -----------
   Operating income (loss)                         (290,000)         (55,700)           9,400          123,700          157,400
   Interest expense                                (161,300)        (195,400)        (147,700)        (140,800)        (154,600)
   Interest income                                    1,500            4,300            8,000           11,600           18,100
   Gain on sale of cable assets                          --               --               --               --              900
   Costs of potential sale of cable
     television systems                                  --               --               --               --          (90,500)
                                                -----------      -----------      -----------      -----------      -----------
   Net loss                                     $  (449,800)     $  (246,800)     $  (130,300)     $    (5,500)     $   (68,700)
                                                ===========      ===========      ===========      ===========      ===========
   Distributions to partners                    $   259,000      $        --      $        --      $        --      $        --
                                                ===========      ===========      ===========      ===========      ===========

PER UNIT OF LIMITED
  PARTNERSHIP INTEREST:
   Net loss                                     $    (12.16)     $     (6.67)     $     (3.52)     $     (0.15)     $     (1.86)
                                                ===========      ===========      ===========      ===========      ===========
   Distributions                                $      7.00      $        --      $        --      $        --      $        --
                                                ===========      ===========      ===========      ===========      ===========

OTHER OPERATING DATA

   Net cash provided by operating activities    $   532,900      $   408,700      $   957,000      $ 1,379,800      $ 1,103,300
   Net cash used in investing activities           (447,900)        (548,100)        (700,100)        (604,800)        (768,200)
   Net cash provided by (used in)
      financing activities                          (47,900)         (13,900)          56,800         (823,700)        (277,600)
   EBITDA(1)                                        714,200          920,700        1,063,600        1,242,500        1,300,800
   EBITDA to revenues                                  35.6%            41.6%            42.1%            42.6%            42.9%
   Total debt to EBITDA                                2.7x             1.8x             1.2x             1.4x             1.1x
   Capital expenditures                         $   438,400      $   526,700      $   673,300      $   577,200      $   753,400
</TABLE>


<TABLE>
<CAPTION>
                                                                              As of December 31,
                                                -------------------------------------------------------------------------------
BALANCE SHEET DATA                                  1994             1995             1996             1997             1998
                                                -----------      -----------      -----------      -----------      -----------
<S>                                             <C>              <C>              <C>              <C>              <C>        
Total assets                                    $ 7,027,700      $ 6,765,700      $ 6,656,500      $ 5,894,700      $ 5,566,300
Total debt                                        1,907,500        1,630,700        1,288,400        1,750,000        1,400,000
General partners' deficit                           (33,400)         (35,900)         (37,200)         (37,300)         (38,000)
Limited partners' capital                         3,953,900        3,709,600        3,580,600        3,575,200        3,507,200
</TABLE>


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

           (1) EBITDA is calculated as operating income before depreciation and
amortization. Based on its experience in the cable television industry, the
Partnership believes that EBITDA and related measures of cash flow serve as
important financial analysis tools for measuring and comparing cable television
companies in several areas, such as liquidity, operating performance and
leverage. In addition, the covenants in the primary debt instrument of the
Partnership use EBITDA-derived calculations as a measure of financial
performance. EBITDA is not a measurement determined under GAAP and does not
represent cash generated from operating activities in accordance with GAAP.
EBITDA should not be considered by the reader as an alternative to net income as
an indicator of the Partnership's financial performance or as an alternative to
cash flows as a measure of liquidity. In addition, the Partnership's definition
of EBITDA may not be identical to similarly titled measures used by other
companies.



                                      -25-
<PAGE>   26

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

INTRODUCTION

           The 1992 Cable Act required the FCC to, among other things, implement
extensive regulation of the rates charged by cable television systems for basic
and programming service tiers, installation, and customer premises equipment
leasing. Compliance with those rate regulations has had a negative impact on the
Partnership's revenues and cash flow. The 1996 Telecom Act substantially changed
the competitive and regulatory environment for cable television and
telecommunications service providers. Among other changes, the 1996 Telecom Act
provides that the regulation of CPST rates will terminate on March 31, 1999.
There can be no assurance as to what, if any, further action may be taken by the
FCC, Congress or any other regulatory authority or court, or the effect thereof
on the Partnership's business. Accordingly, the Partnership's historical
financial results as described below are not necessarily indicative of future
performance.

           This Report includes certain forward looking statements regarding,
among other things, future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
Partnership. Such forward looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing cable
television operators such as the Partnership, as discussed more fully elsewhere
in this Report.

RESULTS OF OPERATIONS

           1998 COMPARED TO 1997

           The Partnership's revenues increased from $2,917,600 to $3,030,600,
or by 3.9%, for the year ended December 31, 1998 as compared to 1997. Of the
$113,000 increase, $74,900 was due to increases in the number of subscriptions
for basic, premium and tier services and $49,200 was due to increases in
regulated service rates that were implemented by the Partnership in 1997. These
increases were partially offset by an $11,100 decrease due to decreases in other
revenue producing items, primarily installation revenue. As of December 31,
1998, the Partnership had approximately 7,500 basic subscribers and 1,900
premium service units.

           Service costs increased from $976,600 to $1,024,100, or by 4.9%, for
the year ended December 31, 1998 as compared to 1997. Service costs represent
costs directly attributable to providing cable services to customers. The
increase was primarily due to higher programming fee expense, resulting from
higher rates charged by program suppliers and increases in the number of
subscribers.

           General and administrative expenses remained relatively unchanged,
increasing from $430,700 to $431,300, or by less than 1.0%, for the year ended
December 31, 1998 as compared to 1997. Increases in audit fees and system
operating management expenses allocated by affiliated partnerships were largely
offset by decreases in bad debt expense.

           Management fees and reimbursed expenses increased from $267,800 to
$274,400, or by 2.5%, for the year ended December 31, 1998 as compared to 1997.
Management fees increased in direct relation to increased revenues as described
above. Reimbursed expenses increased principally due to an increase in expenses
allocated by the Corporate General Partner associated with the Partnership's
increase in subscribers.



                                      -26-
<PAGE>   27

           Depreciation and amortization expense increased from $1,118,800 to
$1,143,400, or by 2.2%, for the year ended December 31, 1998 as compared to
1997, due to asset additions and due to a reduction in the estimated remaining
life of existing plant which must be rebuilt by 1999 as required in a franchise
agreement.

           The Partnership's operating income increased from $123,700 to
$157,400, or by 27.2%, for the year ended December 31, 1998 as compared 1997,
due primarily to increases in revenues as described above.

           Interest expense increased from $140,800 to $154,600, or by 9.8%, for
the year ended December 31, 1998 as compared to 1997, due to an increase in
average borrowings during 1998.

           Interest income increased from $11,600 to $18,100, or by 56.0%, for
the year ended December 31, 1998 as compared to 1997, due to higher average cash
balances available for investment.

           As of December 31, 1998, the Partnership had incurred $90,500 of
expenses related to the proposed sale of its cable television system assets.

           Due to the factors described above, the Partnership's net loss
increased from $5,500 to $68,700 for the year ended December 31, 1998 as to
1997.

           EBITDA is calculated as operating income before depreciation and
amortization. See footnote 1 to "Selected Financial Data." EBITDA as a
percentage of revenues increased from 42.6% during 1997 to 42.9% in 1998. The
increase was primarily caused by increased revenues. EBITDA increased from
$1,242,500 to $1,300,800, or by 4.7%, as a result.

           1997 COMPARED TO 1996

           The Partnership's revenues increased from $2,524,700 to $2,917,600,
or by 15.6%, for the year ended December 31, 1997 as compared to 1996. Of the
$392,900 increase, $188,300 was due to increases in regulated service rates that
were implemented by the Partnership in the second and fourth quarters of 1996
and the fourth quarter of 1997, $125,900 was due to increases in the number of
subscriptions for basic, premium and tier services, $46,100 was due to increases
in other revenue producing items including advertising sales revenue and $32,600
was due to the July 1, 1996 restructuring of The Disney Channel from a premium
channel to a tier channel. As of December 31, 1997, the Partnership had
approximately 7,200 basic subscribers and 2,000 premium service units.

           Service costs increased from $825,200 to $976,600, or by 18.3%, for
the year ended December 31, 1997 as compared to 1996. Service costs represent
costs directly attributable to providing cable services to customers.
Programming fees accounted for the majority of the increase. The increase was
also due to increases in franchise fees, personnel costs, pole rent expense and
copyright fees. The increase in programming fees was primarily due to higher
rates charged by program suppliers and increases in the number of subscriptions
for services. Franchise fees and copyright fees increased in direct relation to
increased revenues as described above. Personnel costs charged to the
Partnership by affiliates increased due to staff additions and wage increases,
while pole rent expense increased due to extensions of the Partnership's systems
to pass new serviceable homes in their franchise areas.

           General and administrative expenses increased from $404,500 to
$430,700, or by 6.5%, for the year ended December 31, 1997 as compared to 1996,
primarily due to an increase in bad debt expense and personnel costs charged to
the Partnership by affiliates.



                                      -27-
<PAGE>   28

           Management fees and reimbursed expenses increased from $231,400 to
$267,800, or by 15.7%, for the year ended December 31, 1997 as compared to 1996.
Management fees increased in direct relation to increased revenues as described
above and reimbursed expenses increased primarily due to higher allocated
personnel costs resulting from staff additions and wage increases.

           Depreciation and amortization expense increased from $1,054,200 to
$1,118,800, or by 6.1%, for the year ended December 31, 1997 as compared to
1996, primarily due to a reduction in the estimated remaining life of existing
plant, which must be rebuilt by 1999 as required by two franchise agreements.

           Operating income increased from $9,400 to $123,700 for the year ended
December 31, 1997 as compared to 1996, primarily due to increases in revenues as
described above.

           Interest expense, net of interest income, decreased from $139,700 to
$129,200, or by 7.5%, for the year ended December 31, 1997 as compared to 1996,
primarily due to a decrease in average borrowings.

           Due to the factors described above, the Partnership's net loss
decreased from $130,300 to $5,500, or by 95.8%, for the year ended December 31,
1997 as compared to 1996.

           EBITDA is calculated as operating income before depreciation and
amortization. See footnote 1 to "Selected Financial Data." EBITDA as a
percentage of revenues increased from 42.1% during 1996 to 42.6% in 1997. The
increase was primarily caused by increased revenues. EBITDA increased from
$1,063,600 to $1,242,500, or by 16.8%, as a result.

           DISTRIBUTIONS TO PARTNERS

           As provided in the partnership agreement, distributions to partners
are funded from such amounts after providing for working capital and other
liquidity requirements including debt service and capital expenditures not
otherwise funded by borrowings. The Partnership discontinued distributions to
partners in July 1994 due to liquidity requirements and financial market
conditions. The Partnership's new credit Facility does not restrict the payment
of distributions unless an event of default exists thereunder or the
Partnership's ratio of debt to cash flow is greater than 4 to 1.

LIQUIDITY AND CAPITAL RESOURCES

           The Partnership's primary objective, having invested its net offering
proceeds in cable systems, is to distribute to its partners all available cash
flow from operations and proceeds from the sale of cable systems, if any, after
providing for expenses, debt service and capital requirements relating to the
expansion, improvement and upgrade of its cable systems.

           Substantially all of the available channel capacity in the
Partnership's cable systems is being utilized and each of the Partnership's
cable systems requires upgrading. Existing franchise agreements for three of the
seven franchise areas in the Partnership's Villa Rica, Georgia cable system
require the Partnership to complete system upgrades in 1999. In addition, the
Partnership is in the process of negotiating the renewal of franchise agreements
for two other franchise areas served by the Villa Rica cable system and the
Partnership believes that the renewed franchise agreements may require the
Partnership to upgrade the cable system within those franchise areas. If the
Partnership is unable to obtain financing to fund the upgrades required by its
franchise agreements, the respective franchising authorities may be entitled to
terminate the franchise agreements and the Partnership could lose valuable
franchises.

           Because the Villa Rica cable system is served by one headend and
utilizes integrated cable hardware, the Partnership's proposed upgrade program
would cover all of the seven franchise areas in the 



                                      -28-
<PAGE>   29

Villa Rica, Georgia cable system (the "Villa Rica Upgrade") and is estimated to
require aggregate capital expenditures of approximately $7.5 million. The
Partnership, however, does not presently have, and believes it will be unable to
obtain, the funds required to complete the Villa Rica Upgrade. The Partnership
only has approximately $1.1 million of availability under its $2.5 million
revolving loan facility. In addition, the partnership agreement (the
"Partnership Agreement") provides that the Partnership may not incur borrowings
unless the amount of such borrowings, together with all outstanding borrowings,
does not exceed 33% of the original capital raised by the Partnership (i.e., a
maximum of approximately $3.0 million of outstanding indebtedness).
Consequently, even if the Partnership used the approximately $1.1 million of
existing availability under its revolving loan facility and was able to obtain
the additional $500,000 of debt financing permitted under the terms of the
Partnership Agreement, the Partnership would still lack approximately $5.9
million of additional funding necessary to complete the Villa Rica Upgrade.

           The Partnership considered seeking an amendment to the Partnership
Agreement to permit the Partnership to incur sufficient indebtedness to fund
completion of the Villa Rica Upgrade. Ultimately, however, the Partnership
concluded that such an amendment would not benefit the Partnership because debt
financing sufficient to complete the Villa Rica Upgrade was not available. This
conclusion was based in large part on the discussions held with financing
sources in 1996 and 1997 in connection with the refinancing of the long-term
indebtedness of several partnerships managed by the Corporate General Partner.
Since financing was not available to fund completion of the Villa Rica Upgrade,
the Partnership instead engaged a business broker to solicit offers from third
parties to purchase the Partnership's cable systems. In response to such
solicitation, the Partnership received only the Initial Offers, each of which
excluded the Ivins, Utah and Fisk, Missouri cable systems and contained material
closing conditions and potential material purchase price adjustments.

           The Partnership concluded that it was not in the best interests of
the unitholders to accept either of the Initial Offers because, among other
things, each Initial Offer was subject to material closing conditions and
potential material purchase price adjustments, and neither Initial Offer
constituted an offer to purchase all of the Partnership's cable systems.
Subsequent to the Partnership's receipt of the Initial Offers, the Partnership
received the Falcon Offer for $10,473,200 in cash. The Falcon Offer includes a
price for the Villa Rica cable system which exceeds the highest of the Initial
Offers by approximately 2.5%, contains no potential purchase price adjustments
and contains only limited closing conditions. After the Partnership received the
Falcon Offer, the Partnership received the Fisk Offer. The Partnership concluded
that it was not in the best interests of the unitholders to accept the Fisk
Offer because, among other things, the Fisk Offer did not constitute an offer to
purchase all of the cable systems, and the Falcon Offer includes a price for the
Fisk, Missouri cable system that exceeds the Fisk Offer by approximately 15%.

           Given current market conditions for the Partnership's cable systems,
the lack of channel capacity, the impending upgrades required by the
Partnership's franchise agreements and the Partnership's funding limitations,
the Corporate General Partner believes that accepting the Falcon Offer is in the
best interests of the Partnership and the unitholders. Accordingly, the
Purchasers and the Partnership entered into the Purchase Agreement, dated as of
November 6, 1998, pursuant to which the Purchasers agreed to purchase from the
Partnership, and the Partnership agreed to sell to the Purchasers, subject to
obtaining the requisite consents from the unitholders as discussed below, all of
the Partnership's cable systems for a price of $10,473,200 in cash (the "Sale").
If the Sale is consummated, the Corporate General Partner will make one or more
liquidating distributions to the unitholders and the general partners and, after
providing for the payment of the Partnership's obligations, cause the
Partnership to dissolve, terminate and be liquidated. Based upon the terms and
conditions of the Sale, after repayment of the Partnership's existing
obligations, the Partnership presently estimates that liquidating distributions
to Unitholders would total between $220 and $230 per unit, less applicable
taxes, if any. As a condition to the Sale, the Purchase Agreement requires that
the holders of a majority of the units approve the Sale, certain amendments to
the partnership agreement and the liquidation of the Partnership. On November 9,
1998, the Partnership filed with the Securities and Exchange Commission
preliminary consent solicitation materials on Schedule 14A and a Transaction
Statement on Schedule 13E-3 



                                      -29-
<PAGE>   30

relating to the proposed Sale. On January 26, 1999, the Partnership filed
amended preliminary consent solicitation materials on Amendment No. 1 to
Schedule 14A and Amendment No. 2 to its Rule 13e-3 Transaction Statement.

           One of the Partnership's franchise agreements in the Villa Rica cable
system requires the Partnership to have completed an upgrade to the cable system
by February 7, 1999 and the Partnership has not yet completed that upgrade.
Another of the Partnership's franchise agreements in the Villa Rica system
requires the Partnership to complete an upgrade to the cable system by May 20,
1999 and the Partnership expects that it will not have completed an upgrade by
the required date. The Partnership has commenced each of the upgrades and has
not received any indication from either of the franchising authorities that they
intend to take any action adverse to the Partnership as the result of the
Partnership's noncompliance with the upgrade requirements in the respective
franchise agreements. There can be no assurance, however, that the franchising
authorities will not take action that is adverse to the Partnership.

           The Partnership is party to a loan agreement with Enstar Finance
Company, LLC ("EFC"), a subsidiary of the Corporate General Partner. The loan
agreement provides for a revolving loan facility of $2,528,900 (the "Facility").
The Partnership prepaid $350,000 of its outstanding borrowings during 1998 such
that total outstanding borrowings under the Facility were $1,400,000 at December
31, 1998. All outstanding borrowings under the Facility would be repaid in full
with the proceeds from the Sale of the Partnership's assets as described above.

           The Partnership's Facility matures on August 31, 2001, at which time
amounts then outstanding are due in full. Borrowings bear interest at the
lender's base rate (7.75% at December 31, 1998) plus 0.625%, or at an offshore
rate plus 1.875%. Under certain circumstances, the Partnership is required to
make mandatory prepayments, which permanently reduce the maximum commitment
under the Facility. The Facility contains certain financial tests and other
covenants including, among others, restrictions on incurrence of indebtedness,
investments, sales of assets, acquisitions and other covenants, defaults and
conditions and compliance with material terms of various agreements. The
Partnership was in violation of a loan covenant pertaining to its franchise
compliance for which it received a waiver through December 31, 1999 from EFC and
its lenders. The Partnership believes it was in compliance with all other
covenants as of December 31, 1998.

           The Facility does not restrict the payment of distributions to
partners unless an event of default exists thereunder or the Partnership's ratio
of debt to cash flow is greater than 4 to 1. As previously disclosed, however,
in response to the FCC's amended rate regulation rules and the Partnership's
capital expenditure requirements, distributions to Unitholders were discontinued
in July 1994. As stated at the time of the announcement of this decision, the
Partnership believes that it is critical to preserve its liquidity though the
retention of cash. As a result, and because of the pending system upgrade
requirements discussed above, the Partnership does not anticipate paying
distributions at any time in the foreseeable future except in connection with a
liquidation of the Partnership as described above.

           The Corporate General Partner contributed $244,600 of its $632,100
receivable balance from the Partnership for past due management fees and
reimbursed expenses as an equity contribution to EFC. This balance remains an
outstanding obligation of the Partnership. Such receivable balance would be
repaid from the proceeds of the Sale of the Partnership's assets as described
above.

           Beginning in August 1997, the Corporate General Partner elected to
self-insure the Partnership's cable distribution plant and subscriber
connections against property damage as well as possible business interruptions
caused by such damage. The decision to self-insure was made due to significant
increases in the cost of insurance coverage and decreases in the amount of
insurance coverage available.



                                      -30-
<PAGE>   31

           In October 1998, FCLP reinstated third party insurance coverage for
all of the cable television properties owned or managed by FCLP to cover damage
to cable distribution plant and subscriber connections and against business
interruptions resulting from such damage. This coverage is subject to a
significant annual deductible, which applies to all of the cable television
properties owned or managed by FCLP.

           Approximately 90% of the Partnership's subscribers are served by its
system in Villa Rica, Georgia and neighboring communities. Significant damage to
the system due to seasonal weather conditions or other events could have a
material adverse effect on the Partnership's liquidity and cash flows. The
Partnership continues to purchase insurance coverage in amounts its management
views as appropriate for all other property, liability, automobile, workers'
compensation and other types of insurable risks.

           During the fourth quarter of 1998, FCLP, on behalf of the Corporate
General Partner, continued its identification and evaluation of the
Partnership's Year 2000 business risks and its exposure to computer systems, to
operating equipment which is date sensitive and to the interface systems of its
vendors and service providers. The evaluation has focused on identification and
assessment of systems and equipment that may fail to distinguish between the
year 1900 and the year 2000 and, as a result, may cease to operate or may
operate improperly when dates after December 31, 1999 are introduced.

           Based on a study conducted in 1997, FCLP concluded that certain of
the Partnership's information systems were not Year 2000 compliant and elected
to replace such software and hardware with applications and equipment certified
by the vendors as Year 2000 compliant. FCLP installed a number of the new
systems in January 1999. The remaining systems are expected to be installed by
mid-1999. The total anticipated cost, including replacement software and
hardware, will be borne by FCLP. FCLP is utilizing internal and external
resources to install the new systems. FCLP does not believe that any other
significant information technology ("IT") projects affecting the Partnership
have been delayed due to efforts to identify and address Year 2000 issues.

           Additionally, FCLP has continued to inventory the Partnership's
operating and revenue generating equipment to identify items that need to be
upgraded or replaced and has surveyed cable equipment manufacturers to determine
which of their models require upgrade or replacement to become Year 2000
compliant. Identification and evaluation, while ongoing, are substantially
completed and a plan is being developed to remediate non-compliant equipment
prior to January 1, 2000. FCLP expects to complete its planning process by the
end of May 1999. Upgrade or replacement, testing and implementation will be
performed thereafter. The cost of such replacement or remediation, currently
estimated at $4,300, is not expected to have a material effect on the
Partnership's financial position or results of operations. The Partnership had
not incurred any costs related to the Year 2000 project as of December 31, 1998.
FCLP plans to inventory, assess, replace and test equipment with embedded
computer chips in a separate segment of its project, presently scheduled for
1999.

           FCLP has continued to survey the Partnership's significant third
party vendors and service suppliers to determine the extent to which the
Partnership's interface systems are vulnerable should those third parties fail
to solve their own Year 2000 problems on a timely basis. Among the most
significant service providers upon which the Partnership relies are programming
suppliers, power and telephone companies, various banking institutions and the
Partnership's customer billing service. A majority of these service suppliers
either have not responded to FCLP's inquiries regarding their Year 2000
compliance programs or have responded that they are unsure if they will become
compliant on a timely basis. Consequently, there can be no assurance that the
systems of other companies on which the Partnership must rely will be Year 2000
compliant on a timely basis.

           FCLP expects to develop a contingency plan in 1999 to address
possible situations in which various systems of the Partnership, or of third
parties with which the Partnership does business, are not compliant prior to
January 1, 2000. Considerable effort will be directed toward distinguishing
between those 



                                      -31-
<PAGE>   32

contingencies with a greater probability of occurring from those whose
occurrence is considered remote. Moreover, such a plan will necessarily focus on
systems whose failure poses a material risk to the Partnership's results of
operations and financial condition.

           The Partnership's most significant Year 2000 risk is an interruption
of service to subscribers, resulting in a potentially material loss of revenues.
Other risks include impairment of the Partnership's ability to bill and/or
collect payment from its customers, which could negatively impact its liquidity
and cash flows. Such risks exist primarily due to technological operations
dependent upon third parties and to a much lesser extent to those under the
control of the Partnership. Failure to achieve Year 2000 readiness in either
area could have a material adverse impact on the Partnership. The Partnership is
unable to estimate the possible effect on its results of operations, liquidity
and financial condition should its significant service suppliers fail to
complete their readiness programs prior to the Year 2000. Depending on the
supplier, equipment malfunction or type of service provided, as well as the
location and duration of the problem, the effect could be material. For example,
if a cable programming supplier encounters an interruption of its signal due to
a Year 2000 satellite malfunction, the Partnership will be unable to provide the
signal to its cable subscribers, which could result in a loss of revenues,
although the Partnership would attempt to provide its customers with alternative
program services for the period during which it could not provide the original
signal. Due to the number of individually owned and operated channels the
Partnership carries for its subscribers, and the packaging of those channels,
the Partnership is unable to estimate any reasonable dollar impact of such
interruption.

           1998 VS. 1997

           Cash provided by operating activities decreased by $276,500 from
$1,379,800 to $1,103,300 for the year ended December 31, 1998 as compared to
1997. Changes in receivables provided $197,500 less cash in 1998 than in 1997,
primarily due to the collection of an insurance claim in the first three months
of 1997. The Partnership used $29,500 more cash in 1998 for prepaid expenses and
liabilities owed to third party creditors due to differences in the timing of
payments.

           The Partnership used $163,400 more cash in investing activities
during 1998 than in 1997, primarily due to an increase of $176,200 in
expenditures for tangible assets, partially offset by a decrease of $11,900 in
expenditures for intangible assets. Financing activities used $546,100 less cash
in 1998 than in 1997. The Partnership used $1,322,400 more cash in 1997 than in
1998 to pay past due balances for management fees and reimbursed expenses owed
to the Corporate General Partner and programming expense owed to Falcon
Cablevision. Additionally, the Partnership used $938,400 less cash for the
repayment of debt in 1998 and $35,300 less cash for deferred loan costs related
to its Facility with EFC. The Partnership borrowed $1,750,000 under its Facility
with EFC in 1997 as compared with 1998 when the Partnership borrowed no
additional funds.

           1997 VS. 1996

           Cash provided by operating activities increased by $422,800 from
$957,000 to $1,379,800 for the year ended December 31, 1997 as compared to 1996.
Cash increased by $139,400 from the collection of receivable balances, including
an insurance settlement for storm damage to the Partnership's Georgia cable
systems. Changes in prepaid expenses and accounts payable provided $88,600 more
cash due to differences in the timing of payments.

           The Partnership used $95,300 less cash in investing activities during
1997 than in 1996 primarily due to a decrease of $96,100 in expenditures for
tangible assets. Financing activities used $880,500 more cash in 1997 than in
1996. The Partnership used $1,652,800 more cash to pay previously deferred
amounts owed to the Corporate General Partner and Falcon Cablevision. The
Partnership also used $946,200 more cash to repay debt under its previous credit
facility and $31,500 more cash for the payment of 



                                      -32-
<PAGE>   33

deferred loan costs related to the new Facility. Borrowings of $1,750,000 under
the new Facility partially offset increased uses of cash for financing
activities during 1997.

NEW ACCOUNTING PRONOUNCEMENT

           In 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on Costs of Start-Up Activities."
The new standard, which becomes effective for the Partnership on January 1,
1999, requires costs of start-up activities to be expensed as incurred. The
unamortized portion of previously capitalized start-up costs, which approximates
$25,000, is to be written off in the period of adoption.

INFLATION

           Certain of the Partnership's expenses, such as those for equipment
repair and replacement, billing and marketing generally increase with inflation.
However, the Partnership does not believe that its financial results have been,
or will be, adversely affected by inflation in a material way, provided that it
is able to increase its service rates periodically, of which there can be no
assurance. See "Legislation and Regulation."

ITEM 7(a).              QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 
                        MARKET RISK

           The Partnership is exposed to financial market risks, including
changes in interest rates from its long-term debt arrangements. Under its
current policies, the Partnership does not use interest rate derivative
instruments to manage exposure to interest rate changes. An increase in interest
rates of 1% in 1998 would have increased the Partnership's interest expense for
the year ended December 31, 1998 by approximately $14,500 with a corresponding
effect on its net loss.

ITEM 8.              FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

           The financial statements and related financial information required
to be filed hereunder are indexed on Page F-1.

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

           Not applicable.



                                      -33-
<PAGE>   34

                                    PART III

ITEM 10.              DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

           The General Partners of the Partnership may be considered, for
certain purposes, the functional equivalents of directors and executive
officers. The Corporate General Partner is Enstar Communications Corporation,
and Robert T. Graff, Jr. is the Individual General Partner. As part of Falcon
Cablevision's September 30, 1988 acquisition of the Corporate General Partner,
Falcon Cablevision received an option to acquire Mr. Graff's interest as
Individual General Partner of the Partnership and other affiliated cable limited
partnerships that he previously co-sponsored with the Corporate General Partner,
and Mr. Graff received the right to cause Falcon Cablevision to acquire such
interests. These arrangements were modified and extended in an amendment dated
September 10, 1993 pursuant to which, among other things, the Corporate General
Partner obtained the option to acquire Mr. Graff's interest in lieu of the
purchase right described above which was originally granted to Falcon
Cablevision. Since its incorporation in Georgia in 1982, the Corporate General
Partner has been engaged in the cable/telecommunications business, both as a
general partner of 15 limited partnerships formed to own and operate cable
television systems and through a wholly-owned operating subsidiary. As of
December 31, 1998 the Corporate General Partner managed cable television systems
with approximately 91,000 basic subscribers.

           On September 30, 1998, FHGLP acquired ownership of the Corporate
General Partner from Falcon Cablevision. FHGI is the sole general partner of
FHGLP. FHGLP controls the general partners of 15 limited partnerships which
operate under the Enstar name (including the Partnership). Although these
limited partnerships are affiliated with FHGLP, their assets are owned by legal
entities separate from the Partnership.

           Set forth below is certain general information about the Directors
and Executive Officers of the Corporate General Partner:


<TABLE>
<CAPTION>
NAME                       POSITION
----                       --------
<S>                        <C>
Marc B. Nathanson          Director, Chairman of the Board and Chief Executive Officer
Frank J. Intiso            Director, President and Chief Operating Officer
Stanley S. Itskowitch      Director, Executive Vice President and General Counsel
Michael K. Menerey         Director, Executive Vice President, Chief Financial Officer and Secretary
Joe A. Johnson             Executive Vice President - Operations
Thomas J. Hatchell         Executive Vice President - Operations
Abel C. Crespo             Vice President, Corporate Controller
</TABLE>


MARC B. NATHANSON, 53, has been Chairman of the Board and Chief Executive
Officer of FHGI and its predecessors since 1975, and prior to September 19, 1995
also served as President. He has been Chairman of the Board and Chief Executive
Officer of Enstar Communications Corporation since October 1988, and also served
as its President prior to September 1995. Prior to 1975, Mr. Nathanson was Vice
President of Marketing for Teleprompter Corporation, then the largest cable
operator in the United States. He also held executive positions with Warner
Cable and Cypress Communications Corporation. He is a former President of the
California Cable Television Association and a member of Cable Pioneers. He is
currently a director of the National Cable Television Association ("NCTA") and
will Chair its 1999 National Convention. At the 1986 NCTA convention, Mr.
Nathanson was honored by being named the recipient of the Vanguard Award for
outstanding contributions to the growth and development of the cable television
industry. Mr. Nathanson is a 30-year veteran of the cable television industry.
He is a founder of the Cable Television Administration and Marketing Society
("CTAM") and the Southern California Cable Television Association. Mr. Nathanson
is an Advisory Board member of TVA, (Brazil) and also Chairman of the Board and
Chief Executive Officer of Falcon International 



                                      -34-
<PAGE>   35

Communications, LLC. Mr. Nathanson was appointed by President Clinton on
November 1, 1998 as Chair of the Board of Governors for the International Bureau
of Broadcasting which oversees Voice of America, Radio/TV Marti, Radio Free
Asia, Radio Free Europe and Radio Liberty. Mr. Nathanson is a trustee of the
Annenburg School of Communications at the University of Southern California and
a member of the Board of Visitors of the Anderson School of Management at UCLA.
In addition, he serves on the Board of the UCLA Foundation and the UCLA Center
for Communications Policy and is on the Board of Governors of AIDS Project Los
Angeles and Cable Positive.

FRANK J. INTISO, 52, was appointed President and Chief Operating Officer of FHGI
in September 1995. Between 1982 and September 1995, Mr. Intiso held the
positions of Executive Vice President and Chief Operating Officer, with
responsibility for the day-to-day operations of all cable television systems
under the management of Falcon. He has been President and Chief Operating
Officer of Enstar Communications Corporation since September 1995, and between
October 1988 and September 1995 held the positions of Executive Vice President
and Chief Operating Officer. Mr. Intiso has a Masters Degree in Business
Administration from UCLA and is a Certified Public Accountant. He currently
serves as Immediate Past Chair of the California Cable Television Association
and is on the boards of the Cable Advertising Bureau, Cable in the Classroom,
and the California Cable Television Association. He is a member of the American
Institute of Certified Public Accountants, the American Marketing Association,
the American Management Association and the Southern California Cable Television
Association.

STANLEY S. ITSKOWITCH, 60, has been a Director of FHGI and its predecessors
since 1975. He served as Senior Vice President and General Counsel of FHGI from
1987 to 1990 and has been Executive Vice President and General Counsel since
February 1990. Mr. Itskowitch has been Executive Vice President and General
Counsel of Enstar Communications Corporation since October 1988. He has been
President and Chief Executive Officer of F.C. Funding, Inc. (formerly Fallek
Chemical Company), which is a marketer of chemical products, since 1980. He is a
Certified Public Accountant and a former tax partner in the New York office of
Touche Ross & Co. (now Deloitte & Touche LLP). He has a J.D. Degree and an
L.L.M. Degree in Tax from New York University School of Law. Mr. Itskowitch is
also Executive Vice President and General Counsel of Falcon International
Communications, LLC.

MICHAEL K. MENEREY, 47, has been Executive Vice President, Chief Financial
Officer and Secretary of FHGI and Enstar Communications Corporation since
February 1998 and was Chief Financial Officer and Secretary of FHGI and its
predecessors between 1984 and 1998 and of Enstar Communications Corporation
since October 1988. Mr. Menerey is a Certified Public Accountant and is a member
of the American Institute of Certified Public Accountants and the California
Society of Certified Public Accountants, and he was formerly associated with BDO
Seidman.

JOE A. JOHNSON, 54, has been Executive Vice President of Operations of FHGI
since September 1995, and was a Divisional Vice President of FHGI between 1989
and 1992. He has been Executive Vice President-Operations of Enstar
Communications Corporation since January 1996. From 1982 to 1989, he held the
positions of Vice President and Director of Operations for Sacramento Cable
Television, Group W Cable of Chicago and Warner Amex. From 1975 to 1982, Mr.
Johnson held Cable System and Regional Manager positions with Warner Amex and
Teleprompter. Mr. Johnson is also a member of the Cable Pioneers.

THOMAS J. HATCHELL, 49, has been Executive Vice President of Operations of FHGI
and Enstar Communications Corporation since February 1998. From October 1995 to
February 1998, he was Senior Vice President of Operations of Falcon
International Communications, L.P. and its predecessor company and was a Senior
Vice President of FHGI from January 1992 to September 1995. Mr. Hatchell was a
Divisional Vice President of FHGI between 1989 and 1992. From 1981 to 1989, he
served as Vice President and Regional Manager for the San Luis Obispo,
California region owned by an affiliate of FHGI. He was Vice President of
Construction of an affiliate of FHGI from June 1980 to June 1981.



                                      -35-
<PAGE>   36

ABEL C. CRESPO, 39, has been Vice President, Corporate Controller of FHGI and
Enstar Communications Corporation since March 1999. He previously had served as
Controller since January 1997. Mr. Crespo joined Falcon in December 1984, and
has held various accounting positions during that time. Mr. Crespo holds a
Bachelor of Science degree in Business Administration from California State
University, Los Angeles.

OTHER OFFICERS OF FALCON

           The following sets forth certain biographical information with
respect to certain additional members of FHGI management.

LYNNE A. BUENING, 45, has been Vice President of Programming of FHGI since
November 1993. From 1989 to 1993, she served as Director of Programming for
Viacom Cable, a division of Viacom International Inc. Prior to that, Ms. Buening
held programming and marketing positions in the cable, broadcast and newspaper
industries.

OVANDO COWLES, 45, has been Vice President of Advertising Sales and Production
of FHGI since January 1992. From 1988 to 1991, he served as Director of
Advertising Sales and Production at Cencom Cable Television in Pasadena,
California. From 1985 to 1988, he was an Advertising Sales Account Executive at
Choice TV, an affiliate of FHGI.

HOWARD J. GAN, 52, has been Vice President of Regulatory Affairs of FHGI and its
predecessors since 1988. Prior to joining FHGI, he was General Counsel at
Malarkey-Taylor Associates, a Washington, D.C.-based telecommunications
consulting firm, from 1986 to 1988, and was Vice President and General Counsel
at CTIC Associates from 1978 to 1983. In addition, he was an attorney and an
acting Branch Chief of the Federal Communications Commission's Cable Television
Bureau from 1973 to 1978.

R.W. ("SKIP") HARRIS, 51, has been Vice President of Marketing of FHGI since
June 1991. Mr. Harris was National Director of Affiliate Marketing for The
Disney Channel from 1985 to 1991. He was also a sales manager, regional
marketing manager and director of marketing for Cox Cable Communications from
1978 to 1985.

MARTIN B. SCHWARTZ, 39, has been Vice President of Corporate Development of FHGI
since March 1999. Mr. Schwartz joined Falcon in November 1989 and has held
various finance, planning and corporate development positions during that time,
most recently that of Director of Corporate Development. Mr. Schwartz has a
Masters Degree in Business Administration from UCLA.

JOAN SCULLY, 63, has been Vice President of Human Resources of FHGI and its
predecessors since May 1988. From 1987 to May 1988, she was self-employed as a
management consultant to cable and transportation companies. She served as
Director of Human Resources of a Los Angeles-based cable company from 1985
through 1987. Prior to that time, she served as a human resource executive in
the entertainment and aerospace industries. Ms. Scully holds a Masters Degree in
Human Resources Management from Pepperdine University.

RAYMOND J. TYNDALL, 51, has been Vice President of Engineering of FHGI since
October 1989. From 1975 to September 1989, he held various technical positions
with Choice TV and its predecessors. From 1967 to 1975, he held various
technical positions with Sammons Communications. He is a certified National
Association of Radio and Television Engineering ("NARTE") engineer in lightwave,
microwave, satellite and broadband and is a member of the Cable Pioneers.

           In addition, FHGI has six Divisional Vice Presidents who are based in
the field. They are G. William Booher, Daniel H. DeLaney, Ron L. Hall, Ronald S.
Hren, Michael E. Kemph and Michael D. Singpiel.



                                      -36-
<PAGE>   37

           Each director of the Corporate General Partner is elected to a
one-year term at the annual shareholder meeting to serve until the next annual
shareholder meeting and thereafter until his respective successor is elected and
qualified. Officers are appointed by and serve at the discretion of the
directors of the Corporate General Partner.

ITEM 11.              EXECUTIVE COMPENSATION

MANAGEMENT FEE

           The Partnership has a management agreement (the "Management
Agreement") with Enstar Cable Corporation, a wholly owned subsidiary of the
Corporate General Partner (the "Manager"), pursuant to which Enstar Cable
Corporation manages the Partnership's systems and provides all operational
support for the activities of the Partnership. For these services, the Manager
receives a management fee of 5% of the Partnership's gross revenues, excluding
revenues from the sale of cable television systems or franchises, calculated and
paid monthly. In addition, the Partnership reimburses the Manager for certain
operating expenses incurred by the Manager in the day-to-day operation of the
Partnership's cable systems. The Management Agreement also requires the
Partnership to indemnify the Manager (including its officers, employees, agents
and shareholders) against loss or expense, absent negligence or deliberate
breach by the Manager of the Management Agreement. The Management Agreement is
terminable by the Partnership upon sixty (60) days written notice to the
Manager. The Manager has engaged FCLP to provide certain management services for
the Partnership and pays FCLP a portion of the management fees it receives in
consideration of such services and reimburses FCLP for expenses incurred by FCLP
on its behalf. Additionally, the Partnership receives certain system operating
management services from affiliates of the Manager in lieu of directly employing
personnel to perform such services. The Partnership reimburses the affiliates
for its allocable share of their operating costs. The Corporate General Partner
also performs certain supervisory and administrative services for the
Partnership, for which it is reimbursed.

           For the fiscal year ended December 31, 1998, the Manager charged the
Partnership management fees of approximately $151,500 and reimbursed expenses of
$122,900. The Partnership reimbursed affiliates approximately $290,400 for
system operating management services. In addition, certain programming services
are purchased through FCLP. The Partnership paid FCLP approximately $607,300 for
these programming services for fiscal year 1998.

PARTICIPATION IN DISTRIBUTIONS

           The General Partners are entitled to share in distributions from, and
profit and losses in, the Partnership. See Item 5., "Market for Registrant's
Equity Securities and Related Security Holder Matters."



                                      -37-
<PAGE>   38

ITEM 12.              SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                      AND MANAGEMENT

           As of March 1, 1999, the only persons known by the Partnership to own
beneficially or that may be deemed to own beneficially more than 5% of the units
were:


<TABLE>
<CAPTION>
                                       Name and Address              Amount and Nature of        Percent
       Title of Class                 of Beneficial Owner            Beneficial Ownership        of Class 
----------------------------     -----------------------------      ----------------------      ----------
<S>                              <C>                                <C>                         <C>
Units of Limited Partnership     Warren Heller                             2,316(1)                 6.3%
   Interest                      515 W. Buckeye Road #104
                                 Phoenix, AZ  85003-2696

Units of Limited Partnership     Wilmington Trust Co.,                     4,000(1)                10.9%
   Interest                        Trustee for Andrea B. Cutler
                                 P.O. Box E
                                 The Plains, VA  22171

Units of Limited Partnership     Madison Partnership Liquidity             2,085(1)                 5.7%
   Interest                        Investors 36 LLC
                                 317 Madison Avenue, Suite 219
                                 New York, NY  10017
</TABLE>


(1) As reported to the Partnership by its transfer agent, Gemisys Corporation.


           The Corporate General Partner is a wholly-owned subsidiary of FHGLP.
FHGI owns a 10.6% interest in, and is the general partner of, FHGLP. As of March
3, 1999, the common stock of FHGI was owned as follows: 78.5% by Falcon Cable
Trust, a grantor trust of which Marc B. Nathanson is trustee and he and members
of his family are beneficiaries; 20% by Greg A. Nathanson; and 1.5% by Stanley
S. Itskowitch. Greg A. Nathanson is Marc B. Nathanson's brother.

ITEM 13.              CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CONFLICTS OF INTEREST

           On September 30, 1998, FHGLP acquired ownership of Enstar
Communications Corporation from Falcon Cablevision and FCLP assumed the
management services operations of FHGLP. FCLP now manages the operations of the
partnerships of which Enstar Communications Corporation is the Corporate General
Partner, including the Partnership. FCLP began receiving management fees and
reimbursed expenses which had previously been paid by the Partnership, as well
as other affiliated entities, to FHGLP. The day-to-day management of FCLP is
substantially the same as that of FHGLP, which serves as the managing partner of
FCLP.

           Certain members of management of the Corporate General Partner have
also been involved in the management of other cable ventures. FCLP may enter
into other cable ventures, including ventures similar to the Partnership.

           The Partnership relies upon the Corporate General Partner and certain
of its affiliates to provide general management services, system operating
services, supervisory and administrative services and programming. See Item 11.,
"Executive Compensation." The Partnership is also party to a loan agreement 



                                      -38-
<PAGE>   39

with a subsidiary of the Corporate General Partner. See Item 7., "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources."

           Conflicts of interest involving acquisitions and dispositions of
cable television systems could adversely affect Unitholders. For instance, the
economic interests of management in other affiliated partnerships are different
from those in the Partnership and this may create conflicts relating to which
acquisition opportunities are preserved for which entities.

           These affiliations subject FCLP, FHGLP and the Corporate General
Partner and their management to certain conflicts of interest. Such conflicts of
interest relate to the time and services management will devote to the
Partnership's affairs and to the acquisition and disposition of cable television
systems. Management or its affiliates may establish and manage other entities
which could impose additional conflicts of interest.

           FCLP, FHGLP and the Corporate General Partner will resolve all
conflicts of interest in accordance with their fiduciary duties.

FIDUCIARY RESPONSIBILITY AND INDEMNIFICATION OF THE GENERAL PARTNERS

           A general partner is accountable to a limited partnership as a
fiduciary and consequently must exercise good faith and integrity in handling
partnership affairs. Where the question has arisen, some courts have held that a
limited partner may institute legal action on his own behalf and on behalf of
all other similarly situated limited partners (a class action) to recover
damages for a breach of fiduciary duty by a general partner, or on behalf of the
partnership (a partnership derivative action) to recover damages from third
parties. Section 14-9-1001 of the Georgia Revised Uniform Limited Partnership
Act also allows a partner to maintain a partnership derivative action if general
partners with authority to do so have refused to bring the action or if an
effort to cause those general partners to bring the action is not likely to
succeed. Certain cases decided by federal courts have recognized the right of a
limited partner to bring such actions under the Securities and Exchange
Commission's Rule 10b-5 for recovery of damages resulting from a breach of
fiduciary duty by a general partner involving fraud, deception or manipulation
in connection with the limited partner's purchase or sale of partnership units.

           The partnership agreement provides that the General Partners will be
indemnified by the Partnership for acts performed within the scope of their
authority under the partnership agreement if such general partners (i) acted in
good faith and in a manner that it reasonably believed to be in, or not opposed
to, the best interests of the Partnership and the partners, and (ii) had no
reasonable grounds to believe that their conduct was negligent. In addition, the
partnership agreement provides that the General Partners will not be liable to
the Partnership or its limited partners for errors in judgment or other acts or
omissions not amounting to negligence or misconduct. Therefore, limited partners
will have a more limited right of action than they would have absent such
provisions. In addition, the Partnership maintains, at its expense and in such
reasonable amounts as the Corporate General Partner shall determine, a liability
insurance policy which insures the Corporate General Partner, FHGI and its
affiliates (which include FCLP), officers and directors and such other persons
as the Corporate General Partner shall determine, against liabilities which they
may incur with respect to claims made against them for certain wrongful or
allegedly wrongful acts, including certain errors, misstatements, misleading
statements, omissions, neglect or breaches of duty. To the extent that the
exculpatory provisions purport to include indemnification for liabilities
arising under the Securities Act of 1933, it is the opinion of the Securities
and Exchange Commission that such indemnification is contrary to public policy
and therefore unenforceable.



                                      -39-
<PAGE>   40

                                     PART IV

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

                      (a)  1.   Financial Statements

                                Reference is made to the Index to Financial
                                Statements on page F-1.



                      (a)  2.   Financial Statement Schedules

                                Reference is made to the Index to Financial
                                Statements on page F-1.



                      (a)  3.   Exhibits

                                Reference is made to the Index to Exhibits on
                                Page E-1.



                      (b)       Reports on Form 8-K

                                None.



                                      -40-
<PAGE>   41

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 23, 1999.

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                                      By: Enstar Communications Corporation,
                                          Corporate General Partner


                                      By:  /s/ Marc B. Nathanson
                                          -----------------------------
                                          Marc B. Nathanson
                                          Chairman of the Board and
                                          Chief Executive Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities indicated on the 23rd day of March 1999.


<TABLE>
<CAPTION>
             Signatures                                      Title(*)
----------------------------------      --------------------------------------------------
<S>                                     <C>


      /s/ Marc B. Nathanson             Chairman of the Board and Chief Executive Officer
      ----------------------------      (Principal Executive Officer)
      Marc B. Nathanson                 


      /s/ Michael K. Menerey            Executive Vice President, Chief Financial Officer,
      ----------------------------      Secretary and Director 
      Michael K. Menerey                  (Principal Financial and Accounting Officer)


      /s/ Frank J. Intiso               President, Chief Operating Officer
      ----------------------------      and Director
      Frank J. Intiso


      /s/ Stanley S. Itskowitch         Executive Vice President, General Counsel
      ----------------------------      and Director
      Stanley S. Itskowitch
</TABLE>


(*) Indicates position(s) held with Enstar Communications Corporation, the
Corporate General Partner of the Registrant.



                                      -41-
<PAGE>   42

                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>                                                                     <C>
Report of Independent Auditors                                           F-2

Balance Sheets - December 31, 1997 and 1998                              F-3

Financial Statements for each of 
  the three years in the period 
  ended December 31, 1998:

    Statements of Operations                                             F-4

    Statements of Partnership Capital (Deficit)                          F-5

    Statements of Cash Flows                                             F-6

Notes to Financial Statements                                            F-7
</TABLE>


All schedules have been omitted because they are either not required, not
applicable or the information has otherwise been supplied.



                                      F-1
<PAGE>   43

                         REPORT OF INDEPENDENT AUDITORS


Partners
Enstar Income/Growth Program Six-B, L.P. (A Georgia Limited Partnership)


We have audited the accompanying balance sheets of Enstar Income/Growth Program
Six-B, L.P. (a Georgia limited partnership) as of December 31, 1997 and 1998,
and the related statements of operations, partnership 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Enstar Income/Growth Program
Six-B, L.P. at December 31, 1997 and 1998, 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.



                                          /s/ ERNST & YOUNG LLP


Los Angeles, California
March 12, 1999



                                      F-2
<PAGE>   44

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                                 BALANCE SHEETS

                ================================================


<TABLE>
<CAPTION>
                                                                        December 31,
                                                              ---------------------------------
                                                                  1997                  1998
                                                              -----------           -----------
<S>                                                           <C>                   <C>        
ASSETS:
   Cash and cash equivalents                                  $   304,800           $   362,300

   Accounts receivable, less allowance of $2,500 and
     $1,900 for possible losses                                   101,500                82,800

   Prepaid expenses and other assets                               48,800                64,100

   Property, plant and equipment, less accumulated
     depreciation and amortization                              3,477,400             3,508,100

   Franchise cost, net of accumulated
     amortization of $2,615,600 and $2,976,700                  1,714,100             1,361,500

   Intangible costs, net of accumulated amortization
     of $380,800 and $398,600                                     248,100               187,500
                                                              -----------           -----------

                                                              $ 5,894,700           $ 5,566,300
                                                              ===========           ===========


                          LIABILITIES AND PARTNERSHIP CAPITAL
                          -----------------------------------
LIABILITIES:
   Accounts payable                                           $   176,500           $   193,100
   Due to affiliates                                              430,300               504,000
   Note payable - affiliate                                     1,750,000             1,400,000
                                                              -----------           -----------

             TOTAL LIABILITIES                                  2,356,800             2,097,100
                                                              -----------           -----------

COMMITMENTS AND CONTINGENCIES

PARTNERSHIP CAPITAL (DEFICIT):
   General partners                                               (37,300)              (38,000)
   Limited partners                                             3,575,200             3,507,200
                                                              -----------           -----------

             TOTAL PARTNERSHIP CAPITAL                          3,537,900             3,469,200
                                                              -----------           -----------

                                                              $ 5,894,700           $ 5,566,300
                                                              ===========           ===========
</TABLE>



                 See accompanying notes to financial statements.



                                      F-3
<PAGE>   45

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                            STATEMENTS OF OPERATIONS

                ================================================


<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                -------------------------------------------------------
                                                    1996                  1997                  1998
                                                -----------           -----------           -----------
<S>                                             <C>                   <C>                   <C>        
REVENUES                                        $ 2,524,700           $ 2,917,600           $ 3,030,600
                                                -----------           -----------           -----------

OPERATING EXPENSES:
   Service costs                                    825,200               976,600             1,024,100
   General and administrative expenses              404,500               430,700               431,300
   General Partner management fees
     and reimbursed expenses                        231,400               267,800               274,400
   Depreciation and amortization                  1,054,200             1,118,800             1,143,400
                                                -----------           -----------           -----------

                                                  2,515,300             2,793,900             2,873,200
                                                -----------           -----------           -----------

OPERATING INCOME                                      9,400               123,700               157,400
                                                -----------           -----------           -----------

OTHER INCOME (EXPENSE):
   Interest expense                                (147,700)             (140,800)             (154,600)
   Interest income                                    8,000                11,600                18,100
   Gain on sale of cable assets                          --                    --                   900
   Costs of potential sale of
     cable television systems                            --                    --               (90,500)
                                                -----------           -----------           -----------

                                                   (139,700)             (129,200)             (226,100)
                                                -----------           -----------           -----------

NET LOSS                                        $  (130,300)          $    (5,500)          $   (68,700)
                                                ===========           ===========           ===========

NET LOSS ALLOCATED TO GENERAL PARTNERS          $    (1,300)          $      (100)          $      (700)
                                                ===========           ===========           ===========

NET LOSS ALLOCATED TO LIMITED PARTNERS          $  (129,000)          $    (5,400)          $   (68,000)
                                                ===========           ===========           ===========

NET LOSS PER UNIT OF LIMITED
   PARTNERSHIP INTEREST                         $     (3.52)          $     (0.15)          $     (1.86)
                                                ===========           ===========           ===========


WEIGHTED AVERAGE LIMITED
   PARTNERSHIP UNITS OUTSTANDING
   DURING THE YEAR                                   36,626                36,626                36,626
                                                ===========           ===========           ===========
</TABLE>


                 See accompanying notes to financial statements.



                                      F-4
<PAGE>   46

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                   STATEMENTS OF PARTNERSHIP CAPITAL (DEFICIT)

                ================================================


<TABLE>
<CAPTION>
                                          General               Limited
                                          Partners              Partners               Total
                                        -----------           -----------           -----------
<S>                                     <C>                   <C>                   <C>        
PARTNERSHIP CAPITAL (DEFICIT),
   January 1, 1996                      $   (35,900)          $ 3,709,600           $ 3,673,700

    Net loss for year                        (1,300)             (129,000)             (130,300)
                                        -----------           -----------           -----------

PARTNERSHIP CAPITAL (DEFICIT),
   December 31, 1996                        (37,200)            3,580,600             3,543,400

    Net loss for year                          (100)               (5,400)               (5,500)
                                        -----------           -----------           -----------

PARTNERSHIP CAPITAL (DEFICIT),
   December 31, 1997                        (37,300)            3,575,200             3,537,900

    Net loss for year                          (700)              (68,000)              (68,700)
                                        -----------           -----------           -----------

PARTNERSHIP CAPITAL (DEFICIT),
   December 31, 1998                    $   (38,000)          $ 3,507,200           $ 3,469,200
                                        ===========           ===========           ===========
</TABLE>



                 See accompanying notes to financial statements.



                                      F-5
<PAGE>   47

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                            STATEMENTS OF CASH FLOWS

                ================================================


<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                -------------------------------------------------------
                                                                    1996                  1997                  1998
                                                                -----------           -----------           -----------
<S>                                                             <C>                   <C>                   <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                    $  (130,300)          $    (5,500)          $   (68,700)
    Adjustments to reconcile net loss to net
      cash provided by operating activities:
        Depreciation and amortization                             1,054,200             1,118,800             1,143,400
        Amortization of deferred loan costs                           1,300                 6,700                 9,500
        Gain on sale of cable assets                                     --                    --                  (900)
        Increase (decrease) from changes in:
          Receivables                                                76,800               216,200                18,700
          Prepaid expenses and other assets                          (4,300)               12,800               (15,300)
          Accounts payable                                          (40,700)               30,800                16,600
                                                                -----------           -----------           -----------

             Net cash provided by operating activities              957,000             1,379,800             1,103,300
                                                                -----------           -----------           -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                           (673,300)             (577,200)             (753,400)
    Increase in intangible assets                                   (27,100)              (27,600)              (15,700)
    Proceeds from sale of property, plant
      and equipment                                                     300                    --                   900
                                                                -----------           -----------           -----------

             Net cash used in investing activities                 (700,100)             (604,800)             (768,200)
                                                                -----------           -----------           -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Repayment of debt                                              (342,200)           (1,288,400)                   --
    Borrowings from affiliate                                            --             1,750,000                    --
    Repayment of borrowings from affiliate                               --                    --              (350,000)
    Deferred loan costs                                              (5,100)              (36,600)               (1,300)
    Due to affiliate                                                404,100            (1,248,700)               73,700
                                                                -----------           -----------           -----------

             Net cash provided by (used in)
                financing activities                                 56,800              (823,700)             (277,600)
                                                                -----------           -----------           -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                313,700               (48,700)               57,500

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                       39,800               353,500               304,800
                                                                -----------           -----------           -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                        $   353,500           $   304,800           $   362,300
                                                                ===========           ===========           ===========
</TABLE>


                 See accompanying notes to financial statements.



                                      F-6
<PAGE>   48

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

FORM OF PRESENTATION

           Enstar Income/Growth Program Six-B, L.P., a Georgia limited
partnership (the "Partnership"), owns and operates cable television systems in
rural areas of Georgia, Utah and Missouri.

           The financial statements do not give effect to any assets that the
partners may have outside of their interest in the Partnership, nor to any
obligations, including income taxes of the partners.

           These financial statements have been prepared assuming that the
Partnership will continue as a going concern. As more fully described in Note 3
to the financial statements, the Partnership does not possess sufficient capital
to upgrade its cable systems. Some of these upgrades are required by the
Partnership's franchise agreements. As a result, the Corporate General Partner
has agreed, subject to unitholders' approval, to sell the assets of the
Partnership to affiliates of the Corporate General Partner for $10,473,200 in
cash and to dissolve the Partnership. The financial statements do not include
any adjustments to reflect the potential liquidation of the Partnership.

CASH EQUIVALENTS

           For purposes of the statements of cash flows, the Partnership
considers all highly liquid debt instruments purchased with an initial maturity
of three months or less to be cash equivalents.

           Cash equivalents at December 31, 1996 include $277,000 of short-term
investments in commercial paper.

PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION AND AMORTIZATION

           Property, plant and equipment are stated at cost. Direct costs
associated with installations in homes not previously served by cable are
capitalized as part of the distribution system, and reconnects are expensed as
incurred. For financial reporting, depreciation and amortization is computed
using the straight-line method over the following estimated useful lives:


<TABLE>
<S>                                                  <C>       
          Cable television systems                   5-15 years
          Vehicles                                      3 years
          Furniture and equipment                     5-7 years
          Leasehold improvements                  Life of lease
</TABLE>

           In 1996, the Partnership revised the estimated useful life of its
existing plant assets in two Georgia franchise areas from 15 years to 8.3 years.
In 1998, the Partnership revised the estimated useful life of its plant assets
in a third Georgia franchise area from 15 years to approximately 8.7 years. The
Partnership implemented the reductions as a result of system upgrades that are
required to be completed as provided for in the franchise agreements. The impact
of this change in the life of the assets was to increase depreciation expense by
approximately $139,000, $133,000 and $149,000 in 1996, 1997 and 1998,
respectively.



                                      F-7
<PAGE>   49

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

FRANCHISE COST

           The excess of cost over the fair values of tangible assets and
customer lists of cable television systems acquired represents the cost of
franchises. In addition, franchise cost includes capitalized costs incurred in
obtaining new franchises and the renewal of existing franchises. These costs are
amortized using the straight-line method over the lives of the franchises,
ranging up to 15 years. The Partnership periodically evaluates the amortization
periods of these intangible assets to determine whether events or circumstances
warrant revised estimates of useful lives. Costs relating to unsuccessful
franchise applications are charged to expense when it is determined that the
efforts to obtain the franchise will not be successful.

INTANGIBLE COSTS

           Intangible costs include covenants-not-to-compete and deferred
charges which are amortized using the straight-line method over two years or the
life of the covenant and certain fees paid to the Corporate General Partner and
other system acquisition costs which are amortized using the straight-line
method over two to 12 years. Costs related to borrowings are capitalized and
amortized to interest expense over the life of the related loan.

RECOVERABILITY OF ASSETS

           The Partnership assesses on an ongoing basis the recoverability of
intangible and capitalized plant assets based on estimates of future
undiscounted cash flows compared to net book value. If the future undiscounted
cash flow estimate were less than net book value, net book value would then be
reduced to estimated fair value, which would generally approximate discounted
cash flows. The Partnership also evaluates the amortization periods of assets,
including goodwill and other intangible assets, to determine whether events or
circumstances warrant revised estimates of useful lives.

REVENUE RECOGNITION

           Revenues from customer fees, equipment rental and advertising are
recognized in the period that services are delivered. Installation revenue is
recognized in the period the installation services are provided to the extent of
direct selling costs. Any remaining amount is deferred and recognized over the
estimated average period that customers are expected to remain connected to the
cable television system.

INCOME TAXES

           As a partnership, Enstar Income/Growth Program Six-B, L.P. pays no
income taxes. All of the income, gains, losses, deductions and credits of the
Partnership are passed through to its partners. The basis in the Partnership's
assets and liabilities differs for financial and tax reporting purposes. At
December 31, 1998, the book basis of the Partnership's net assets exceeds its
tax basis by $2,207,900.

         The accompanying financial statements, which are prepared in accordance
with generally accepted accounting principles, differ from the financial
statements prepared for tax purposes due to the different treatment of various
items as specified in the Internal Revenue Code. The net effect of these
accounting differences is that the Partnership's net loss for 1998 in the
financial statements is $68,700 as



                                      F-8
<PAGE>   50

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES (CONTINUED)

compared to its tax income of $203,500 for the same period. The difference is
principally due to timing differences in depreciation and amortization expense.

COSTS OF START-UP ACTIVITIES

           In 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on Costs of Start-Up Activities."
The new standard, which becomes effective for the Partnership on January 1,
1999, requires costs of start-up activities to be expensed as incurred. The
unamortized portion of previously capitalized start-up costs, which approximates
$25,000, is to be written off in the period of adoption.

ADVERTISING COSTS

           All advertising costs are expensed as incurred.

EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST

           Earnings and losses have been allocated 99% to the limited partners
and 1% to the general partners. Earnings and losses per unit of limited
partnership interest are based on the weighted average number of units
outstanding during the year. The General Partners do not own units of
partnership interest in the Partnership, but rather hold a participation
interest in the income, losses and distribution of the Partnership.

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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

NOTE 2 - PARTNERSHIP MATTERS

           The Partnership was formed on September 23, 1987 to acquire,
construct, improve, develop and operate cable television systems in various
locations in the United States. The partnership agreement provides for Enstar
Communications Corporation (the "Corporate General Partner") and Robert T.
Graff, Jr. to be the general partners and for the admission of limited partners
through the sale of interests in the Partnership.

           On September 30, 1988, Falcon Cablevision, a California limited
partnership, purchased all of the outstanding capital stock of the Corporate
General Partner. On September 30, 1998, Falcon Holding Group, L.P., a Delaware
limited partnership ("FHGLP"), acquired ownership of the Corporate General
Partner from Falcon Cablevision. Simultaneously with the closing of that
transaction, FHGLP contributed all of its existing cable television system
operations to Falcon Communications, L.P. ("FCLP"), a California limited



                                      F-9
<PAGE>   51
                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 2 - PARTNERSHIP MATTERS (CONTINUED)

partnership and successor to FHGLP. FHGLP serves as the managing partner of
FCLP. The Corporate General Partner has contracted with FCLP and its affiliates
to provide management services for the Partnership.

           The Partnership was formed with an initial capital contribution of
$1,100 comprised of $1,000 from the Corporate General Partner and $100 from the
initial limited partner. Sale of interests in the Partnership began November
1988, and the initial closing took place in January 1989. The Partnership
continued to raise capital until November 1989, at which time the Partnership
had raised a total of $9,156,400. The Partnership began its cable television
business operations in January 1990 with the acquisition of its first cable
television property.

         The amended partnership agreement generally provides that all cash
distributions, as defined, be allocated 1% to the general partners and 99% to
the limited partners until the limited partners have received aggregate cash
distributions equal to their original capital contributions. The amended
partnership agreement also provides that all partnership operating profits be
allocated to the partners in the same proportion as cash flow distributions are
made. However, even after the limited partners have received cash flow equal to
their initial investment, the general partners will only receive a 1%
distribution of proceeds from a disposition or refinancing of a system until the
limited partners have received an annual simple interest return of at least 8%
of their initial investment less any distributions from previous dispositions or
refinancing of systems. Thereafter, proceeds from a disposition or refinancing
of a system shall be distributed 80% to the limited partners and 20% to the
general partners. Gains from dispositions of systems are first allocated in the
same manner as the proceeds from such dispositions. This occurs until the
dispositions result in the aggregate fair market value of the Partnership's
remaining system(s) being less than or equal to 50% of the aggregate
contributions to the capital of the Partnership by the partners.

           Any losses, whether resulting from operations or the sale or
disposition of a system, are allocated 99% to the limited partners and 1% to the
general partners until the limited partners' capital account balances are equal
to zero. Thereafter, all losses are allocated to the Corporate General Partner.

           Upon dissolution of the Partnership, distributions are to be made to
the partners in accordance with their capital account balances. No partners
other than general partners shall be obligated to restore any negative capital
account balance existing upon dissolution of the Partnership. All allocations to
individual limited partners will be based on their respective limited
partnership ownership interests.

           The amended partnership agreement limits the amount of debt the
Partnership may incur.

NOTE 3 - POTENTIAL SALE OF PARTNERSHIP ASSETS

           The Partnership has concluded that it is not able to obtain the
appropriate amount of capital to make the necessary upgrades to its cable
systems. Existing franchise agreements for three of the seven franchise areas in
the Partnership's Villa Rica, Georgia cable system require the Partnership to
complete system upgrades in 1999. In addition, the Partnership is in the process
of negotiating the renewal of expired franchise agreements for two other
franchise areas served by the Villa Rica cable system and the Partnership
believes that the renewed franchise agreements may require the Partnership to
upgrade the cable system within those franchise areas. If the Partnership is
unable to obtain financing to fund the upgrades required by



                                      F-10
<PAGE>   52

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 3 - POTENTIAL SALE OF PARTNERSHIP ASSETS (CONTINUED)

its franchise agreements, the respective franchising authorities may be entitled
to terminate the franchise agreements.

           Because the Villa Rica cable system is served by one headend and
utilizes integrated cable hardware, the Partnership's proposed upgrade program
would cover all of the seven franchise areas in the Villa Rica, Georgia cable
system (the "Villa Rica Upgrade") and is estimated to require aggregate capital
expenditures of approximately $7.5 million. The Partnership only has $1.1
million of availability under its $2.5 million revolving loan facility and is
limited by the partnership agreement to incur up to a maximum of approximately
$3.0 million of indebtedness. Consequently, even if the Partnership used the
approximately $1.1 million of existing availability under its revolving loan
facility and was able to obtain the additional $500,000 of debt financing
permitted under the terms of the partnership agreement, the Partnership would
still lack approximately $5.9 million of additional funding necessary to
complete the Villa Rica Upgrade.

           The Partnership considered seeking an amendment to the partnership
agreement to permit the Partnership to incur sufficient indebtedness to fund
completion of the Villa Rica Upgrade, but concluded that sufficient debt
financing was not available. As a result, the Partnership engaged a business
broker to solicit offers for its cable systems, but received only two
preliminary offers (the "Initial Offers"), each of which excluded the Ivins,
Utah and Fisk, Missouri cable systems and contained material closing conditions
and potential material purchase price adjustments. The Partnership concluded
that it was not in the best interests of unitholders to accept either of the
Initial Offers because, among other things, neither Initial Offer constituted an
offer to purchase all of the cable systems, and each Initial Offer was subject
to material closing conditions and potential material purchase price
adjustments. Subsequent to the Partnership's receipt of the Initial Offers, the
Partnership received an offer (the "Falcon Offer") from certain subsidiaries of
FCLP (the "Purchasers") to purchase all of the Partnership's cable systems for
$10,473,200 in cash. The Falcon Offer includes a price for the Villa Rica cable
system which exceeds the highest of the Initial Offers by approximately 2.5%,
contains no potential purchase price adjustments and only limited closing
conditions. After the Partnership received the Falcon Offer, the Partnership
received an additional offer solely for the Fisk, Missouri cable system (the
"Fisk Offer"). The Partnership concluded that it was not in the best interests
of the unitholders to accept the Fisk Offer because, among other things, the
Fisk Offer did not constitute an offer to purchase all of the cable systems, and
the Falcon Offer includes a price for the Fisk, Missouri cable system that
exceeds the Fisk Offer by approximately 15%.

           The Corporate General Partner believes that accepting the Falcon
Offer is in the best interests of the Partnership and the unitholders.
Accordingly, the Partnership and the Purchasers entered into an Asset Purchase
Agreement, dated November 6, 1998 (the "Purchase Agreement"), for the purchase
and sale of all of the Partnership's assets, subject to limited partner approval
as discussed below. If the sale is consummated, the Corporate General Partner
will make one or more liquidating distributions to the partners and, after
providing for the payment of the Partnership's obligations, cause the
Partnership to dissolve, terminate and be liquidated. After repayment of the
Partnership's existing obligations, the Partnership presently estimates that
liquidating distributions to unitholders would total between $220 and $230 per
unit, less applicable taxes, if any. The sale will require the holders of at
least a majority of the Partnership's limited partnership units to consent to
the sale, to certain amendments to the partnership agreement and to the
liquidation.



                                      F-11
<PAGE>   53

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 3 - POTENTIAL SALE OF PARTNERSHIP ASSETS (CONTINUED)

           Should the Falcon Offer be rejected by the unitholders, the
Partnership would need to amend the partnership agreement to seek additional
sources of capital, of which there can be no assurance, seek to renegotiate the
franchise agreements to delay the required rebuilds, or limit, to the extent
possible, the upgrade expenditures to those franchises with required rebuilds.
If the above actions are not sufficient to meet the Partnership's franchise
requirements, the Partnership would need to seek additional potential buyers for
its cable television systems.

           As of December 31, 1998, the Partnership had incurred costs of
approximately $90,500 related to the proposed sale, which have been expensed.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

           Property, plant and equipment consist of:


<TABLE>
<CAPTION>
                                                December 31,
                                       ---------------------------------
                                           1997                  1998
                                       -----------           -----------
<S>                                    <C>                   <C>        
Cable television systems               $ 6,531,200           $ 7,132,300
Vehicles, furniture and
    equipment, and leasehold
    improvements                           190,800               313,300
                                       -----------           -----------

                                         6,722,000             7,445,600
Less accumulated depreciation
    and amortization                    (3,244,600)           (3,937,500)
                                       -----------           -----------

                                       $ 3,477,400           $ 3,508,100
                                       ===========           ===========
</TABLE>


NOTE 5 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

           The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:

Cash and Cash Equivalents

           The carrying amount approximates fair value due to the short maturity
of those instruments.

Notes Payable

           The carrying amount approximates fair value due to the variable rate
nature of the notes payable.



                                      F-12
<PAGE>   54

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 6 - NOTE PAYABLE - AFFILIATE

           On September 30, 1997, the Partnership refinanced its existing debt
with a credit facility from a subsidiary of the Corporate General Partner,
Enstar Finance Company, LLC ("EFC"). EFC obtained a secured bank facility of $35
million from two agent banks in order to obtain funds that would in turn be
advanced to the Partnership and certain of the other partnerships managed by the
Corporate General Partner. The Partnership entered into a loan agreement with
EFC for a revolving loan facility (the "Facility") of $2,528,900 of which
$1,750,000 was advanced to the Partnership at closing. Such funds together with
available cash were used to repay the Partnership's previous note payable
balance of $1,077,100 and related interest expense, deferred management fees and
reimbursed expenses of $387,500 due the Corporate General Partner and deferred
programming fees of $408,000 owed to an affiliated partnership. Outstanding
borrowings at December 31, 1998 were $1,400,000.

           The Partnership's Facility matures on August 31, 2001, at which time
all amounts then outstanding are due in full. Borrowings bear interest at the
lender's base rate (7.75% at December 31, 1998) plus 0.625%, or at an offshore
rate plus 1.875%. The Partnership is permitted to prepay amounts outstanding
under the Facility at any time without penalty, and is able to reborrow
throughout the term of the Facility up to the maximum commitment then available
so long as no event of default exists. If the Partnership has "excess cash flow"
(as defined in its loan agreement) and has leverage, as defined, in excess of
4.25 to 1, or receives proceeds from sales of its assets in excess of a
specified amount, the Partnership is required to make mandatory prepayments
under the Facility. Such prepayments permanently reduce the maximum commitment
under the Facility. The Partnership is also required to pay a commitment fee of
0.5% per annum on the unused portion of its Facility, and an annual
administrative fee. Advances by EFC under its partnership loan facilities are
independently collateralized by individual partnership borrowers so that no
partnership is liable for advances made to other partnerships. Borrowings under
the Partnership's Facility are collateralized by substantially all assets of the
Partnership. At closing, the Partnership paid to EFC a $25,700 facility fee.
This represented the Partnership's pro rata portion of a similar fee paid by EFC
to its lenders. In connection with this refinancing, the Partnership wrote off
$3,200 in 1997 in deferred loan costs relating to the former bank credit
agreement.

           The Facility contains certain financial tests and other covenants
including, among others, restrictions on incurrence of indebtedness,
investments, sales of assets, acquisitions and other covenants, defaults and
conditions and compliance with material terms of various agreements. The
Facility does not restrict the payment of distributions to partners unless an
event of default exists thereunder or the Partnership's ratio of debt to cash
flow is greater than 4 to 1. The Partnership was in violation of a loan covenant
pertaining to its franchise compliance for which it received a waiver through
December 31, 1999 from EFC and its lenders. The Partnership believes it was in
compliance with all other covenants as of December 31, 1998.

           The Corporate General Partner contributed a $244,600 receivable
balance due from the Partnership for deferred management fees and reimbursed
expenses as an equity contribution to EFC. This balance remains an outstanding
obligation of the Partnership.



                                      F-13
<PAGE>   55
                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 7 - COMMITMENTS AND CONTINGENCIES

           The Partnership leases tower sites associated with its systems under
operating leases expiring in various years through 2003.

           Future minimum rental payments under non-cancelable operating leases
that have remaining terms in excess of one year as of December 31, 1998 are as
follows:


<TABLE>
<CAPTION>
                 Year                                  Amount
                 ----                                  ------
<S>                                                    <C>    
                 1999                                  $ 7,500
                 2000                                    7,800
                 2001                                    2,400
                 2002                                      600
                                                       -------
                                                       $18,300
                                                       =======
</TABLE>


           Rentals, other than pole rentals, charged to operations approximated
$17,300, $18,300 and $21,600 in 1996, 1997 and 1998, respectively. Pole rentals
approximated $40,800, $47,500 and $49,200 in 1996, 1997 and 1998, respectively.

           Capital expenditures of approximately $2.9 million will be necessary
to upgrade existing cable television systems in 1999 as required by three
franchise agreements, but the Partnership intends to spend approximately $7.5
million in total to upgrade its systems. The Partnership is unable to obtain
adequate capital to accomplish these upgrades. See Note 3. One of the
Partnership's franchise agreements in the Villa Rica cable system requires the
Partnership to have completed an upgrade to the cable system by February 7, 1999
and the Partnership has not yet completed that upgrade. Another of the
Partnership's franchise agreements in the Villa Rica system requires the
Partnership to complete an upgrade to the cable system by May 20, 1999 and the
Partnership expects that it will not have completed that upgrade by the required
date. The Partnership has commenced each of the upgrades and has not received
any indication from either of the franchising authorities that they intend to
take any action adverse to the Partnership as the result of the Partnership's
noncompliance with the upgrade requirements in the respective franchise
agreements. There can be no assurance, however, that the franchising authorities
will not take action that is adverse to the Partnership.

           The Partnership is subject to regulation by various federal, state
and local government entities. The Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") provides for, among other things,
federal and local regulation of rates charged for basic cable service, cable
programming service tiers ("CPSTs") and equipment and installation services.
Regulations issued in 1993 and significantly amended in 1994 by the Federal
Communications Commission (the "FCC") have resulted in changes in the rates
charged for the Partnership's cable services. The Partnership believes that
compliance with the 1992 Cable Act has had a significant negative impact on its
operations and cash flow. It also believes that any potential future liabilities
for refund claims or other related actions would not be material. The
Telecommunications Act of 1996 (the "1996 Telecom Act") was signed into law on
February 8, 1996. As it pertains to cable television, the 1996 Telecom Act,
among other things, (i) ends the regulation of certain CPSTs in 1999; (ii)
expands the definition of effective competition, the existence of which
displaces rate



                                      F-14
<PAGE>   56

                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

regulation; (iii) eliminates the restriction against the ownership and operation
of cable systems by telephone companies within their local exchange service
areas; and (iv) liberalizes certain of the FCC's cross-ownership restrictions.

           Beginning in August 1997, the Corporate General Partner elected to
self-insure the Partnership's cable distribution plant and subscriber
connections against property damage as well as possible business interruptions
caused by such damage. The decision to self-insure was made due to significant
increases in the cost of insurance coverage and decreases in the amount of
insurance coverage available.

           In October 1998, FCLP reinstated third party insurance coverage for
all of the cable television properties owned or managed by FCLP to cover damage
to cable distribution plant and subscriber connections and against business
interruptions resulting from such damage. This coverage is subject to a
significant annual deductible which applies to all of the cable television
properties owned or managed by FCLP.

           Approximately 90% of the Partnership's subscribers are served by its
system in Villa Rica, Georgia and neighboring communities. Significant damage to
the system due to seasonal weather conditions or other events could have a
material adverse effect on the Partnership's liquidity and cash flows. The
Partnership continues to purchase insurance coverage in amounts its management
views as appropriate for all other property, liability, automobile, workers'
compensation and other types of insurable risks.


NOTE 8 - TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES

           The Partnership has a management and service agreement (the
"Agreement") with a wholly owned subsidiary of the Corporate General Partner
(the "Manager") for a monthly management fee of 5% of gross receipts, as
defined, from the operations of the Partnership. Management fee expense was
$126,200, $145,900 and $151,500 in 1996, 1997 and 1998, respectively.

           In addition to the monthly management fee, the Partnership reimburses
the Manager for direct expenses incurred on behalf of the Partnership, and for
the Partnership's allocable share of operational costs associated with services
provided by the Manager. All cable television properties managed by the
Corporate General Partner and its subsidiaries are charged a proportionate share
of these expenses. The Corporate General Partner has contracted with FCLP and
its affiliates to provide management services for the Partnership. Corporate
office allocations and district office expenses are charged to the properties
served based primarily on the respective percentage of basic customers or homes
passed (dwelling units within a system) within the designated service areas.
Reimbursed expenses were $105,200, $121,900 and $122,900 in 1996, 1997 and 1998,
respectively.

         The payment of management fees and reimbursed expenses was deferred in
prior years. On September 30, 1997, the Partnership obtained new financing and
subsequently used such borrowings and other available cash to pay $387,500 of
its cumulative deferred balance, which approximated $632,100. The remainder of
these deferred amounts was contributed as an equity contribution by the
Corporate General



                                      F-15
<PAGE>   57
                    ENSTAR INCOME/GROWTH PROGRAM SIX-B, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                    ========================================

NOTE 8 - TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES (CONTINUED)

Partner to EFC. See Note 6. In the normal course of business, the Partnership
pays interest and principal to EFC.

         The Partnership also receives certain system operating management
services from affiliates of the Corporate General Partner in addition to the
Manager due to the fact that there are no such employees directly employed by
the Partnership. The Partnership reimburses the affiliates for its allocable
share of the affiliates' operational costs. The total amount charged to the
Partnership for these costs approximated $243,000, $266,100 and $290,400 in
1996, 1997 and 1998, respectively. No management fee is payable to the
affiliates by the Partnership and there is no duplication of reimbursed expenses
and costs paid to the Manager.

           Substantially all programming services have been purchased through
FCLP. FCLP, in the normal course of business, purchases cable programming
services from certain program suppliers owned in whole or in part by affiliates
of an entity that became a general partner of FCLP on September 30, 1998. Such
purchases of programming services are made on behalf of the Partnership and the
other partnerships managed by the Corporate General Partner as well as for
FCLP's own cable television operations. FCLP charges the Partnership for these
costs based on an estimate of what the Corporate General Partner could negotiate
for such programming services for the 15 partnerships managed by the Corporate
General Partner as a group. The Partnership recorded programming fee expense of
$451,900, $526,800 and $607,300 in 1996, 1997 and 1998, respectively. The
payment of programming fees to FCLP was deferred in prior years. On September
30, 1997, the Partnership utilized borrowings from its Facility together with
available cash to pay its cumulative deferred programming expense balance, which
approximated $408,000. Programming fees are included in service costs in the
statements of operations.

           The Partnership has entered into the Purchase Agreement to sell
substantially all of its assets to certain of its affiliates. See Note 3.

NOTE 9 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

           During the years ended December 31, 1996, 1997 and 1998, cash paid
for interest amounted to $148,700, $114,400 and $162,100, respectively.



                                      F-16
<PAGE>   58

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION
------         -----------
<S>            <C>
3              Amended and Restated Agreement of Limited Partnership of Enstar
               Income/Growth Program Six-B, L.P. dated January 5, 1989(1)

10.1           Management Agreement between Enstar Income/Growth Program Six-B,
               L.P. and Enstar Cable Corporation(1)

10.2           Service agreement between Enstar Communication Corporation,
               Enstar Cable Corporation and Falcon Holding Group, Inc. dated as
               of October 1, 1988(1)

10.3           Franchise ordinance and related documents thereto granting a
               non-exclusive community antenna television system for the City of
               Ivins, Utah(1)

10.4           Franchise Ordinance 86-7 and related documents thereto granting a
               non-exclusive community antenna television franchise for the City
               of Ivins, Utah.(2)

10.5           Franchise Ordinance 90-2 establishing the uniform franchise tax
               on all public utilities of the Town of Ivins, Utah.(2)

10.6           Franchise Ordinance 210 and related documents thereto granting a
               non-exclusive community antenna television franchise for the City
               of Fisk, Missouri.(2)

10.7           Franchise Ordinance 121 and related documents thereto granting a
               non-exclusive community antenna television franchise for the City
               of Qulin, Missouri.(2)

10.8           Franchise Ordinance and related documents thereto granting a
               non-exclusive community antenna television franchise for the City
               of Buchanan, Georgia.(2)

10.9           Franchise Ordinance and related documents thereto granting a
               non-exclusive community antenna television franchise for the City
               of Temple, Georgia.(2)

10.10          Franchise Ordinance and related documents thereto granting a
               non-exclusive community antenna television franchise for the
               County of Carroll, Georgia.(2)

10.11          Franchise Ordinance and related documents thereto granting a
               non-exclusive community antenna television franchise for the City
               of Bowdon, Georgia.(2)

10.12          Franchise Resolution and related documents thereto granting a
               non-exclusive community antenna television franchise for the
               County of Haralson, Georgia.(2)

10.13          Franchise Agreement and related documents thereto granting a
               non-exclusive community antenna television franchise for the City
               of Bremen, Georgia.(2)

10.14          Franchise ordinance and related documents thereto granting a
               non-exclusive community antenna television franchise for the City
               of Villa Rica, Georgia.(2)

10.15          Credit and Term Loan Agreement dated December 14, 1990 by and
               between Enstar Income/Growth Program Six-B, L.P. and The First
               National Bank of Boston.(2)

10.16          Amendment No. 1 to Credit Agreement dated December 14, 1990
               between Enstar Income/Growth Program Six-B, L.P. and the First
               National Bank of Boston, dated March 23, 1993.(3)

10.17          Amendment No. 2 to Credit Agreement dated December 14, 1990
               between Enstar Income/Growth Program Six-B, L.P. and the First
               National Bank of Boston, dated March 22, 1994.(4)
</TABLE>



                                       E-1
<PAGE>   59

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER         DESCRIPTION
------         -----------
<S>            <C>
10.18          Amendment No. 3 to Credit Agreement dated December 14, 1990
               between Enstar Income/Growth Program Six-B, L.P. and the First
               National Bank of Boston, dated August 11, 1994.(5)

10.19          Franchise ordinance and related documents thereto granting a
               non-exclusive community antenna franchise for the City of Villa
               Rica, Georgia.(6)

10.20          Franchise ordinance and related documents thereto granting a
               non-exclusive community antenna franchise for the City of Temple,
               Georgia. (6)

10.21          Amendment No. 4 to Credit Agreement dated December 14, 1990
               between Enstar Income/Growth Program Six-B, L.P. and the First
               National Bank of Boston, dated September 29, 1995.(7)

10.22          Amendment No. 5 to Credit Agreement dated December 14, 1990
               between Enstar Income/Growth Program Six-B, L.P. and the First
               National Bank of Boston, dated March 28, 1996.(8)

10.23          Loan Agreement between Enstar Income/Growth Program Six-B, L.P.
               and Enstar Finance Company, LLC dated September 30, 1997.(9)

10.24          A resolution of the City of Bremen, Georgia extending the Cable
               Television Franchise of Enstar Income/Growth Program Six-B, L.P.
               Passed and adopted December 8, 1997.(10)

10.25          Franchise ordinance granting a non-exclusive community antenna
               television franchise for the City of Bowdon, Georgia and a
               resolution amending the franchise agreement. (11)

10.26          Asset Purchase Agreement by and among Falcon Cablevision, Falcon
               Telecable and Enstar Income/Growth Program Six-B, L.P., dated as
               of November 6, 1998. (12)

21.1           Subsidiaries: None.
</TABLE>



                                      E-2
<PAGE>   60

                                  EXHIBIT INDEX

                               FOOTNOTE REFERENCES

(1)     Incorporated by reference to the exhibits to the Registrant's Annual
        Report on Form 10-K, File No. 0-18495 for the fiscal year ended December
        31, 1989.

(2)     Incorporated by reference to the exhibits to the Registrant's Annual
        Report on Form 10-K, File No. 0-18495 for the fiscal year ended December
        31, 1990.

(3)     Incorporated by reference to the exhibits to the Registrant's Quarterly
        Report on Form 10-Q, File No. 0-18495 for the quarter ended March 31,
        1993.

(4)     Incorporated by reference to the exhibits to the Registrant's Annual
        Report on Form 10-K, File No. 0-18495 for the fiscal year ended December
        31, 1993.

(5)     Incorporated by reference to the exhibits to the Registrant's Quarterly
        Report on Form 10-Q, File No. 0-18495 for the quarter ended September
        30, 1994.

(6)     Incorporated by reference to the exhibits to the Registrant's Quarterly
        Report on Form 10-Q, File No. 0-18495 for the quarter ended March 31,
        1995.

(7)     Incorporated by reference to the exhibits to the Registrant's Quarterly
        Report on Form 10-Q, File No. 0-18495 for the quarter ended September
        30, 1995.

(8)     Incorporated by reference to the exhibits to the Registrant's Annual
        Report on Form 10-K, File No. 0-18495 for the fiscal year ended December
        31, 1995.

(9)     Incorporated by reference to the exhibits to the Registrant's Quarterly
        Report on Form 10-Q, File No. 0-18495 for the quarter ended September
        30, 1997.

(10)    Incorporated by reference to the exhibits to the Registrant's Annual
        Report on Form 10-K, File No. 0-18495 for the fiscal year ended December
        31, 1997.

(11)    Incorporated by reference to the exhibits to the Registrant's Quarterly
        Report on Form 10-Q, File No. 0-18495 for the quarter ended June 30,
        1998.

(12)    Incorporated by reference to Annex A of the Consent Solicitation
        Statement to the Registrant's Amendment No. 1 to Schedule 14A, filed on
        January 26, 1999.


                                      E-3