<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

       For the fiscal year ended December 31, 1997

                                       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 numbers: 333-9535 and 333-9535-01

                     FrontierVision Operating Partners, L.P.
                       FrontierVision Capital Corporation*
           (Exact names of Registrants as specified in their charters)

          Delaware                                     84-1316775
          Delaware                                     84-1353734
(States or other jurisdiction              (IRS Employer Identification Numbers)
of incorporation or organization)

             1777 South Harrison Street,
            Suite P-200, Denver, Colorado                       80210
      (Address of principal executive offices)               (Zip Code)

                                 (303) 757-1588
              (Registrants' telephone number, including area code)

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

Securities registered pursuant to section 12(g) of the Act:  None.

         Indicate  by check  mark  whether  the  Registrants  (1) have 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
Registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days.

                 Yes [x]                              No [  ]

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained to
the best of the  Registrants'  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]

       Number of shares of common stock of  FrontierVision  Capital  Corporation
outstanding as of March 27, 1998: 100.

*        FrontierVision  Capital  Corporation  meets the conditions set forth in
         General  Instruction  I(1)(a) and (b) to the Form 10-K and is therefore
         filing with the reduced disclosure format.

Documents Incorporated by Reference:  None.


<PAGE>

                                TABLE OF CONTENTS


<TABLE>

                                                     PART I
<S>                                                                                                <C>                   
Item 1.           BUSINESS.
                  The Company....................................................................   4
                  Business Strategy..............................................................   4
                  Development of the Systems ....................................................   6
                  System Descriptions............................................................   8
                  Technological Developments.....................................................  10
                  The Cable Television Industry..................................................  11
                  Programming, Service and Rates.................................................  12
                  Marketing, Customer Service and Community Relations ...........................  13
                  Franchises ....................................................................  13
                  Competition ...................................................................  14
                  Employees .....................................................................  17
                  Legislation and Regulation ....................................................  17

Item 2.           PROPERTIES. ...................................................................  23

Item 3.           LEGAL PROCEDINGS...............................................................  24

Item 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................  24



                                                      PART II
Item 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS............................................................  25

Item 6.           SELECTED FINANCIAL DATA........................................................  25

Item 7.           MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.
                  Introduction...................................................................  27
                  Results of Operations .........................................................  28
                  Liquidity and Capital Resources ...............................................  31

Item 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  RISK...........................................................................  34

Item 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ..................................  34

Item 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE. ..........................................  34


</TABLE>



                                       2
<PAGE>

<TABLE>


                                                     PART III
<S>                                                                                               <C>   
Item 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
                  Directors and Executive Officers of FrontierVision Inc.........................  35
                  Advisory Committee ............................................................  37

Item 11.          EXECUTIVE COMPENSATION.
                  Deferred Compensation Plan.....................................................  37
                  Compensation Committee Interlocks and Insider Participation ...................  38
                  Employment Agreement...........................................................  38

Item 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.....................................................................  39

Item 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................  40



                                                      PART IV
Item 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                  FORM 8-K.
                  Financial Statements ..........................................................  41
                  Reports on Form 8-K ...........................................................  44
                  Exhibits ......................................................................  44
                  Financial Statement Schedules .................................................  44

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT BY REGISTRANT'S
WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF
THE EXCHANGE ACT ................................................................................  45


GLOSSARY ........................................................................................  46

FINANCIAL STATEMENTS ............................................................................ F-1

FINANCIAL STATEMENT SCHEDULES ................................................................... S-1

EXHIBITS

</TABLE>




                                       3
<PAGE>



                                     PART I

Item 1.           BUSINESS

FrontierVision  Operating  Partners,  L.P. and its  subsidiaries  ("FVOP" or the
"Company")  own,  operate  and  develop  cable  television  systems in small and
medium-sized  suburban  and  exurban  communities  in the United  States.  As of
December 31, 1997, the Company was one of the twenty largest  operators of cable
television   systems  in  the  United   States,   owning  systems  which  passed
approximately  817,000 homes and served approximately  559,800 basic subscribers
(the "Existing Systems").

The Company was  organized  in 1995 under the laws of the State of Delaware  and
its headquarters are located at 1777 South Harrison Street, Suite P-200, Denver,
Colorado, 80210. Its telephone number is (303) 757-1588 and it may be reached by
e-mail at InvestorRel@FVP.com.

THE COMPANY

The Company seeks to maximize  enterprise  value by acquiring  cable  television
systems at  attractive  prices in  geographically  rational  clusters to achieve
economies  of scale and by  improving  system  management  to enhance  operating
profit.

To date, the Company has been highly  successful in its acquisition  activities.
Since closing its first  acquisition in November 1995, the Company has completed
20  acquisitions  and has established  significant  critical mass and subscriber
density  within its targeted  geography.  The following  table  illustrates  the
Company's growth, and operating characteristics of its systems, through December
31, 1997.



                        --------------------------------------------------------
                                          Basic        Premium    Total Revenue
                         Homes Passed   Subscribers     Units    (In Thousands)
                         -------------------------------------------------------
   December 31, 1995       125,300        92,700        35,700         4,369
   December 31, 1996       498,900       356,400       152,100        76,464
   Decebmer 31, 1997       817,000       559,800       275,400       145,126

The Company has established three primary operating  clusters--New England, Ohio
and  Kentucky--with a fourth,  smaller group of cable television  systems in the
Southeast.  As of December 31, 1997, over 85% of the Company's  subscribers were
within its three primary operating clusters. The Company is currently the second
largest MSO in Kentucky,  the largest MSO in Maine and the third  largest MSO in
Ohio. In the Southeast,  the Company has accumulated attractive systems which it
expects to either  consolidate with subsequent  system  acquisitions,  trade for
systems within the Company's  primary  operating  regions or divest at favorable
prices.


BUSINESS STRATEGY

The  next  phase  of the  Company's  business  plan  will  focus  on  increasing
subscriber density within its operating clusters through selective acquisitions,
reducing expenses through consolidating business operations,  making significant
investment and  improvements in technical plant and selectively  introducing new
video and data  services.  The  Company  believes  it can  further  enhance  the
operational  and  financial   performance  of  its  cable  systems  as  well  as
effectively  position the properties for a more  widespread  rollout of existing
and new cable and broadband telecommunications services. To achieve its business
objective, the Company pursues the following business strategies:

                                       4
<PAGE>

TARGET  CLUSTERS IN SMALL AND  MEDIUM-SIZED  MARKETS.  The Company has  acquired
contiguous  clusters of cable television  systems serving small and medium-sized
suburban  and  exurban  markets  which are  generally  within 50 to 100 miles of
larger urban and suburban  communities.  The Company  believes that such markets
have many of the  beneficial  attributes  of larger urban and suburban  markets,
including  moderate to high household  growth,  economic  stability,  attractive
subscriber  demographics  and  favorable  potential for  additional  clustering.
Moreover,  in such  markets,  the  Company  believes  that (i) it will face less
direct  competition  given the lower  population  densities and higher costs per
subscriber of installing cable service;  (ii) it will maintain higher subscriber
penetration  levels  and  lower  customer  turnover  based  on  fewer  competing
entertainment  alternatives;  and (iii) its  overhead and  operating  costs will
generally be lower than similar costs incurred in larger markets.

GROW THROUGH STRATEGIC AND OPPORTUNISTIC ACQUISITIONS.  In seeking to become the
consolidator of cable television  systems within its targeted  geographic areas,
the  Company  has   systematically   implemented  a  focused   acquisition   and
consolidation  strategy  within  its three  primary  operating  clusters  of New
England,  Ohio and Kentucky and its systems group in the  Southeast.  During the
fourth quarter of 1997, the Company  significantly  increased the size and scale
of its operating  clusters by completing  the aquisition of larger cable systems
deemed "non-core" by larger MSOs. The Company will continue to pursue both large
acquisitions and "fill-in"  acquisitions in its operating clusters.  The Company
believes that such acquisition  targets will have diminished  strategic value to
other  prospective  buyers given the  Company's  geographic  prominence in these
regions.  Consequently,  the Company believes these  acquisition  targets can be
purchased at favorable prices.

IMPLEMENT  OPERATING  EFFICIENCIES  AND  INCREASE  OPERATING  CASH FLOW  THROUGH
REGIONAL  CONSOLIDATION.   Upon  acquiring  a  system,  the  Company  implements
extensive  management,  operational  and technical  changes  designed to improve
operating  efficiencies  and increase  operating cash flow. By centralizing  and
upgrading  customer  support   functions,   the  Company  has  begun  to  reduce
administrative  costs and better manage and train  employees,  while providing a
higher  level of  customer  service  than was  previously  provided  by smaller,
dispersed offices. Within the Existing Systems, the Company plans to consolidate
up to 57 customer  service and sales offices into five regional  service centers
and 17 local  payment  offices.  The  Company  also  seeks to  reduce  technical
operating costs and capital expenditures by consolidating headend facilities. In
the Existing Systems, the Company plans to eliminate a significant number of the
246 headends.  By serving more subscribers from a single distribution point, the
Company has begun to decrease ongoing technical  maintenance  expenses,  improve
system  reliability  and enhance  cost-efficiencies  in adding new  channels and
services.

PROMOTE AND EXPAND SERVICE  OFFERINGS.  Because many of the Company's  customers
received  limited service  offerings prior to acquisition,  the Company believes
that a significant  opportunity exists to increase service revenue by increasing
the programming and pricing  options  available to its customers.  The Company's
marketing  programs  include a mix of basic and premium service packages with an
emphasis on appealing to different  customer  segments in specific local markets
in  order  to  maximize   customer  value,   positive   perception  and  overall
profitability.  Towards  this  end,  the  Company  has  revised  basic  and tier
programming  line-ups,  launched  several lower priced premium  channels such as
Starz! and Encore, and created premium service package offerings. In April 1997,
the  Company  established  a  centralized,   in-house  telemarketing  center  to
telemarket   premium   service   packages  to  its   customers.   During   1997,
tele-marketers working out of the Company's  telemarketing center contacted over
175,000 of the  Company's  customers,  generating  over 12,000  sales of premium
units. As systems are  consolidated and technically  enhanced,  the Company will
also  continue to expand  addressability,  which is currently  available to less
than  44% of its  subscribers,  and  seek  to  increase  revenues  derived  from
pay-per-view  movies and events, as well as new pay services such as interactive
video games. With the expanded  advertising  market delivery afforded by larger,
contiguous   system  clusters,   the  Company  plans  to  intensify  local  spot
advertising sales efforts.  Additionally,  the Company  successfully  introduced
digital  cable  television  in two of its systems  during the fourth  quarter of
1997.  Based on  favorable  early  results in these test  markets,  the  Company
anticipates a more widespread  roll-out of digital  programming  services during
1998.

STRATEGICALLY  UPGRADE SYSTEMS.  The Company will selectively  upgrade its cable
systems to  increase  channel  capacities,  enhance  signal  quality and improve
technical  reliability.  The Company believes that such technical  



                                       5
<PAGE>

upgrades will not only enhance the potential for increasing  revenues,  but also
will improve customer and community relations and further solidify the Company's
incumbent position as the preeminent local provider of video services.  Over the
next five years,  the Company  intends to establish a technical  platform of 750
MHz (110 analog channels) in its larger markets and 400 MHz to 550 MHz (54 to 78
analog  channels) in most of its systems.  Subsequent to this upgrade plan, over
one-half of the Company's  subscribers will be served by systems with 550 MHz to
750 MHz plant.  Over the same period,  the Company  plans to invest  substantial
amounts in new technologies.  The Company continually monitors and evaluates new
technological  developments  to anticipate the  introduction of new services and
program  delivery  capabilities,  such as  digital  cable  television  and cable
Internet  access.  As a result,  the Company may  determine  to  reallocate  the
investment of its capital in order to more widely deploy such  technology and to
make optimal use of its assets.

POSITION THE SYSTEMS FOR  BROADBAND  SERVICES.  By  implementing  a hybrid fiber
optic/coaxial  cable design ("HFC") across the majority of its cable plant,  the
Company will  effectively  position itself for the introduction of new broadband
video,  voice and data services.  Given its fiber-rich local  infrastructure and
the expanded  bandwidth  provided by coaxial cable, the Company believes it will
enjoy distinct  advantages over competitive  service providers.  Such advantages
include  higher  speed,  increased  capacity,  greater  selectivity  and  better
technical  reliability.  The Company's full service  broadband HFC networks will
enable it to offer a wide range of new services that include video  applications
such as digital  programming,  regional  advertising  insertion and  interactive
video  games,  as well as  telecommunications  and data  services  such as cable
Internet  access,  virtual  LAN  applications,  high speed  point-to-point  data
transmission and competitive telephone access.

FOCUS  ON THE  CUSTOMER.  The  Company  continually  seeks to  provide  superior
customer service to its customers.  Fundamental to this effort is development of
technically  advanced  customer  call  centers,  the  establishment  of a common
billing and customer  information  platform  and the  continous  improvement  of
programming  and pricing  options.  To date,  the Company has  established  four
state-of-the-art  customer call centers which, as of December 31, 1997,  handled
customer  call  volume for  approximately  85% of the  Company's  customers.  By
centralizing customer service at the regional level, all functions that directly
impact  subscribers,   including  sales  and  marketing,  customer  service  and
administration,  and technical support, are implemented as close to the customer
as possible. In addition, as a result of its consolidation  efforts, the Company
has been able to enhance its customer  service by increasing  hours of operation
for its customer service functions,  better  coordinating  technical service and
installation   calls,   speeding   responsiveness  to  customer   inquiries  and
standardizing maintenance procedures.  While centralizing and improving customer
service,  the Company has opened local payment and technical offices to maintain
its local  presence and visibility  within its  communities.  Additionally,  the
Company  expects to have  converted all of the  subscribers  within the Existing
Systems to a single  billing  and  customer  information  platform by the end of
1998. As part of the Company's  plans to upgrade its acquired  cable systems the
Company regularly evaluates the programming packages, pricing options and add-on
services available to its customers. During 1997, the Company added over 440 new
channels of programming and expects to add over 240 new channels during 1998.


DEVELOPMENT OF THE SYSTEMS

The Company was organized in 1995 to exploit  acquisition  opportunities  in the
cable  television  marketplace  created by the  confluence of several  economic,
regulatory,  competitive and technical forces. The cable television industry has
experienced rapid and continuing  consolidation  over the last several years for
various reasons. Operators have been faced with the need for increased levels of
capital  expenditures to expand channel capacity and have recently begun to face
the threat of competition from new market  entrants,  including DBS services and
telephone company video programming  services.  Many smaller MSOs,  particularly
those that were  acquisitive  during the late  1980's and  purchased  systems at
prices significantly higher than those paid by the Company, sought liquidity for
their investors or were constrained from accessing additional capital to upgrade
or  rebuild  aging  plant to remain  competitive  with other  video  programming
providers.  More  recently,  larger  MSOs have  embarked on their own program of
divesting or trading less strategic systems to redirect their resources to major
urban and suburban markets.

                                       6
<PAGE>

As a result of this  supply and demand  anomaly,  the  Company  has been able to
selectively acquire cable television properties from both small and large MSO's,
thereby establishing core geographic clusters and subscriber mass. The aggregate
purchase  price paid by the Company for the Existing  Systems was  approximately
$952.6 million,  representing an average of 8.82 times the Acquisition Cash Flow
and $1,657 per subscriber.  The following table  summarizes the  acquisitions of
the Existing Systems:

<TABLE>
                                                            ------------------------------------------------------------
                                                                                     Purchase       Basic     Purchase
                                                                                     Price(1)    Subscribers Price Per
Predecessor Owner                                                 Date Acquired    (in millions) Acquired(2) Subscriber
-----------------                                           ------------------------------------------------------------
                                                            
<S>                                                                     <C>            <C>           <C>       <C>   
United Video Cablevision, Inc. (the  "UVC Systems ").......    November 9, 1995        $  120.8      87,400    $1,382
Longfellow Cable Company, Inc. (the  "Longfellow Systems ")   November 21, 1995             6.1       5,100     1,196
C4  Media  Cable  Southeast,  Limited  Partnership  (the "C4   
Systems").................................................     February 1, 1996            47.6      40,400     1,178
Americable   International  Maine,  Inc.  (the   "Americable     March 29, 1996             4.8       3,350     1,433
Systems ").................................................
Cox Communications (the  "Cox Systems ")...................       April 9, 1996           136.0      77,200     1,762
Phoenix  Grassroots  Cable  Systems,  LLC (the   "Grassroots    
Systems").................................................      August 29, 1996             9.3       7,400     1,257
Triax Southeast Associates, L.P. (the  "Triax Systems ")...     October 7, 1996            84.7      53,200     1,592
American Cable Entertainment of Kentucky-Indiana,  Inc. (the
 "ACE Systems")..........................................       October 9, 1996           146.0      83,250     1,754      
SRW,  Inc.'s  Penn/Ohio  Cablevision,  L.P.  (the "Penn/Ohio   
Systems ").................................................    October 31, 1996             3.8       3,225     1,178
SRW,  Inc.'s  Deep Creek Cable TV,  L.P.  (the  "Deep  Creek  
System")..................................................    December 23, 1996             3.0       2,175     1,379
Bluegrass Cable Partners, L.P. (the  "Bluegrass Systems ").      March 20, 1997             9.9       7,225     1,370
Clear Cable T.V., Inc. and B&G Cable T.V. Systems,
   Inc. (the  "Clear/B&G Systems ")........................      March 31, 1997             1.7       1,450     1,172
Milestone  Communications of New York, L.P. (the  "Milestone     
   Systems")..............................................       March 31, 1997             2.8       2,125     1,318
Triax Associates I, L.P. (the  "Triax I Systems ").........        May 30, 1997            34.5      20,700     1,667
Phoenix Front Row Cablevision (the  "Front Row Systems ")..        May 30, 1997             6.8       5,250     1,295
PCI Incorporated (the "Bedford System")....................     August 29, 1997            13.5       7,750     1,742
SRW, Inc.'s Blue Ridge Cable Systems,  L.P. (the "Blue Ridge  
Systems")..................................................   September 3, 1997             4.1       4,550       901
Harold's Home Furnishings, Inc. (the "Harold's System")....    October 31, 1997             1.5       1,480     1,014
A-R Cable Services - ME, Inc. (the "Cablevision Systems")..    October 31, 1997            78.2      54,300     1,440
TCI Cablevision of Vermont, Inc. and Westmarc Development
    Joint Venture (the "TCI-VT/NH Systems")................    December 2, 1997            34.5      22,100     1,561
Cox Communications, Inc. (the "Cox-Central Ohio Systems")..   December 19, 1997           203.0      85,400     2,377
                                                                                       --------     -------    ------
Total......................................................                            $  952.6     575,030    $1,657

                                                                                       ========     =======    ======
</TABLE>
------------
(1) Represents the contract  purchase price excluding  working capital  purchase
adjustments and transaction  costs.  
(2)  Includes  10,600  subscribers  to systems  that were sold by the Company in
1996.

The Company will  continue to make  acquisitions  of cable systems to expand and
improve its existing operating clusters and will continue to dispose of or trade
non core cable  systems.  The Company  believes  that  acquisition  oportunities
continue  to exist  among the small and large MSO  segments.  During  1997,  the
Company  completed an $800 million senior  secured credit  facility and received
approximately  $179.9  million  in equity  contributions  from its  general  and
limited  partners.  Based on its  well-defined  geography  focus,  strong market
presence and financial capacity, the Company believes that it is well positioned
to continue to acquire cable  systems at  attractive  values and meet its growth
objective of acquiring 750,000 subscribers.

As of January 16, 1998, the Company had entered into four purchase agreements to
acquire, for aggregate consideration of approximately $105.8 million, contiguous
cable systems or cable systems in close  proximity to the Existing  Systems.  In
the aggregate, these systems served approximately 59,300 basic subscribers as of
December 31, 1997. Of the total subscribers, approximately 33,900 would be added
to the  Company's  Ohio cluster and  approximately  25,400 to the  Company's New
England cluster.  These systems possess technical profiles generally superior to
the profiles  for the  Existing  Systems and are  generally  larger in size.  At
closing, the Company expects the nine acquired systems to offer an average of 62
analog  channels  and 450  MHz of  capacity.  On  March  6,  1998,  the  Company
consummated  the  acquisition  of systems in Michigan from  TVC-Sumpter  Limited
Partnership and North Oakland  Cablevision  Partners Limited  Partnership for an
aggregate purchase price of $14.2 million. These systems will be integrated into
the  Company's  Ohio  cluster.  In  addition,  on December  12, 1997 the Company

                                       7
<PAGE>

entered into an asset exchange agreement to obtain two Tennessee systems serving
approximately  5,000  subscribers in exchange for three of its Southeast  region
systems serving  approximately  4,300 subscribers in the Southeast  region.  The
Company  completed  this  exchange on March 12, 1998.  There can be no assurance
that  the  remaining  potential  acquisitions  will be  consummated  or that the
Company can  successfully  integrate  any  acquired  business  with its existing
operations.


SYSTEM DESCRIPTIONS

The Company's cable  television  systems consist of three primary  clusters--New
England,  Ohio and  Kentucky--with  a fourth,  smaller  group of  systems in the
Southeast.  The following chart provides certain operating and technical profile
statistics as of December 31, 1997 for the Company.

<TABLE>
                                                       -----------------------------------------------------------------
                                                          New England     Ohio      Kentucky   Southeast     Existing
                                                            Cluster     Cluster     Cluster      Region      Systems
                                                       -----------------------------------------------------------------
<S>                                                         <C>         <C>         <C>         <C>           <C>    
Homes passed.........................................       214,900     328,600     170,100     103,400       817,000
Basic subscribers....................................       142,600     231,500     123,900      61,800       559,800
Basic penetration....................................          66.4%       70.5%       72.8%       59.8%         68.5%
Premium units........................................        83,900     118,400      47,600      25,500       275,400
Premium penetration..................................          58.8%       51.1%       38.4%       41.3%         49.2%
Average monthly revenue per basic subscriber (1).....         30.05       33.25       32.59       26.39         31.53
Number of headends...................................            77          80          39          50           246
Percentage of subscribers with at least 54-channel
   capacity..........................................          44.4%       77.1%       57.0%       26.1%         58.7%
</TABLE>
___________
(1) Average  monthly revenue per basic  subscriber  equals revenue for the month
ended December 31, 1997 divided by the number of basic subscribers as of the end
of such period.

NEW ENGLAND CLUSTER. The systems in the New England cluster passed approximately
214,900  homes and served  approximately  142,600 basic  subscribers  and 83,900
premium  units as of December  31,  1997.  The New England  cluster is comprised
primarily of systems  located in  communities  in  southern,  middle and coastal
Maine,  central  New  Hampshire  and  northern  Vermont.  Of the Maine  systems'
approximately  116,000 total subscribers,  approximately  90,000 subscribers are
located in Bangor and Lewiston and  contiguous  communities or in nearby coastal
communities.  In addition,  the Company  serves  resort  communities  in Maine's
Carrabassett  Valley that include  Sugarloaf/USA  and Sunday River.  Most of the
approximately  19,500  subscribers  in New  Hampshire are located in Lebanon and
surrounding  communities,  and most of the 7,100 Vermont subscribers are located
within  20 miles of  Burlington,  the  state's  largest  city.  The 1996  median
household income and projected household growth rates (from 1996 to 2001) in the
areas served by the New England  Systems exceed U.S.  averages for counties with
less than  100,000  households  ("Comparable  Counties"),  according  to Equifax
National Decision Systems, 1996.

Approximately 44.4% of the Company's  subscribers in the New England cluster are
offered  at least 54  channels.  The  Company  plans to utilize  excess  channel
capacity by introducing new basic and premium services,  increasing  penetration
of addressable  converters,  available to only 46.3% of the New England  cluster
subscribers as of December 31, 1997, and aggressively  pursuing spot advertising
revenue,  which  accounted for $0.62 per  subscriber per month during the fourth
quarter of 1997. The New England cluster's basic penetration rate is 16.9% below
the  Maine  state  average   penetration  rate  of  79.8%  according  to  Warren
Publishing, Inc.'s Television and Cable Factbook, 1997.

OHIO CLUSTER. Systems in the Ohio cluster passed approximately 328,600 homes and
served  approximately  231,500 basic subscribers and 118,400 premium units as of
December  31,  1997.  The  majority of the  subscribers  in the Ohio cluster are
located in northwest Ohio,  extending from the northern  suburbs of Toledo south
along the Indiana  state border,  and central  Ohio,  south and east of suburban
Columbus to the Ohio River. The 1996 median household income in the Ohio cluster
exceeds U.S.  averages for Comparable  Counties,  according to Equifax  National
Decision 


                                       8
<PAGE>

Systems,  1996,  although household growth rates in the areas served by the Ohio
systems are  projected  to lag that of  Comparable  Counties  over the next five
years.

Approximately 77.1% of the Company's subscribers in the Ohio cluster are offered
at least 54 channels, including a fiber-to-the-feeder 550 MHz design in Ashland,
Kentucky and Newark, Ohio. Although the Ohio cluster's basic penetration rate at
December  31,  1997 was above  the 1996 Ohio  state  average  of 65.6%,  its pay
penetration  rate was  approximately  18.8%  below the Ohio  state  average  pay
penetration rate of 63.0% according to Warren Publishing,  Inc.'s Television and
Cable Factbook, 1997.

As part of its technical  improvement program, the Company plans to increase the
deployment of addressable converters,  which were available to only 37.3% of the
Ohio  cluster  subscribers  as of December 31,  1997,  and to more  aggressively
market  pay-per-view  and other  interactive  services  such as video games.  In
addition,  the Company  plans to leverage its existing  centralized  advertising
facilities  and  personnel  to increase  advertising  revenue in all of the Ohio
cluster,  which  accounted for $0.86 per  subscriber per month during the fourth
quarter of 1997.

KENTUCKY  CLUSTER.  The systems in the  Kentucky  cluster  passed  approximately
170,100  homes and served  approximately  123,900 basic  subscribers  and 47,600
premium units as of December 31, 1997. A single regional customer service center
in Richmond,  Kentucky  serves all Kentucky  subscribers,  the majority of which
reside in outlying communities of Lexington,  Kentucky and Cincinnati, Ohio. The
1996 median  household income and the projected growth rates (from 1996 to 2001)
in the areas served by the Kentucky systems exceed U.S.  averages for Comparable
Counties, according to Equifax National Decision Systems, 1996.

Approximately  57.0% of the Company's  subscribers  in the Kentucky  cluster are
offered  at least 54  channels,  including  fiber-to-the-feeder  550 MHz  design
systems in Nicholasville, Kentucky and Delhi, Ohio and 750 MHz design systems in
Madison,  Indiana and  Winchester,  Kentucky.  The Company  continues  to expend
capital to complete a fiber ring surrounding Lexington, Kentucky. When complete,
this  fiber  loop will  serve  approximately  60,000  subscribers  from a single
headend  facility,   interconnecting   approximately  fifteen  existing  headend
facilities and passing nine colleges and universities. The Kentucky cluster will
then be effectively  positioned to offer broadband  telecommunications  and data
services   such  as  high  speed   Internet   access,   distance   learning  and
point-to-point  telephony.  The Company plans to utilize excess channel capacity
to introduce new basic and premium services to the Kentucky  cluster.  While the
Kentucky  cluster's basic  penetration rate at December,  1997 was less than the
Kentucky  state average of 76.9%,  its pay  penetration  rate was  approximately
21.0% below the Kentucky state average pay  penetration  rate of 48.6% according
to Warren Publishing, Inc.'s Television and Cable Factbook, 1997.

As part of its technical improvement program, the Company also plans to increase
the deployment of addressable converters,  which were available to only 65.9% of
the  Kentucky  cluster  subscribers  as  of  December  31,  1997,  and  to  more
aggressively market pay-per-view and other interactive  services.  Additionally,
the Company plans to leverage its existing  centralized  advertising  facilities
and advertising  sales personnel to increase  advertising  revenue in all of the
Kentucky cluster,  which accounted for $1.26 per subscriber per month during the
fourth quarter of 1997.

SOUTHEAST SYSTEMS.  The Company plans to either consolidate  further the systems
in its Southeast region through  acquisitions,  trade certain of the systems for
properties  within  its New  England,  Ohio and  Kentucky  clusters  or sell the
systems outright. As such, the Company's operating and capital expenditure plans
for the  Southeast  systems  will be limited to  maintenance  and  discretionary
projects  that will  increase  the value of the systems to a potential  buyer or
trading partner.  The Southeast systems passed  approximately  103,400 homes and
served  approximately  61,800 basic  subscribers  and 25,500 premium units as of
December 31, 1997. The Southeast  systems at December 31, 1997 were comprised of
groups of systems  located  in the  following  states:  (i)  Tennessee,  serving
approximately   19,600  basic   subscribers;   (ii)  North   Carolina,   serving
approximately 14,300 basic subscribers;  (iii) Virginia,  serving  approximately
19,500 basic subscribers; and (iv) Maryland/Pennsylvania,  serving approximately
8,400  basic  subscribers.  The  Tennessee  systems  are  located  primarily  in
Greeneville,  Tennessee and surrounding communities;  the North Carolina systems
are located  near Rocky Mount,  North  Carolina;  and the  Virginia  systems are
located in


                                       9
<PAGE>

north central  Virginia  between  Charlottesville  and Winchester and in Eastern
Virginia, near Richmond. The Maryland/Pennsylvania systems are located along the
Maryland and Pennsylvania  border,  approximately  120 miles west of Washington,
D.C. The 1996 median  household  income and actual and projected  growth rate in
the  number  of  households  (from  1996 to 2001)  in the  areas  served  by the
Southeast  systems exceed U.S.  averages for Comparable  Counties,  according to
Equifax National Decision Systems, 1996.

Approximately  26.1% of the current plant design in the  Southeast  region is at
least 54 channels. The Company will continue to evaluate capital expenditures to
rebuild and upgrade plant based on the sales or trading  status of the Southeast
systems.


TECHNOLOGICAL DEVELOPMENTS

As part of its  commitment  to  customer  service,  the Company  maintains  high
technical  performance  standards in all of its cable  systems,  and systems are
selectively  upgraded and maintained to maximize channel capacity and to improve
picture  quality and  reliability of the delivery of additional  programming and
new  services.  Before  committing  the  capital to upgrade or rebuild a system,
management  carefully assesses (i) subscribers'  demand for more channels,  (ii)
requirements in connection with franchise renewals, (iii) competing technologies
that are  currently  available,  (iv)  subscriber  demand  for  other  cable and
broadband   telecommunications   services,   (v)  the  extent  to  which  system
improvements will increase the  attractiveness of the property to a future buyer
and (vi) the cost effectiveness of any such capital outlay.

The  following  tables  set forth  certain  information  regarding  the  channel
capacities and miles of plant and the average number of subscribers  per headend
for the Existing Systems as of December 31, 1997.

<TABLE>
                              -------------------------------------------------------------------
                              <220 MHz:    221-399 MHz:   400-549 MHz:  550-750 MHz:
                               Up to 32     33 to 53        54 to 77     78 to 110
                               Channels     Channels        Channels      Channels          Total
                              --------------------------------------------------------------------
<S>                              <C>          <C>             <C>            <C>            <C>   
Miles of plant                   264          10,596          7,699          2,294          20,853
% miles of plant                 1.3%           50.8%          36.9%          11.0%          100.0%
% of basic subscribers           1.5%           39.8%          40.7%          18.0%          100.0%

</TABLE>
<TABLE>
                           ------------------------------------------------------------------------------------------
                                                         Number of Subscribers Per Headend
                           -------------------------------------------------------------------------------------------
                                           1,001-           5,001-           10,001-
                           <1,000          5,000            10,000           25,000          >25,001           Total
                           -------------------------------------------------------------------------------------------
<S>                        <C>             <C>              <C>              <C>              <C>             <C>    
# of subscribers           60,430          164,810          109,130          143,080          82,350          559,800
% of subscribers             10.8%            29.4%            19.5%            25.6%           14.7%           100.0%
</TABLE>

The Company's  Existing  Systems have an average  capacity of  approximately  56
channels  and  delivered  an  average  of 46  channels  of  programming  to  its
subscribers  as of  December  31,  1997.  Approximately  60%  of  the  Company's
subscribers are served by systems with more than 5,000  subscribers and over 40%
are served by systems serving more than 10,000 subscribers. The Company believes
that its  current  excess  channel  capacity  and  significant  number of larger
systems will allow it to cost effectively introduce new service offerings.

Approximately  43.9% of the  Company's  subscribers  currently  have  access  to
addressable  technology.  Addressable  technology enables the Company,  from the
office or  headend,  to change the  premium  channels  being  delivered  to each
subscriber or to activate pay-per-view services. These service level changes can
be  effectuated  without  the delay or expense  associated  with  dispatching  a
technician to the subscriber's home. Addressable technology also reduces premium
service  theft and allows the Company  automatically  to  disconnect  delinquent
accounts electronically from the customer service center.

The  use  of  fiber  optic   technology   in  concert  with  coaxial  cable  has
significantly enhanced cable system performance. Fiber optic strands are capable
of carrying hundreds of video,  data and voice channels over extended  


                                       10
<PAGE>

distances  without the extensive  signal  amplification  typically  required for
coaxial cable. To date, the Company has used fiber to interconnect  headends, to
eliminate  headends  by  installing  fiber  backbones  and to  reduce  amplifier
cascades,  thereby  improving  both  picture  quality,  system  reliability  and
operational efficiencies.

Recently,   digital  cable  television  has  become   commercially  viable  with
technological  cost reductions.  The Company believes that this development will
allow it to increase  services to its subscribers.  The Company has successfully
launched  digital cable  television  service in two of its systems and, based on
favorable  early results in these test markets,  is in the process of installing
necessary headend equipment for launches in additional systems. The Company will
continue to monitor  customer  demand and  profitability  of such digital  cable
television  services  to assess the  viability  of a more  wide-spread  roll-out
during 1998.


THE CABLE TELEVISION INDUSTRY

A cable television system receives  television,  radio and data signals that are
transmitted to the system's headend site by means of off-air antennas, microwave
relay systems and satellite  earth  stations.  These signals are then modulated,
amplified and distributed,  primarily  through  coaxial,  and in some instances,
fiber optic cable, 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, generally for extended periods of up to 15 years.

The cable television  industry developed in the United States in the late 1940's
and early 1950's in response to the needs of residents  in  predominantly  rural
and  mountainous  areas of the country  where the quality of off-air  television
reception was inadequate  due to factors such as topography and remoteness  from
television  broadcast towers. In the late 1960's,  cable television systems also
developed in small and medium-sized cities and suburban areas that had a limited
availability of clear off-air television  station signals.  All of these markets
are regarded  within the cable industry as "classic"  cable  television  station
markets. In more recent years, cable television systems have been constructed in
large urban cities and nearby suburban areas,  where good off-air reception from
multiple television  stations usually is already available,  in order to receive
the numerous,  satellite-delivered  channels carried by cable television systems
which are not otherwise available via broadcast television reception.

Cable  television  systems offer customers  various levels (or "tiers") of cable
services  consisting  of  (i)  off-air  television  signals  of  local  network,
independent  and  educational  stations,  (ii) a limited  number  of  television
signals from so-called "superstations"  originating from distant cities (such as
WGN), (iii) various  satellite-delivered,  non-broadcast channels (such as Cable
News Network ("CNN"),  MTV: Music Television  ("MTV"),  the USA Network ("USA"),
Entertainment  and  Sports  Programming  Network  ("ESPN")  and  Turner  Network
Television  ("TNT")),  (iv) certain programming  originated locally by the cable
television system (such as public, governmental and educational access programs)
and (v)  informational  displays  featuring  news,  weather,  stock  market  and
financial reports and public service announcements. For an extra monthly charge,
cable  television  systems  also  offer  premium  television  services  to their
customers. These services (such as Home Box Office (R) ("HBO"), Showtime (R) and
regional   sports   networks)  are   satellite-delivered   channels   consisting
principally  of feature films,  live sports  events,  concerts and other special
entertainment features, usually presented without commercial interruption.

A customer generally pays an initial  installation charge and fixed monthly fees
for basic and premium  television  services and for other  services (such as the
rental of converters  and remote  control  devices).  Such monthly  service fees
constitute  the primary  source of revenue for cable  television  operators.  In
addition to customer  revenue from these services,  cable  television  operators
generate  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 networks,  such as ESPN,
MTV and USA. Cable television operators frequently also offer to their customers
home shopping  services,  which pay the systems a share of revenue from sales of
products in the systems' service areas. See "--Programming, Services and Rates."


                                       11
<PAGE>

PROGRAMMING, SERVICES AND RATES

The Company has various  contracts to obtain basic and premium  programming  for
its systems from program  suppliers  whose  compensation is typically based on a
fixed fee per customer.  The Company's programming contracts are generally for a
fixed  period  of time and are  subject  to  negotiated  renewal.  Some  program
suppliers provide volume discount pricing  structures or offer marketing support
to the Company. In particular, the Company has negotiated programming agreements
with premium  service  suppliers that offer cost incentives to the Company under
which premium  service unit prices  decline as certain  premium  service  growth
thresholds  are met. The  Company's  successful  marketing  of multiple  premium
service  packages  emphasizing  customer  value has  enabled the Company to take
advantage of such cost  incentives.  In  addition,  the Company is a member of a
programming  consortium consisting of small to medium-sized MSOs serving, in the
aggregate,  over eight million cable  subscribers.  The consortium was formed to
help create efficiencies in the areas of securing and administering  programming
contracts, as well as to establish more favorable programming rates and contract
terms for small to  medium-sized  operators.  The Company  intends to  negotiate
programming contract renewals both directly and through the consortium to obtain
the best available  contract terms. The Company also has various  retransmission
consent arrangements with commercial broadcast stations.  Some of these consents
require direct payment of nominal fees for carriage.  In some other instances no
payment is  required;  however,  the Company has entered  into  agreements  with
certain  stations  to  carry  satellite-delivered  cable  programming  which  is
affiliated  with the network  carried by such stations.  The Company  renewed or
renegotiated  a substantial  portion of agreements  through  December 1999 under
substantially   the  same   terms.   See   "Legislation   and   Regulation--Must
Carry/Retransmission Consent."

Although  services  vary from  system to system  due to  differences  in channel
capacity,  viewer  interests  and  community  demographics,  the majority of the
Company's  systems offer a "basic service tier,"  consisting of local television
channels  (network and independent  stations)  available  over-the-air and local
public, governmental,  home-shopping and leased access channels. The majority of
the  Company's  systems  offer,  for a monthly  fee, an  expanded  basic tier of
"superstations"   originating  from  distant  cities  (such  as  WGN),   various
satellite-delivered,  non-broadcast  channels  (such as CNN,  MTV, USA, ESPN and
TNT) and certain  programming  originated  locally by the cable  system (such as
public, governmental and educational access programs) providing information with
respect to news,  time,  weather  and the stock  market.  In  addition  to these
services,  the Company's  systems typically provide one or more premium services
purchased from independent suppliers and combined in different formats to appeal
to the various segments of the viewing  audience,  such as HBO (R), Cinemax (R),
Showtime   (R),  The  Movie  Channel  (TM)  and  Starz!.   These   services  are
satellite-delivered  channels consisting  principally of feature films, original
programming,  live  sports  events,  concerts  and other  special  entertainment
features,  usually  presented  without  commercial  interruption.  Such  premium
programming  services are offered by the Company's systems both on an a la carte
basis and as part of premium service packages designed to enhance customer value
and to enable the Company's systems to take advantage of programming  agreements
offering cost incentives based on premium unit growth. Subscribers may subscribe
for one or more  premium  units.  Additionally,  the  Company  plans to  upgrade
certain of its systems with fiber optic  cable,  which will allow the Company to
expand its ability to use "tiered"  packaging  strategies for marketing  premium
services and promoting niche  programming  services.  The Company  believes that
this ability will increase basic and premium  penetration as well as revenue per
subscriber.

Rates to subscribers  vary from market to market and in accordance with the type
of service  selected.  As of December 31, 1997, the average monthly rate for the
Existing  Systems was $24.51 for the basic and  expanded  basic  service  tiers.
These rates reflect reductions effected in response to the federal re-regulation
of cable  television  industry rates in 1992, and in particular,  the FCC's rate
regulations implementing the 1992 federal law, which became effective in 1993. A
one-time  installation  fee,  which  may be  waived  in whole or in part  during
certain promotional periods, is charged to new subscribers.  Management believes
that the Company's  rate  practices are  generally  consistent  with the current
practices in the industry. See "Legislation and Regulation."

                                       12
<PAGE>


MARKETING, CUSTOMER SERVICE AND COMMUNITY RELATIONS

The Company aggressively markets and promotes its cable television services with
the  objective  of adding and  retaining  customers  and  increasing  subscriber
revenue.  The Company  actively  markets its basic and premium program  packages
through a number of coordinated marketing  techniques,  which include (i) direct
consumer sales and  subscriber  audit  programs,  (ii) direct mail for basic and
upgrade acquisition campaigns,  (iii) monthly subscriber statement inserts, (iv)
local newspaper and broadcast/radio  advertising where population  densities are
sufficient  to  provide  a  reasonable  cost per  sale  and  (vi)  cross-channel
promotion of new services  and  pay-per-view.  Towards this end, the Company has
established a single  centralized  telemarketing  center to provide the outbound
telemarketing  support for all  operating  regions.  Using a predictive  dialing
system platform, the operation will focus on (i) basic and pay unit acquisition,
(ii)  delinquent  account  collection  activities,  (iii) customer  satisfaction
surveys and (iv) targeted marketing campaigns.

The Company is dedicated to providing  superior customer  service.  To meet this
objective,   the  Company   provides  its  customers  with  a  full  line-up  of
programming,  a wide variety of  programming  options and  packages,  timely and
reliable service and improved technical quality. The Company's employees receive
ongoing  training  in  customer  service,  sales and  subscriber  retention  and
technical support. In general, following a new installation,  a customer service
representative will follow up by telephone contact with the subscriber to assess
the quality of  installation  and the service the subscriber is receiving and to
ensure overall subscriber  satisfaction.  Customer service  representatives  and
technicians  are also trained to market  upgrades or cross-sell  services at the
point of sale of service. As part of its consolidation  efforts, the Company has
established   centralized  customer  service  facilities,   increased  hours  of
operation,  and installed  state-of-the-art  telephone,  information and billing
systems to improve  responsiveness  to customer needs. In addition,  the Company
has retained local payment and technical  offices to maintain its local presence
and visibility within its communities.

Recognizing that strong governmental, franchise and public relations are crucial
to the overall success of the Company,  the Company  aggressively  maintains and
improves the working  relationships  with all  governmental  entities within the
franchise  areas.  Regional  management meets regularly with local officials for
the  purposes of keeping  them advised on the  Company's  activities  within the
communities,  to receive information and feedback on the Company's standing with
officials  and  customers  alike and to ensure that the Company can maximize its
growth  potential in areas where new housing  development  is occurring or where
significant technical plant improvement is underway.  The regional management is
also responsible for franchise  renewal  negotiations as well as the maintenance
of  Company  visibility  through  involvement  in  various  community  and civic
organizations  and  charities.  In addition,  the Company has hired  experienced
community relations personnel in its New England,  Ohio and Kentucky clusters to
enhance local visibility and long-term relationships.


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
regulation  under  state and federal  law,  including  the Cable  Communications
Policy  Act of 1984  (the  "1984  Cable  Act"),  the Cable  Television  Consumer
Protection and  Competition Act of 1992 (the "1992 Cable," and together with the
1984 Cable Act, the "Cable  Acts") and the  Telecommunications  Act of 1996 (the
"1996  Telecom  Act"),  as well as the rules,  regulations  and  policies of the
Federal Communications Commission (the "FCC") and applicable state agencies. See
"Legislation and Regulation."

As of December 31, 1997, the Company held 665 franchises. These franchises, most
of which are  non-exclusive,  provide  for the  payment  of fees to the  issuing
authority.  In all of the  Existing  Systems,  such  franchise  fees are  


                                       13
<PAGE>

passed through  directly to the customers.  The Cable Acts prohibit  franchising
authorities  from imposing  franchise  fees in excess of 5% of gross revenue and
also permit the cable system operator to seek  renegotiation and modification of
franchise requirements if warranted by changed  circumstances.  See "Legislation
and Regulation."

Approximately  98.0% of the Existing  System's basic  subscribers are in service
areas that require a franchise.  The table below  groups the  franchises  of the
Existing  Systems by date of expiration and presents the approximate  number and
percentage of basic  subscribers for each group of franchises as of December 31,
1997.

<TABLE>
                               -----------------------------------------------------
                                           Percentage of                  Percentage of
                                Number of       Total        Number of     Franchised
Year of Franchise Expiration   Franchises    Franchises    Subscribers     Subscribers
                               -----------------------------------------------------
<S>                                 <C>            <C>       <C>                <C>
1997 through 2001                    234            35%       196,100            35%
2002 and thereafter                  431            65%       353,000            65%
                                 -------       -------        -------       -------
 Total                               665           100%       549,100           100%
</TABLE>

The Cable Acts provide,  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. In
addition,  the Cable Acts  established  comprehensive  renewal  procedures which
require that an incumbent  franchisee's  renewal  application be assessed on its
own merits and not as part of a comparative process with competing applications.
See "Legislation and Regulation."

The Company  believes  that it generally  has very good  relationships  with its
franchising communities. The Company has never had a franchise revoked or failed
to have a franchise renewed.  In addition,  all of the franchises of the Company
eligible  for renewal  have been renewed or extended at or prior to their stated
expirations,  and no franchise  community  has refused to consent to a franchise
transfer to the Company.


COMPETITION

Cable television systems face competition from alternative  methods of receiving
and distributing  television signals and from other sources of news, information
and entertainment such as off-air television broadcast programming,  newspapers,
movie theaters,  live sporting events,  interactive online computer services and
home video products, including videotape cassette recorders. The extent to which
a cable  communications  system is competitive  depends, in part, upon the cable
system's  ability to provide,  at a  reasonable  price to  customers,  a greater
variety of programming  and other  communications  services than those which are
available  off-air  or  through  other  alternative  delivery  sources  and upon
superior technical performance and customer service.

Cable television  systems generally operate pursuant to franchises  granted on a
nonexclusive  basis. The 1992 Cable Act prohibits  franchising  authorities from
unreasonably denying requests for additional  franchises and permits franchising
authorities  to  operate  cable   television   systems.   See  "Legislation  and
Regulation." It is possible that a franchising  authority might grant additional
franchises to other  companies  containing  terms and conditions  more favorable
than those afforded the Company. Well-financed businesses from outside the cable
industry  (such as the  public  utilities  that own the poles to which  cable is
attached)  may become  competitors  for  franchises  or  providers  of competing
services. See "Legislation and Regulation." Competition from other video service
providers  exists in areas  served by the  Company.  In a limited  number of the
Company's  franchise  areas,  the Company faces direct  competition from another
franchised cable television system.

The  availability  of  reasonably-priced  home  satellite  dish  earth  stations
("HSDs")    enables    individual    households   to   receive   many   of   the
satellite-delivered   program   services   formerly   available  only  to  cable
subscribers.  The 1992 Cable Act contains provisions,  which the FCC implemented
with  regulations,  to enhance the ability of cable  competitors to purchase and
make available to HSD owners certain  satellite-delivered  cable  programming at

                                       14
<PAGE>

competitive  costs. The 1996 Telecom Act and FCC regulations  implementing  that
law preempt certain local  restrictions on the use of HSDs and roof-top antennae
to receive satellite  programming and over-the-air  broadcasting  services.  See
"Legislation and Regulation."

Cable  operators also face  competition  from private  satellite  master antenna
television  ("SMATV")  systems  that serve  condominiums,  apartment  and office
complexes and private  residential  developments.  The 1996 Telecom Act broadens
the definition of SMATV systems not subject to regulation as a franchised  cable
television  system.  SMATV  systems  offer  both  improved  reception  of  local
television  stations and many of the same  satellite-delivered  program services
offered by franchised cable television systems. SMATV operators often enter into
exclusive agreements with building owners or homeowners' associations,  although
some states have enacted laws that authorize  franchised  cable operators access
to such private  complexes.  These laws have been  challenged in the courts with
varying results.  In addition,  some companies are developing and/or offering to
these private  residential  and commercial  developments  packages of telephony,
data and video services.  The ability of the Company to compete for customers in
residential and commercial developments served by SMATV operators is uncertain.

Congress has enacted  legislation  and the FCC has adopted  regulatory  policies
providing  a  more  favorable   operating   environment  for  new  and  existing
technologies  that  provide,  or have  the  potential  to  provide,  substantial
competition to cable  television  systems.  These  technologies  include,  among
others,  DBS service  whereby  signals are transmitted by satellite to receiving
facilities located on customer premises.  Programming is currently  available to
individual  households,  condominiums,  apartment and office  complexes  through
conventional,  medium and high-powered satellites.  DBS providers can offer more
than 100 channels of video  programming to their  subscribers  and are providing
movies,  broadcast  stations,  and other program services comparable to those of
cable  television  systems.  The  FCC and  Congress  are  presently  considering
proposals to enhance the ability of DBS  providers to gain access to  additional
programming  and to authorize  DBS carriers to transmit  local  signals to local
markets.  Currently,   Primestar  Partners  (a  consortium  comprised  of  cable
operators and a satellite company),  DirecTV, and EchoStar  Communications Corp.
("EchoStar") are providing  nation-wide DBS services.  There are other companies
that are currently  providing or are planning to provide  domestic DBS services.
American Sky Broadcasting  ("ASkyB"), a joint venture between MCI Communications
Corp.  ("MCI") and The News  Corporation  Limited ("News  Corp."),  is currently
developing  high-power  DBS  services.  Primestar,  News  Corp.,  MCI and  ASkyB
recently  announced  several  agreements in which News Corp., MCI and ASkyB will
sell to  Primestar  two  satellites  under  construction  and MCI will assign to
Primestar (subject to various  governmental  approvals) an FCC DBS license.  The
satellites to be sold to Primestar, when operational, are expected to be capable
of providing approximately 200 channels of DBS service in the United States. The
Primestar  partners  recently  announced an agreement to  consolidate  their DBS
assets into a new publicly traded  company.  DBS providers  provide  significant
competition to cable service providers, including the Company.

Digital  satellite  service ("DSS") offered by DBS systems currently has certain
advantages over cable systems with respect to programming  and digital  quality,
as well as  disadvantages  that include high  up-front  customer  equipment  and
installation  costs  and a lack of  local  programming,  service  and  equipment
distribution. While DSS presents a competitive threat, the Company currently has
excess  channel  capacity  available in most of its  systems,  as well as strong
local customer service and technical support,  which will enhance its ability to
compete.  By selectively  increasing channel capacities of systems to between 54
and 100 channels and introducing new premium  channels,  pay-per-view  and other
services,  the  Company  will seek to maintain  programming  parity with DSS and
magnify  competitive  service  price  points.  Based  on  internal  tracking  of
subscriber disconnects, the Company believes it lost less than 2,400 subscribers
to DBS during the year ended  December 31, 1997.  On an annualized  basis,  this
represents  less than 0.7% of the  subscribers  of the  Existing  Systems  as of
December 31, 1997.  The Company  will  continue to monitor  closely the activity
level  and the  product  and  service  needs  of its  customer  base to  counter
potential erosion of its market position or unit growth to DSS.

Cable  television  systems  also  compete  with  wireless  program  distribution
services such as MMDS,  which uses low power  microwave  frequencies to transmit
video programming over the air to customers.  Additionally,  the FCC adopted new
regulations  allocating  frequencies  in the 28 GHz band for a new  multichannel
wireless video service 


                                       15
<PAGE>

called Local Multipoint  Distribution  Service ("LMDS") that is similar to MMDS.
The FCC initiated spectrum auctions for LMDS licenses in February 1998. Wireless
distribution  services  generally  provide  many  of  the  programming  services
provided by cable  systems,  and  digital  compression  technology  is likely to
increase  significantly the channel capacity of their systems.  Because MMDS and
LMDS service  requires  unobstructed  "line of sight"  transmission  paths,  the
ability of MMDS and LMDS  systems to compete  may be  hampered  in some areas by
physical terrain and large buildings. In the majority of the Company's franchise
service  areas,  prohibitive  topography and limited "line of sight" access have
limited, and are likely to continue to limit, competition from MMDS systems. The
Company is not aware of any  significant  MMDS  operation  currently  within its
cable franchise service areas.

The 1996  Telecom  Act makes it easier for local  exchange  telephone  companies
("LECs") and others to provide a wide variety of video services competitive with
services  provided by cable  systems and to provide cable  services  directly to
subscribers.  See  "Legislation  and  Regulation."  Various LECs  currently  are
providing video programming  services within and outside their telephone service
areas through a variety of distribution  methods,  including both the deployment
of broadband wire  facilities and the use of wireless  transmission  facilities.
LECs and other  companies  also  provide  facilities  for the  transmission  and
distribution  to homes and  businesses of interactive  computer-based  services,
including  the Internet,  as well as data and other  non-video  services.  Cable
television systems could be placed at a competitive disadvantage if the delivery
of video,  interactive  online computer services and other non-video services by
LECs  becomes   widespread,   since  LECs  are  not   required,   under  certain
circumstances,  to obtain local franchises to deliver such services or to comply
with the variety of obligations imposed upon cable television systems under such
franchises.  Issues of  cross-subsidization by LECs of video, data and telephony
services  also pose  strategic  disadvantages  for cable  operators  seeking  to
compete with LECs that provide such  services.  The Company  cannot  predict the
likelihood  of success of such video and broadband  service  ventures by LECs or
the impact on the Company of such competitive  ventures.  The Company  believes,
however,  that the small to medium-sized markets in which it provides or expects
to provide cable  services are unlikely to support  competition in the provision
of video and  telecommunications  broadband  services given the lower population
densities and high costs per  subscriber of installing  plant.  The 1996 Telecom
Act's provision promoting  facilities-based  broadband  competition is primarily
targeted at larger  markets,  and its prohibition on buy-outs and joint ventures
between  incumbent cable operators and LECs exempts small operators and carriers
meeting certain criteria. See "Legislation and Regulation." The Company believes
that  significant  growth  opportunities  exist for the Company by  establishing
cooperative  rather than competitive  relationships with LECs within its service
areas, to the extent permitted by law.

Competition in the online  services area is significant.  Recently,  a number of
large  corporations  in  the   telecommunications   and  technology  industries,
including the Regional Bell  Operating  Companies  ("RBOCs"),  GTE  Corporation,
Microsoft,  Compaq  Computer  Corporation and Intel  Corporation,  announced the
formation of a working group to accelerate the deployment of Asymmetric  Digital
Subscriber Line ("ADSL") technology. It is anticipated that ADSL technology will
allow Internet access at peak data transmission  speeds equal to or greater than
that of modems over  conventional  telephone  lines.  Bell Atlantic  Corporation
("Bell Atlantic") and several other RBOCs recently requested the FCC in separate
petitions to fully  deregulate  packet-switched  networks to allow it to provide
high-speed broadband services,  including online services,  without regarding to
present LATA boundaries and other  regulatory  restrictions.  Competitors in the
online services area include  existing  Internet service  providers,  LECs, long
distance carriers and others, many of whom have more substantial  resources than
the Company.  The Company cannot predict the likelihood of success of the online
services  offered by the Company's  competitors  or the impact on the Company of
such competitive ventures.

Other  new  technologies  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

                                       16
<PAGE>

also permits  commercial and  noncommercial  FM stations to use their subcarrier
frequencies to provide nonbroadcast  services including data transmissions.  The
FCC  established an  over-the-air  Interactive  Video and Data Service that will
permit two-way  interaction  with commercial and educational  programming  along
with  informational and data services.  The FCC has conducted  spectrum auctions
for licenses to provide PCS. PCS will enable license  holders,  including  cable
operators, to provide voice and data services.

Advances in communications  technology as well as changes in the marketplace and
the regulatory and legislative  environments are constantly occurring.  Thus, it
is not possible to predict the effect that ongoing or future  developments might
have on the cable industry or on the operations of the Company.


EMPLOYEES

At December 31, 1997, the Company had  approximately  937  equivalent  full-time
employees,  nine of whom belonged to a collective  bargaining  unit. The Company
considers its relations with its employees to be good.


LEGISLATION AND REGULATION

The Cable Acts and the 1996 Telecom Act amended the  Communications  Act of 1934
(as amended,  the  "Communications  Act") and  established a national  policy to
guide the development  and regulation of cable systems.  The 1996 Telecom Act is
the most comprehensive reform of the nation's  telecommunications laws since the
Communications  Act.  Although the long-term  goal of the 1996 Telecom Act is to
promote   competition   and  decrease   regulation  of  various   communications
industries, in the short-term the law delegates to the FCC (and in some cases to
the  states)  broad  new  rulemaking  authority.  Principal  responsibility  for
implementing  the  policies  of the  Cable  Acts  and the  1996  Telecom  Act is
allocated  between the FCC and state or local franchising  authorities.  The FCC
and state regulatory  agencies are required to conduct  numerous  rulemaking and
regulatory  proceedings to implement the 1996 Telecom Act, and such  proceedings
may  materially  affect the cable  communications  industry.  The following is a
summary of federal  laws and  regulations  materially  affecting  the growth and
operation  of the cable  communications  industry and a  description  of certain
state and local laws.

RATE  REGULATION.  The 1992  Cable  Act  authorized  rate  regulation  for cable
communications  services and  equipment in  communities  that are not subject to
"effective  competition,"  as defined by federal law. Most cable  communications
systems are now subject to rate regulation for basic cable service and equipment
by local officials under the oversight of the FCC which has prescribed  detailed
criteria for such rate  regulation.  The 1992 Cable Act also requires the FCC to
resolve  complaints  about rates for cable  programming  service tiers ("CPSTs")
(other than  programming  offered on a per channel or per program  basis,  which
programming  is not  subject  to rate  regulation)  and to reduce any such rates
found  to be  unreasonable.  The  1996  Telecom  Act  eliminates  the  right  of
individuals  to file CPST rate  complaints  with the FCC and requires the FCC to
issue a final order within 90 days after receipt of CPST rate  complaints  filed
by any  franchising  authority.  The 1992 Cable Act limits the  ability of cable
television  systems  to raise  rates  for basic and  certain  cable  programming
services (collectively, the "Regulated Services").

FCC  regulations  govern rates that may be charged to subscribers  for Regulated
Services.  The FCC uses a  benchmark  methodology  as the  principal  method  of
regulating rates for Regulated  Services.  Cable operators are also permitted to
justify rates using a cost-of-service  methodology,  which contains a rebuttable
presumption of an industry-wide 11.25% after tax rate of return on an operator's
allowable rate base. Franchising authorities are empowered to regulate the rates
charged  for  monthly  basic  service,   for  additional  outlets  and  for  the
installation,  lease and sale of equipment  used by  subscribers  to receive the
basic cable service tier, such as converter boxes and remote control units.  The
FCC's rules require franchising authorities to regulate these rates on the basis
of actual cost plus a reasonable  profit, as defined by the FCC. Cable operators
required  to  reduce  rates may also be  required  to  refund  overcharges  with
interest.  The FCC has also adopted  comprehensive  and restrictive  regulations
allowing  


                                       17
<PAGE>

operators to modify their  regulated  rates on a quarterly or annual basis using
various  methodologies  that  account  for  changes in the  number of  regulated
channels,  inflation and increases in certain external costs,  such as franchise
and other governmental fees,  copyright and retransmission  consent fees, taxes,
programming fees and franchise-related  obligations.  The Company cannot predict
whether the FCC will modify these "going forward" regulations in the future.

The 1996  Telecom Act  provides  for rate  deregulation  of CPSTs by March 1999,
although  legislation  has  been  proposed  to  extend  the  regulatory  period.
Deregulation  will occur sooner for systems in markets  where  comparable  video
programming services,  other than DBS, are offered by local telephone companies,
or their  affiliates,  or by third parties using the local  telephone  company's
facilities, or where "effective competition" is established under the 1992 Cable
Act. The 1996 Telecom Act also modifies the uniform rate  provisions of the 1992
Cable Act by prohibiting regulation of non-predatory bulk discount rates offered
to subscribers in commercial and residential  developments and permits regulated
equipment  rates to be  computed by  aggregating  costs of broad  categories  of
equipment at the franchise, system, regional or company level.

The 1996  Telecom  Act  deregulates  rates  for CPSTs for  certain  small  cable
operators immediately and, in certain  circumstances  deregulates basic services
and equipment. The deregulation of a smaller cable operator's rates only applies
in  franchise  areas in which the small cable  operator  serves  50,000 or fewer
subscribers.  To qualify for the "small cable operator" rate deregulation  under
the 1996  Telecom  Act,  the  operator  (and its  affiliates)  must serve in the
aggregate  less  than  one  percent  (currently  estimated  by  the  FCC  to  be
approximately 617,000 subscribers) of all U.S. cable television  subscribers and
may not be affiliated  with an entity or group of entities that in the aggregate
has annual gross revenue  exceeding  $250 million.  The FCC has adopted  interim
rules  in which  it has  defined  "affiliate"  as any  entity  that has a 20% or
greater equity interest in the small cable operator  (active or passive) or that
holds de jure or de facto  control  over the small  cable  operator.  The FCC is
currently  conducting a rulemaking  to implement  the 1996 Telecom  Act's "small
cable operator" rate deregulation,  including adoption of permanent  affiliation
standards.

In addition to rate  deregulation  for certain small cable  operators  under the
1996  Telecom  Act,  the FCC adopted  regulations  in June 1995  ("Small  System
Regulations")  pursuant  to the 1992 Cable Act that were  designed to reduce the
substantive and procedural  burdens of rate regulation on "small cable systems."
For  purposes  of these FCC  regulations,  a "small  cable  system"  is a system
serving 15,000 or fewer  subscribers that is owned by or affiliated with a cable
company which serves, in the aggregate, 400,000 or fewer subscribers.  Under the
FCC's Small System  Regulations,  qualifying systems may justify their regulated
service and  equipment  rates using a simplified  cost-of-service  formula.  The
regulatory  benefits  accruing to qualified  small cable  systems  under certain
circumstances  remain  effective  even if such  systems are later  acquired by a
larger  cable  operator  that serves in excess of 400,000  subscribers.  Various
franchising   authorities  and  municipal  groups  have  requested  the  FCC  to
reconsider its Small System  Regulations.  The FCC has determined  that the 1996
Telecom Act does not require  modification of its Small System Regulations.  The
Company  believes  that  many of the  Existing  Systems  currently  satisfy  the
eligibility  criteria  under  the  FCC's  Small  System  Regulations  and  would
therefore be eligible to use the FCC's simplified cost-of-service methodology to
justify basic  service,  CPST and equipment  rates if regulated by a franchising
authority or the FCC.  Because the Company now serves in the aggregate more than
400,000 subscribers, most of the systems acquired from larger MSOs, such as TCI,
Cox  and  Cablevision,  generally  will  not be  eligible  for  rate  regulatory
treatment as "small cable  systems";  however,  certain  systems  acquired  from
qualified "small cable operators" will be "grandfathered"  under the FCC's Small
System  Regulations and will continue to be eligible to justify  regulated rates
using the FCC's  simplified  cost-of-service  formula until they serve more than
15,000 subscribers.

The Company's  basic service  rates are  currently  regulated in 82  communities
covering  approximately 27% of its subscribers.  Additionally,  to the Company's
knowledge, there are pending at the FCC five CPST rate complaints that generally
were filed against the Company's predecessors and that cover approximately 4% of
its  subscribers.  While the Company  cannot predict the outcome of the FCC CPST
rate  proceedings or of any pending local regulation of its basic service rates,
the  Company  believes  that  the  ultimate  resolution  of  local  and FCC rate
proceedings will not have a material  adverse impact on the Company's  financial
position or its results of operations.

                                       18
<PAGE>

"ANTI-BUY THROUGH" PROVISIONS. The 1992 Cable Act also requires cable systems to
permit customers to purchase video programming  offered by the operator 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  system's  lack of
addressable converter boxes or other technological  limitations do not permit it
to do so.  The  statutory  exemption  for  cable  systems  that do not  have the
technological  capacity  to offer  programming  in the  manner  required  by the
statute is available until a system obtains such capability,  but not later than
December 2002. The FCC may waive such time periods, if deemed necessary. Most of
the Company's  cable systems do not have the  technological  capability to offer
programming in the manner  required by the statute and currently are exempt from
complying with the requirement.

MUST CARRY/RETRANSMISSION  CONSENT. The 1992 Cable Act contains broadcast signal
carriage  requirements that allow local commercial television broadcast stations
to elect once every three years to require a cable  system to carry the station,
subject to certain exceptions,  or to negotiate for "retransmission  consent" to
carry  the  station.  A cable  system  generally  is  required  to  devote up to
one-third of its activated channel capacity for the carriage of local commercial
television stations pursuant to the mandatory carriage  requirements of the 1992
Cable Act.  Local  noncommercial  television  stations are also given  mandatory
carriage  rights;  however,  such stations are not given the option to negotiate
retransmission  consent  for the  carriage  of their  signals by cable  systems.
Additionally,  cable systems are required to obtain  retransmission  consent for
all   "distant"   commercial   television   stations   (except  for   commercial
satellite-delivered  independent  "superstations" such as WGN), commercial radio
stations and certain low power television  stations carried by such systems.  In
March  1997,  the U.S.  Supreme  Court  affirmed a  three-judge  district  court
decision upholding the constitutional validity of the 1992 Cable Act's mandatory
signal carriage requirements. The FCC will conduct a rulemaking in the future to
consider the requirements,  if any, for mandatory carriage of digital television
signals. The Company cannot predict the ultimate outcome of such a rulemaking or
the impact of new carriage requirements of the Company or its business.

As a result of the mandatory  carriage rules, some of the Company's systems have
been required to carry  television  broadcast  stations that otherwise would not
have been  carried and have caused  displacement  of  possibly  more  attractive
programming.  The retransmission  consent rules have resulted in the deletion of
certain local and distant  televisions  broadcast stations which various Company
systems were carrying.  To the extent  retransmission  consent fees must be paid
for the continued carriage of certain television stations, the Company's cost of
doing  business will increase with no assurance  that such fees can be recovered
through rate increases.

DESIGNATED CHANNELS.  The Communications Act permits franchising  authorities to
require cable  operators to set aside certain  channels for public,  educational
and governmental  access  programming.  Federal law also requires a cable system
with 36 or more  channels to  designate a portion of its  channel  capacity  for
commercial  leased  access by third  parties  to  provide  programming  that may
compete with services  offered by the cable operator.  The FCC has adopted rules
regulating:  (i) the maximum  reasonable  rate a cable  operator  may charge for
commercial use of the designated channel capacity; (ii) the terms and conditions
for commercial use of such channels;  and (iii) the procedures for the expedited
resolution  of disputes  concerning  rates or commercial  use of the  designated
channel  capacity.  The U.S. Supreme Court recently held parts of the 1992 Cable
Act  regulating   "indecent"   programming  on  local  access   channels  to  be
unconstitutional,  but upheld the statutory right of cable operators to prohibit
or limit the provision of  "indecent"  programming  on commercial  leased access
channels.

FRANCHISE  PROCEDURES.  The 1984  Cable Act  affirms  the  right of  franchising
authorities (state or local,  depending on the practice in individual states) to
award  one  or  more  franchises   within  their   jurisdictions  and  prohibits
non-grandfathered  cable  systems  from  operating  without a franchise  in such
jurisdictions.  The 1992 Cable Act  encourages  competition  with existing cable
systems  by (i)  allowing  municipalities  to  operate  their own cable  systems
without  franchises,  (ii)  preventing  franchising  authorities  from  granting
exclusive  franchises or unreasonably  refusing to award  additional  franchises
covering an existing cable system's  service area, and (iii)  prohibiting  (with
limited exceptions) the common ownership of cable systems and co-located MMDS or
SMATV  systems.  The FCC had  relaxed its  restrictions  on  ownership  of SMATV
systems to permit a cable  operator to acquire SMATV  systems in the  operator's
existing franchise area so long as the programming services provided 


                                       19
<PAGE>

through the SMATV system are offered  according to the terms and  conditions  of
the cable  operator's local franchise  agreement.  The 1996 Telecom Act provides
that the  cable/SMATV and cable/MMDS  cross-ownership  rules do not apply in any
franchise area where the cable operator faces "effective competition" as defined
by federal law. The 1996 Telecom Act also permits local  telephone  companies to
provide video  programming  services as traditional  cable  operators with local
franchises.

The Cable Acts also  provide  that in  granting or  renewing  franchises,  local
authorities  may  establish   requirements  for  cable-related   facilities  and
equipment,  but not for video programming or information  services other than in
broad  categories.  The Cable Acts limit  franchise  fees to 5% of cable  system
revenue  derived from the provision of cable services and permit cable operators
to obtain modification of franchise requirements by the franchising authority or
judicial action if warranted by changed circumstances.  The Company's franchises
typically provide for payment of fees to franchising  authorities of up to 5% of
"revenue" (as defined by each franchise agreement),  which fees may be passed on
to subscribers. Recently, a federal appellate court held that a cable operator's
gross revenue includes all revenue received from subscribers, without deduction,
and overturned an FCC order which had held that a cable operator's gross revenue
does not include money collected from subscribers that is allocated to pay local
franchise fees. The 1996 Telecom Act generally prohibits franchising authorities
from (i) imposing  requirements in the cable  franchising  process that require,
prohibit  or  restrict  the  provision  of  telecommunications  services  by  an
operator,  (ii) imposing  franchise fees on revenue derived by the operator from
providing   telecommunications   services  over  its  cable  system,   or  (iii)
restricting  an  operator's   use  of  any  type  of  subscriber   equipment  or
transmission technology.

The 1984 Cable Act contains  renewal  procedures  designed to protect  incumbent
franchisees  against  arbitrary  denials  of  renewal.  The 1992 Cable Act makes
several  changes  to the  renewal  process  which  could  make it  easier  for a
franchising  authority  to deny  renewal.  Moreover,  even if the  franchise  is
renewed,  the  franchising  authority  may seek to impose  new and more  onerous
requirements  such  as  significant  upgrades  in  facilities  and  services  or
increased franchise fees as a condition of renewal.  Similarly, if a franchising
authority's  consent is required  for the  purchase or sale of a cable system or
franchise,  such  authority  may  attempt to impose more  burdensome  or onerous
franchise   requirements   in  connection  with  a  request  for  such  consent.
Historically,  franchises  have  been  renewed  for  cable  operators  that have
provided  satisfactory  services  and  have  complied  with  the  terms of their
franchises.  The Company  believes  that it has  generally  met the terms of its
franchises and has provided  quality levels of service,  and it anticipates that
its future franchise renewal prospects generally will be favorable.

Various courts have considered  whether  franchising  authorities have the legal
right to limit franchise awards to a single cable operator and to impose certain
substantive franchise requirements (i.e., access channels, universal service and
other technical requirements). These decisions have been inconsistent and, until
the U.S. Supreme Court rules definitively on the scope of cable operators' First
Amendment protections,  the legality of the franchising process generally and of
various specific franchise requirements is likely to be in a state of flux.

OWNERSHIP  LIMITATIONS.  Pursuant to the 1992 Cable Act,  the FCC adopted  rules
prescribing  national  customer limits and limits on the number of channels that
can be  occupied  on a cable  system  by a video  programmer  in which the cable
operator has an attributable  interest.  The FCC's  horizontal  ownership limits
have been stayed because a federal district court found the statutory limitation
to be  unconstitutional.  An appeal of that  decision  is  pending  and has been
consolidated  with an appeal  of the FCC's  regulations  which  implemented  the
national customer and channel  limitation  provisions of the 1992 Cable Act. The
1996 Telecom Act eliminates the statutory  prohibition on the common  ownership,
operation or control of a cable system and a television broadcast station in the
same service area and directs the FCC to eliminate its  regulatory  restrictions
on  cross-ownership of cable systems and national  broadcasting  networks and to
review its  broadcast-cable  ownership  restrictions  to  determine  if they are
necessary  in the public  interest.  Pursuant to the mandate of the 1996 Telecom
Act, the FCC eliminated its regulatory  restriction on  cross-ownership of cable
systems and national broadcasting networks and has initiated a formal inquiry to
review its broadcast-cable ownership restriction.

TELEPHONE  COMPANY  OWNERSHIP  OF CABLE  SYSTEMS.  The 1996  Telecom  Act  makes
far-reaching changes in the regulation of telephone companies that provide video
programming services.  The 1996 Telecom Act eliminated 


                                       20
<PAGE>

federal  legal  barriers  to  competition  in  the  local  telephone  and  cable
communications   businesses,   preempted  legal  barriers  to  competition  that
previously  existed  in state  and  local  laws and  regulations  and set  basic
standards  for  relationships  between  telecommunications  providers.  The 1996
Telecom  Act  eliminated  the  statutory  telephone   company/cable   television
cross-ownership  prohibition,  thereby  allowing LECs to offer video services in
their telephone  service areas.  LECs may provide  service as traditional  cable
operators  with local  franchises or they may opt to provide  their  programming
over  unfranchised   "open  video  systems,"  subject  to  certain   conditions,
including, but not limited to, setting aside a portion of their channel capacity
for use by unaffiliated program distributors on a non-discriminatory  basis. The
1996 Telecom Act  generally  limits  acquisitions  and  prohibits  certain joint
ventures  between LECs and cable  operators  in the same market.  There are some
statutory  exceptions to the buy-out and joint venture  prohibitions,  including
exceptions  for certain  small cable systems (as defined by federal law) and for
cable systems or telephone  facilities  serving certain rural areas, and the FCC
is authorized to grant waivers of the prohibitions under certain  circumstances.
The FCC adopted  regulations  implementing the 1996 Telecom Act requirement that
LECs open their  telephone  networks to  competition  by  providing  competitors
interconnection,  access to unbundled  network  elements and retail  services at
wholesale rates. Numerous parties appealed these regulations.  The U.S. Court of
Appeals for the Eighth Circuit,  where the appeals were  consolidated,  recently
vacated key portions of the FCC's  regulations,  including the FCC's pricing and
nondiscrimination  rules.  In January  1998,  the U.S.  Supreme  Court agreed to
review the Eighth Circuit's decision.  The Company cannot predict the outcome of
this litigation or the FCC rulemakings, and the ultimate impact of any final FCC
regulations on the Company or its businesses cannot be determined at this time.

POLE ATTACHMENT.  The Communications Act requires the FCC to regulate the rates,
terms and  conditions  imposed by public  utilities  for cable  systems'  use of
utility pole and conduit space unless state  authorities  can  demonstrate  that
they adequately regulate pole attachment rates, as is the case in certain states
in which the  Company  operates.  In the  absence of state  regulation,  the FCC
administers  pole  attachment  rates  through  the use of a formula  that it has
devised.  In some cases,  utility  companies have increased pole attachment fees
for cable systems that have installed fiber optic cables and that are using such
cables for the distribution of nonvideo services. The FCC concluded that, in the
absence of state  regulation,  it has jurisdiction to determine  whether utility
companies  have justified  their demand for additional  rental fees and that the
Communications  Act does not permit disparate rates based on the type of service
provided over the equipment  attached to the utility's  pole. The FCC's existing
pole  attachment  rate formula,  which may be modified by a pending  rulemaking,
governs charges by utilities for  attachments by cable operators  providing only
cable  services.  The 1996  Telecom Act and the FCC's  implementing  regulations
modify the current  pole  attachment  provisions  of the  Communications  Act by
immediately permitting certain providers of telecommunications  services to rely
upon the protections of the current law 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.  The FCC recently
adopted  new  regulations  to govern the charges  for pole  attachments  used by
companies  providing  telecommunications  services,  including cable  operators.
These new pole attachment  rate  regulations  will become  effective in February
2001 and any resulting increase in attachment rates resulting from the FCC's new
regulations  will be phased  in equal  annual  increments  over a period of five
years  beginning in February 2001.  The ultimate  impact of any revised FCC rate
formula or of any new pole  attachment  rate  regulations  on the Company or its
business cannot be determined at this time.

OTHER  STATUTORY  PROVISIONS.  The 1992 Cable Act,  the 1996 Telecom Act and FCC
regulations  preclude  a  satellite  video  programmer  affiliated  with a cable
company,  or with a common  carrier  providing  video  programming  directly  to
customers, from favoring an affiliated company over competitors and require such
a programmer to sell its programming to other multichannel  video  distributors.
These  provisions limit the ability of cable program  suppliers  affiliated with
cable  companies or with common  carriers  providing  satellite-delivered  video
programming directly to customers to offer exclusive programming arrangements to
their affiliates.  In December 1997, the FCC initiated a rulemaking to address a
number of  possible  changes to its  program  access  rules.  The 1992 Cable Act
requires  operators to block fully both the video and audio  portion of sexually
explicit or indecent  programming  on channels that are  primarily  dedicated to
sexually oriented programming or, alternatively,  to carry such programming only
at "safe harbor" time periods  currently defined by the FCC as the hours between
10 p.m. to 6 a.m. Several  adult-oriented  cable programmers have challenged the
constitutionality  of this  statutory  provision,  but the  U.S.  Supreme  


                                       21
<PAGE>

Court  recently  refused to  overturn a lower  court's  denial of a  preliminary
injunction  motion  seeking to enjoin  the  enforcement  of this law.  The FCC's
regulations  implementing this statutory provision became effective in May 1997.
The  Communications  Act also  includes  provisions,  among  others,  concerning
horizontal and vertical ownership of cable systems,  customer service,  customer
privacy, marketing practices, equal employment opportunity,  obscene or indecent
programming, technical standards, and consumer equipment compatibility.

OTHER FCC REGULATIONS. The FCC recently revised its cable inside wiring rules to
provide a more specific  procedure for the  disposition of internal cable wiring
that  belongs to an incumbent  cable  operator  that is forced to terminate  its
cable  services in a multiple  dwelling  unit  ("MDU")  building by the building
owner.  The FCC is also  considering  additional  rules  relating  to MDU inside
wiring that, if adopted, may disadvantage incumbent cable operators. The FCC has
various rulemaking proceedings pending that will implement the 1996 Telecom Act;
it also has adopted  regulations  implementing  various  provisions  of the 1992
Cable Act and the 1996 Telecom Act that are the subject of petitions  requesting
reconsideration of various aspects of its rulemaking proceedings. In addition to
the FCC regulations noted above,  there are other FCC regulations  covering such
areas as equal employment opportunity,  syndicated program exclusivity,  network
program nonduplication,  closed captioning of video programming, registration of
cable  systems,  maintenance  of various  records and public  inspection  files,
microwave frequency usage, lockbox  availability,  origination  cablecasting and
sponsorship   identification,   antenna  structure  notification,   marking  and
lighting,  carriage of local sports broadcast programming,  application of rules
governing  political   broadcasts,   limitations  on  advertising  contained  in
nonbroadcast children's  programming,  consumer protection and customer service,
ownership  of home  wiring,  indecent  programming,  programmer  access to cable
systems,  programming  agreements,  technical  standards,  consumer  electronics
equipment  compatibility  and DBS  implementation.  The FCC has the authority to
enforce its  regulations  through  the  imposition  of  substantial  fines,  the
issuance  of  cease  and  desist   orders   and/or  the   imposition   of  other
administrative  sanctions,  such as the  revocation  of FCC  licenses  needed to
operate  certain  transmission  facilities  often used in connection  with cable
operations.

The 1992 Cable Act, the 1996 Telecom Act and the FCC's rules  implementing these
statutory provisions generally have increased the administrative and operational
expenses of cable systems and have resulted in additional  regulatory  oversight
by the FCC and local franchise authorities. The Company will continue to develop
strategies  to minimize the adverse  impact that the FCC's  regulations  and the
other  provisions  of the 1992  Cable Act and the 1996  Telecom  Act have on the
Company's business. However, no assurances can be given that the Company will be
able to develop and  successfully  implement  such  strategies  to minimize  the
adverse  impact of the FCC's  rate  regulations,  the 1992 Cable Act or the 1996
Telecom Act on the Company's business.

COPYRIGHT

Cable systems are subject to federal  copyright  licensing  covering carriage of
television and radio broadcast  signals.  In exchange for filing certain reports
and  contributing a percentage of their revenue to a federal  copyright  royalty
pool,  cable operators can obtain blanket  permission to retransmit  copyrighted
material on  broadcast  signals.  The nature and amount of future  payments  for
broadcast  signal  carriage cannot be predicted at this time. In a recent report
to Congress, the Copyright Office recommended that Congress make major revisions
of both the cable television and satellite  compulsory  licenses to make them as
simple  as  possible  to  administer,  to  provide  copyright  owners  with full
compensation for the use of their works, and to treat every  multichannel  video
delivery system the same, except to the extent that technological differences or
differences  in the regulatory  burdens placed upon the delivery  system justify
different  copyright  treatment.  The possible  simplification,  modification or
elimination  of the  compulsory  copyright  license is the subject of continuing
legislative  review.  The  elimination or substantial  modification of the cable
compulsory  license  could  adversely  affect  the  Company's  ability to obtain
suitable  programming and could  substantially  increase the cost of programming
that remained available for distribution to the Company's customers. The Company
cannot predict the outcome of this legislative activity.

Cable operators distribute programming and advertising that use music controlled
by the two major music  performing  rights  organizations,  the  Association  of
Songwriters,  Composers,  Artists and Producers  ("ASCAP") and Broadcast  Music,
Inc. ("BMI"). In October 1989, the special rate court of the U.S. District Court
for the  Southern  


                                       22
<PAGE>

District  of New York  imposed  interim  rates on the  cable  industry's  use of
ASCAP-controlled  music. The same federal  district court  established a special
rate court for BMI.  BMI and certain  cable  industry  representatives  recently
concluded  negotiations for a standard licensing agreement covering the usage of
BMI music contained in advertising and other  information  inserted by operators
into cable  programming  and on certain  local access and  origination  channels
carried on cable systems.  ASCAP and cable industry  representatives have met to
discuss the development of a standard  licensing  agreement covering ASCAP music
in local origination and access channels and pay-per-view programming.  Although
the Company cannot predict the ultimate  outcome of these industry  negotiations
or the amount of any license  fees it may be required to pay for past and future
use of  ASCAP-controlled  music,  it does not believe  such license fees will be
material to the Company's operations.

STATE AND LOCAL REGULATION

Cable  systems  are  subject to state and local  regulation,  typically  imposed
through  the   franchising   process,   because  they  use  local   streets  and
rights-of-way.  Regulatory  responsibility  for essentially local aspects of the
cable business such as franchisee  selection,  billing practices,  system design
and construction,  and safety and consumer  protection remains with either state
or local officials and, in some jurisdictions, with both.

Cable  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 franchisee fails to comply with material provisions. The terms
and conditions of franchises vary materially from  jurisdiction to jurisdiction.
Each franchise  generally  contains  provisions  governing  payment of franchise
fees,  franchise term, system construction and maintenance  obligations,  system
channel capacity, design and technical performance,  customer service standards,
franchise  renewal,  sale  or  transfer  of  the  franchise,  territory  of  the
franchisee,  indemnification of the franchising authority,  use and occupancy of
public streets and types of cable services provided.  A number of states subject
cable systems to the jurisdiction of centralized  state  governmental  agencies,
some of which  impose  regulation  of a  character  similar  to that of a public
utility.  Attempts in other states to regulate  cable systems are continuing and
can be  expected  to  increase.  To date,  the only  state in which the  Company
currently  operates  that has enacted  such state level  regulation  is Vermont;
however,  upon  completion  of a pending  acquisition,  the Company will acquire
control of several cable systems in the State of Massachusetts  and will then be
subject to regulation by the Massachusetts  Department of Telecommunications and
Energy.  The Company cannot predict  whether any of the other states in which it
currently operates will engage in such regulation in the future. State and local
franchising  jurisdiction  is not  unlimited,  however,  and  must be  exercised
consistently  with  federal  law.  The  1992  Cable  Act  immunizes  franchising
authorities from monetary damage awards arising from regulation of cable systems
or decisions made on franchise grants, renewals, transfers and amendments.

The  foregoing  does not purport to describe all present and  proposed  federal,
state, and local regulations and legislation affecting the cable industry. Other
existing federal regulations,  copyright licensing,  and, in many jurisdictions,
state and local  franchise  requirements,  are currently the subject of judicial
proceedings,  legislative hearings and administrative and legislative  proposals
which  could  change,  in varying  degrees,  the manner in which  cable  systems
operate.  Neither the outcome of these  proceedings  nor the impact on the cable
communications  industry  or the Company can be  predicted  at this time.  Other
bills  and  administrative   proposals   pertaining  to  cable  television  have
previously  been  introduced  in Congress or  considered  by other  governmental
bodies over the past several years. It is probable that further attempts will be
made by Congress and other  governmental  bodies  relating to the  regulation of
communications services.


Item 2.           PROPERTIES

The Company's  principal  physical assets consist of cable television  operating
plant and equipment,  including signal receiving, encoding and decoding devices,
headends and distribution  systems and customer house drop equipment for each of
its cable television systems.  The signal receiving apparatus typically includes
a  tower,  antenna,  ancillary  


                                       23
<PAGE>

electronic  equipment  and earth  stations for  reception of satellite  signals.
Headends,  consisting  of  associated  electronic  equipment  necessary  for the
reception,  amplification  and  modulation  of  signals,  are  located  near the
receiving  devices.  The Company's  distribution  system  consists  primarily of
coaxial  and fiber  optic  cables and  related  electronic  equipment.  Customer
devices consist of decoding converters,  which expand channel capacity to permit
reception  of more than twelve  channels of  programming.  Some of the  Existing
Systems  utilize  converters that can be addressed by sending coded signals from
the headend over the cable network. See "Business--Technological Developments."

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

The Company's  cables  generally are attached to utility poles under pole rental
agreements with local public utilities,  although in some areas the distribution
cable is buried in underground ducts or trenches. The physical components of the
Company's systems require  maintenance and periodic  upgrading to keep pace with
technological advances.


Item 3.           LEGAL PROCEEDINGS

There are no material pending legal  proceedings to which the Company is a party
or to which any of its properties are subject.


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

Not applicable.



                                       24
<PAGE>


                                     PART II

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

There is no  established  public  trading  market for the  Company's  classes of
common equity.


Item 6.           SELECTED FINANCIAL DATA

The following tables present selected  financial data derived from the Company's
financial  statements  as of December 31, 1997,  1996 and 1995 and for the years
ended December 31, 1997 and 1996 and the period from inception  (April 17, 1995)
through  December  31, 1995 which have been  audited by KPMG Peat  Marwick  LLP,
independent certified public accountants,  and selected unaudited operating data
for such periods.

The following table also presents combined  historical  financial data as of and
for the years ended December 31, 1996,  1995, 1994 and 1993 for the UVC Systems,
the C4 Systems,  the Cox  Systems,  the ACE Systems and the Triax  Systems  (the
"Predecessor  Systems").  The summary  unaudited  combined  selected  historical
financial data are derived from the audited and unaudited  historical  financial
statements of the Existing  Systems and should be read in  conjunction  with the
audited  financial  statements  and  related  notes  thereto of the  Predecessor
Systems  and  included  elsewhere  in this  Form  10-K.  The  combined  selected
financial data set forth below represent the combined  results of operations for
the  systems  for the periods  during  which the  systems  were not owned by the
Company and, accordingly,  do not reflect any purchase accounting adjustments or
any changes in the  operation or  management of the systems that the Company has
made  since  the  date  of  acquisition  or  intends  to  make  in  the  future.
Accordingly,  the  Company  does not  believe  that such  operating  results are
indicative of future operating results of the Company.



                                       25
<PAGE>



<TABLE>


                                       -----------------------------------------------------------------------------------------
                                                         FVOP                                    Predecessor Systems
                                       -----------------------------------------      -------------------------------------------
                                                                     
                                      For the Year    For the Year    From April 17,   For the Year   For the Year    For the Year
                                         Ended           Ended       1995(inception)      Ended           Ended          Ended
                                      December 31,     December 31,   to December 31,  December 31,   December 31,    December 31,
                                          1997            1996             1995        1995 (1)(2)     1994 (3)(4)     1993 (3)(4)
                                        ---------       ---------       ---------       ---------       ---------       ---------
In  thousands,  except  ratios  and
operating statistical data

STATEMENT OF OPERATIONS DATA:
<S>                                     <C>             <C>             <C>             <C>             <C>             <C>      
Revenue ...........................     $ 145,126       $  76,464       $   4,369       $ 109,765       $ 105,368       $  96,171
Operating expenses ................        74,314          39,181           2,311          62,098          58,643          52,702
Corporate administrative expenses .         4,418           2,930             127            --               --              --
Depreciation and amortization .....        64,398          35,336           2,308          42,354          46,345          41,863
Preacquisition expenses ...........          --              --               940            --               --              --
                                        ---------       ---------       ---------       ---------       ---------       ---------
Operating income (loss) ...........         1,996            (983)         (1,317)          5,313             380           1,606
Interest expense, net(5) ..........       (42,652)        (22,422)         (1,386)        (37,898)        (34,506)        (31,230)
Other income (expense) ............        (1,161)           (396)           --            (4,409)         (2,570)         (3,450)
Extraordinary item - Loss on early
   retirement of debt .............        (5,046)           --              --              --              --              --
                                        ---------       ---------       ---------       ---------       ---------       ---------
Net income (loss) .................     $ (46,863)      $ (23,801)      $  (2,703)      $ (36,994)      $ (36,696)      $ (33,074)
                                        =========       =========       =========       =========       =========       =========

BALANCE SHEET DATA
   (END OF PERIOD):
Total assets ......................     $ 919,708       $ 549,168       $ 143,512       $ 288,253       $ 228,820       $ 255,108
Total debt ........................       632,000         398,194          93,159         285,144         263,660         255,319
Partners' capital .................       263,043         130,003          46,407
Financial Ratios and Other Data:
EBITDA(6) .........................     $  66,394       $  34,353       $     991       $  47,667       $  46,725       $  43,469
EBITDA margin(6) ..................          45.7%           44.9%           22.7%           43.4%           44.3%           45.2%
Total debt to EBITDA(7) ...........          6.19
EBITDA to interest expense(8) .....          1.72
Net  cash  flows from operating
activities ........................     $  26,336       $  18,911       $   1,907
Net  cash  flows from investing
activities ........................      (428,064)       (418,215)       (131,345)
Net  cash  flows from financing
activities ........................       401,502         400,293         132,088
Deficiency  of  earnings  to  fixed
charges(9) ........................     $  46,863       $  23,801       $   2,703

OPERATING STATISTICAL  DATA  (END
  OF PERIOD EXCEPT AVERAGE):
Homes passed ......................       817,000         498,900         125,300
Basic subscribers .................       559,800         356,400          92,700
Basic penetration .................         68.5%           71.4%           74.0%
Premium units .....................       275,400         152,100          35,700
Premium penetration ...............         49.2%           42.7%           38.5%
Average monthly revenue per
basic subscriber(10) ..............     $   31.53       $   29.73       $   27.76
-------------
</TABLE>

(1) Includes  the  combined  results of  operations  of the UVC Systems,  the C4
Systems,  the Cox  Systems,  the ACE Systems and the Triax  Systems for the year
ended  December 31, 1995  (except for the UVC  Systems,  which is for the period
ended  November 8, 1995).  As the results of  operations  of the UVC Systems are
included in the Company's  historical  results of  operations  subsequent to the
date of the Company's acquisition thereof (November 9, 1995), the amounts do not
include  $4.2 million in revenue,  $2.4  million in operating  expenses and $2.2
million in  depreciation  and  amortization  (computed  after the application of
purchase  accounting  adjustments)  attributable  to such systems.  
(2) Includes  combined  balance sheet data for the UVC Systems as of November 9,
1995, the date of the Company's  acquisition thereof, and combined balance sheet
data for the C4 Systems,  the Cox Systems, the ACE Systems and the Triax Systems
as of December 31, 1995, because such acquisitions  occurred  subsequent to that
date.
(3)Includes  the  combined  results of  operations  of the UVC  Systems,  the C4
Systems,  the Cox Systems,  the ACE Systems and the Triax  Systems for the years
ended December 31, 1994 and 1993.
(4) Includes  combined  balance sheet data for the UVC Systems,  the C4 Systems,
the Cox Systems,  the ACE Systems and the Triax  Systems as of December 31, 1994
and 1993.
(5) Interest  expense for  December 31, 1997,  1996 and 1995 was net of interest
income of $994, $471 and $60 respectively (dollars in thousands).

                                       26
<PAGE>

(6) EBITDA is defined as net income before  interest,  taxes,  depreciation  and
amortization.  The  Company  believes  that  EBITDA is a  meaningful  measure of
performance  because it is  commonly  used in the cable  television  industry to
analyze  and  compare  cable  television  companies  on the  basis of  operating
performance,  leverage and  liquidity.  In addition,  the Company's  senior bank
indebtedness  (the  "Amended  Credit  Facility")  and  the  Subordinated   Notes
Indenture ("FVOP Notes Indenture")  contain certain  covenants,  compliance with
which is  measured  by  computations  substantially  similar  to  those  used in
determining EBITDA.  However, EBITDA is not intended to be a performance measure
that should be  regarded as an  alternative  either to  operating  income or net
income as an indicator of operating performance or to cash flows as a measure of
liquidity,  as determined  in  accordance  with  generally  accepted  accounting
principles. EBITDA margin represents the percentage of EBITDA to revenue.
(7) For purposes of this  computation,  EBITDA for the most recent quarter ended
is multiplied by four.  This  presentation  is consistent with the incurrence of
indebtedness  tests in the FVOP  Notes  Indenture.  In  addition,  this ratio is
commonly used in the cable television industry as a measure of leverage.
(8) For purposes of this  computation,  EBITDA and interest expense for the most
recent  quarter  ended  is  multiplied  by four,  including  certain  pro  forma
adjustments  made to  include  the effect of debt  incurred  to  purchase  those
systems acquired by the Company during the quarter.  This ratio is commonly used
in the cable television industry as a measure of coverage.
(9) For  purposes of this  computation,  earnings  are defined as income  (loss)
before income taxes and fixed  charges.  Fixed charges are defined as the sum of
(i) interest costs (including an estimated interest component of rental expense)
and (ii) amortization of deferred financing costs.
(10) Average  monthly revenue per basic  subscriber  equals revenue for the last
month of the period divided by the number of basic  subscribers as of the end of
such period.


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

INTRODUCTION

The following discussion of the financial condition and results of operations of
the Company, the description of the Company's business as well as other sections
of this Form 10-K contain  certain  forward-looking  statements.  The  Company's
actual  results  could differ  materially  from those  discussed  herein and its
current  business  plans could be altered in response to market  conditions  and
other factors beyond the Company's control.

The Company commenced operations on November 9, 1995 with the acquisition of its
first cable television systems. See "Business--Development of the Systems" for a
description  of the  Existing  Systems.  The Company has  operated  the Existing
Systems for a limited period of time and had no operations  prior to November 9,
1995.  All  acquisitions  have been  accounted for under the purchase  method of
accounting  and,  therefore,  the  Company's  historical  results of  operations
include the results of  operations  for each acquired  system  subsequent to its
respective acquisition date.

The Company's  objective is to increase its  subscriber  base and operating cash
flow through  selective  acquisitions  of cable  television  systems that can be
integrated  with the Existing  Systems and to enhance  enterprise  value through
operating  improvements and revenue growth. The Company continues the process of
acquiring cable systems,  and integrating new systems with its current  systems.
The  Company  also  continues  to  invest  significant   capital  for  technical
enhancement,  including  the  headend  equipment  needed  to  launch  additional
channels contemporaneously with service rate increases which the Company expects
to implement  over the course of 1998.  To date,  the Company has  eliminated 20
customer  service and sales offices and has established  four regional  customer
call  centers  which,  as  of  year-end,   handled   customer  call  volume  for
approximately  85% of the  Company's subscribers. In  addition,  the  Company is
offering  digital  cable  television  service  in two of its  systems  and  will
continue to launch such services in 1998.

During the fourth  quarter of 1997,  the  Company  completed  three  significant
acquisitions, in the process adding approximately 85,400 subscribers to its Ohio
cluster and  approximately  76,400  subscribers to its New England cluster.  The
Company currently serves  approximately  142,600  subscribers in its New England
Cluster,  231,500 subscribers in its Ohio Cluster and 123,900 subscribers in its
Kentucky Cluster.  In addition,  the Company entered into a $800 million Amended
Credit Facility which the Company believes gives it sufficient available capital
to meet its growth objective of acquiring at least 750,000 subscribers.




                                       27
<PAGE>

On March 6, 1998, the Company consummated the acquisition of systems in Michigan
from  TVC-Sumpter  Limited  Partnership and North Oakland  Cablevision  Partners
Limited  Partnership for an aggregate purchase price of $14.2 million.  On March
12, 1998 the Company  completed an exchange of cable  television  systems in the
Southeast  region with Comcast  Cablevision of the South.  As of March 25, 1998,
the Company had entered into three  additional  purchase  agreements  to acquire
certain cable television systems, located in Ohio and New England, for aggregate
consideration of approximately  $91.6 million.  The transactions are expected to
close  during the second and third  quarters  of 1998.  These  transactions  are
subject to customary closing  conditions and certain  regulatory  approvals that
are not completely  within the Company's  control.  See Note 4 for more detailed
descriptions of the transactions.

During mid January of 1998,  certain of the communities served by the Company in
Maine  experienced  devastating  ice storms.  The Company expects to recognize a
loss due to service outages and increased labor costs of approximately  $925,000
due to the ice storms. Additionally,  the Company will expend capital to replace
and repair  subscriber drops. The Company expects the loss to be isolated to the
first quarter of 1998, although the long-term financial effect of the ice storms
cannot be determined.


RESULTS OF OPERATIONS

THREE  MONTHS  ENDED  DECEMBER  31, 1997  COMPARED  WITH  THETHREE  MONTHS ENDED
SEPTEMBER 30, 1997

The following table sets forth,  for the three-month  periods ended December 31,
1997 and September 30, 1997,  certain statements of operations and other data of
the Company. As a result of the Company's limited operating history, the Company
believes that its results of operations for the periods  presented in this table
are not indicative of the Company's future results.

                            ------------------------------------------
                             Three Months Ended     Three Months Ended
                              December 31, 1997     September 30, 1997
                            -------------------    -------------------
                                           % of                   % of
                             Amount     Revenue     Amount     Revenue
                            -------        ----    -------        ---- 
In thousands (unaudited)
Revenue ...............     $42,740       100.0%   $36,750       100.0%
Expenses
     Operating expenses      21,520        50.4     18,332        49.9
     Corporate expenses       1,298         3.0      1,071         2.9
                            -------        ----    -------        ---- 
EBITDA(1) .............     $19,922        46.6%   $17,347        47.2%
                            =======        ====    =======        ==== 

Basic subscribers......     559,800                401,300
Premium units..........     275,400                172,900
--------------
(1)  EBITDA   represents   operating  income  (loss)  before   depreciation  and
amortization.  The  Company  believes  that  EBITDA is a  meaningful  measure of
performance  because it is  commonly  used in the cable  television  industry to
analyze  and  compare  cable  television  companies  on the  basis of  operating
performance,  leverage and liquidity.  In addition,  the Amended Credit Facility
and the FVOP Notes Indenture contain certain covenants, compliance with which is
measured  by  computations  substantially  similar to those used in  determining
EBITDA.  However, EBITDA is not intended to be a performance measure that should
be regarded as an  alternative  either to  operating  income or net income as an
indicator of operating  performance  or to cash flows as a measure of liquidity,
as determined in accordance with generally accepted accounting principles.

The  three-month  period ended December 31, 1997 is the only period in which the
Company  operated all of the Existing  Systems,  although  certain  systems (the
Cablevision  Systems,  the  Harold's  System,  the  TCI-VT/NH  Systems  and  the
Cox-Central  Ohio  Systems) were  purchased  during the period and are reflected
only for that portion of the period that such systems were owned by the Company.
The  three-month  period ended  September 30, 1997 represents the integration of
all of the Existing  Systems (except for the Cablevision  Systems,  the Harold's
System,  the  TCI-VT/NH  Systems and the  Cox-Central  Ohio  Systems),  although
certain systems (the Blue Ridge 

                                       28
<PAGE>

Systems  and the  Bedford  Systems)  were  purchased  during  the period and are
reflected  only for that  portion of the period that such  systems were owned by
the Company.

The  Company  consummated  the  acquisitions  of the  Cablevision  Systems,  the
TCI-VT/NH  Systems and the Cox-Central Ohio Systems during the fourth quarter of
1997, acquiring cable systems serving  approximately 85,400 basic subscribers in
Ohio and 76,400 subscribers in Maine, New Hampshire and Vermont.

Revenue increased 16.3%, or approximately $5.9 million,  to approximately  $42.7
million for the three months ended  December 31, 1997 from  approximately  $36.8
million for the three months ended  September 30, 1997.  Operating and corporate
expenses increased  approximately 17.4% and 21.2%,  respectively,  for the three
months ended  December 31, 1997 from the three months ended  September 30, 1997.
The number of basic subscribers  increased  approximately  39.5% from 401,300 at
September 30, 1997 to 559,800 as of December 31, 1997, and the number of premium
units increased approximately 59.3% from 172,900 to 275,400 over the three-month
period.

Significant  growth  over the third  quarter of 1997 in revenue,  operating  and
corporate   expenses,   basic   subscribers   and  premium  units  is  primarily
attributable  to the Company's  acquisitions of cable systems during October and
December  of  1997.  As its  operations  base has  developed,  the  Company  has
increased  its  focus  on   integration   of  business   operations  to  achieve
efficiencies, significant investment in technical plant and promotion of new and
existing  services to enhance  revenues.  The impact of certain of these efforts
resulted in an increase in EBITDA  margin over the course of the year.  Overall,
the EBITDA margin  decreased  slightly in the fourth  quarter as a result of the
integration of the  significant  acquisitions of the  Cablevision  Systems,  the
TCI-VT/NH  Systems and the Cox-Central Ohio Systems,  however,  on a same system
basis, the EBITDA margin remained flat at approximately 47%.


YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996 AND YEAR
ENDED  DECEMBER 31, 1996  COMPARED  WITH PERIOD FROM APRIL 17, 1995  (INCEPTION)
THROUGH DECEMBER 31, 1995

The following  table set forth,  for the years ended  December 31, 1997 and 1996
and for the period  from April 15,  1995  through  December  31,  1995,  certain
statements  of  operations  and other  data of the  Company.  As a result of the
Company's  limited operating  history,  the Company believes that its results of
operations  for the periods  presented in this table are not  indicative  of the
Company's future results.

<TABLE>
                                        -----------------------------------------------------------------------------------
                                                Year Ended                 Year Ended              Period From April 17, 1995
                                             December 31, 1997          December 31, 1996             to December 31,1995
                                        -----------------------       ----------------------          ---------------------
                                                          % of                          % of                           % of
                                           Amount      Revenue           Amount      Revenue              Amount    Revenue
                                        ---------        -----        ---------        -----          ---------       -----  
In thousands
<S>                                     <C>              <C>          <C>              <C>             <C>            <C>    
Revenue ...........................     $ 145,126        100.0 %      $  76,464        100.0 %         $   4,369      100.0 %
Expenses
    Operating expenses ............        74,314         51.2           39,181         51.2               2,311       52.9
    Corporate expenses ............         4,418          3.0            2,930          3.9                 127        2.9
    Depreciation and amortization .        64,398         44.4           35,336         46.2               2,308       52.8
    Pre-acquisition expenses ......          --             --              --           --                  940       21.5
                                        ---------        -----        ---------        -----          ---------       -----  
           Total expenses .........       143,130         98.6           77,447        101.3               5,686      103.1
                                        ---------        -----        ---------        -----          ---------       -----  
Operating income/(loss) ...........         1,996          1.4             (983)        (1.3)             (1,317)     (30.1)
Interest expense, net .............       (42,652)       (29.4)         (22,422)       (29.3)             (1,386)     (31.7)
Other expense .....................        (1,161)        (0.8)            (396)        (0.5)                --          --
Extraordinary item - Loss on early
    retirement of debt ............        (5,046)        (3.5)             --           --                  --          --
                                        ---------        -----        ---------        -----          ---------       -----  
Net loss ..........................     $ (46,863)       (32.3)%      $ (23,801)       (31.1)%        $  (2,703)      (61.9)%
                                        =========        =====        =========        =====          =========       =====  

EBITDA ............................     $  66,394        45.8 %       $  34,353         44.9 %        $     991        22.7 %
                                        =========        =====        =========        =====          =========       =====  

Basic subscribers .................       559,800                       356,400                          92,700
Premium units .....................       275,400                       152,100                          35,700

</TABLE>




                                       29
<PAGE>


YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

Revenue  increased  to $145.1  million in the year ended  December 31, 1997 from
$76.5  million  in the  period  ended  December  31,  1996.  This  increase  was
attributable  in  part  to  having  a full  year  of  operations  from  the  the
acquisition  of the  following  sytems:  C4 Systems  on  February  1, 1996;  the
Americable  Systems on March 29,  1996;  the Cox  Systems on April 9, 1996;  the
Grassroots Systems on August 29, 1996; the Triax Systems on October 7, 1996; the
ACE Systems on October 9, 1996;  the Penn/Ohio  Systems on October 31, 1996; and
the Deep Creek System on December 23, 1996.  Revenue for the year ended December
31, 1997 also reflects  operations  for the  following  systems from the date of
their  respective  acquisitions in 1997: the Bluegrass Sytems on March 20, 1997;
the  Clear/B&G  Systems on March 31, 1997;  the  Milestone  Systems on March 31,
1997;  the Triax I Systems  on May 30,  1997;  the Front Row  Systems on May 30,
1997; the Bedford System on August 29, 1997; the Blue Ridge Systems on September
3, 1997; the  Cablevision  Systems on October 31, 1997;  the Harold's  System on
October 31, 1997; the TCI-VT/NH  Systems on December 2, 1997 and the Cox-Central
Ohio Systems on December 19, 1997.

Operating  and  corporate  expenses were reduced to 54.3% of revenue in the year
ended  December  31, 1997 from 55.1% of revenues in the year ended  December 31,
1996 due primarily to the achievement of  efficiencies  in the corporate  office
through the  elimination  of  duplicative  expenses,  such as customer  billing,
accounting, accounts payable and payroll administration.

Depreciation  and  amortization  increased  82.2%  as a  result  of  acquisition
activity that occurred in 1996 and 1997. Net interest expense increased to $42.7
million from $22.4 million as a result of the higher weighted  average  drawings
on the Company's senior bank indebtedness (the "Senior Credit Facility" prior to
December  19,  1997)  as well as a result  of the  inclusion  of a full  year of
interest  expense  on the  Notes.  The  extraordinary  item for the  year  ended
December 31, 1997 represents the write-off of $5.0 million of deferred financing
costs  related to the early  retirement  of the Senior  Credit  Facility.  Other
expenses for the year ended  December 31, 1997  include the  retirement  of $1.1
million  of plant  assets in  connection  with  completed  upgrade  and  rebuild
projects.

In an effort to maximize revenue from existing subscribers, the Company also has
established and commenced  operations at a centralized,  in-house  telemarketing
center  equipped with  state-of-the  art predictive  dialing and  communications
equipment.  The Company's efforts are focused on telemarketing  premium services
to its  subscribers in its New England,  Kentucky and Ohio  operating  clusters.
Beginning in April 1997, telemarketers have contacted the Company's subscribers,
marketing  the  Company's  "Ultimate  TV"  package,  a premium  service  package
consisting of at least three premium channels.  This has resulted in an increase
in the number of pay units purchased by those subscribers of approximately 24.5%
over the period from inception through December 31, 1997. The Company intends to
continue to aggressively  market selected  premium service  packages through its
internal telemarketing resources.

Other marketing  initiatives for the year-ended  December 31, 1997 include sales
audit  remarketing and channel  additions and service rate increases in selected
cable systems.  The Company has also continued its sales audit and  door-to-door
marketing  program,  inspecting  selected  systems to clean up its billing  data
base,  verify homes  passed data,  market  services to potential  customers  and
identify  unauthorized  subscribers,  which the  Company  attempts to convert to
paying subscribers.

As a result  of such  cost  efficiencies  and the  aforementioned  acquisitions,
EBITDA  increased to 45.8% of revenues in the year ended  December 31, 1997 from
44.9% of revenues in the year ended December 31, 1996.

During the twelve months ended December 31, 1997,  (i) the Company's  annualized
subscriber  churn rate (which  represents  the  annualized  number of subscriber
terminations  divided by the weighted  average number of subscribers  during the
period) was approximately 32.0%, and (ii) the average subscriber life implied by
such subscriber churn rate was approximately 3.1 years. Churn rates are computed
without  adjustment  for  the  effects  of  seasonal   subscriber  activity  and
acquisitions  and are within the  Company's  expectations.  The Company does not
expect churn rates to improve during its acquisition  phase. 


                                       30
<PAGE>

YEAR ENDED  DECEMBER  31,  1996  COMPARED  WITH THE PERIOD  FROM APRIL 17,  1995
(INCEPTION) DECEMBER 31, 1995

Revenue  increased to $76.5 million in the twelve months ended December 31, 1996
from $4.4 million in the period  ended  December  31,  1995.  This  increase was
attributable  in part to having a full year of  operations  from the UVC Systems
and the  Longfellow  Systems (both acquired in November  1995).  Revenue for the
twelve months ended December 31, 1996 also reflect  operations for the following
systems  from the date of  their  respective  acquisitions:  the C4  Systems  on
February 1, 1996; the  Americable  Systems on March 29, 1996; the Cox Systems on
April 9, 1996; the  Grassroots  Systems on August 29, 1996; the Triax Systems on
October 7, 1996;  the ACE Systems on October 9, 1996;  the Penn/Ohio  Systems on
October 31, 1996; and the Deep Creek System on December 23, 1996.

Operating and corporate  expenses were reduced to 55.1% of revenue in the twelve
months  ended  December  31,  1996 from 55.8% of  revenues  in the period  ended
December 31, 1995 due  primarily to  cost-cutting  measures  implemented  by the
Company.  These  efforts  included the  establishment  of  centralized  regional
service centers in Rockland, Maine, Greeneville,  Tennessee,  Richmond, Kentucky
and  Chillicothe,  Ohio and the elimination of certain customer service offices.
Other cost reductions have been realized  through the elimination of duplicative
expenses,  such as customer  billing,  accounting,  accounts payable and payroll
administration.

The increase in depreciation and amortization  expense of $33.0 million from the
period ended  December 31, 1995 to the year ended December 31, 1996 was a result
of the  inclusion of a full year of expense for  acquisitions  completed in 1995
and new acquisitions  completed in 1996. Net interest expense increased by $21.0
million due to the higher  weighted  average debt balance  outstanding  over the
year ended December 31, 1996.

As a result  of such  cost  efficiencies  and the  aforementioned  acquisitions,
EBITDA  increased to 44.9% of revenues in the twelve  months ended  December 31,
1996 from 22.7% of revenues in the period ended December 31, 1995.


LIQUIDITY AND CAPITAL RESOURCES

The cable television  business  generally requires  substantial  capital for the
construction, expansion and maintenance of the delivery system. In addition, the
Company has pursued,  and intends to pursue in the future,  a business  strategy
which includes selective acquisitions. Since its founding in 1995, the Company's
cash from equity investments,  bank borrowings and other debt issued by FVOP has
been sufficient to finance the Company's  acquisitions  and,  together with cash
generated  from  operating  activities,  also  has been  sufficient  to meet the
Company's debt service,  working capital and capital  expenditure  requirements.
The Company  intends to continue to finance such debt service,  working  capital
and capital expenditure requirements in the future through a combination of cash
from  operations,  indebtedness  and equity  capital  sources,  and the  Company
believes that it will continue to generate cash and be able to obtain  financing
sufficient  to meet such  requirements.  The  ability of the Company to meet its
debt service and other  obligations  will depend upon the future  performance of
the Company  which,  in turn, is subject to general  economic  conditions and to
financial, political,  competitive,  regulatory and other factors, many of which
are beyond the Company's control.

On December 19, 1997 the Company amended its existing  senior bank  indebtedness
and  entered  into an $800.0  million  Amended  Credit  Facility  with The Chase
Manhattan  Bank,  as  Administrative  Agent,  J.P.  Morgan  Securities  Inc., as
Syndication  Agent,  CIBC Inc., as  Documentation  Agent,  and the other lenders
signatory  thereto.  The  Amended  Credit  Facility  includes a $300.0  million,
7.75-year  reducing revolving credit facility (the "Revolving Credit Facility"),
a $250.0 million,  7.75-year term loan (the "Facility A Term Loan") and a $250.0
million, 8.25-year term loan (the "Facility B Term Loan"). At December 31, 1997,
the Company had no amounts  outstanding  under the  Revolving  Credit  Facility,
$182.0  million  outstanding  under the Facility A Term Loan and $250.0  million
outstanding  under the Facility B Term Loan. The weighted average interest rates
at December  31, 1997 on the  outstanding  borrowings  under the Facility A Term
Loan  and  the  Facility  B  Term  Loan  were  approximately  8.25%  and  8.38%,
respectively.  The Company has entered into  interest  rate swap  agreements  to
hedge the  underlying  LIBOR  rate  exposure  for $170.0  million of  borrowings
through  November 1999 and October 2000.  For the year 


                                       31
<PAGE>

ended  December 31,  1997,  the Company had  recognized  an increase to interest
expense  of  approximately  $312,200  as a result  of these  interest  rate swap
agreements.

In general, the Amended Credit Facility requires the Company to use the proceeds
from any equity or subordinated debt issuance or any cable system disposition to
reduce  indebtedness  for borrowings  under the Amended  Credit  Facility and to
reduce  permanently  commitments  thereunder,   subject  to  certain  exceptions
permitting  the  Company  to  use  such  proceeds  to  fund  certain   permitted
acquisitions,  provided  that the Company is  otherwise in  compliance  with the
terms of the Amended Credit Facility.

The  Amended  Credit  Facility is secured by a pledge of all limited and general
partnership  interests in the Company and in any subsidiaries of the Company and
a first priority lien on all the tangible and  intangible  assets of the Company
and each of its  subsidiaries.  In addition,  in the event of the occurrence and
continuance  of an event of  default  under the  Amended  Credit  Facility,  the
Administrative  Agent is entitled to replace the general  partner of the Company
with its designee.

FrontierVision  Holdings,  L.P.  ("Holdings"),  as the general  partner of FVOP,
guarantees  the  indebtedness  under the  Amended  Credit  Facility on a limited
recourse  basis.  The Amended Credit Facility is also secured by a pledge of all
limited and general  partnership  interests in FVOP and a first priority lien on
all the assets of FVOP and its subsidiaries.

On October 7, 1996, FVOP issued $200.0 million aggregate principal amount of 11%
Senior Subordinated Notes due 2006 (the "FVOP Notes").  The FVOP Notes mature on
October  15,  2006  and  bear  interest  at  11%,  with  interest  payments  due
semiannually  commencing on April 15, 1997.  The Company paid its first interest
payment of $11.5 million on April 15, 1997. The FVOP Notes are general unsecured
obligations  of the  Company  and rank  subordinate  in right of  payment to all
existing and any future senior indebtedness.  In anticipation of the issuance of
the FVOP  Notes,  the  Company  entered  into  deferred  interest  rate  setting
agreements to reduce the interest rate exposure  related to the FVOP Notes.  The
financial statement effect of these agreements will be to increase the effective
interest rate which the Company incurs over the life of the FVOP Notes.

Holdings and FrontierVision  Holdings Capital Corporation  ("Holdings  Capital")
were formed for the purpose of acting as co-issuers of $237.7 million  aggregate
principal  amount at  maturity  of 11 7/8%  Senior  Disount  Notes due 2007 (the
"Discount Notes").  FrontierVision  Partners,  L.P. ("FVP"), FVOP's sole general
partner,  contributed  to Holdings,  both  directly and  indirectly,  all of the
outstanding  partnership interests of FVOP prior to the issuance of the Discount
Notes on September 19, 1997 (the "Formation Transaction") and therefore, at that
time,  FVOP  and  Capital  became  wholly-owned   consolidated  subsidiaries  of
Holdings.  Holdings  contributed the proceeds of the Discount Notes to FVOP as a
capital contribution.

During the year ended  December 31, 1997,  FVOP  received  approximately  $179.9
million of equity  contributions  from its partners (from FVP prior to September
19,  1997,  and  Holdings   subsequent  to  September  19,  1997).  Such  equity
contributions  and senior debt,  along with cash flow generated from operations,
have  been  sufficient  to  finance  capital  improvement  projects  as  well as
acquisitions.  The Company has adequately  serviced its debt in accordance  with
the provisions of the Amended Credit Facility from EBITDA of approximately $66.4
million generated by the Company for the year ended December 31, 1997.

In connection  with the  acquisition  of the UVC Systems,  the Company  issued a
subordinated  note to UVC in the  aggregate  principal  amount of $7.2  million.
Under the terms of the UVC Note,  the Company  repaid the UVC Note in connection
with the closing of the Amended Credit Facility.

The Company is in the process of  performing  a  preliminary  assessment  of the
applicability  of Year 2000 issues to its business and  operations.  The Company
uses specialized  third-party  service  providers for all subscriber  management
purposes,  including billing,  revenue  collection and related reporting.  These
third-party  service  providers  have  represented to the Company that Year 2000
issues are being  addressed  by such  providers.  The  software  utilized by 


                                       32
<PAGE>

the Company's primary third-party  billing service will be Year  2000-compatible
by the fourth  quarter of 1998. As such, the Company does not expect the cost of
addressing  the Year 2000 issues  relative  to its  billing and  revenue-related
functions to be a material  event.  Furthermore,  with respect to the  managment
information system and technical  equipment,  the Company is uncertain as to the
ultimate  cost of bringing  such items into  compliance  with Year 2000  issues.
However,  the Company  believes  that there will be timely  resolution  of these
issues relevant to its business and operations.

CASH FLOWS FROM OPERATING ACTIVITIES

Cash flows from  operating  activities for the year ended December 31, 1997 were
$26.3 million  compared to $18.9  million for the year ended  December 31, 1996.
The  increase  was  primarily  a result of cable  television  system  operations
acquired during 1996 and 1997.

Cash flows from  operating  activities for the year ended December 31, 1996 were
$18.9 million  compared to $1.9 million for the period from inception (April 17,
1995) through December 31, 1995. The increase was the result of cable television
system  operations  acquired  during 1996 as the UVC Systems and the  Longfellow
Systems were acquired during the fourth quarter of 1995.

CASH FLOWS FROM INVESTING ACTIVITIES

Investing  cash flows  were  primarily  used to fund  capital  expenditures  and
acquire  cable  television  systems.  Capital  expenditures  for the year  ended
December 31, 1997 were  approximately  $32.7 million  compared to  approximately
$9.3  million  for the  year  ended  December  31,  1996.  Capital  expenditures
primarily  consisted of expenditures  for the  construction and expansion of the
delivery system,  and additional costs were incurred related to the expansion of
customer service facilities.  The Company invested  approximately $392.6 million
in  acquisitions   during  the  year  ended  December  31,  1997  compared  with
approximately $421.5 million for the same period in 1996.

The Company  had  capital  expenditures  of $9.3  million  during the year ended
December 31, 1996 compared to $0.6 million for the period from inception  (April
17, 1995) through December 31, 1995. The 1996 expenditures  primarily  consisted
of expenditures  for the  construction  and expansion of the delivery system and
additional  costs were  incurred  related to the  expansion of customer  service
facilities.  In addition,  for the year ended  December  31,  1996,  the Company
capitalized  approximately  $2.0 million  attributable  to the cost of obtaining
certain  franchise,  leasehold  and  other  long-term  agreements.  The  Company
invested  approximately  $421.5  million in  acquisitions  during the year ended
December 31, 1996 compared with approximately $121.3 million for the period from
inception  (April 17, 1995) through December 31, 1995. The Company also disposed
of cable television  systems for net proceeds of $15.1 million in the year ended
December 31, 1996.

The Company  expects to spend a total of  approximately  $73.0  million over the
next two years for capital  expenditures  with respect to the Existing  Systems.
These  expenditures  will primarily be used for (i)  installation of fiber optic
cable and microwave  links which will allow for the  consolidation  of headends,
(ii)  analog and  digital  converter  boxes which will allow the Company to more
effectively  market  premium  and  pay-per-view  services,  (iii) the  continued
deployment  of coaxial  cable to build-out  the Existing  Systems,  (iv) headend
equipment  for the HITS  digital  television  system  and (v) the  upgrade  of a
portion of the Company's cable television  distribution  systems to, among other
things,  increase bandwidth and channel capacity.  See  "Business--Technological
Developments."

CASH FLOWS FROM FINANCING ACTIVITIES

Acquisitions  during  1997 were  financed  with  equity  contributions  from the
Company's   partners  and  net  borrowings   under  the  Company's  senior  bank
indebtedness. Acquisitions during the year ended December 31, 1996 were financed
with equity  contributions  from the Company's  partners,  borrowings  under the
Senior  Credit  Facility,  and issuance of $200.0  million  aggregate  principal
amount of FVOP  Notes;  acquisitions  for the period from  inception  


                                       33
<PAGE>

(April 17, 1995) were  financed  with equity  contributions  from the  Company's
partners and borrowings under the Senior Credit Facility.

During the year ended December 31, 1997, the Company had received  approximately
$179.9 million of equity contributions from its partners as compared with $107.4
million for the year ended  December 31, 1996,  and $49.1 million for the period
from inception (April 17, 1995) through December 31, 1995. The contributions for
the year ended  December 31, 1997 include net proceeds of  approximately  $142.3
million received from the issuance of the Discount Notes.

From  inception  through  December 31, 1997,  FVP had received a total of $199.4
million of equity  commitments from its partners and all such equity commitments
had been invested in FVP and FVP had contributed  substantially  all such equity
investments to the Company.


Item 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.


Item 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial  statements  of the Company  appear on page F-1 of this Form 10-K.
The  financial  statement  schedules  required  under  Regulation  S-X are filed
pursuant to Item 14 of this Form 10-K, and appear on page S-1 of this Form 10-K.

All other schedules are omitted as the required information is not applicable or
the information is presented in the financial statements, related notes or other
schedules.


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

During 1996, the Company dismissed its independent  public  accountants,  Arthur
Andersen  LLP ("AA")  and  subsequently  engaged  KPMG Peat  Marwick  LLP as the
Company's  principal   independent  public  accountants.   The  Company  had  no
disagreements with AA since formation and through the date of dismissal, nor did
any of AA's  reports  on the  financial  statements  of the  Company  contain an
adverse  opinion or  disclaimer  of opinion,  nor was any report  modified as to
uncertainty,  audit scope, or accounting principle. The change in accountants is
fully  disclosed  in the  Company's  Form 8-K filed with the SEC on October  29,
1996.



                                       34
<PAGE>




                                    PART III


Item 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

FVOP's sole general partner is Holdings.  Holdings' sole general partner is FVP.
FVP's sole  general  partner is FVP GP, L.P.  ("FVP GP").  FVP GP's sole general
partner is  FrontierVision  Inc.  Information  with respect to the directors and
executive   officers  of   FrontierVision   Inc.  and   FrontierVision   Capital
Corporation, respectively, is set forth below:

<TABLE>

FRONTIERVISION INC.

<S>                       <C>  <C>
Name                      Age   Position
----                      ---   --------
James C. Vaughn            52   President, Chief Executive Officer and Director
John S. Koo                36   Senior Vice President, Chief Financial Officer, Secretary and Director
David M. Heyrend           47   Vice President of Engineering
Albert D. Fosbenner        43   Vice President - Treasurer
William P. Brovsky         41   Vice President of Marketing and Sales
James W. McHose            34   Vice President - Finance
Richard G. Halle           34   Vice President of Business Development
Todd E. Padgett            32   Vice President of Operations

FRONTIERVISION CAPITAL CORPORATION

Name                      Age   Position
----                      ---   --------
James C. Vaughn            52   President, Chief Executive Officer and Director
John S. Koo                36   Senior Vice President, Chief Financial Officer, Secretary and Director
Albert D. Fosbenner        43   Vice President - Treasurer
</TABLE>

JAMES  C.  VAUGHN,  President,   Chief  Executive  Officer  and  a  Director  of
FrontierVision  Inc.  and Holdings  Capital and a founder of the  Company,  is a
cable television system operator and manager with over 30 years of experience in
the  cable  television  industry.  From 1987 to 1995,  he served as Senior  Vice
President of Operations for Triax  Communications  Corp., a top 40 MSO, where he
was  responsible  for  managing  all  aspects  of small and  medium-sized  cable
television  systems.  These systems grew from serving 57,000 subscribers to over
376,000  subscribers  during  Mr.  Vaughn's  tenure.   Prior  to  joining  Triax
Communications,    Mr.   Vaughn   served   as   Director   of   Operations   for
Tele-Communications,  Inc. from 1986 to 1987, with  responsibility  for managing
the development of Chicago-area cable television systems. From 1985 to 1986, Mr.
Vaughn was Division Manager for Harte-Hanks  Communications.  From 1983 to 1985,
Mr. Vaughn served as Vice President of Operations  for Bycom,  Inc. From 1979 to
1983, Mr. Vaughn served as Director of Engineering for the Development  Division
of Cox Cable Communications Corp. From 1970 to 1979, Mr. Vaughn served as Senior
Staff Engineer for Viacom, Inc.'s cable division,  and a Director of Engineering
for Showtime, a division of Viacom International, Inc.

JOHN S. KOO, Senior Vice President,  Chief  Financial  Officer,  Secretary and a
Director  of  FrontierVision  Inc.  and  Holdings  Capital  and a founder of the
Company,  has over eleven years of banking experience in the  telecommunications
industry.  From 1990 to 1995,  Mr. Koo served as a Vice  President  at  Canadian
Imperial Bank of Commerce ("CIBC"), where he co-founded CIBC's Mezzanine Finance
Group, targeted at emerging media and telecommunications  businesses.  From 1986
to 1990,  Mr. Koo was a Vice  President at Bank of New England  specializing  in
media  finance.  From  1984  to  1986,  he was a  management  consultant  to the
financial services industry.

                                       35
<PAGE>

DAVID M. HEYREND,  Vice President of Engineering of FrontierVision  Inc., has 23
years of cable  television  engineering  management and  operations  experience.
Prior to joining the Company in 1996,  Mr.  Heyrend  served from 1988 to 1995 as
Director  of  Engineering  for UVC,  where  he  developed  technical  standards,
employee development programs and oversaw plant construction projects. From 1985
to 1988, as Director of Programs for Tele-Engineering  Corporation, he developed
and managed broadband LAN projects for clients such as Allen Bradley, Ford Motor
Company  and TRW.  Mr.  Heyrend  also worked for  several  years with  Daniels &
Associates in system technical operations and engineering management.

ALBERT D.  FOSBENNER,  Vice  President - Treasurer  of  FrontierVision  Inc. and
Capital,  has fourteen years of domestic,  international  and new business cable
television   experience  and  is  responsible  for  the  Company's   accounting,
reporting,  treasury and information technology activities. Prior to joining the
Company  in  early  1998  Mr.  Fosbenner  served  as the  CFO of a  Denver-based
interactive  television  network startup company from 1994 to 1997, where he was
responsible for all finance,  treasury,  accounting and administrative functions
of the company. From 1991 to 1994 Mr. Fosbenner served (in Norway) as the CFO of
Norkabel A/S, a Norwegian  cable  television MSO (owned by United  International
Holdings, Inc.) serving 142,000 subscribers. While at Norkabel Mr. Fosbenner was
responsible for finance, accounting,  treasury, investor relations and MIS. From
1985 to 1991 Mr.  Fosbenner  worked for both United Cable  Television and United
Artists  Entertainment  in a  number  of  financial  and  operations  management
positions,  including Director of Finance & Administration and Division Business
Manager.  Mr.  Fosbenner  is a  Certified  Public  Accountant  and  a  Certified
Management Accountant.

WILLIAM P.  BROVSKY,  Vice  President of Marketing  and Sales of  FrontierVision
Inc., has fourteen years of cable  television  experience and is responsible for
programming  and contract  negotiations  in addition to overseeing the sales and
marketing  activities of the Company's operating  divisions.  Before joining the
Company in 1996, Mr. Brovsky managed  day-to-day sales and marketing  operations
from 1989 to 1996 for Time Warner Cable of  Cincinnati,  serving  almost 200,000
subscribers.  He also  served as Project  Manager,  supervising  all  aspects of
system  upgrades  to fiber  optics.  From 1982 to 1989,  Mr.  Brovsky  served as
General Sales Manager for American Television and  Communications,  where he was
responsible for sales, marketing and telemarketing operations for Denver and its
suburban markets.

JAMES W. MCHOSE,  Vice President - Finance of FrontierVision  Inc., has over ten
years of  accounting  and tax  experience,  including six years  providing  tax,
accounting and consulting  services to companies engaged in the cable television
industry.  Through  early  1998,  Mr.  McHose  served  the  Company  as the Vice
President - Treasurer.  Prior to joining the Company in 1996,  Mr.  McHose was a
Senior Manager in the Information, Communications, and Entertainment practice of
KPMG Peat Marwick,  LLP,  where he  specialized  in taxation of companies in the
cable television industry. In this capacity, Mr. McHose served MSOs with over 14
million  subscribers  in the  aggregate.  Mr.  McHose  is a member  of the Cable
Television Tax Professional's Institute and is a Certified Public Accountant.

RICHARD G. HALLE, Vice President of Business  Development of FrontierVision Inc.
since February 1997, is  responsible  for the evaluation and  development of new
businesses  including  cable modems and  Internet  access,  digital  programming
delivery,  distance learning and alternative  telephone access. Prior to joining
the  Company,  from  1995 to 1996 Mr.  Halle  served  as the Vice  President  of
Operations   and  then  as  the  Vice   President   of   Development   at  Fanch
Communications,  a top 20  MSO,  where  he was  initially  responsible  for  the
management  of an  operating  region of  100,000  subscribers  and  subsequently
responsible for the planning and deployment of all advanced  services  including
digital television,  dial-up Internet access and high speed cable modems.  Prior
to that, he spent nine years in the banking industry,  specializing in media and
telecommunications finance.

TODD E. PADGETT,  Vice President of Operations of FrontierVision  Inc., has over
six years of project management and corporate finance experience.  Through early
1998, Mr. Padgett served the Company as the Vice President - Finance.  From 1990
to 1995, Mr. Padgett served as Project Manager for Natural Gas Pipeline  Company
of America,  a subsidiary  of MidCon  Corp.,  which is a division of  Occidental
Petroleum   Corporation,   where  he  specialized  in  developing,   evaluating,
negotiating and financing natural gas pipeline and international power projects.
Mr. Padgett is a Certified Public  Accountant and has an MBA from the University
of Chicago. 


                                       36
<PAGE>

ADVISORY COMMITTEE

The partnership  agreement of FVP provides for the  establishment of an Advisory
Committee  to consult with and advise FVP GP, the general  partner of FVP,  with
respect to FVP's business and overall strategy. The Advisory Committee has broad
authority to review and approve or disapprove  matters  relating to all material
aspects of FVP's  business.  The approval of  seventy-five  percent (75%) of the
members of the  Advisory  Committee  that are  entitled to vote on the matter is
required  in order  for the  Company  to  effect  any  cable  television  system
acquisition.  The Advisory  Committee  consists of four  representatives  of the
Attributable  Class A Limited Partners of FVP and one  representative of FVP GP.
Subject to certain  conditions,  each of the four  Attributable  Class A Limited
Partners of FVP listed in "Principal  Security Holders" is entitled to designate
(directly or indirectly)  one of the four  Attributable  Class A Limited Partner
representatives  on  the  Advisory  Committee.  The  designees  of  J.P.  Morgan
Investment  Corporation,  1818 II Cable Corp. (whose designee is selected by two
affiliated  individuals  specified in the FVP  Partnership  Agreement),  Olympus
Cable Corp. and First Union Capital  Partners Inc. are John W. Watkins,  Richard
H. Witmer,  Jr., James A. Conroy and L. Watts Hamrick,  III,  respectively.  FVP
GP's designee is Mr. Vaughn.


Item 11.          EXECUTIVE COMPENSATION

The following table summarizes the compensation  paid to  FrontierVision  Inc.'s
Chief  Executive  Officer  and  to  each  of  the  four  remaining  most  highly
compensated  officers receiving  compensation in excess of $100,000 for services
rendered during the fiscal years ended December 31, 1997, 1996 and 1995.

<TABLE>

                           SUMMARY COMPENSATION TABLE

                                                                    ----------------------------------------------------
                                                                             Annual Compensation          All Other
Name and Principal Position                                         Year      Salary        Bonus       Compensation (1)
---------------------------                                         ----    ---------     --------      ---------------- 
<S>                                                                 <C>      <C>          <C>          <C>     
James C. Vaughn                                                     1997     $305,030     $ 90,000     $ 11,465
   President and Chief Executive Officer                            1996      283,986      120,000        7,882
                                                                    1995      169,695      110,000

John S. Koo                                                         1997      179,745      150,000        5,241
   Senior Vice President, Chief Financial Officer and Secretary     1996      170,192      111,618        4,760
                                                                    1995       93,416       90,000

William J. Mahon, Jr.                                               1997      121,175       25,000        3,761
     Vice President of Business Development                         1996       13,900       53,350         --
                                                                    1995         --           --           --

William P. Brovsky                                                  1997       89,339       49,525        2,730
   Vice President of Marketing and Sales                            1996       38,750         --            842
                                                                    1995         --           --           --

James W. McHose                                                     1997       91,614       41,000        2,834
   Vice President - Finance                                         1996       39,015       22,800          889
                                                                    1995         --           --           --
________
</TABLE>
(1)  Consists  of FVP's  contributions  to the 401(k) Plan and to a key man life
insurance plan.

DEFERRED COMPENSATION PLAN

FVP  established  the   FrontierVision   Partners,   L.P.   Executive   Deferred
Compensation Plan (the "Deferred  Compensation  Plan") effective January 1, 1996
to allow key employees the opportunity to defer the payment of compensation to a
later  date  and to  participate  in any  appreciation  of FVP's  business.  The
Deferred   Compensation  Plan  is  administered  by  FVP's  Advisory  Committee.
Participation in the Deferred  Compensation  Plan is limited to 


                                       37
<PAGE>

James C. Vaughn,  John S. Koo and other key  executives of FVP or its affiliates
approved  by  the  Compensation   Committee  of  the  Advisory   Committee  (the
"Compensation Committee").

Under the Deferred  Compensation Plan, eligible  participants may elect to defer
the  payment  of a  portion  of their  compensation  each  year up to an  amount
determined by the Compensation  Committee.  Any amount deferred is credited to a
bookkeeping  account,  which is  credited  with  interest at the rate of 12% per
annum.  Each  participant's  account also has a phantom equity component through
which the account will be credited  with  earnings in excess of 12% per annum to
the extent the Net Equity  Value of FVP  appreciates  in excess of 12% per annum
during  the term of the  deferral.  Net  Equity  Value of FVP is  determined  by
multiplying  each cable  television  system's  EBITDA for the most recent fiscal
quarter by the weighted  average  multiple of EBITDA paid by FVP to acquire each
cable television  system;  provided that if  substantially  all of the assets or
partnership interests of FVP are sold, Net Equity Value shall be based upon such
actual sale price  adjusted to reflect any prior  distributions  to the partners
and any  payments  during  the term of the  deferral  to the  holders of certain
subordinated notes issued to the limited partners of FVP. Accounts shall be paid
following (i) the sale of all of FVP's partnership interests or upon liquidation
of FVP, other than sales or liquidations which are part of a reorganization,  or
(ii)  the  death or  disability  of the  participant  prior  to  termination  of
employment with FVP. The Compensation  Committee may agree to pay the account in
the  event  the  participant  incurs  a  severe  financial  hardship  or if  the
participant  agrees to an  earlier  payment.  There are 11  employees  currently
participating in the Deferred  Compensation Plan,  including Messrs.  Vaughn and
Koo.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

A Compensation Committee of the Advisory Committee of FVP, consisting of Messrs.
Watkins and Witmer, as representative of J.P. Morgan Investment  Corporation and
1818 II Cable  Corp.,  respectively,  sets  the  compensation  of the  executive
officers of the Company. See "Certain Relationships and Related Transactions."


EMPLOYMENT AGREEMENT

In connection  with the formation of the Company,  James. C. Vaughn entered into
an employment  agreement with FVP,  dated as of April 17, 1995 (the  "Employment
Agreement"). The Employment Agreement expired by its terms as of April 17, 1997.
The Employment Agreement provided that Mr. Vaughn would be employed as President
and Chief Executive Officer of FVP. The Employment Agreement  established a base
salary to be paid to Mr.  Vaughn  each  year,  subject to annual  adjustment  to
reflect  increases  in the  Consumer  Price  Index for All Urban  Consumers,  as
published by the Bureau of Labor  Statistics of the United States  Department of
Labor (or, in the event of the discontinuance thereof, another appropriate index
selected by FVP, with the approval of the Advisory Committee).  In addition, Mr.
Vaughn  was  entitled  to  annual  bonuses  of up to  $75,000,  subject  to  the
attainment  of  certain  performance  objectives  set  forth  in the  Employment
Agreement.  Mr.  Vaughn  agreed  not to  compete  with  FVP for the  term of his
employment with FVP and for an additional  period of two years thereafter and to
keep certain information in connection with FVP confidential.



                                       38
<PAGE>


Item 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth,  as of December 31, 1997, (i) the percentage of
the total partnership  interests of FVP beneficially  owned by the directors and
executive  officers of  FrontierVision  Inc. and each person who is known to the
Company  to own  beneficially  more than 5.0% of any class of FVP's  partnership
interests  and (ii) the  percentage of the equity  securities of  FrontierVision
Inc.,  FVP GP, FVP and Holdings  owned by each director or executive  officer of
FrontierVision Inc. named in the Summary Compensation Table and by all executive
officers of  FrontierVision  Inc. as a group.  Holdings was formed as a Delaware
limited  partnership  in August  1997.  FVP has  contributed  its 99.9%  general
partner   interest  in  FVOP  to  Holdings  in  connection  with  the  Formation
Transaction.  FVP has  contributed  its 100%  interest in FVOP Inc. to Holdings,
with the result that FVOP is wholly owned, directly or indirectly,  by Holdings.
Capital was incorporated in July, 1996 and is a wholly-owned subsidiary of FVOP.
It has nominal assets and does not conduct any  operations.  For a more detailed
discussion  of the  ownership of the Company,  see  "Certain  Relationships  and
Related Transactions".

<TABLE>

<S>                                                      <C>                                             <C>
Name and Address of Beneficial Owners                    Type of Interest                         % of  Class
-------------------------------------                    ----------------                         -----------
FrontierVision Partners, L.P. ( "FVP ")(1)               General Partner Interest in Holdings (2)      99.90%
1777 South Harrison Street, Suite P-200
Denver, Colorado 80210

FVP GP, L.P. (3)                                         General Partner Interest in FVP                1.00%
1777 South Harrison Street, Suite P-200
Denver, Colorado 80210

J.P. Morgan Investment Corporation                       Limited Partnership Interest in FVP           22.83%
101 California Street, Suite 3800                           (Attributable Class A Limited Partner)
San Francisco, CA 94111                                  Limited Partnership Interest in FVP GP         7.18%

1818 II Cable Corp.                                      Limited Partnership Interest in FVP           23.63%
c/o Brown Brothers Harriman & Co.                           (Attributable Class A Limited Partner)
59 Wall Street                                           Limited Partnership Interest in FVP GP         7.18%
New York, NY 10005

Olympus Cable Corp.                                      Limited Partnership Interest in FVP           14.77%
Metro Center--One Station Place                              (Attributable Class A Limited Partner)
Stamford, CT 06920                                       Limited Partnership Interest in FVP GP         7.18%

First Union Capital Partners, Inc.                       Limited Partnership Interest in FVP           15.05%
One First Union Center, 5th Floor                           (Attributable Class A Limited Partner)
Charlotte, NC 28288                                      Limited Partnership Interest in FVP GP         4.31%

James C. Vaughn                                          Stockholder of FrontierVision Inc.            66.67%
1777 South Harrison Street, Suite P-200                  Limited Partnership Interest in FVP GP        48.78%
Denver, Colorado 80210

John S. Koo                                              Stockholder of FrontierVision Inc.            33.33%
1777 South Harrison Street, Suite P-200                  Limited Partnership Interest in FVP GP        24.39%
Denver, Colorado 80210

All other executive officers and directors as a group                                                   0.00%
</TABLE>
----------------
(1) FVP's limited partners (owning 99% of the partnership interests therein) are
various institutional investors and accredited investors.
(2) Holdings' sole limited  partner  (owning 0.1% of the  partnership  interests
therein) is FrontierVision Holdings, LLC.
(3) FVP GP's  sole  general  partner  (owning  1% of the  partnership  interests
therein) is  FrontierVision  Inc., which is owned by James C. Vaughn and John S.
Koo. FVP GP's limited partners (owning 99% of the partnership interests therein)
consist of various institutional investors, James C. Vaughn and John S. Koo.


                                       39
<PAGE>


Item 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company's sole general partner  (owning 99.9% of the  partnership  interests
therein) is  Holdings.  Holdings'  sole  general  partner  (owning  99.9% of the
partnership  interests  therein) is FVP.  Holdings' sole limited partner (owning
0.1% of the partnership  interests  therein) is  FrontierVision  Holdings,  LLC,
which is a wholly owned subsidiary of FVP. FVP's sole general partner (owning 1%
of the partnership  interests therein) is FVP GP. FVP's limited partners (owning
99% of the partnership  interests  therein)  consist of J.P.  Morgan  Investment
Corporation,  an affiliate of J.P. Morgan  Securities  Inc., First Union Capital
Partners,  Inc., an affiliate of First Union Capital Markets Corp.,  and various
institutional investors and accredited investors.  FVP GP's sole general partner
(owning 1% of the partnership  interests therein) is FrontierVision  Inc., which
is owned by James C. Vaughn and John S. Koo. See "Principal Security Holders."

As of December 31, 1997,  J.P.  Morgan  Investment  Corporation  and First Union
Capital  Partners,  Inc. had  committed  approximately  $44.9  million and $30.0
million,  respectively,  to FVP, all of which has been contributed to FVP. As of
December  31,  1997,   FrontierVision   Inc.  had  committed   and   contributed
approximately  $19,935  to  FVP,  representing  contributions  of  approximately
$13,290  and $6,645 by James C.  Vaughn and John S. Koo,  respectively,  who are
directors of  FrontierVision  Inc. Such capital  commitments were contributed as
equity to FVOP in  connection  with the  closing of  acquisitions  by FVOP,  for
escrow  deposits for  acquisitions  by FVOP under  contract and for FVOP working
capital requirements.

J.P. Morgan Investment  Corporation and First Union Capital  Partners,  Inc. are
"Special  Class A" limited  partners of FVP. Upon the  termination of FVP and in
connection with  distributions  to its partners in respect of their  partnership
interests,  J.P. Morgan  Investment  Corporation,  First Union Capital Partners,
Inc. and FVP GP will be entitled to receive "carried interest"  distributions or
will be allocated a portion of 15% of any remaining capital to be distributed by
FVP after certain other  distributions  are made.  J.P.  Morgan  Securities Inc.
acted as  placement  agent  for the  initial  offering  of  limited  partnership
interests of FVP (other than with respect to the investment  made by J.P. Morgan
Investment  Corporation)  and the  placement  of debt  securities  of FVP and in
connection with those activities  received  customary fees and  reimbursement of
expenses.

J.P.  Morgan  Securities  Inc., The Chase  Manhattan Bank, an affiliate of Chase
Securities  Inc.,  and CIBC Inc.,  an  affiliate  of CIBC Wood Gundy  Securities
Corp.,  are  agents and  lenders  under the  Amended  Credit  Facility  and have
received customary fees for acting in such capacities.  In addition, J.P. Morgan
Securities  Inc.,  Chase  Securities  Inc., CIBC Wood Gundy Securities Corp. and
First Union Capital Markets Corp.  (collectively,  the "Underwriters")  received
compensation in the aggregate of  approximately  $6.0 million in connection with
the  issuance  of the FVOP  Notes and  received  aggregate  compensation  in the
aggregate of  approximately  $5.3 million in connection with the issuance of the
Discount Notes.  There are no other  arrangements  between the FVOP Underwriters
and their affiliates and the Company or any of its affiliates  pursuant to which
the  Underwriters or their  affiliates will receive any additional  compensation
from the Company or any of its affiliates.


                                       40
<PAGE>



                                     PART IV

Item 14.        Exhibits, Financial Statement Schedules, And Reports On Form 8-K


(A)(1)   Financial Statements.  The following financial statements are included 
         in Item 8 of Part II:

<TABLE>
                                                                                                         Page
           FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
<S>                                                                                                         <C>
              Independent Auditors' Report                                                                F-3
              Consolidated Balance Sheets as of December 31, 1997 and 1996                                F-4
              Consolidated  Statements of Operations  for the years ended December 31, 1996 
                and 1997 and the period from inception  (April 17, 1995) through December 31, 1995        F-5 
              Consolidated  Statements of Partners' Capital for the years ended December 31, 1997
                and 1996 and the period from inception  (April 17, 1995) through December 31, 1995        F-6  
              Consolidated  Statements  of Cash Flows for the years ended December 31, 1997 and 
                1996 and the period from inception (April 17, 1995) through December 31, 1995             F-7
              Notes to Consolidated Financial Statements                                                  F-8

           FRONTIERVISION CAPITAL CORPORATION
              Independent  Auditors'  Report                                                              F-18 
              Balance  Sheets as of December 31, 1997 and 1996                                            F-19  
              Statement of Operations for the year ended December 31, 1996 and for the period from
                July  26,  1996  (inception)  through  December  31,  1996                                F-20
              Statement of Owner's  Equity for the year ended  December 31, 1997 and for the period
                from July 26, 1996  (inception)  through  December 31, 1996                               F-21
              Statement  of Cash Flows for the year ended  December 31, 1997 and for the period from
                July 26, 1996 (inception) through December 31, 1996                                       F-22
              Note to Financial Statements                                                                F-23

           UNITED VIDEO CABLEVISION, INC. (SELECTED ASSETS ACQUIRED BY FVOP)
              Independent  Auditors' Report                                                               F-24 
              Divisional Balance Sheets as of November  8,  1995  and  December  31,  1994                F-25  
              Statements  of Divisional Operations for the period from January 1, 1995 through
                November 8, 1995 and for the years ended  December  31, 1994 and 1993                     F-26  
              Statements  of  Divisional  Equity for the period  from January 1, 1995 through
                November 8, 1995 and for the years ended  December 31, 1994 and 1993                      F-27  
              Statements of Divisional Cash Flows for the period from January 1, 1995 through
                November 8, 1995 and for the years ended December 31, 1994 and 1993                       F-28
              Notes to Divisional Financial Statements                                                    F-29

           ASHLAND AND DEFIANCE  CLUSTERS  (SELECTED  ASSETS  ACQUIRED  FROM COX
              COMMUNICATIONS,  INC. BY FVOP)  
              Independent  Auditors' Report                                                               F-32
              Combined Statements of Net Assets as of December 31, 1995 and 1994                          F-33 
              Combined Statements of Operations for the eleven-month period ended December 31, 
                1995, for the one-month  period ended January 31, 1995 and for the years ended
                December 31, 1994 and 1993                                                                F-34
              Statements  of Changes in Net Assets for the  eleven-month  period ended December 31, 
                1995, for the one-month  period ended January 31, 1995 and for the years ended 
                December 31, 1994 and 1993                                                                F-35
              Combined  Statements  of Cash  Flows for the  eleven-month  period ended December 31,
                1995, for the one-month  period ended January 31, 1995 and for the years ended 
</TABLE>


                                       41
<PAGE>
<TABLE>

           <S>                                                                                            <C>
                December 31, 1994 and 1993                                                                F-36
              Notes to Combined Financial Statements                                                      F-37

           C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
              Independent  Auditors' Report                                                               F-45 
              Consolidated  Balance Sheets as of December 31, 1995 and 1994                               F-46 
              Consolidated Statements of Loss for the years ended  December 31, 1995 and 1994             F-47  
              Consolidated Statements of Partners' Deficit for the years ended December 31, 1995 and 
                1994                                                                                      F-48
              Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 
                1994                                                                                      F-49
              Notes to Consolidated Financial Statements                                                  F-50

           AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
              Independent  Auditors'  Report                                                              F-55 
              Balance Sheets as of September 30, 1996 (unaudited) and  December  31,  1995  and  1994     F-56
              Statements of Operations for the nine-month period ended September 30, 1996
                (unaudited)  and for the years ended December 31, 1995, 1994 and 1993                     F-57  
              Statements of Shareholders' Deficiency for the nine-month period ended September 30,
                1996 (unaudited) and for the years ended December 31, 1995, 1994 and 1993                 F-58 
              Statements of Cash Flows for the nine-month  period ended September 30, 1996
                (unaudited) and for the years ended December 31, 1995, 1994 and 1993                      F-59
              Notes to Financial Statements                                                               F-60

           TRIAX SOUTHEAST ASSOCIATES, L.P.
              Report of Independent Public Accountants                                                    F-68 
              Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 and 1994          F-69
              Statements of Operations for the nine-month period ended September 30, 1996
                (unaudited)  and for the years ended December 31, 1995, 1994 and 1993                     F-70  
              Statements of Partners' Capital for the nine-month period ended September 30,
                 1996  (unaudited)  and for the years ended  December  31, 1995, 1994 and 1993            F-71  
              Statements  of Cash  Flows for the  nine-month period ended September 30, 1996
                (unaudited) and for the years ended December 31, 1995, 1994 and 1993                      F-72
              Notes to Financial Statements                                                               F-73

           CENTRAL OHIO CLUSTER (SELECTED ASSETS ACQUIRED FROM COX COMMUNICATIONS, INC. BY FVOP)
              Independent Auditor's Report                                                               F-80
              Combined  Statements of Net Assets as of September 30, 1997  (unaudited) and 
                December 31, 1996                                                                        F-81
              Combined  Statements of Income for the nine-month periods ended September 30, 1997 
                (unaudited) and September 30, 1996 (unaudited) and for the year ended December 
                31, 1996                                                                                 F-82
              Combined  Statements  of Changes in Net Assets for the  nine-month period ended  
                September  30, 1997  (unaudited)  and for the year ended December 31, 1996               F-83
              Combined Statements of Cash Flows for the nine-month periods ended September 30, 
                1997 (unaudited) and September 30, 1996 (unaudited) and for the year ended 
                December 31, 1996                                                                        F-84
              Notes to Combined Financial Statements                                                     F-85

    (2)  Financial  Statement  Schedules.   The  following  Financial  Statement
         Schedules are submitted herewith:

         Independent Auditors' Report                                                                     S-2
         Schedule II:  Valuation and Qualifying Accounts                                                  S-3
</TABLE>

                                       42
<PAGE>

    (3)  List of Exhibits.
  
         3.1     Amended and Restated Agreement of Limited  Partnership of FVOP.
                 (4)
         3.2     Certificate of Limited Partnership of FVOP. (1)
         3.9     Certificate  of   Incorporation   of   FrontierVision   Capital
                 Corporation. (1)
         3.10    Bylaws of FrontierVision Capital Corporation.  (1)
         4.1     Indenture  dated as of October 7,  1996,  among  FrontierVision
                 Operating Partners,  L.P.,  FrontierVision  Capital Corporation
                 and Colorado National Bank, as Trustee. (3)
         10.1    Senior Credit Facility.  (1)
         10.2    Employment Agreement of James C. Vaughn.  (1)
         10.3    Asset  Purchase  Agreement  dated July 20, 1995 between  United
                 Video Cablevision,  Inc. and FrontierVision Operating Partners,
                 L.P. (1)
         10.4    Asset Acquisition  Agreement (July 27, 1995 Auction Sale) dated
                 as of July 27,  1995 among  Stephen S. Gray in his  capacity as
                 Receiver  of  Longfellow  Cable  Company,  Inc.,   Carrabassett
                 Electronics   and   Carrabassett   Cable   Company,   Inc.  and
                 FrontierVision Operating Partners, L.P. (1)
         10.5    Asset Purchase  Agreement dated October 27, 1995 among C4 Media
                 Cable  Southeast,  Limited  Partnership,  County Cable Company,
                 L.P. and FrontierVision Operating Partners, L.P. (1)
         10.6    Asset  Purchase  Agreement  dated  November  17, 1995 among Cox
                 Communications  Ohio,  Inc.,  Times Mirror Cable  Television of
                 Defiance,    Inc.,    Chillicothe    Cablevision,    Inc.   Cox
                 Communications   Eastern  Kentucky,   Inc.  and  FrontierVision
                 Operating Partners, L.P. (1)
         10.7    Asset  Purchase  Agreement  dated  February  27,  1996  between
                 Americable   International   Maine,  Inc.  and   FrontierVision
                 Operating Partners, L.P. (1)
         10.8    Asset  Purchase  Agreement  dated  May  16,  1996  among  Triax
                 Southeast  Associates,  L.P., Triax Southeast  General Partner,
                 L.P. and FrontierVision Operating Partners, L.P. (1)
         10.9    Asset Purchase and Sale  Agreement  dated June 21, 1996 between
                 HPI  Acquisition  Co. LLC (assignee of Helicon  Partners I, LP)
                 and FrontierVision Operating Partners, L.P. (1)
         10.10   Asset Purchase  Agreement dated July 15, 1996 between  American
                 Cable    Entertainment    of    Kentucky-Indiana,    Inc.   and
                 FrontierVision Operating Partners, L.P. (1)
         10.11   Asset  Purchase  Agreement  dated as of July 30,  1996  between
                 Shenandoah   Cable   Television   Company  and   FrontierVision
                 Operating Partners, L.P. (1)
         10.12   Purchase Agreement dated as of August 6, 1996 between Penn/Ohio
                 Cablevision,  L.P. and FrontierVision  Operating Partners, L.P.
                 (1)
         10.13   Asset Purchase  Agreement  dated July 19, 1996 between  Phoenix
                 Grassroots Cable Systems,  L.L.C. and FrontierVision  Operating
                 Partners, L.P. (1)
         10.14   Amendment No. 1 to Senior Credit Facility. (1)
         10.15   Consent and Amendment No. 2 to Senior Credit Facility. (3)
         10.16   Asset  Purchase  Agreement  dated May 8, 1997 between A-R Cable
                 Services--ME,  Inc. and FrontierVision Operating Partners, L.P.
                 (4)
         10.17   Asset  Purchase  Agreement  dated  May  12,  1997  between  TCI
                 Cablevision  of  Vermont,   Inc.,  Westmarc  Development  Joint
                 Venture and FrontierVision Operating Partners, L.P. (4)
         10.18   Amended Credit Facility.
         10.19   Asset Purchase  Agreement  dated as of October 15, 1997 between
                 Coxcom, Inc. and FrontierVision Operating Partners, L.P. (4)
         12.1    Statement of  Computation  of Ratios. 
         16.1    Report of change in accountants. (2)
         27.1    Financial Data Schedule as of and for the period ended December
                 31, 1997.

         Footnote References
         (1)     Incorporated  by reference to the exhibits to the  Registrant's
                 Registration Statement on Form S-1, Registration No. 333-9535.
         (2)     Incorporated  by reference to the exhibits to the  Registrant's
                 Current Report on Form 8-K, File No. 333-9535 dated October 22,
                 1996.

 

                                       43
<PAGE>

         (3)     Incorporated  by reference to the exhibits to the  Registrant's
                 Quarterly  Report  on Form  10-Q,  File  No.  333-9535  for the
                 quarter ended September 30, 1996.
         (4)     Incorporated  by  reference  to the  exhibits to  Holdings  and
                 Holdings   Capital's   Registration   Statement  on  Form  S-4,
                 Registration No. 333-36519.

   (B)   Reports on Form 8-K.

         1.      Item 2, Item 5 and Item 7, Form 8-K dated  December  12,  1997.
                 Required   financial   information   and  pro  forma  financial
                 information  to be provided in amended filing within 60 days of
                 date of initial filing.
         2.      Item 7, Form 8-K/A  dated  December  19,  1997 to  provide  the
                 required   financial   information   and  pro  forma  financial
                 information.

  (C)    Exhibits. The exhibits required by this Item are listed under Item 14
         (A)(3).

  (D)    Financial  Statement  Schedules.   The  financial  statement  schedules
         required by this Item are listed under Item 14(A)(2).





                                       44
<PAGE>



                    SUPPLEMENTAL INFORMATION TO BE FURNISHED
                 WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF
                 THE EXCHANGE ACT BY REGISTRANT'S WHICH HAVE NOT
                 REGISTERED SECURITIES PURSUANT TO SECTION 12 OF
                                THE EXCHANGE ACT


         Other than a copy of this Form 10-K, no annual report or proxy material
has  been  or  will be sent to  security  holders  of  FrontierVision  Operating
Partners, L.P. or FrontierVision Capital Corporation.



                                       45
<PAGE>



                                    GLOSSARY

The following is a description of certain terms used in this Form 10-K.

ACQUISITION CASH FLOW--Forecasted net income of an acquired system, for a period
believed to be appropriate  based on the facts and  circumstances  of a specific
acquisition,  calculated as of the date of  acquisition  of such system,  before
interest,  taxes,   depreciation,   amortization  and  corporate  administrative
expenses.  The Company believes that Acquisition Cash Flow is a measure commonly
used in the cable television  industry to analyze and compare the purchase price
of cable television systems.  However,  Acquisition Cash Flow is not intended to
be an  indicator  of  actual  operating  performance  and is not  determined  in
accordance with generally accepted accounting principles.

A LA CARTE--The purchase of programming services on a per-channel or per-program
basis.

ADDRESSABILITY--"Addressable"  technology permits the cable operator to activate
remotely the cable  television  services to be delivered to subscribers  who are
equipped with  addressable  converters.  With  addressable  technology,  a cable
operator can add to or reduce services provided to a subscriber from the headend
site without dispatching a service technician to the subscriber's home.

BASIC  PENETRATION--Basic  subscribers  as a  percentage  of the total number of
homes passed in the system.

BASIC  SERVICE--A  package of  over-the-air  broadcast  stations,  local  access
channels and certain  satellite-delivered  cable television services (other than
premium services).

BASIC  SUBSCRIBER--A  subscriber  to a cable  or other  television  distribution
system who  receives  the basic  level of cable  television  service  and who is
usually charged a flat monthly rate for a number of channels. A home with one or
more  television  sets  connected  to a cable  system  is  counted  as one basic
subscriber.

CABLE  PLANT--A  network of coaxial  and/or  fiber optic  cables  that  transmit
multiple channels carrying  video-programming,  sound and data between a central
facility and an individual customer's television set. Networks may allow one-way
(from a headend to a residence  and/or business) or two-way (from a headend to a
residence and/or business with a data return path to the headend) transmission.

CHANNEL  CAPACITY--The  number of video programming channels that can be carried
over a communications system.

CLUSTERING--A  general term used to describe  the  strategy of  operating  cable
television  systems in a  specific  geographic  region,  thus  allowing  for the
achievement  of economies of scale and operating  efficiencies  in such areas as
system management, marketing and technical functions.

COAXIAL  PLANT--Cable  consisting  of a  central  conductor  surrounded  by  and
insulated  from  another  conductor.   It  is  the  standard  material  used  in
traditional  cable  systems.  Signals are  transmitted  through it at  different
frequencies,  giving greater channel capacity than is possible with twisted pair
copper wire, but less than is possible with optical fiber.

COMPETITIVE ACCESS PROVIDER (CAP)--A company that provides its customers with an
alternative to the local telephone  company for local transport of private line,
special access services and switched access services.  CAPs are also referred to
in   the   industry   as   alternative   access   vendors,   alternative   local
telecommunications  service  providers  (ALTS)  and  metropolitan  area  network
providers (MANs).


                                       46
<PAGE>

COST-OF-SERVICE--A  general  term  used to refer  to the  regulation  of  prices
charged to a customer. Existing prices are set and price increases are regulated
by allowing a company to earn a reasonable rate of return,  as determined by the
regulatory authority.

DENSITY--A  general term used to describe the number of homes passed per mile of
cable plant.

DIGITAL  COMPRESSION--The  conversion  of the standard  analog video signal into
digital signal, and the compression of that signal so as to facilitate  multiple
channel transmission through a single channel's bandwidth.

DIGITAL  PROGRAMMING  SYSTEM--A  programming  distribution  system  under  which
multiple  channels of programming  are digitally  transmitted via satellite to a
cable  television  system's  headend  and then  retransmitted,  using  the cable
system's existing  distribution  platform,  to subscribers equipped with special
digital  converters.   One  such  example  is  the  Headend-in-the-Sky   digital
programming system ("HITS"). The use of the HITS system enables a cable operator
to transmit from 6 to 14 digital  channels using the same bandwidth as used by a
single analog  channel and,  thus,  has the potential to  dramatically  expand a
system's channel capacity.

DIRECT   BROADCAST   SATELLITE   (DBS)--A   service   by   which   packages   of
satellite-delivered   television   programming  are  transmitted  directly  into
individual homes, each serviced by a single satellite dish.

EXPANDED  BASIC  SERVICE--A  package of  satellite-delivered  cable  programming
services  available  only for additional  subscription  over and above the basic
level of television service.

FCC--Federal Communications Commission.

FIBER  OPTICS--Technology  that involves sending laser light pulses across glass
strands to transmit digital information; fiber is virtually immune to electrical
interference  and most  environmental  factors  that  affect  copper  wiring and
satellite  transmissions.  Use of fiber optic  technology  reduces  noise on the
cable system,  improves signal quality and increases system channel capacity and
reliability.

FIBER OPTIC BACKBONE  CABLE--The  principal  fiber optic trunk lines for a cable
system which is using a hybrid fiber-coaxial  architecture to deliver signals to
customers.

FIBER OPTIC TRUNK  LINES--Cables  made of glass fibers through which signals are
transmitted  as  pulses  of  light  to the  distribution  portion  of the  cable
television system which in turn goes to the customer's home. Capacity for a very
large number of channels can be more easily provided.

FIBER-TO-THE-FEEDER--Network  topology/architecture using a combination of fiber
optic  cable  and  coaxial  cable  transmission  lines  to  deliver  signals  to
customers.  Initially  signals are  transmitted  from the headend on fiber optic
trunk lines into  neighborhood  nodes (an individual  point of  origination  and
termination  or  intersection  on the network,  usually  where  electronics  are
housed)  and then from the  nodes to the end user on a  combination  of  coaxial
cable  distribution/feeder  and drop lines.  The  coaxial  feeder and drop lines
typically represent the operator's "last mile" of plant to the end user.

HEADEND--A  collection of hardware,  typically  including  satellite  receivers,
modulators,  amplifiers  and video  cassette  playback  machines,  within  which
signals  are  processed  and then  combined  for  distribution  within the cable
network.

HOMES PASSED--Homes that can be connected to a cable distribution system without
further extension of the distribution network.

HFC--Hybrid  fiber  optic/coaxial  cable  design,  used  in a  cable  television
system's distribution plant.


                                       47
<PAGE>

Internet--The large,  worldwide network of thousands of smaller,  interconnected
computer networks. Originally developed for use by the military and for academic
research  purposes,  the  Internet is now  accessible  by millions of  consumers
through online services.

LAN--Local  Area  Network--A  communications  network that serves users within a
confined  geographical  area,  consisting  of servers,  workstations,  a network
operating system and a communications link.

Microwave Links--The  transmission of voice, video or data using microwave radio
frequencies, generally above 1 GHz, from one location to another.

MMDS--Multichannel Multipoint Distribution Service. A one-way radio transmission
of programming over microwave  frequencies from a fixed station  transmitting to
multiple receiving facilities located at fixed points.

MSO--A term used to  describe  cable  television  companies  that are  "multiple
system operators."

New Product Tiers--A general term used to describe  unregulated cable television
services.

Over-The-Air  Broadcast  Stations--A  general  term  used  to  describe  signals
transmitted by local television broadcast stations, including network affiliates
or independent  television  stations,  that can be received directly through the
air by the use of a standard rooftop receiving antenna.

Pay-Per-View--Payment  made for individual movies, programs or events as opposed
to a monthly subscription for a whole channel or group of channels.

PCS--Personal  Communications  Services,  or PCS,  is the  name  given  to a new
generation of  cellular-like  telecommunications  services which are expected to
provide  customers  new  choices in  wireless  mobile  telecommunications  using
digital  technology for voice and data service  compared to  traditional  analog
technology.

Premium  Penetration--Premium  service units as a percentage of the total number
of basic  service  subscribers.  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  to more than one
premium service unit.

Premium  Service--An  individual cable  programming  service  available only for
additional  subscription  over and above the basic or expanded  basic  levels of
cable television service.

Premium  Units--The  number of  subscriptions to premium services which are paid
for on an individual basis.

Rebuild--The  replacement  or  upgrade  of an  existing  cable  system,  usually
undertaken  to improve  either its  technological  performance  or to expand the
system's channel or bandwidth capacity in order to provide more services.

SMATV--Satellite  Master Antenna Television System. A video programming delivery
system to multiple dwelling units utilizing satellite transmissions.

Telephony--The provision of telephone service.

Tiers--Varying levels of cable services consisting of differing  combinations of
several  over-the-air   broadcast  and   satellite-delivered   cable  television
programming services.


                                       48
<PAGE>




                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
                                                                                                            Page


<S>                                                                                                           <C>
FrontierVision Operating Partners, L.P. and Subsidiaries
   Independent Auditors' Report                                                                               F-3
   Consolidated Balance Sheets as of December 31, 1997 and 1996                                               F-4
   Consolidated  Statements  of Operations  for the years ended  December 31, 1997 and 1996 and for the
     period from inception (April 17, 1995) through December 31, 1995                                         F-5
   Consolidated  Statements of Partners' Capital for the years ended December 31, 1997 and 1996 and for
     the period from inception (April 17, 1995) through December 31, 1995                                     F-6
   Consolidated  Statements  of Cash Flows for the years ended  December  31, 1997 and 1996 and for the
     period from inception (April 17, 1995) through December 31, 1995                                         F-7
   Notes to Consolidated Financial Statements                                                                 F-8

FrontierVision Capital Corporation
   Independent Auditors' Report                                                                               F-18
   Balance Sheets as of December 31, 1997 and 1996                                                            F-19
   Statement of Operations  for the year ended  December 31, 1997 and for the period from July 26, 1996
     (inception)  through December 31, 1996                                                                   F-20 
   Statement of Owner's Equity for the year ended December 31, 1997 and for the period from July 26,
     1996 (inception) through December  31, 1996                                                              F-21
   Statement  of Cash Flows for the year ended  December 31, 1997 and for the period from July 26, 1996
     (inception) through December 31, 1996                                                                    F-22
   Note to the Financial Statements                                                                           F-23

United Video Cablevision, Inc. (Selected Assets Acquired by FVOP)
   Independent Auditors' Report                                                                               F-24
   Divisional Balance Sheets as of November 8, 1995 and December 31, 1994                                     F-25
   Statements of Divisional  Operations  for the period from January 1, 1995 through  November 8, 1995
     and for the years ended December 31, 1994 and 1993                                                       F-26
   Statements  of Divisional  Equity for the period from January 1, 1995 through  November 8, 1995 and
     for the years ended December 31, 1994 and 1993                                                           F-27
   Statements  of Divisional  Cash Flows for the period from January 1, 1995 through  November 8, 1995
     and for the years ended December 31, 1994 and 1993                                                       F-28
   Notes to Divisional Financial Statements                                                                   F-29

Ashland and Defiance Clusters (Selected Assets Acquired From Cox Communications, Inc. by FVOP)
   Independent Auditors' Report                                                                               F-32
   Combined Statements of Net Assets as of December 31, 1995 and 1994                                         F-33
   Combined Statements of Operations for the eleven-month  period ended December 31, 1995, for the 
     one-month period ended January 31, 1995 and for the years ended December 31, 1994 and 1993               F-34
   Statements  of  Changes  in Net  Assets  for the  eleven-month  period  ended December 31, 1995, for 
     the one-month  period ended January 31, 1995 and for the years ended December 31, 1994 and 1993          F-35
   Combined Statements of Cash Flows for the eleven-month  period ended December 31, 1995, for the 
     one-month period ended January 31, 1995 and for the years ended December 31, 1994 and 1993               F-36
   Notes to Combined Financial Statements                                                                     F-37
</TABLE>
                                                


                                      F-1
<PAGE>
                                   
<TABLE>
<S>                                                                                                             <C>
                                                                                                                Page
                                          
C4 Media Cable Southeast, Limited Partnership
   Independent Auditors' Report                                                                                F-45
   Consolidated Balance Sheets as of December 31, 1995 and 1994                                                F-46
   Consolidated Statements of Loss for the years ended December 31, 1995 and 1994                              F-47
   Consolidated Statements of Partners' Deficit for the years ended December 31, 1995 and 1994                 F-48
   Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1994                        F-49
   Notes to Consolidated Financial Statements                                                                  F-50

American Cable Entertainment of Kentucky-Indiana, Inc.
   Independent  Auditors'  Report                                                                              F-55 
   Balance  Sheets as of September  30, 1996 (unaudited)  and December 31, 1995 and 1994                       F-56 
   Statements of Operations for the nine-month period ended September 30, 1996 (unaudited) and for
     the  years  ended  December  31,  1995,  1994 and 1993                                                    F-57  
   Statements  of Shareholders' Deficiency for the nine-month period ended September 30, 1996
     (unaudited)  and for the years ended December 31, 1995,  1994 and 1993                                    F-58
   Statements of Cash Flows for the nine-month  period ended  September 30, 1996 (unaudited) and for
     the years ended December 31, 1995, 1994 and 1993                                                          F-59
   Notes to Financial Statements                                                                               F-60

Triax Southeast Associates, L.P.
   Report of Independent  Public Accountants                                                                   F-68 
   Balance Sheets as of September 30,  1996  (unaudited)  and  December  31, 1995 and 1994                     F-69  
   Statements  of Operations for the nine-month period ended September 30, 1996 (unaudited) and for
     the  years  ended  December  31,  1995,  1994 and 1993                                                    F-70  
   Statements  of Partners'  Capital  for  the  nine-month  period  ended  September  30,  1996 (unaudited) 
     and for the years ended  December 31, 1995,  1994 and 1993                                                F-71  
   Statements  of Cash Flows for the nine-month period ended September 30, 1996 (unaudited) and for
     the years ended December 31, 1995, 1994 and 1993                                                          F-72
   Notes to Financial Statements                                                                               F-73

Central Ohio Cluster (Selected Assets Acquired From Cox Communications, Inc. by FVOP)
   Independent  Auditor's  Report                                                                              F-80  
   Combined  Statements of Net Assets as of September 30, 1997 (unaudited) and December 31, 1996               F-81
   Combined Statements of Income for the nine-month periods ended September 30, 1997 (unaudited) and
     September  30, 1996  (unaudited)  and for the year ended  December 31, 1996                               F-82 
   Combined  Statements of Changes in Net Assets for the nine-month  period ended September 30, 1997
     (unaudited)  and for  the  year  ended  December  31,  1996                                               F-83 
   Combined Statements of Cash Flows for the nine-month  periods ended September 30, 1997 (unaudited)
     and September 30, 1996 (unaudited) and for the year ended December 31, 1996                               F-84
   Notes to Combined Financial Statements                                                                      F-85


</TABLE>


                                      F-2
<PAGE>



                          INDEPENDENT AUDITORS' REPORT



To the Partners of
FrontierVision Operating Partners, L.P.:

We have audited the accompanying  consolidated  balance sheets of FrontierVision
Operating Partners,  L.P. and subsidiaries as of December 31, 1997 and 1996, and
the related  consolidated  statements of operations,  partners'capital  and cash
flows  for the  years  ended  December  31,  1997 and 1996 and the  period  from
inception  (April  17,  1995 -- see Note 1) through  December  31,  1995.  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 consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of  FrontierVision
Operating Partners, L. P. and subsidiaries as of December 31, 1997 and 1996, and
the  results  of their  operations  and their  cash  flows  for the years  ended
December 31, 1997 and 1996 and the period from  inception  (April 17, 1995 - see
Note  1)  through  December  31,  1995 in  conformity  with  generally  accepted
accounting principles.



                                        KPMG PEAT MARWICK LLP

Denver, Colorado
March 16, 1998





                                      F-3
<PAGE>




            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                  In Thousands

<TABLE>


                                                                       ------------------------------
                                                                       December 31,          December 31,
                                                                          1997                  1996
                                                                       ---------              ---------

                                    ASSETS
<S>                                                                     <C>                  <C>     
Cash and cash equivalents                                               $  3,413             $  3,639
Accounts receivable, net of allowance for doubtful accounts
   of $640 and $767                                                        8,071                4,544
Other receivables                                                           --                    846
Prepaid expenses and other                                                 2,642                2,231
Investment in cable television systems, net:
   Property and equipment                                                247,724              199,461
   Franchise cost and other intangible assets                            637,725              324,905
                                                                        --------             --------
      Total investment in cable television systems, net                  885,449              524,366
                                                                        --------             --------
Deferred financing costs, net                                             17,990               13,042
Earnest money deposits                                                     2,143                  500
                                                                        --------             --------
      Total assets                                                      $919,708             $549,168
                                                                        ========             ========

                   LIABILITIES AND PARTNERS' CAPITAL
Accounts payable                                                        $  2,647             $  1,994
Accrued liabilities                                                       15,126               10,825
Subscriber prepayments and deposits                                        1,828                1,862
Accrued interest payable                                                   5,064                6,290
Debt                                                                     632,000              398,194
                                                                        --------             --------
     Total liabilities                                                   656,665              419,165
                                                                        --------             --------

Partners' capital:
   FrontierVision Holdings, L.P.                                         262,780              129,874
   FrontierVision Operating Partners, Inc.                                   263                  129
                                                                        --------             --------
      Total partners' capital                                            263,043              130,003
Commitments

                                                                        --------             --------
      Total liabilities and partners' capital                           $919,708             $549,168
                                                                        ========             ========



</TABLE>







          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                  In Thousands

<TABLE>



                                                    --------------------------------------------------------
                                                                                                For the Period
                                                                                                From Inception
                                               For the Year Ended     For the Year Ended      (April 17, 1995 --
                                                   December 31,           December 31,        see Note 1) through
                                                      1997                   1996             December 31, 1995
                                                    ---------              ---------              ---------

<S>                                                 <C>                    <C>                    <C>      
Revenue                                             $ 145,126              $  76,464              $   4,369
Expenses:
    Operating expenses                                 74,314                 39,181                  2,311
    Corporate administrative expenses                   4,418                  2,930                    127
    Depreciation and amortization                      64,398                 35,336                  2,308
    Pre-acquisition expenses                             --                     --                      940
                                                    ---------              ---------              ---------
        Total expenses                                143,130                 77,447                  5,686
                                                    ---------              ---------              ---------
Operating income/(loss)                                 1,996                   (983)                (1,317)
Interest expense, net                                 (42,652)               (22,422)                (1,386)
Other expense                                          (1,161)                  (396)                  --
                                                    ---------              ---------              ---------
Loss before extraordinary item                        (41,817)               (23,801)                (2,703)
Extraordinary item - Loss on early
   retirement of debt                                  (5,046)                  --                     --
                                                    ---------              ---------              ---------
Net loss                                            $ (46,863)             $ (23,801)             $  (2,703)
                                                    =========              =========              ========= 
                                                                                                   

Net loss allocated to:
FrontierVision Holdings, L.P. 
     (General Partner)                              $ (46,816)             $ (23,776)             $  (2,700)
FrontierVision Operating Partners, Inc. 
     (Limited Partner)                                    (47)                   (25)                    (3)
                                                    ---------              ---------              ---------
                                                    $ (46,863)             $ (23,801)             $  (2,703)
                                                    =========              =========              =========

</TABLE>















          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                                  In Thousands



<TABLE>

                                                  ---------------------------------------------------------
                                                                         FrontierVision
                                                  FrontierVision           Operating
                                                   Holdings, L.P.        Partners, Inc.
                                                (General Partner)      (Limited Partner)           Total
                                                   ---------              ---------              ---------
<S>                                                 <C>                   <C>                   <C>       
Balance, at inception (April 17, 1995)              $    --               $      --             $       --
      Capital contributions                           49,061                     49                 49,110    
      Net loss                                        (2,700)                    (3)                (2,703)
                                                   ---------              ---------              ---------
Balance, December 31, 1995                            46,361                     46                 46,407
      Capital contributions                          107,289                    108                107,397            
      Net loss                                       (23,776)                   (25)               (23,801)
                                                   ---------              ---------              ---------
Balance, December 31, 1996                           129,874                    129                130,003
      Capital contributions                          179,722                    181                179,903
      Net loss                                       (46,816)                   (47)               (46,863)
                                                   ---------              ---------              ---------
Balance, December 31, 1997                         $ 262,780              $     263              $ 263,043
                                                   =========              =========              =========

</TABLE>



























          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                            STATEMENTS OF CASH FLOWS
                                  In Thousands
<TABLE>

                                                                          ----------------------------------------------------------
                                                                                                                    For the Period
                                                                                                                    From Inception
                                                                           For the Year         For the Year     (April 17, 1995 --
                                                                             Ended                 Ended         see Note 1) through
                                                                           December 31,         December 31,        December 31,
                                                                              1997                  1996                1995
                                                                            -------                -------                -------

Cash Flows From Operating Activities:
<S>                                                                       <C>                    <C>                    <C>       
    Net loss                                                              $ (46,863)             $ (23,801)             $  (2,703)
    Adjustments  to  reconcile  net  loss  to  net
        cash  flows  from  operating activities:
        Extraordinary item - Loss on early retirement of debt                 5,046                   --                     --   
        Depreciation and amortization                                        64,398                 35,336                  2,308
        Net loss on disposal of assets                                        1,104                    388                   --
        Amortization of deferred debt issuance costs                          1,492                    999                     69
        Interest expense deferred and included in
            long-term debt                                                      721                    924                   --
        Changes in operating assets and liabilities, net of
            effect of acquisitions:
            Accounts receivable                                                (582)                (1,946)                  (261)
            Receivable from seller                                              846                  1,377                   --
            Prepaid  expenses and other                                        (106)                (1,266)                    75
            Accounts  payable and accrued liabilities                         3,029                  3,423                  1,637
            Subscriber prepayments and deposits                              (1,523)                (2,393)                   362
            Accrued interest payable                                         (1,226)                 5,870                    420
                                                                            -------                -------                -------
                Total adjustments                                            73,199                 42,712                  4,610
                                                                            -------                -------                -------
                Net cash flows from operating activities                     26,336                 18,911                  1,907
                                                                            -------                -------                -------
Cash Flows From Investing Activities:
    Capital expenditures                                                    (32,738)                (9,304)                  (573)
    Pending acquisition costs                                                  (146)                  --                     --
    Cash paid for franchise costs                                              (406)                (2,009)                  --
    Earnest money deposits                                                   (2,143)                  (500)                (9,502)
    Proceeds from disposition of cable television systems                      --                   15,065                   --   
    Cash paid in acquisitions of cable television systems                  (392,631)              (421,467)              (121,270)
                                                                            -------                -------                -------
                 Net cash flows from investing activities                  (428,064)              (418,215)              (131,345)
                                                                            -------                -------                -------
Cash Flows From Financing Activities:
    Debt borrowings                                                         523,000                137,700                 85,900
    Payments on debt borrowings                                            (289,845)               (33,600)                  --   
    Proceeds of issuance of Senior Subordinated Notes                          --                  200,000                   --
    Principal payments on capital lease obligations                             (70)                   (16)                  --   
    Increase in deferred financing fees                                     (11,357)                (3,771)                (2,922)
    Offering costs related to Senior Subordinated Notes                        (129)                (7,417                   --   
    Partner capital contributions                                           179,903                107,397                 49,110
                                                                            -------                -------                -------
                  Net cash flows from financing   activities                401,502                400,293                132,088
                                                                            -------                -------                -------
Net Increase in Cash and Cash Equivalents                                      (226)                   989                  2,650
Cash and Cash Equivalents, at beginning of period                             3,639                  2,650                   --
                                                                            -------                -------                -------
Cash and Cash Equivalents, end of period                                  $   3,413              $   3,639              $   2,650
                                                                            =======                =======                =======

Supplemental Disclosure of Cash Flow Information:
    Cash paid for interest                                                $  42,226              $  15,195              $     957
                                                                            =======                =======                =======

</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>

            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(1)      THE COMPANY

Organization and Capitalization

FrontierVision  Operating Partners, L.P. (the "Company" or "FVOP") is a Delaware
limited  partnership  formed on July 14, 1995 for the purpose of  acquiring  and
operating cable television  systems.  As of December 31, 1997, the Company owned
and operated cable television  systems in three primary operating clusters - New
England,  Ohio and Kentucky - with a fourth,  smaller group of cable  television
systems in the Southeast. The Company was initially capitalized in November 1995
with approximately $38 from its sole limited partner,  FrontierVision  Operating
Partners, Inc. ("FVOP Inc."), a Delaware corporation,  and approximately $38,300
from its, at the time,  sole  general  partner,  FrontierVision  Partners,  L.P.
("FVP"), a Delaware limited partnership.

On September 19, 1997,  FrontierVision  Holdings, L.P. ("Holdings"),  a Delaware
limited partnership,  and FrontierVision Holdings Capital Corporation ("Holdings
Capital")  co-issued $237,650 aggregate  principal amount at maturity of 11 7/8%
Senior   Discount  Notes  due  2007  (the   "Discount   Notes").   Holdings,   a
newly-organized  holding company, was formed to be the co-issuer of the Discount
Notes and to be the new general  partner of FVOP.  FVP  contributed to Holdings,
both directly and indirectly,  all of the outstanding  partnership  interests in
FVOP  immediately  prior to the issuance of the Discount  Notes (the  "Formation
Transaction"),  and  therefore,  FVOP  and  FrontierVision  Capital  Corporation
("Capital")  became  wholly  owned-consolidated  subsidiaries  of  Holdings.  In
addition,  FVOP Inc.,  previously  a  wholly-owned  subsidiary  of FVP, is now a
wholly-owned subsidiary of Holdings.

During the year ended December 31, 1997, the Company received additional capital
contributions of approximately $179,903 from its partners.  This amount includes
net proceeds of $142,250 received from the issuance of the Discount Notes, which
were  contributed  by  Holdings to FVOP as a capital  contribution.  The capital
contribution  from Holdings was used by FVOP to repay certain bank  indebtedness
of $65,500 with the remainder placed in escrow to finance pending  acquisitions.
All of the escrow  proceeds had been utilized as of December 31, 1997.  Prior to
the Formation  Transaction,  FVP allocated  certain  administrative  expenses to
FVOP,  which are  included  as capital  contributions  from its  partners.  Such
expense  allocations  were  approximately  $231  and $735  for the  years  ended
December 31, 1997 and 1996, respectively.

Capital, a Delaware  corporation,  is a wholly-owned  subsidiary of the Company,
and was  organized  on July 26, 1996 for the sole purpose of acting as co-issuer
with the  Company  of $200  million  aggregate  principal  amount of 11%  Senior
Subordinated  Notes due 2006 (the "Notes").  Capital has nominal assets and does
not have any material operations.

Allocation of Profits, Losses and Distributions

Generally, the Company's Partnership agreement provides that profits, losses and
distributions  will be allocated to the general  partner and the limited partner
pro rata based on capital contributions.




                                      F-8
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(1)      THE COMPANY (continued)

Pre-Acquisition Expenses

The  Company  had no  substantive  operations  of its own  until the date of the
acquisitions  described in Note 4. However,  FVP,  which was formed on April 17,
1995,  incurred certain general and administrative  costs deemed attributable to
FVOP  prior to the  Company's  legal  formation.  Such  expenditures  have  been
reflected in the accompanying  financial statements as pre-acquisition  expenses
as  if  the  Company  had  incurred  those  costs  directly.  In  addition,  the
accompanying  balance  sheet as of December  31,  1996  reflects  earnest  money
deposits paid by FVP on behalf of the Company  related to planned  acquisitions.
All  such  amounts  have  been  reflected  as  capital   contributions   in  the
accompanying financial statements.


(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Principles of Consolidation

The accompanying  consolidated  financial statement include the accounts of FVOP
and those of its wholly- owned subsidiaries, Capital, FrontierVision New England
Cable, Inc. ("New England") and FrontierVision Access Partners,  LLC ("Access").
As of  December  31,  1997,  New  England  and  Access  had no  operations.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.

Cash and Cash Equivalents

For  purposes of the  financial  statements,  the Company  considers  all highly
liquid  investments with original  maturities of three months or less to be cash
equivalents.

Property and Equipment

Property  and  equipment   are  stated  at  cost  and  include  the   following:
distribution   facilities,   support   equipment  and  leasehold   improvements.
Replacements,  renewals and  improvements  are capitalized and costs for repairs
and  maintenance are charged to expense when incurred.  The Company  capitalized
direct labor and overhead  related to installation  activities of  approximately
$3,844 and $1,577 for the periods ended December 31, 1997 and 1996. Depreciation
is computed on a straight-line basis using an average estimated useful life of 8
years.  At the time of  ordinary  retirements,  sales or other  dispositions  of
property, a gain or loss is recognized.

Franchise Costs, Covenants not to Compete, Subscriber Lists and Goodwill

Franchise costs, covenants not to compete,  subscriber lists and goodwill result
from  the   application  of  the  purchase  method  of  accounting  to  business
combinations.  Such  amounts are  amortized  on a  straight-line  basis over the
following  periods:  15 years for franchise  costs (which reflects the Company's
ability to renew existing  franchise  agreements),  5 years for covenants not to
compete, 7 years for subscriber lists and 15 years for goodwill.

                                      F-9
<PAGE>

            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company periodically reviews the carrying amount of its property,  plant and
equipment  and its  intangible  assets to determine  whether  current  events or
circumstances  warrant  adjustments to such carrying  amounts.  If an impairment
adjustment  is deemed  necessary,  such loss is  measured by the amount that the
carrying value of such assets exceeds their fair value.  Considerable management
judgment is necessary to estimate the fair value of assets, accordingly,  actual
results could vary significantly from such estimates.

Deferred Financing Costs

Deferred financing costs are being amortized using the straight line method over
the life of the loans. Accumulated amortization at December 31, 1997 and 1996 is
$912 and $1,068, respectively.

Revenue Recognition

Revenue is recognized  in the period in which the related  services are provided
to the subscribers.

Derivative Financial Instruments

The Company  manages risk arising from  fluctuations  in interest rates by using
interest  rate swap  agreements,  as  required by its credit  agreements.  These
agreements are treated as off-balance sheet financial instruments.  The interest
rate swap agreements are being accounted for as a hedge of the debt  obligation,
and  accordingly,  the net  settlement  amount is recorded as an  adjustment  to
interest expense in the period incurred.

Income Taxes

No provision  has been made for federal,  state or local income taxes related to
the Company because they are the responsibility of the individual partners.  The
principal  difference between results reported for financial  reporting purposes
and for income tax purposes  results from  differences in depreciable  lives and
amortization methods utilized for tangible and intangible assets.

Reclassification

Certain amounts have been reclassified for comparability.




                                      F-10
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(3)    INVESTMENT IN CABLE TELEVISION SYSTEMS

The  Company's  investment  in cable  television  systems  is  comprised  of the
following:

<TABLE>
                                                                   ------------------------------------
                                                                   December 31,            December 31,
                                                                      1997                    1996
                                                                    ---------              ---------
<S>                                                                 <C>                    <C>      
Property and equipment                                              $ 297,229              $ 217,148
Less--accumulated depreciation                                        (49,505)               (17,687)
                                                                    ---------              ---------
       Property and equipment, net                                    247,724                199,461
                                                                    ---------              ---------
Franchise costs                                                       523,096                258,453
Covenants not to compete                                               14,983                 14,934
Subscriber lists                                                      106,270                 41,777
Goodwill                                                               44,702                 28,845
                                                                    ---------              ---------
                                                                      689,051                344,009
Less--accumulated amortization                                        (51,326)               (19,104)
                                                                    ---------              ---------
       Franchise costs and other intangible assets, net               637,725                324,905
                                                                    ---------              ---------
Total investment in cable television systems, net                   $ 885,449              $ 524,366
                                                                    =========              =========
</TABLE>


(4)      ACQUISITIONS AND DISPOSITIONS

Acquisitions

The Company has  completed  several  acquisitions  since its  inception  through
December 31, 1997.  All of the  acquisitions  have been  accounted for using the
purchase  method of accounting,  and,  accordingly,  the purchase price has been
allocated  to the  assets  acquired  and  liabilities  assumed  based  upon  the
estimated fair values at the respective  dates of acquisition.  Such allocations
are subject to  adjustments  as final  appraisal  information is received by the
Company.  Amounts  allocated to property,  plant and equipment and to intangible
assets will be respectively  depreciated and amortized,  prospectively  from the
date of  acquisition  based upon the  Company's  useful  lives and  amortization
periods.  The following table lists the  acquisitions and the purchase price for
each.

<TABLE>

------------------------------------------------------------------------------------------------------------------------------------
                 Predecessor Owner                                 Primary Location of Systems     Date Acquired Acquisition Cost(a)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                  <C>                     <C> 
United Video Cablevision, Inc.                                             Maine and Ohio         November 9, 1995          $121,800
Longfellow Cable Company, Inc.                                                 Maine              November 21, 1995           $6,100
C4  Media  Cable  Southeast,   Limited  Partnership ("C4")             Virginia and Tennessee     February 1, 1996           $47,600
Americable International Maine, Inc.                                           Maine               March 29, 1996             $4,800
Cox Communications, Inc. ("Cox")                                                Ohio                April 9, 1996           $135,900
Phoenix Grassroots Cable Systems, LLC                                 Maine and New Hampshire      August 29, 1996            $9,700
Triax Southeast Associates, L.P. ("Triax")                               Kentucky and Ohio         October 7, 1996           $85,800
American Cable  Entertainment of  Kentucky-Indiana, Inc. ("ACE")        Kentucky and Indiana       October 9, 1996          $147,300
SRW, Inc.'s Penn/Ohio Cablevision, L.P.                                Pennsylvania and Ohio      October 31, 1996            $3,800
SRW, Inc.'s Deep Creek Cable TV, L.P.                                         Maryland            December 23, 1996           $3,000
Bluegrass Cable Partners, L.P.                                                Kentucky             March 20, 1997            $10,400
Clear Cable T.V., Inc. and B&G Cable T.V.  Systems, Inc.                      Kentucky             March 31, 1997             $1,800
Milestone Communications of New York, L.P.                                      Ohio               March 31, 1997             $3,000
Triax Associates I, L.P. ("Triax I")                                            Ohio                May 30, 1997             $34,800
Phoenix Front Row Cablevision                                                   Ohio                May 30, 1997              $6,900
PCI Incorporated                                                              Michigan             August 29, 1997           $13,600
SRW, Inc.'s Blue Ridge Cable Systems, L.P.                          Tennessee and North Carolina  September 3, 1997           $4,100
A-R Cable Services - ME, Inc. ("Cablevision")                                  Maine              October 31, 1997           $78,600
Harold's Home Furnishings, Inc.                                      Pennsylvania and Maryland    October 31, 1997            $1,600
TCI  Cablevision  of  Vermont,  Inc.  and  Westmarc  Development 
 Joint Venture ("TCI-VT/NH")                                         Vermont and New Hampshire    December 2, 1997           $34,700
Cox Communications, Inc. ("Cox-Central Ohio")                                   Ohio              December 19, 1997        $203,700*
---------------
</TABLE>



                                      F-11
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(4)      ACQUISITIONS AND DISPOSITIONS (continued)

(a) Acquisition cost represents the purchase price  allocation  between tangible
and intangible  assets including certain purchase  accounting  adjustments as of
December 31, 1997.
*     Subject to adjustment.

The combined purchase price of certain of these  acquisitions has been allocated
to the acquired assets and liabilities as follows:
<TABLE>

                                                         -----------------------------------------------------
                                                           1997                   1996                  1995
                                                      Acquisitions(a)       Acquisitions(a)        Acquisitions
                                                         ---------             ---------             ---------
<S>                                                     <C>                    <C>                   <C>        
     Property, plant and equipment                      $   48,805             $ 169,240             $  43,333  
     Franchise costs and other intangible assets           344,490               268,836                84,595
                                                         ---------             ---------             ---------    
          Subtotal                                         393,295               438,076               127,928
                                                         ---------             ---------             ---------
     Net working capital (deficit)                            (164)               (7,107)                  542
     Less - Earnest money deposits applied                    (500)               (9,502)                    -        
     Less - Subordinated promissory note to seller               -                     -                (7,200)
                                                         ---------             ---------             ---------
          Total cash paid for acquisitions               $ 392,631             $ 421,467             $ 121,270
                                                         =========             =========             =========
</TABLE>

(a) The combined  purchase price includes certain purchase price adjustments for
acquisitions consummated prior to the respective periods.

The Company has reported the  operating  results of its acquired  cable  systems
from the dates of their respective  acquisition.  Unaudited pro forma summarized
operating  results of the Company,  assuming the C4, Cox,  Triax,  ACE, Triax I,
Cablevision,  TCI-VT/NH and Cox-Central Ohio acquisitions  (the  "Acquisitions")
had been consummated on January 1, 1996, are as follows:

<TABLE>
                                                            ---------------------------------------
                                                                  Year Ended December 31, 1997
                                                            ---------------------------------------
                                                           Historical                     Pro Forma
                                                             Results     Acquisitions      Results
                                                            ---------      ---------      ---------
<S>                                                         <C>             <C>           <C>      
Revenue                                                     $ 145,126       $ 60,011      $ 205,137
                                                                                             
Operating, selling, general and administrative expenses       (78,732)       (30,486)      (109,218)
Depreciation and amortization                                 (64,398)       (23,960)       (88,358)
                                                            ---------      ---------      ---------
Operating income                                                1,996          5,565          7,561
Interest and other expenses                                   (48,859)       (19,174)       (68,033)
                                                            ---------      ---------      ---------
Net loss                                                    $ (46,863)     $ (13,609)     $ (60,472)
                                                            =========      =========      =========

                                                            ---------------------------------------
                                                                     Year Ended December 31, 1996
                                                            ---------------------------------------
                                                            Historical                     Pro Forma
                                                              Results     Acquisitions      Results
                                                            ---------      ---------      ---------
Revenue                                                     $  76,464      $ 110,309      $ 186,773 
Operating, selling, general and administrative expenses       (42,111)       (60,990)      (103,101)
Depreciation and amortization                                 (35,336)       (51,660)       (86,996)
                                                            ---------      ---------      ---------
Operating loss                                                 (2,341)        (3,324)          (983)
Interest and other expenses                                   (22,818)       (38,330)       (61,148)
                                                            ---------      ---------      ---------
Net loss                                                    $ (23,801)     $ (40,671)     $ (64,472)
                                                            =========      =========      =========
</TABLE>

The pro  forma  financial  information  presented  above has been  prepared  for
comparative purposes only and does not purport to be indicative of the operating
results which actually would have resulted had the Acquisitions been consummated
on the dates indicated.  Furthermore,  the above pro forma financial information
does not include the effect of certain  acquisitions  and  dispositions of cable
systems  because  these  transactions  were not  material  on an  individual  or
aggregate basis.

                                      F-12
<PAGE>

            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(4)      ACQUISITIONS AND DISPOSITIONS (continued)

As of December 31, 1997,  the Company had advanced $30 and $113 to Bluegrass and
Front Row, respectively, in the form of letters of credit in connection with the
transfer of certain franchises in favor of the Company.

On  December  12,  1997,  the  Company   entered  into  an  agreement  with  the
shareholders of New England Cable Television of Massachusetts, Inc. ("NECMA") to
acquire  all of the  outstanding  stock  of NECMA  for a price of  approximately
$43,600.  NECMA is a  Massachusetts  S-Corporation  which owns cable  television
assets in  Massachusetts.  As of December  31,  1997,  the Company had  advanced
$2,000 as an earnest money deposit related to this transaction.

On December 19, 1997, the Company entered into an asset purchase  agreement with
TCI Cablevision of Ohio, Inc. to acquire certain cable television assets in Ohio
for a cash purchase price of $10,000.

On January 15, 1998, the Company  entered into an asset purchase  agreement with
TVC-Sumpter Limited  Partnership and North Oakland Cablevision  Partners Limited
Partnership to acquire  certain cable  television  assets in Michigan for a cash
purchase price of $14,200. This acquisition was consummated on March 6, 1998.

On January 16, 1998, the Company  entered into an asset purchase  agreement with
Ohio Cablevision  Network,  Inc. to acquire certain cable  television  assets in
Ohio for a cash purchase price of $38,000.

Asset Exchange

On December 12, 1997, the Company entered into an asset exchange  agreement with
Comcast  Cablevision of the South to exchange certain cable television assets in
the Southeast region. This asset exchange was consummated on March 12, 1998.

Dispositions

The Company has completed two dispositions  from its inception  through December
1996.

On July 24, 1996,  the Company  sold  certain  cable  television  system  assets
located primarily in Chatsworth, Georgia to an affiliate of Helicon Partners for
an aggregate sales price of approximately $7,900.

On September 30, 1996, the Company sold certain cable  television  system assets
located in Virginia to  Shenandoah  Cable  Television  Company,  an affiliate of
Shenandoah  Telephone  Company,  for an aggregate  sales price of  approximately
$7,100.



                                      F-13
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(5)    DEBT

The Company's debt was comprised of the following:

<TABLE>

                                                                                  ----------------------
                                                                                 December 31,  December 31,
                                                                                    1997          1996
                                                                                   --------     --------
<S>                                                                                 <C>           <C>
Bank Credit Facility (a) --
  Term loans,  interest based on various floating libor rate options (8.33%
     and 8.60% weighted average at December 31, 1997 and 1996,
     respectively), payable monthly                                                $432,000     $190,000 
11% Senior Subordinated Notes due 2006 (b)                                          200,000      200,000
Subordinated promissory note to UVC at 11.5% interest, repaid in December 1997         --          8,124
Other                                                                                  --             70
                                                                                   --------     --------
      Total debt                                                                   $632,000     $398,194
                                                                                   ========     ========
</TABLE>

(a)    Bank Credit Facility.

       As of December 31, 1996,  the Company had entered into an amended  credit
       agreement (the "Senior Credit  Facility") with a maximum  availability of
       $265.0  million of which $190.0  million was  available in term loans and
       $75.0  million was available as a revolving  line of credit.  The Company
       had drawn $190.0 million in term loans as of December 31, 1996.

       On December  19,  1997,  the Company  entered  into a Second  Amended and
       Restated Credit Agreement (the "Amended Credit Facility")  increasing the
       available  senior debt by $535.0  million,  for a total  availability  of
       $800.0  million.  The amount  available under the Amended Credit Facility
       includes two term loans of $250.0  million  each  ("Facility A Term Loan"
       and  "Facility  B Term  Loan")  and a  $300.0  million  revolving  credit
       facility ("Revolving Credit Facility").  The Facility A Term Loan and the
       Revolving  Credit  Facility both mature on September 30, 2005. The entire
       outstanding  principal  amount of the Revolving Credit Facility is due on
       September  30, 2005,  with  escalating  principal  payments due quarterly
       beginning  December 31, 1998 under the Facility A Term Loan. The Facility
       B Term Loan matures March 31, 2006 with 95% of the principal being repaid
       in the last two quarters of the term of the facility.

       Under the terms of the Amended Credit Facility,  with certain exceptions,
       the  Company  has a  mandatory  prepayment  obligation  upon a change  of
       control  of the  Company  and the sale of any of its  operating  systems.
       Further, beginning with the year ending December 31, 2001, the Company is
       required to make  prepayments  equal to 50% of its excess  cash flow,  as
       defined in the Amended Credit Facility.  The Company also pays commitment
       fees ranging from 1/2% - 3/8% per annum on the average unborrowed portion
       of the total amount available under the Amended Credit Facility.

       The  Amended  Credit  Facility  also  requires  the  Company to  maintain
       compliance with various financial  covenants  including,  but not limited
       to,  covenants  relating to total  indebtedness,  debt  ratios,  interest
       coverage ratio and fixed charges ratio.  In addition,  the Amended Credit
       Facility has  restrictions on certain  partnership  distributions  by the
       Company.  As of December 31, 1997, the Company was in compliance with the
       financial covenants of the Amended Credit Facility.

       All  partnership  interests  in the Company and all assets of the Company
       and its subsidiaries are pledged as  collateral  for the  Amended  Credit
       Facility.


                                      F-14
<PAGE>

            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(5)      DEBT (continued)

       In order to convert  certain of the  interest  payable at variable  rates
       under the Amended Credit Facility to interest at fixed rates, the Company
       has entered into  interest  rate swap  agreements  for  notional  amounts
       totaling $170,000,  and maturing between November 15, 1999 and October 7,
       2000.  According  to these  agreements,  the Company pays or receives the
       difference  between  (1) an average  fixed rate of 5.932% and (2) various
       available  floating rate options  applied to the same  $170,000  notional
       amount  every  three  months  during the term of the  interest  rate swap
       agreement.  For the years ended  December 31, 1997 and 1996,  the Company
       had recognized an increase in interest expense of approximately  $312 and
       $195, respectively, as a result of these interest rate swap agreements.

       On October 3, 1997,  in order to convert  certain of the future  interest
       payable at various rates under future  indebtedness,  the Company entered
       into a forward interest rate swap agreement, commencing October 15, 1998,
       for a notional  amount totaling  $150,000,  maturing on October 15, 2001.
       According  to  this  agreement,  the  Company  will  pay or  receive  the
       difference  between  (1) a fixed rate of 6.115%  and (2) a floating  rate
       based on three month libor applied to the same $150,000  notional  amount
       every three months during the term of the interest rate swap agreement.

(b)    Senior Subordinated Notes

       On October 7, 1996,  the Company  issued,  pursuant to a public  offering
       (the "Offering"),  $200,000 aggregate  principal amount of the Notes. Net
       proceeds  from the  Offering of  $192,500,  after costs of  approximately
       $7,500, were available to the Company on October 7, 1996.

       In connection  with the  anticipated  issuance of the Notes in connection
       with the  Offering,  the Company  entered  into  deferred  interest  rate
       setting  agreements  to reduce the  Company's  interest  rate exposure in
       anticipation of issuing the Notes. The cost of such agreements, amounting
       to $1,390,  are  recognized  as a component of interest  expense over the
       term of the Notes.

       The  Notes  are  unsecured   subordinated   obligations  of  the  Company
       (co-issued by Capital) that mature on October 15, 2006.  Interest accrues
       at 11% per annum beginning from the date of issuance, and is payable each
       April 15 and October 15, commencing April 15, 1997.

       The   Subordinated   Notes  Indenture  (the   "Indenture")   has  certain
       restrictions on incurrence of indebtedness, distributions, mergers, asset
       sales and changes in control of the Company.

J.P.  Morgan  Investment  Corporation  and First Union  Capital  Partners,  Inc.
("Equity  Holders") are affiliates of the Company,  owning in the  aggregate,  a
37.6% limited  partnership  interest in FVP.  Affiliates  of the Equity  Holders
received  underwriting fees of approximately $3.6 million in connection with the
issuance of the Notes.



                                      F-15
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

(5)      DEBT (continued)

The debt of the Company matures as follows:

                             Year Ended December 31 --
                             1998               $  1,365
                             1999                  8,254
                             2000                 18,455
                             2001                 25,735
                             2002                 33,015
                             Thereafter          545,176
                                                --------
                                                $632,000
                                                ========


(6)    DEFERRED FINANCING COSTS

The  Company   refinanced  its  Senior  Credit   Facility  in  December,   1997.
Accordingly,  the  deferred  financing  costs  related to the initial  debt were
written off. The effect of this write-off was a $5,046 charge to expense and was
recorded  as an  extraordinary  item.  Additional  costs  related to the Amended
Credit Facility were recorded as deferred financing costs during 1997.


(7)    INCOME TAXES

Income taxes have not been  recorded in the  accompanying  financial  statements
because they accrue  directly to the partners.  Taxable  losses  reported to the
partners are different  from those  reported in the  accompanying  statements of
operations due primarily to differences in depreciation and amortization methods
and estimated useful lives under regulations  prescribed by the Internal Revenue
Service.

A reconciliation  between the net loss reported for financial reporting purposes
and the net loss reported for federal income tax purposes is as follows:

<TABLE>
                                                                    --------------------------------------
                                                                     1997            1996            1995
                                                                   --------        --------        --------
<S>                                                                <C>             <C>             <C>      
Net loss for financial reporting purposes                          $(46,863)       $(23,801)       $ (2,703)
Excess depreciation and amortization recorded for income tax        
        purposes                                                    (11,678)        (15,647)           (192)
Other temporary differences                                            (643)            326             186
                                                                   --------        --------        --------
Net loss for federal income tax purposes                           $(59,184)       $(39,122)       $ (2,709)
                                                                   ========        ========        ========
</TABLE>


(8)    FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents  approximate  their fair value
due to the nature and length of maturity of the investments.

The estimated fair value of the Company's  Amended  Credit  Facility is based on
floating  market  rates at December 31,  1997;  therefore,  there is no material
difference  in the  fair  market  value  and the  carrying  value  of such  debt
instruments. The Notes have an aggregate principal amount of $200,000 with a 11%
coupon  rate.  The current fair value for the Notes at December 31, 1997 is 111%
of the face value.





                                      F-16
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts In Thousands

 (9)     COMMITMENTS AND CONTINGENCIES

The Company has annual  commitments  under lease  agreements  for office  space,
equipment,  pole rental and land upon which  certain of its towers and  antennae
are  constructed.  Rent expense for the years ended December 31, 1997,  1996 and
1995 was $4,065, $2,365 and $194, respectively.


Estimated  future  noncancelable  lease  payments  under such lease  obligations
subsequent to December 31, 1997 are as follows:

                            Year Ended December 31 --
                            1998                    $  873
                            1999                       663
                            2000                       412
                            2001                       218
                            2002                       159
                            Thereafter                 279
                                                    ------
                                                    $2,604
                                                    ======

In October 1992,  Congress enacted the Cable Television Consumer and Competition
Act of 1992 (the "1992  Cable  Act") which  greatly  expanded  federal and local
regulation  of  the  cable  television  industry.   The  Federal  Communications
Commission ("FCC") adopted  comprehensive  regulations,  effective  September 1,
1993,  governing  rates  charged  to  subscribers  for  basic  cable  and  cable
programming services which allowed cable operators to justify regulated rates in
excess  of the FCC  benchmarks  through  cost of  service  showings  at both the
franchising  authority  level for basic service and at the FCC level in response
to  complaints  on rates for cable  programming  services.  The FCC also adopted
comprehensive  and restrictive  regulations  allowing  operators to modify their
regulated rates on a quarterly or annual basis using various  methodologies that
account  for the changes in the number of  regulated  channels,  inflation,  and
increases in certain  external costs,  such as franchise and other  governmental
fees,  copyright and  retransmission  consent fees, taxes,  programming fees and
franchise related obligations.  The FCC has also adopted regulations that permit
qualifying  small  cable  operators  to  justify  their  regulated  service  and
equipment rates using a simplified cost-of-service formula.

As a result of such actions,  the Company's basic and tier service rates and its
equipment and installation charges (the "Regulated Services") are subject to the
jurisdiction of local franchising  authorities and the FCC. The Company believes
that  it  has  complied  in all  material  respects  with  the  rate  regulation
provisions  of the federal  law.  However,  the  Company's  rates for  Regulated
Services are subject to review by the FCC, if a complaint has been filed,  or by
the  appropriate  franchise  authority if it is certified by the FCC to regulate
basic rates. If, as a result of the review process, a system cannot substantiate
its  rates,  it could be  required  to  retroactively  reduce  its  rates to the
appropriate  benchmark  and  refund the excess  portion of rates  received.  Any
refunds of the excess  portion of tier service rates would be retroactive to the
date of  complaint.  Any  refunds of the excess  portion of all other  Regulated
Service rates would be  retroactive to one year prior to the  implementation  of
the rate reductions.

The  Company's  agreements  with  franchise  authorities  require the payment of
annual fees which  approximate 3% of system franchise  revenue.  Such franchises
are generally nonexclusive and are granted by local governmental authorities for
a  specified  term of years,  generally  for  extended  periods of up to fifteen
years.






                                      F-17
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To The Shareholder of
FrontierVision Capital Corporation:

We have  audited  the  accompanying  balance  sheets of  FrontierVision  Capital
Corporation  as of  December  31, 1997 and 1996 and the  related  statements  of
operations,  owner's  equity and cash flows for the year ended December 31, 1997
and for the period from July 26, 1996  (inception)  through  December  31, 1996.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial  position  of  FrontierVision  Capital
Corporation  as of December 31, 1997 and 1996 and the results of its  operations
and its cash flows for the year ended  December 31, 1997 and for the period from
July 26  (inception)  through  December 31, 1996 in  conformity  with  generally
accepted accounting principles.


                                         KPMG PEAT MARWICK LLP


Denver, Colorado
March 16, 1998



                                      F-18
<PAGE>


                       FRONTIERVISION CAPITAL CORPORATION
                                 BALANCE SHEETS


<TABLE>
                                                                  ---------------------------
                                                                   December 31,   December 31,
                                                                      1997            1996
                                                                      -----           -----

                                    ASSETS


<S>                                                                   <C>             <C>  
Cash                                                                  $ 143           $ 188
                                                                      -----           -----
            Total assets                                              $ 143           $ 188
                                                                      =====           =====


                        LIABILITIES AND OWNER'S EQUITY

Payable to FVOP                                                       $ 100           $ 100
Owner's equity:
      Common stock, par value $.01; 1,000 shares authorized;
         100 shares issued and outstanding                                1               1    
      Additional paid-in capital                                         99              99
      Retained deficit                                                  (57)            (12)
                                                                      -----           -----
          Total owner's equity                                           43              88
                                                                      -----           -----
          Total liabilities and owner's equity                        $ 143           $ 188
                                                                      =====           =====

</TABLE>























               See accompanying note to the financial statements.



                                      F-19
<PAGE>


                       FRONTIERVISION CAPITAL CORPORATION
                            STATEMENTS OF OPERATIONS


<TABLE>

                                                                     ---------------------------------------
                                                                                            For the Period
                                                                     For the Year         from July 26, 1996
                                                                         Ended            (Inception) through
                                                                     December 31,            December 31,
                                                                         1997                    1996
                                                                      ----------              -------------

<S>                                                                   <C>                     <C>       
Revenue                                                               $        -              $        -
General and administrative expenses                                           45                         12
                                                                      ----------              -------------
   Net loss                                                           $      (45)             $         (12)
                                                                      ==========              =============








</TABLE>

























                 See accompanying note to financial statements.


                                      F-20
<PAGE>



                       FRONTIERVISION CAPITAL CORPORATION
                          STATEMENTS OF OWNER'S EQUITY

<TABLE>


                                            -----------------------------------------------------------
                                            Common         Additional        Retained    Total owner's
                                             stock      paid-in capital      deficit        equity
                                               -----          -----           -----           -----
<S>                                             <C>            <C>             <C>            <C>   
Balance, at July 26, 1996 (inception)          $  --          $  --           $  --          $   --
       Issuance of Common Stock                    1             99              --             100
       Net loss                                   --             --             (12)            (12)
                                               -----          -----           -----           -----    
Balance, December 31, 1996                         1             99             (12)             88
       Net loss                                   --             --             (45)            (45)
                                               -----          -----           -----           -----
Balance, December 31, 1997                     $   1          $  99           $ (57)          $  43
                                               =====          =====           =====           =====

</TABLE>





































                 See accompanying note to financial statements.


                                      F-21
<PAGE>

                       FRONTIERVISION CAPITAL CORPORATION
                            STATEMENTS OF CASH FLOWS

<TABLE>


                                                        --------------------------
                                                                      For the Period
                                                      For the Year      from July 26,
                                                          Ended        1996 through
                                                       December 31,       December 31,
                                                           1997             1996
                                                           -----           -----
Cash flows from operating activities:
<S>                                                        <C>             <C>   
      Net loss                                             $ (45)          $ (12)
      Decrease in receivable from affiliate                   --             100
                                                           -----           -----
      Net cash flows used in operating activities            (45)             88
                                                           -----           -----
Cash flows from investing activities                          --              --
                                                           -----           -----
Cash flows from financing activities:
      Advance from FVOP                                       --             100
                                                           -----           -----
      Net cash flows from financing activities                --             100
                                                           -----           -----
Net increase in cash and cash equivalents                    (45)            188
Cash and cash equivalents, beginning of period               188            --
                                                           -----           -----
Cash and cash equivalents, end of period                   $ 143           $ 188
                                                           =====           =====

</TABLE>


























                 See accompanying note to financial statements.

                                      F-22
<PAGE>




                       FRONTIERVISION CAPITAL CORPORATION
                        NOTE TO THE FINANCIAL STATEMENTS


FrontierVision  Capital Corporation,  a Delaware corporation,  is a wholly owned
subsidiary  of  FrontierVision   Operating  Partners,  L.P.  ("FVOP"),  and  was
organized on July 26, 1996 for the sole purpose of acting as co-issuer with FVOP
of $200 million aggregate principal amount of the 11% Senior Subordinated Notes.




                                      F-23
<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders of
United Video Cablevision, Inc.:

     We have audited the accompanying  divisional  balance sheet of United Video
Cablevision,  Inc.  -- Maine  and Ohio  Divisions  as of  November  8,  1995 and
December 31, 1994,  and the related  statements of divisional  operations,  cash
flows and equity for the period of January 1, 1995 through November 8, 1995, and
for the years ended December 31, 1994 and 1993.  These financial  statements are
the  responsibility  of the  Divisions'  management.  Our  responsibility  is to
express an opinion on these financial statements based on our audit.

     We conducted  our audit 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 from
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 our audit provides a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the  divisional  financial  position of United Video
Cablevision,  Inc.  -- Maine  and Ohio  Divisions  as of  November  8,  1995 and
December 31, 1994,  and the results of its  divisional  operations  and its cash
flows for the period ending  November 8, 1995, and the years ending December 31,
1994 and 1993 in conformity with generally accepted accounting principles.


                                             PIAKER & LYONS, P.C.

May 7, 1996
Vestal, NY




                                      F-24
<PAGE>





                         UNITED VIDEO CABLEVISION, INC.
                            MAINE AND OHIO DIVISIONS
                            DIVISIONAL BALANCE SHEETS


                                                    ------------    ------------
                                                     November 8,    December 31,
                                                       1995             1994
                                                    ------------    ------------
                                     ASSETS
Current Assets
   Cash and Cash Equivalents                         $     75,100  $     35,461
Accounts Receivable (1)
   Accounts Receivable, Trade                             143,673       206,576
   Accounts Receivable, Other                              25,980        31,034
    Less: Allowance for Doubtful Accounts                 (53,994)      (34,928)
                                                     ------------  ------------
Net Accounts Receivable                                   115,659       202,682
                                                     ------------  ------------
    Prepaid Expenses                                      165,080       108,045
                                                     ------------  ------------
Total Current Assets                                      355,839       346,188
                                                     ------------  ------------
Property, Plant and Equipment-- At Cost
    Land                                                   61,556        61,223
    Buildings and Improvements                          1,586,150     1,570,888
    Vehicles                                            2,608,730     2,628,936
    Cable Television Distribution Systems              85,010,454    83,296,885
    Office Furniture, Tools and Equipment               1,386,288     1,363,828
    Less: Accumulated Depreciation (1)                (68,243,467)  (59,163,656)
                                                     ------------  ------------
Net Property, Plant and Equipment                      22,409,711    29,758,104
                                                     ------------  ------------
Intangible Assets
    Franchise Rights                                    1,994,336     1,984,349
    Non Compete Agreements                                 71,753        71,753
    Other Intangible Assets                             1,943,836     1,943,836
    Less: Accumulated Amortization (1)                 (2,930,019)   (2,550,708)
                                                     ------------  ------------
Net Intangible Assets                                   1,079,906     1,449,230
                                                     ------------  ------------
Total Assets                                         $ 23,845,456  $ 31,553,522
                                                     ============  ============

                LIABILITIES AND DIVISIONAL EQUITY
Liabilities
    Accounts Payable                                 $       --    $    684,264
    Subscriber Deposits and Unearned Income               341,263       401,606
    Accrued Franchise Fees                                424,312       469,578
    Accrued Programming Fees                              686,599       513,151
    Other Accrued Expenses                              1,596,134     1,154,024
                                                     ------------  ------------
Total Current Liabilities                               3,048,308     3,222,623
                                                     ------------  ------------

Divisional Equity                                      20,797,148    28,330,899
                                                     ------------  ------------
TOTAL LIABILITIES AND DIVISIONAL EQUITY              $ 23,845,456  $ 31,553,522
                                                     ============  ============









         See the accompanying notes to divisional financial statements.





                                      F-25
<PAGE>





                         UNITED VIDEO CABLEVISION, INC.
                            MAINE AND OHIO DIVISIONS
                       STATEMENTS OF DIVISIONAL OPERATIONS



                                       ------------  ------------  ------------
                                       Period from
                                        January 1,
                                           1995         For the       For the
                                         through      Year Ended     Year Ended
                                        November 8,   December 31,  December 31,
                                           1995          1994           1993
                                       ------------  ------------  ------------
Revenues (1)                           $ 25,417,064  $ 27,964,550  $ 27,917,090
Operating Expenses
   Programming                            5,350,664     5,717,160     5,361,127
   Plant and Operation                    3,741,207     4,185,894     3,902,847
   General and Administrative             3,754,474     4,415,919     4,628,442
   Marketing and Advertising                276,712       248,572       409,890
   Corporate Overhead (3)                 1,270,072     1,327,127     1,470,702
   Depreciation and Amortization (1)      9,625,116    11,225,978     9,960,536
                                       ------------  ------------  ------------
Total Expenses                           24,018,245    27,120,650    25,733,544
                                       ------------  ------------  ------------
Operating Income                          1,398,819       843,900     2,183,546
                                       ------------  ------------  ------------
Other (Income) Expense
   Interest Expense (1)                   4,086,738     4,892,250     4,960,032
   Gain on Sale of Fixed Assets             (25,034)      (33,835)      (33,810)
                                       ------------  ------------  ------------
Total Other (Income) Expense              4,061,704     4,858,415     4,926,222
                                       ------------  ------------  ------------
Net Loss                               $ (2,662,885) $ (4,014,515) $ (2,742,676)
                                       ============  ============  ============



























         See the accompanying notes to divisional financial statements.





                                      F-26
<PAGE>





                         UNITED VIDEO CABLEVISION, INC.
                            MAINE AND OHIO DIVISIONS
                         STATEMENTS OF DIVISIONAL EQUITY



                                    ------------    ------------    ------------
                                        1995            1994            1993
                                    ------------    ------------    ------------

Balance, January 1,                $ 28,330,899    $ 32,700,089    $ 37,526,944
     Net Loss                        (2,662,885)     (4,014,515)     (2,742,676)
     Payments to Corporate
      Division, Net                  (4,870,866)       (354,675)     (2,084,179)
                                   ------------    ------------    ------------
Balance, November 8, 1995          $ 20,797,148
                                   ============
Balance, December 31,                              $ 28,330,899    $ 32,700,089
                                                   ============    ============









































         See the accompanying notes to divisional financial statements.




                                      F-27
<PAGE>





                         UNITED VIDEO CABLEVISION, INC.
                            MAINE AND OHIO DIVISIONS
                       STATEMENTS OF DIVISIONAL CASH FLOWS

<TABLE>
<CAPTION>

                                                  Period from
                                                   January 1,
                                                      1995         For the       For the
                                                   through       Year Ended   Year Ended
                                                  November 8,    December 31, December 31,
                                                      1995          1994          1993
                                                   ----------   -----------    ----------
<S>                                                <C>             <C>         <C>
Increase (Decrease) in Cash and Cash Equivalents
Operating Activities
  Net Loss                                        $(2,662,885)  $(4,014,515)  $(2,742,676)
                                                   ----------   -----------    ----------
Adjustments to Reconcile Net Loss to Net Cash
   Provided by Operations:
   Depreciation                                     9,245,805    10,771,263     9,497,062
   Amortization of Intangibles                        379,311       454,715       463,474
   Allowance for Doubtful Accounts                     19,066         6,124        (3,077)
   Gain on Sale of Assets                             (25,034)      (33,835)      (33,810)
Changes in Operating Assets and Liabilities,
    Net of Effects from Acquisition of Corporate
    Entities:
    Accounts Receivable and Other Receivables          67,957      (132,182)      122,248
    Prepaid Expenses                                  (57,035)       13,897      (158,603)
    Accounts Payable and Accrued Expenses            (113,972)     (846,244)      (52,046)
    Subscriber Deposits and Unearned Income           (60,343)      (45,895)      (72,253)
                                                   ----------   -----------    ----------
Total Adjustments                                   9,455,755    10,187,843     9,762,995
                                                   ----------   -----------    ----------
Net Cash Provided by Operating Activities           6,792,870     6,173,328     7,020,319
                                                   ----------   -----------    ----------
Investing Activities
   Purchase of Property, Plant and Equipment       (2,037,144)   (5,712,592)   (5,024,998)
   Acquisition of Intangible Assets                    (9,987)     (216,154)       (1,928)
   Proceeds from Sale of Assets                       164,766        41,789        37,660
                                                   ----------   -----------    ----------
Net Cash Used in Investing Activities              (1,882,365)   (5,886,957)   (4,989,266)
                                                   ----------   -----------    ----------
   Payments to Corporate Division, Net             (4,870,866)     (354,675)   (2,084,179)
                                                   ----------   -----------    ----------
Net Increase (Decrease) in Cash Equivalents            39,639       (68,304)      (53,126)
   Cash and Cash Equivalents at Beginning of
     Period                                            35,461       103,765       156,891
                                                   ----------   -----------    ----------
Cash and Cash Equivalents at End of Period         $   75,100   $    35,461    $  103,765
                                                   ==========   ===========    ==========
Supplemental Disclosures of Cash Flow
   Information:
   Interest Paid                                 $  4,086,738  $  4,892,250  $  4,960,032
   Income Taxes Paid                                     --            --            --
</TABLE>

DISCLOSURE OF ACCOUNTING POLICY:

For purposes of the statement of cash flows,  the Divisions  consider all highly
liquid debt instruments  purchased with a maturity of three months or less to be
cash equivalents.








         See the accompanying notes to divisional financial statements.




                                      F-28
<PAGE>





                         UNITED VIDEO CABLEVISION, INC.
                            MAINE AND OHIO DIVISIONS
                    NOTES TO DIVISIONAL FINANCIAL STATEMENTS
                                November 8, 1995

(1) SUMMARY OF SIGNIFICANT ACCOUNTING, POLICIES

BUSINESS ACTIVITY

The  accompanying  divisional  financial  statements  include the Maine and Ohio
Divisions of United Video Cablevision, Inc. (the "Divisions"). The Divisions are
engaged in providing  cable  television  programming  services to subscribers in
their franchised areas. The Corporate  division  allocates debt to the operating
divisions based upon the respective  acquisition and construction costs relative
to the debt incurred. Accordingly,  interest has been allocated to the operating
divisions by the Corporate  division in the same manner.  For the purpose of the
divisional financial  statements,  debt has been reflected as division equity in
the  accompanying  financial  statements  under the terms of the agreement  with
FrontierVision Operating Partners, L.P., as no such debt will be assumed.

CONCENTRATIONS OF CREDIT RISK

The Divisions'  trade  receivables are comprised of amounts due from subscribers
in varying  regions  throughout the states.  Concentrations  of credit risk with
respect to trade  receivables  are limited due to the large  number of customers
comprising the Divisions' customer base and geographic dispersion.

REVENUE RECOGNITION

The Divisions  recognize  service  revenues on the accrual basis in the month in
which the service is to be provided.  Payments  received in advance are included
in  deferred  revenue  until the month  they  become  due at which time they are
recognized as income.

CAPITALIZATION AND DEPRECIATION

In  accordance  with  Statement No. #51 of the  Financial  Accounting  Standards
Board,  the Divisions have adopted the policy of capitalizing  certain  expenses
applicable to the construction and operating of a cable television system during
the period while the cable television system is partially under construction and
partially  in  service.  For the  period  ended  November  8,  1995,  the  total
capitalized  costs  amounted  to  $314,347.  During  1994 and  1993,  the  total
capitalized costs amounted to $244,276 and $300,429, respectively.

The Divisions,  for financial  reporting purposes,  provide  depreciation on the
straight-line  method, which is considered adequate for the recovery of the cost
of the properties  over their estimated  useful lives.  For income tax purposes,
however, the Divisions utilize both accelerated methods and the accelerated cost
recovery  system.  For the period  ended  November 8, 1995,  the  provision  for
depreciation  in  the   accompanying   statements  of  operations   amounted  to
$9,245,805.  For the years  ended  December  31,  1994 and 1993,  the  provision
amounted to $10,771,263 and $9,497,062, respectively.





                                      F-29
<PAGE>




                         UNITED VIDEO CABLEVISION, INC.
                            MAINE AND OHIO DIVISIONS
              NOTES TO DIVISIONAL FINANCIAL STATEMENTS (continued)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING, POLICIES (continued)

Depreciation lives for financial statement purposes are as follows:

Headend Equipment
   Tower                                                               12 Years
   Antennae                                                             7 Years
   Other Headend Equipment                                              8 Years
   Trunk and Distribution Equipment
   Traps, Descramblers, Converters, Decoders                            5 Years
   Other Trunk and Distribution Equipment                               8 Years
   Test Equipment                                                       5 Years
   Local Origination Equipment                                          8 Years
   Vehicles                                                             3 Years
   Furniture and Fixtures                                              10 Years
   Leasehold Improvements                                               8 Years
   Computer and EDP Equipment                                           5 Years

AMORTIZATION

The Divisions are amortizing  various intangible assets acquired and incurred on
a  straight-line  basis,  generally  from 5 to 40 years.  For the  period  ended
November 8, 1995, the provision for amortization in the accompanying  statements
of operations  amounted to $379,311.  For the years ended  December 31, 1994 and
1993, the provision amounted to $454,715 and $463,474, respectively.

INCOME TAXES

The Divisions are a part of United Video Cablevision,  Inc. which has elected to
be taxed as a small business  corporation under  "Sub-Chapter S" of the Internal
Revenue Code effective January 1, 1987, wherein the stockholders of United Video
Cablevision, Inc. are taxed on any earnings or losses of the Company.

BAD DEBTS

The  Divisions  have adopted the reserve  method for  recognizing  bad debts for
financial statement purposes and continue to utilize the direct write-off method
for tax purposes.

USE OF ESTIMATES

Management  uses estimates and  assumptions in preparing  financial  statements.
Those  estimates  and  assumptions  affect  the  reported  amounts of assets and
liabilities,  the  disclosure  of  contingent  assets and  liabilities,  and the
reported revenues and expenses.

(2) COMMITMENTS

The Divisions were committed to annual pole rentals of approximately $823,000 at
November  8, 1995 and  $830,000  and  $832,000  at  December  31, 1994 and 1993,
respectively,  to various utilities. These agreements are subject to termination
rights by both parties.

The  Divisions  lease in various  systems the land upon which  their  towers and
antennae are constructed. The annual rental payments under these leases amounted
to approximately $37,000 at November 8, 1995,  approximately $37,000 at December
31, 1994 and approximately $46,000 at December 31, 1993.



                                      F-30
<PAGE>




                         UNITED VIDEO CABLEVISION, INC.
                            MAINE AND OHIO DIVISIONS
              NOTES TO DIVISIONAL FINANCIAL STATEMENTS (continued)

(3) MANAGEMENT AGREEMENT WITH RELATED PARTY

The Divisions are being provided with certain  management and technical services
by a related  party by means of a  management  agreement.  For the period  ended
November 8, 1995, the allocated  billings  amounted to  $1,270,072,  and for the
years ended  December 31, 1994 and 1993,  billings  amounted to  $1,327,127  and
$1,470,702, respectively.

(4) SALE OF DIVISIONS

On November 9, 1995, United Video Cablevision,  Inc. consummated an agreement by
which  it  sold  substantially  all of the net  assets  and  associated  current
liabilities  in  its  Maine  and  Ohio  franchise   areas  (the  Divisions)  for
approximately $120,500,000. Upon the completion of the transaction, United Video
Cablevision, Inc. realized a gain of approximately $100,000,000.






                                      F-31
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

Cox Communications, Inc.:

We have  audited  the  accompanying  combined  statements  of net  assets of the
combined  operations of Cox  Communications,  Inc.'s  ("CCI")  cable  television
systems  serving  57  communities  in  Ashland,   Kentucky  and  Defiance,  Ohio
(collectively referred to as the "Ashland and Defiance Clusters" or "Successor")
whose assets and certain  liabilities were acquired by FrontierVision  Operating
Partners,  L.P. on April 9, 1996,  as of December 31, 1994  ("Predecessor")  and
1995 ("Successor"),  and the related combined statements of operations,  changes
in net  assets,  and cash flows for the years ended  December  31, 1993 and 1994
(Predecessor),  for the one-month  period ended January 31, 1995  (Predecessor),
and for the  eleven-month  period  ended  December 31, 1995  (Successor).  These
financial  statements  are  the  responsibility  of  the  Ashland  and  Defiance
Clusters'  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 combined  financial  statements  referred to above  present
fairly,  in all material  respects,  the  financial  position of the Ashland and
Defiance Clusters at December 31, 1994  (Predecessor) and 1995 (Successor),  and
the  combined  results  of its  operations  and its cash  flows for years  ended
December 31, 1993 and 1994 (Predecessor), for the one-month period ended January
31, 1995 (Predecessor),  and for the eleven-month period ended December 31, 1995
(Successor), in conformity with generally accepted accounting principles.

As discussed in Note 1, effective February 1, 1995, CCI acquired the Ashland and
Defiance  Clusters in  connection  with the  acquisition  of Times  Mirror Cable
Television, Inc.

DELOITTE & TOUCHE LLP

Atlanta, Georgia
April 10, 1996




                                      F-32
<PAGE>





                          ASHLAND AND DEFIANCE CLUSTERS
                        COMBINED STATEMENTS OF NET ASSETS
                                  In Thousands

<TABLE>
<CAPTION>

                                                                   --------------------
                                                                  Successor   Predecessor
                                                                December 31,  December 31,
                                                                     1995        1994
                                                                   --------    --------
                                     ASSETS
     <S>                                                           <C>         <C>
     Cash                                                                      $    188
     Accounts Receivable-- Less allowance for doubtful accounts
     of $43 and $37                                                $  1,784       1,563
     Amounts Due From Affiliate                                       5,848
     Intercompany Income Taxes Receivable                             1,182
     Net Plant and Equipment                                         25,621      18,096
     Intangible Assets                                              110,796      51,210
     Other Assets                                                     1,149         580
                                                                   --------    --------
                                                                   $146,380    $ 71,637
                                                                   ========    ========

                           LIABILITIES AND NET ASSETS
     Accounts Payable                                                 $ 580       $ 692
     Accrued Expenses                                                   966         915
     Intercompany Income Taxes Payable                                            2,160
     Deferred Income                                                  1,355       1,142
     Deferred Income Taxes                                            7,644       3,147
     Other Liabilities                                                  146          99
     Amounts Due to Affiliate                                                    52,317
                                                                   --------    --------
      Total liabilities                                              10,691      60,472
NET ASSETS                                                          135,689      11,165
                                                                   --------    --------
                                                                   $146,380    $ 71,637
                                                                   ========    ========
</TABLE>
























                   See notes to combined financial statements.




                                      F-33
<PAGE>





                          ASHLAND AND DEFIANCE CLUSTERS
                        COMBINED STATEMENTS OF OPERATIONS
                                  In Thousands

<TABLE>
<CAPTION>

                                           -----------------------------------------------
                                           Successor              Predecessor
                                           --------     ----------------------------------
                                         Eleven Months  One Month
                                             Ended        Ended           Year Ended
                                          December 31,  January 31,       December 31,
                                                                     ---------------------
                                              1995         1995         1994        1993
                                           --------     --------     --------     --------
<S>                                        <C>          <C>          <C>          <C>
REVENUES                                   $ 24,628     $  2,096     $ 25,235     $ 24,679
Costs and Expenses
Operating                                     8,035          689        7,188        6,773
   Selling, general, and administrative       4,919          503        5,507        5,398
   Depreciation                               5,480          214        3,293        3,413
   Amortization                               2,727          128        1,830        2,129
                                           --------     --------     --------     --------
    Total costs and expenses                 21,161        1,534       17,818       17,713
                                           --------     --------     --------     --------
Operating Income                              3,467          562        7,417        6,966
Interest Income-- Net                                         79          434          133
Other-- Net                                     (29)                       (3)          (4)
                                           --------     --------     --------     --------
Income Before Income Taxes                    3,438          641        7,848        7,095
Income Taxes                                  3,749          248        3,982        3,559
                                           --------     --------     --------     --------
NET INCOME (LOSS)                          $   (311)    $    393     $  3,866     $  3,536
                                           ========     ========     ========     ========

</TABLE>


























                   See notes to combined financial statements.




                                      F-34
<PAGE>





                          ASHLAND AND DEFIANCE CLUSTERS
                  COMBINED STATEMENTS OF CHANGES IN NET ASSETS
                                  In Thousands

PREDECESSOR
Balance, January 1, 1993                                               $ 11,303
   Net income for the year ended December 31, 1993                        3,536
   Dividends to Affiliate                                                (1,570)
                                                                      ---------
Balance, December 31, 1993                                               13,269
   Net income for the year ended December 31, 1994                        3,866
   Dividends to Affiliate                                                (5,970)
                                                                      ---------
Balance, December 31, 1994                                               11,165
   Net income for the one month ended January 31, 1995                      393
                                                                      ---------
Balance, January 31, 1995                                             $  11,558
                                                                      =========

SUCCESSOR
Fair Value of Assets Acquired and Liabilities Assumed from
   Times Mirror Cable Television, Inc. on February 1, 1995            $ 136,000
   Net loss for the eleven months ended December 31, 1995                  (311)
                                                                      ---------
BALANCE, DECEMBER 31, 1995                                            $ 135,689
                                                                      =========
































                   See notes to combined financial statements.



                                      F-35
<PAGE>



                          ASHLAND AND DEFIANCE CLUSTERS
                        COMBINED STATEMENTS OF CASH FLOWS
                                  In Thousands

<TABLE>
<CAPTION>

                                                                        -----------------------------------------------------------
                                                                        Successor                       Predecessor
                                                                        --------         ------------------------------------------
                                                                      Eleven Months      One Month              Year Ended
                                                                         Ended            Ended                 December 31,
                                                                       December 31,      January 31,      -------------------------
                                                                          1995             1995             1994             1993
                                                                        --------         --------         --------         --------
<S>                                                                     <C>              <C>              <C>              <C>
OPERATING ACTIVITIES:
   Net income (loss)                                                    $   (311)        $    393         $  3,866         $  3,536
   Adjustments to reconcile net income (loss)to net cash
     provided by operating activities:
     Depreciation and amortization                                         8,207              342            5,123            5,542
     Deferred income taxes                                                  (142)             (70)             298              293
     (Increase) decrease in accounts receivable                             (287)              66              114              (45)
     Increase (decrease) in accounts payable and
       accrued expenses                                                      467             (360)            (214)             (92)
     Income taxes payable                                                 (1,182)              31            1,914             (906)
     Other, net                                                              274               45              162              (61)
                                                                         --------         --------         --------         --------
       Net cash provided by operating activities                           7,026              447           11,263            8,267
INVESTING ACTIVITIES:
   Capital expenditures                                                   (1,362)             (65)          (3,795)          (6,075)
   Advances to Affiliate                                                  (5,848)
                                                                         --------         --------         --------         --------
     Net cash used in investing activities                                (7,210)             (65)          (3,795)          (6,075)
FINANCING ACTIVITIES:
   Net change in amounts due to Affiliate                                                    (386)          (1,466)            (580)
   Dividends paid                                                                                           (5,970)          (1,570)
                                                                        --------         --------         --------         --------
   Net cash used in financing activities                                                     (386)          (7,436)          (2,150)
                                                                        --------         --------         --------         --------
NET INCREASE (DECREASE) IN CASH                                             (184)              (4)              32               42
CASH AT BEGINNING OF PERIOD                                                  184              188              156              114
                                                                        --------         --------         --------         --------
CASH AT END OF PERIOD                                                         --          $   184              188         $    156
                                                                        --------         --------         --------         --------
CASH PAID DURING THE PERIOD FOR:
   interest                                                             $     --          $    79         $    434         $    133
                                                                        --------         --------         --------         --------

</TABLE>




















                   See notes to combined financial statements.




                                      F-36
<PAGE>





                          ASHLAND AND DEFIANCE CLUSTERS
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 1993 AND 1994,
                      ONE MONTH ENDED JANUARY 31, 1995, AND
                      ELEVEN MONTHS ENDED DECEMBER 31, 1995

(1) ORGANIZATION AND BASIS OF PRESENTATION

These combined  financial  statements  represent the combined  operations of Cox
Communications,  Inc.'s ("CCI") cable television  systems serving 57 communities
in  Ashland,  Kentucky  and  Defiance,  Ohio  (collectively  referred  to as the
"Ashland  and Defiance  Clusters")  whose  assets and certain  liabilities  were
acquired by  FrontierVision  Operating  Partners,  L.P. on April 9, 1996.  These
cable  television  systems were acquired by CCI, a majority owned  subsidiary of
Cox Enterprises, Inc. ("CEI"), from The Times Mirror Company ("Times Mirror") in
connection  with  CCI's  acquisition  of Times  Mirror  Cable  Television,  Inc.
("TMCT") on  February  1, 1995.  The  operations  of the  Ashland  and  Defiance
Clusters  prior to February  1, 1995 are  referred  to as  "Predecessor"  and as
"Successor" after February 1, 1995.

All significant  intercompany  accounts and transactions have been eliminated in
combination.  The acquisition of the Ashland and Defiance Clusters was accounted
for by the purchase  method of  accounting,  whereby the allocable  share of the
TMCT  purchase  price was pushed  down to the assets  acquired  and  liabilities
assumed  based on  their  fair  values  at the date of  acquisition  as  follows
(thousands of dollars):

Net working capital                                                   $  (2,836)
Plant and equipment                                                      30,022
Deferred taxes related to plant and equipment write-up                   (4,709)
Intangible Assets                                                       113,523
                                                                      ---------
                                                                      $ 136,000
                                                                      =========

The historical  combined  financial  statements do not  necessarily  reflect the
results of  operations  or  financial  position  that would have existed had the
Ashland and Defiance Clusters been an independent company.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

The Ashland and Defiance  Clusters  bill their  customers  in advance;  however,
revenue is recognized as cable television services are provided. Receivables are
generally  collected  within 30 days.  Credit  risk is managed by  disconnecting
services to customers who are delinquent  generally  greater than 60 days. Other
revenues are  recognized  as services are provided.  Revenues  obtained from the
connection  of customers to the cable  television  systems are less than related
direct selling costs; therefore, such revenues are recognized as received.

PLANT AND EQUIPMENT

Depreciation  is computed using  principally the  straight-line  method at rates
based upon  estimated  useful lives of 5 to 20 years for  buildings and building
improvements,  5 to 12 years for cable television systems, and 3 to 10 years for
other plant and equipment.

The costs of initial cable television connections are capitalized as cable plant
at standard  rates for the Ashland and  Defiance  Clusters'  labor and at actual
costs for materials and outside labor.  Expenditures for maintenance and repairs
are charged to operating expense as incurred. At the time of retirements,  sales
or other  dispositions  of property,  the original cost and related  accumulated
depreciation are written off.


                                      F-37
<PAGE>



                          ASHLAND AND DEFIANCE CLUSTERS
               NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

INTANGIBLE ASSETS

Intangible  assets consist primarily of goodwill and franchise costs recorded in
business combinations which is amortized on a straight-line basis over 40 years.
The Ashland and Defiance Clusters assess on an on-going basis the recoverability
of intangible  assets based on estimates of future  undiscounted  cash flows for
the applicable business acquired compared to net book value.

INCOME TAXES

Through January 31, 1995, the accounts of the Ashland and Defiance Clusters were
included in the consolidated federal income tax returns and certain state income
tax returns of Times Mirror.  Beginning on February 1, 1995, the accounts of the
Ashland and Defiance  Clusters were included in the consolidated  federal income
tax returns and certain  state  income tax returns of CEI.  Current  federal and
state income tax expenses and benefits are allocated on a separate  return basis
to the Ashland and  Defiance  Clusters  based on the current year tax effects of
the inclusion of their income,  expenses, and credits in the consolidated income
tax returns of Times Mirror, CEI, or based on separate state income tax returns.

Deferred income taxes arise from temporary  differences between income taxes and
financial reporting and principally relate to depreciation and amortization.

FEES AND TAXES

The Ashland and Defiance  Clusters  incur  various fees and taxes in  connection
with the operation of their cable television  systems,  including franchise fees
paid to various franchise authorities, copyright fees paid to the U.S. Copyright
Tribunal,  and  business  and  franchise  taxes  paid to the  States of Ohio and
Kentucky.  A portion of these fees and taxes are passed  through to the  Ashland
and Defiance  Clusters'  subscribers.  Amounts  collected from  subscribers  are
recorded as a reduction of operating expenses.

PENSION AND POSTRETIREMENT BENEFITS

CCI generally  provides defined pension benefits to all employees based on years
of service and compensation during those years. CEI provides certain health care
and life insurance  benefits to  substantially  all retirees and employees.  For
employees and retirees of the Ashland and Defiance Clusters,  these benefits are
provided  through the CCI plans.  Expense related to these plans is allocated to
the Ashland and Defiance Clusters through the intercompany  account.  The amount
of the allocations is generally based on actuarial determinations of the effects
of the Ashland and Defiance Clusters employees' participation in the plans.

Times Mirror Cable generally  provides defined pension benefits to all employees
based on years of service and the employee's  compensation  during the last five
years of employment.  Prior to December 31, 1992,  these benefits were primarily
provided under the Times Mirror Cable Television,  Inc. Pension Plan (the "Times
Mirror  Cable  Plan")  in  conjunction  with the  Times  Mirror  Employee  Stock
Ownership  Plan.  On December 31,  1992,  the Times Mirror Cable Plan was merged
with the Times Mirror Pension Plan.

Net periodic pension expense for 1993 and 1994 was estimated by an actuary under
the  assumption  that the Times Mirror Cable Plan  continued to be a stand-alone
plan.  This expense was allocated to the Ashland and Defiance  Clusters based on
its salary expense as a percentage of total TMCT salary expense.


                                      F-38
<PAGE>



                          ASHLAND AND DEFIANCE CLUSTERS
               NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

USE OF ESTIMATES

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived  Assets to Be Disposed of," was issued.  This Statement  requires
that long-lived  assets and certain  intangibles be reviewed for impairment when
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable,  with any impairment losses being reported in the period
in which the  recognition  criteria are first applied based on the fair value of
the asset.  Long-lived  assets and  certain  intangibles  to be  disposed of are
required to be reported at the lower of carrying  amount or fair value less cost
to sell. CCI, including the Ashland and Defiance Clusters,  adopted SFAS No. 121
in the first quarter of 1996.  The effect on the combined  financial  statements
upon adoption of SFAS No. 121 was not significant.

(3) CASH MANAGEMENT SYSTEM

The Ashland and Defiance Clusters  participate in CEI's cash management  system,
whereby the bank sends daily  notification of checks presented for payment.  CEI
transfers  funds from other  sources to cover the checks  presented for payment.
Prior to February 1, 1995, the Ashland and Defiance  Clusters  participated in a
similar cash management system with Times Mirror.

(4) PLANT AND EQUIPMENT

Plant and equipment is summarized as follows (Thousands of Dollars):


                                                        -----------------------
                                                        Successor    Predecessor
                                                       December 31, December 31,
                                                          1995           1994
                                                        -----------------------
Land                                                    $      5       $     10
Buildings and building improvements                          207            646
Transmission and distribution plant                       30,235         34,543
Miscellaneous equipment                                      343            472
Construction in progress                                       3             59
                                                        --------       --------
      Plant and equipment, at cost                        30,793         35,730
Less accumulated depreciation                             (5,172)       (17,634)
                                                        --------       --------
      Net plant and equipment                           $ 25,621       $ 18,096
                                                        ========       ========





                                      F-39
<PAGE>




                          ASHLAND AND DEFIANCE CLUSTERS
               NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

(5) INTANGIBLE ASSETS

Intangible assets are summarized as follows (Thousands of Dollars):


                                                    ----------------------------
                                                    Successor        Predecessor
                                                   December 31,     December 31,
                                                      1995               1994
                                                    ---------         ---------
Goodwill                                            $ 113,523         $  60,907
Other                                                                       134
                                                    ---------         ---------
      Total                                           113,523            61,041
Less accumulated amortization                          (2,727)           (9,831)
                                                    ---------         ---------
      Net intangible assets                         $ 110,796         $  51,210
                                                    =========         =========

(6) INCOME TAXES

Income tax expense (benefit) is summarized as follows (Thousands of Dollars):


                                      ------------------------------------------
                                      Successor            Predecessor
                                      -------     ------------------------------
                                   Eleven Months One Month        Year Ended
                                       Ended       Ended         December 31,
                                    December 31, January 31,  ------------------
                                        1995        1995       1994        1993
                                      -------     -------     -------    -------
Current:
   Federal                            $ 3,054     $   248     $ 2,866    $ 2,614
   State                                  837          70         818        652
                                      -------     -------     -------    -------
     Total current                      3,891         318       3,684      3,266
                                      -------     -------     -------    -------
Deferred:
   Federal                               (113)        (68)        183        250
   State)                                 (29          (2)        115         43
                                      -------     -------     -------    -------
     Total deferred                      (142)        (70)        298        293
                                      -------     -------     -------    -------
     Total income taxes               $ 3,749     $   248     $ 3,982    $ 3,559
                                      =======     =======     =======    =======

The tax effects of  significant  temporary  differences  which  comprise the net
deferred tax liabilities are as follows (Thousands of Dollars):


                                                        -----------------------
                                                              December 31,
                                                        -----------------------
                                                          1995            1994
                                                        -------         -------
Plant and equipment                                     $ 7,942         $ 3,408
Other                                                      (298)           (261)
                                                        -------         -------
     Net deferred tax liability                         $ 7,644         $ 3,147
                                                        =======         =======





                                      F-40
<PAGE>




                          ASHLAND AND DEFIANCE CLUSTERS
               NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

(6) INCOME TAXES (continued)

Income tax expense  computed using the United States federal  statutory rates is
reconciled to the reported income tax provisions as follows:

<TABLE>
<CAPTION>

                                                     ----------------------------------------------
                                                     Successor               Predecessor
                                                     -------      ---------------------------------
                                                  Eleven Months    One Month        Year Ended
                                                       Ended         Ended         December 31,
                                                    December 31,   January 31,  -------------------
                                                       1995           1995       1994         1993
                                                     -------      -------       -------     -------
<S>                                                   <C>         <C>           <C>         <C>
Federal statutory income tax rate                          35%          35%          35%         35%
Computed tax expense at federal statutory rates on
   income before income taxes                         $ 1,203      $   224      $ 2,747     $ 2,483
State income taxes (net of federal tax benefit)           534           33          560         424
Acquisition adjustments                                 2,033           44          543         541
1% increase in enacted tax rate                                                                  76
Other, net                                                (21)         (53)         132          35
                                                      -------      -------      -------     -------
       Income tax provision                           $ 3,749      $   248      $ 3,982     $ 3,559
                                                      =======      =======      =======     =======
</TABLE>

(7) RETIREMENT PLANS

As a result of the  acquisition of TMCT by CCI,  effective  January 1, 1996, CEI
established  the Cox  Communications,  Inc.  Pension  Plan (the "CCI  Plan"),  a
noncontributory  defined benefit plan for  substantially  all of CCI's employees
including  Ashland and Defiance  Clusters'  employees.  The Ashland and Defiance
Clusters  employees will become  participants in the CCI Plan retroactive to the
Merger  date of  February  1,  1995.  The CCI Plan  will be  established  with a
transfer  of plan  assets  from CEI and Times  Mirror.  The CCI Plan  assets are
expected to have an estimated  fair value equal to or greater than the projected
benefit obligation attributable to substantially all of the Ashland and Defiance
Clusters employees.  Prior to February 1, 1995, substantially all of the Ashland
and Defiance Clusters' employees  participated in a similar defined benefit plan
provided by TMCT. Several of the Ashland and Defiance  Clusters'  employees were
covered  under a  separate  defined  benefit  plan  funded by the  Communication
Workers of America.

Assumptions used in the actuarial computations were:


                                                       ---------------------
                                                            December 31,
                                                       ---------------------
                                                       1995    1994      1993
                                                       ----    ----      ----
Discount rate                                          7.25%   8.25%     7.50%
Rate of increase in compensation levels                5.00    6.00      6.25
Expected long-term rate of return on assets            9.00    9.50      9.75
                                                       ----    ----      ----

Total  pension  expense  allocated  to the Ashland  and  Defiance  Clusters  was
$53,000,  $44,000,  $0, and $64,000 for the years  ended  December  31, 1993 and
1994,  for the  one-month  period ended January 31, 1995,  and the  eleven-month
period ended December 31, 1995, respectively.

Beginning  February 1, 1995, CEI provides certain health care and life insurance
benefits  to   substantially   all   retirees  of  CEI  and  its   subsidiaries,
Postretirement expense allocated to the Ashland and Defiance Clusters by CEI was
$14,000 for the eleven months ended December 31, 1995.





                                      F-41
<PAGE>




                          ASHLAND AND DEFIANCE CLUSTERS
               NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

(7) RETIREMENT PLANS (continued)

The  funded  status of the  portion  of the  postretirement  plan  covering  the
employees  of  the  Ashland  and  Defiance  Clusters  is not  determinable.  The
accumulated postretirement benefit obligation for the postretirement plan of CEI
substantially exceeded the fair value of assets held in the plan at December 31,
1995.

Beginning  February  1, 1995,  substantially  all of the  Ashland  and  Defiance
Clusters  employees  were eligible to  participate in the savings and investment
plan of CEI.  Under the terms of the plan,  the  Ashland and  Defiance  Clusters
match 50% of employee contributions up to a maximum of 6% of the employee's base
salary.  Prior to February 1, 1995, the Ashland and Defiance Clusters  employees
were eligible to participate in a similar savings and investment plan with Times
Mirror.  The Ashland and Defiance  Clusters' expense under the plan was $39,000,
$43,000, $3,000, and $44,000 for the years ended December 31, 1993 and 1994, for
the one-month period ended January 31, 1995, and the  eleven-month  period ended
December 31, 1996, respectively.

(8) TRANSACTIONS WITH AFFILIATED COMPANIES

The Ashland and Defiance  Clusters  borrow  funds for working  capital and other
needs from CEI.  Certain  management  services  are  provided to the Ashland and
Defiance  Clusters  by CCI and  CEI.  Such  services  include  legal,  corporate
secretarial,   tax,   treasury,   internal  audit,  risk  management,   benefits
administration,  and other  support  services.  Prior to February  1, 1995,  the
Ashland and Defiance Clusters had similar  arrangements  with Times Mirror.  The
Ashland  and  Defiance  Clusters  were  allocated  expenses  for the years ended
December 31, 1993 and 1994, for the one-month period ended January 31, 1995, and
the  eleven-month  period ended December 31, 1995 of  approximately  $1,040,000,
$1,298,000, $117,000, and $1,513,000,  respectively,  related to these services.
Such expenses are estimated by management and are generally  allocated  based on
the number of customers served.  Management believes that these allocations were
made,  on a reasonable  basis.  However,  the  allocations  are not  necessarily
indicative  of the level of  expenses  that  might  have been  incurred  had the
Ashland and Defiance Clusters contracted directly with third parties. Management
has not made a study or any  attempt  to obtain  quotes  from  third-parties  to
determine what the cost of obtaining such services from third parties would have
been. The fees and expenses to be paid by the Ashland and Defiance  Clusters are
subject to change.

The  amounts  due from  affiliate  represent  the net of  various  transactions,
including those described above.  Prior to February 1, 1995, amounts due from/to
Times Mirror bore interest at Times Mirror's  estimated  ten-year financing rate
and ranged between 6% and 8% between 1993 and 1994. Interest income for 1993 and
1994 was  $133,000  and  $434,000,  respectively.  Effective  February  1, 1995,
advances to affiliate are noninterest-bearing.

In accordance  with the  requirements of SFAS No. 107,  "Disclosures  About Fair
Value  of  Financial  Instruments,"  the  Ashland  and  Defiance  Clusters  have
estimated  the fair value of its  intercompany  advances.  Given the  short-term
nature of these advances,  the carrying  amounts  reported in the balance sheets
approximate fair value.

(9) COMMITMENTS AND CONTINGENCIES

The Ashland and Defiance  Clusters lease office  facilities and various items of
equipment under noncancelable  operating leases.  Rental expense under operating
leases  amounted to $119,000 and $122,000 for the years ended  December 31, 1993
and 1994 and  $163,000  for the  eleven-month  period  ended  December 31, 1995.
Future  minimum  lease  payments as of December  31, 1995 for all  noncancelable
operating leases are as follows (Thousands of Dollars),


                                      F-42
<PAGE>



                         ASHLAND AND DEFIANCE CLUSTERS
               NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

(9) COMMITMENTS AND CONTINGENCIES (continued)

     1996                                                                   $126
     1997                                                                    103
     1998                                                                     59
     1999                                                                     50
     2000                                                                     42
     Thereafter                                                                4
                                                                            ----
        Total                                                               $384
                                                                            ====

At December 31, 1995, the Ashland and Defiance Clusters had outstanding purchase
commitments totaling approximately $2,000.

The Ashland and Defiance  Clusters are a party to various legal proceedings that
are ordinary and incidental to its business. Management does not expect that any
legal  proceedings  currently pending will have a material adverse impact on the
Ashland and Defiance  Clusters'  combined financial position or combined results
of operations.

(10) RATE REGULATION AND OTHER DEVELOPMENTS

In 1993 and  1994,  the FCC  adopted  rate  regulations  required  by the  Cable
Television  Consumer  Protection  and  Competition  Act of 1992 (the "1992 Cable
Act"),  which  utilized  a  benchmark  price  cap  system,  or  alternatively  a
cost-of-service  regime,  for establishing the  reasonableness of existing basic
and cable  programming  service rates. The regulations  resulted in, among other
things,  an overall  reduction of up to 17% in basic rates and other  charges in
effect  on  September  30,  1992,   before   inflationary  and  other  allowable
adjustments,   if  those  rates  exceeded  the  revised  per-channel  benchmarks
established   by  the  FCC  and  could  not  otherwise  be  justified   under  a
cost-of-service showing.

In September 1995, the FCC authorized a new,  alternative method of implementing
rate  adjustments  which  will  allow  cable  operators  to  increase  rates for
programming  annually on the basis of  projected  increases  in  external  costs
rather than on the basis of cost increases incurred in the preceding quarter.

Many franchising  authorities have become certified by the FCC to regulate rates
charged by the  Ashland  and  Defiance  Clusters  for basic  cable  service  and
associated  basic cable  service  equipment.  Some local  franchising  authority
decisions  have been  rendered  that were  adverse to the Ashland  and  Defiance
Clusters. In addition, a number of such franchising authorities and customers of
the Ashland and Defiance  Clusters filed  complaints  with the FCC regarding the
rates charged for cable programming services.

In  September  1995,  CCI and the Cable  Services  Bureau  of the FCC  reached a
settlement  in the  form of a  resolution  of all  outstanding  rate  complaints
covering the CCI, the Ashland and Defiance Clusters, and the former Times Mirror
cable  television  systems.  In December  1995,  the FCC approved the Resolution
which,  among other  things,  provided for refunds  ($115,000 to the Ashland and
Defiance  Clusters'  customers) in January  1996,  and the removal of additional
outlet  charges  for  regulated  services  from all of the  Times  Mirror  cable
television  systems,  which accounts for a majority of the refund  amounts.  The
resolution also finds that the Ashland and Defiance  Clusters' cable programming
services  tier rates as of June 30, 1995 are not  unreasonable.  At December 31,
1995,  refunds under the  resolution  were fully provided for in the Ashland and
Defiance Clusters' financial statements.





                                      F-43
<PAGE>




                          ASHLAND AND DEFIANCE CLUSTERS
               NOTES TO COMBINED FINANCIAL STATEMENTS (continued)

(10) RATE REGULATION AND OTHER DEVELOPMENTS (continued)

On February 1, 1996,  Congress  passed the  Telecommunications  Competition  and
Deregulation  Act of 1996  ("the 1996  Act")  which was  signed  into law by the
President on February 8, 1996,  The 1996 Act is intended to promote  substantial
competition  in the  delivery  of video and other  services  by local  telephone
companies  (also known as local  exchange  carriers or "LECs") and other service
providers, and permits cable television operators to provide telephone services.

Among other provisions,  the 1996 Act deregulates the Cable Programming Services
("CPS")  tier of large  cable  television  operators  on March 31, 1999 and upon
enactment, the CPS rates of small cable television operators where a small cable
operator serves 50,000 or fewer subscribers, revises the procedures for filing a
CPS complaint, and adds a new effective competition test.

The 1996 Act  establishes  local exchange  competition  as a national  policy by
preempting laws that prohibit competition in the telephone local exchange and by
establishing uniform  requirements and standards for entry,  competitive carrier
interconnection, and unbundling of LEC monopoly services. Both the FCC and state
commissions  have  substantial  new  responsibilities  to promote the 1996 Act's
competition policy.  Depending on the degree and form of regulatory  flexibility
afforded  the LECs as part of the 1996 Act's  implementation,  the  Ashland  and
Defiance  Clusters'  ability  to offer  competitive  telephony  services  may be
adversely affected.

The 1996 Act  repeals  the cable  television/telephone  cross-ownership  ban and
allows LECs and other common carriers,  as well as cable systems providing local
exchange  service,  to  provide  video  programming  services  as  either  cable
operators or as open video system ("OVS")  operators  within their service areas
upon  certification  from the FCC and pursuant to  regulations  which the FCC is
required  to  adopt.  The  1996  Act  exempts  OVS  operators  from  many of the
regulatory  obligations  that  currently  apply to cable  operators such as rate
regulation and franchise fees, although other requirements are still applicable.
OVS  operators,  although not subject to  franchise  fees as defined by the 1992
Cable Act may be subject to fees  charged by local  franchising  authorities  or
other governmental entities in lieu of franchise fees.




                                      F-44
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

The Partners
C4 Media Cable Southeast, Limited Partnership
Lockney, Texas 79241

We have audited the  consolidated  balance  sheets of C4 Media Cable  Southeast,
Limited  Partnership  and its subsidiary  (the  Partnership)  as of December 31,
1995,  and 1994,  and the related  consolidated  statements  of loss,  partners'
deficit,  and cash flows for the years then ended. These consolidated  financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  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 report.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of C4 Media Cable
Southeast  Limited  Partnership  and its  subsidiary as of December 31, 1995 and
1994,  and the results of its  operations  and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Note 7 to
the consolidated  financial  statements,  the Partnership sold substantially all
assets on February 1, 1996.  The sales price was not  sufficient  to satisfy the
liabilities of the  Partnership.  The remaining unpaid principal and interest on
Senior and Junior  loans have been due and payable  since  September  30,  1990.
These  conditions raise  substantial  doubt about the  Partnership's  ability to
continue as a going concern. Management's plans regarding those matters also are
described in Note 7. The  historical  consolidated  financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                     Williams, Rogers, Lewis & Co., P.C.

Plainview, Texas
March 11, 1996




                                      F-45
<PAGE>





                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1995 and 1994


                                                    ---------------------------
                                                         1995           1994
                                                    ---------------------------
                                     ASSETS
CURRENT ASSETS
     Cash                                           $    203,955   $    204,255
     Accounts Receivable, Net                            168,823        141,025
     Prepaid Expense and Other                           211,289        201,952
                                                    ------------   ------------
     Total Current Assets                                584,067        547,232
                                                    ------------   ------------
PROPERTY, PLANT AND EQUIPMENT
     Plant and Equipment                              41,057,969     39,251,506
     Less: Accumulated Depreciation                  (20,386,652)   (16,172,050)
                                                    ------------   ------------
     Net Property, Plant and Equipment                20,671,317     23,079,456
                                                    ------------   ------------
OTHER ASSETS
     Deposits and Other                                   17,314         17,899
     Franchises, Net                                   2,967,669      4,031,170
     Acquisition Costs, Net                              874,863      1,148,913
     Covenant Not to Compete                                 -0-            -0-
                                                    ------------   ------------
     Total Other Assets                                3,859,846      5,197,982
                                                    ------------   ------------
     Total Assets                                   $ 25,115,230   $ 28,824,670
                                                    ============   ============

                        LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES
     Accounts Payable                               $    735,138   $    691,305
     Other Current Liabilities                           393,423        568,455
     Accrued Interest Payable                         30,022,386     24,315,384
     Notes Payable                                    60,165,844     60,165,844
                                                    ------------   ------------
     Total Current Liabilities                        91,316,791     85,740,988
                                                    ------------   ------------
MINORITY INTEREST                                       (371,926)      (268,729)
                                                    ------------   ------------
PARTNERS' DEFICIT
     General Partners                                (65,829,635)   (56,647,589)
                                                    ------------   ------------
          Total Liabilities and Partners' Deficit   $ 25,115,230   $ 28,824,670
                                                    ============   ============




















    The accompanying notes are an integral part of the financial statements.




                                      F-46
<PAGE>





                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                         CONSOLIDATED STATEMENTS OF LOSS
                           December 31, 1995 AND 1994

                                                  -----------------------------
                                                       1995            1994
                                                  ------------     ------------
REVENUE
  Cable Service                                   $ 11,755,860     $ 11,231,123
                                                  ------------     ------------
EXPENSE
  Programming Costs                                  3,003,682        2,602,692
  Salaries                                           1,124,203        1,046,895
  Other Operating Expenses                           2,607,023        2,642,777
  Management Fees                                      545,641          561,114
  Depreciation                                       4,214,602        4,113,809
  Amortization                                       1,337,551        1,575,551
  Interest                                           8,208,401        7,447,251
                                                  ------------     ------------
                                                    21,041,103       19,990,089
                                                  ------------     ------------
  Loss Before Minority Interest                     (9,285,243)      (8,758,966)
  Minority Interest in Loss of Subsidiary              103,197          116,472
                                                  ------------     ------------
NET LOSS                                          $ (9,182,046)    $ (8,642,494)
                                                  ============     ============

































    The accompanying notes are an integral part of the financial statements.




                                      F-47
<PAGE>





                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                  CONSOLIDATED STATEMENTS OF PARTNER'S DEFICIT
                 For The Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>

                                --------------------------------------------------------
                                                     Class A
                                   General           General     Limited
                                  Partners          Partners     Partners        Total
                                -----------       -----------       ---      -----------
<S>                             <C>               <C>               <C>      <C>             
Balance, December 31, 1993      $  (539,910)     $(47,465,185)     $-0-     $(48,005,095)
     Loss, 1994                     (86,425)       (8,556,069)      -0-       (8,642,494)
                                -----------       -----------       ---      -----------
Balance, December 31, 1994         (626,335)      (56,021,254)      -0-      (56,647,589)
     Loss, 1995                     (91,820)       (9,090,226)      -0-       (9,182,046)
                                -----------       -----------       ---      -----------
BALANCE, DECEMBER 31, 1995      $  (718,155)     $(65,111,480)     $-0-     $(65,829,635)
                                ===========       ===========       ===      ===========



</TABLE>






































    The accompanying notes are an integral part of the financial statements.




                                      F-48
<PAGE>





                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>


                                                           -----------------------------
                                                               1995              1994
                                                           -----------       -----------
<S>                                                        <C>               <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss                                                   $(9,182,046)      $(8,642,494)
Adjustments to reconcile net loss to net cash:
     Minority interest in loss of subsidiary                  (103,197)         (116,472)
     Depreciation                                            4,214,602         4,113,809
     Amortization                                            1,337,551         1,575,551
     Changes in Assets and Liabilities:
          Accounts receivable                                  (27,798)            2,330
          Prepaid expenses and other                            (8,752)           (7,701)
          Accounts payable                                      43,833            20,388
          Other liabilities                                   (175,032)           51,392
          Accrued interest                                   5,707,002         3,928,106
                                                           -----------       -----------
     Net cash provided by operating activities               1,806,163           924,909
                                                           -----------       -----------
CASH FLOW FROM INVESTING ACTIVITIES:
     Purchase of plant, equipment and other assets          (1,806,463)         (854,999)
                                                           -----------       -----------
          Net cash used in investing activities             (1,806,463)         (854,999)
                                                           -----------       -----------
     Net Increase (Decrease) in Cash                              (300)           69,910
     Cash, Beginning of Year                                   204,255           134,345
                                                           -----------       -----------
     Cash, End of Year                                     $   203,955       $   204,255
                                                           ===========       ===========
Supplemental Disclosure for Statements of Cash Flows:
     Cash Paid for Interest                                  2,470,936         3,519,145
Non-Cash Investing Activities:
     Deposit added to cost of plant and equipment                  -0-            39,622


</TABLE>


























    The accompanying notes are an integral part of the financial statements.




                                      F-49
<PAGE>





                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1995 and 1994

(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

ENTITIES:

C4  Media  Cable  Southeast,   Limited   Partnership  and  its  subsidiary  (the
"Partnership")  is a Delaware limited  partnership  organized to own and operate
cable television systems in various communities throughout Virginia,  Tennessee,
and Georgia.  The Partnership provides basic and pay cable television service to
approximately 40,500 subscribers in these states.  General partners are C4 Media
Cable, Inc. and C4 Media Cable Employees Investment Corporation. C4 Media Cable,
Inc. also participates as a limited partner.  Under a letter agreement dated May
9, 1992, Philips Credit  Corporation  ("Philips") has exercised its rights under
certain  pledge  agreements  to exercise  voting  control  over all  partnership
interests.  Accordingly,  effective  October 30, 1992, C4 Media Cable,  Inc. was
replaced by  Southeast  Cable,  Inc., a corporate  affiliate of Philips,  as the
managing  general  partner.  The  managing  general  partner  utilized  Doucette
Management  Company ("DMC") as the business  manager for the  Partnership  until
December  30,  1993 at which  time the  management  agreement  was  assigned  to
Cablevision of Texas III, LP ("CAB III"). See note 4.

PRINCIPLES OF CONSOLIDATION:

The  consolidated  financial  statements  include the accounts of C4 Media Cable
Southeast,  Limited Partnership and County Cable Company, Limited Partnership of
which the  Partnership  is an 80% owner and  general  partner.  All  significant
intercompany transactions have been eliminated.

REVENUE RECOGNITION:

The  Partnership  recognizes  cable service  revenue on the accrual basis in the
month the cable service is provided.  Payments  received in advance are included
in deferred  revenue  until the month the service is provided at which time they
are recognized as income.

PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION:

Property,  plant  and  equipment  used in the  business  are  stated at cost and
depreciated  over estimated  useful lives  generally on the straight line method
for financial  statement  purposes.  Expenditures which  significantly  increase
asset  values or extend  useful  lives are  capitalized,  limited  by  projected
recoverability  of such current  year  expenditures  in the  ordinary  course of
business from expected future revenue.

The useful  lives of  property,  plant and  equipment  for purposes of computing
depreciation range from 3 to 10 years.

FRANCHISES:

The company has been granted rights to operate  within the locations  wherein it
has cable television systems. Such franchises grant certain operating rights and
impose certain costs and  restrictions.  The Partnership pays its franchise fees
annually  on most of its  locations  based upon  either  gross or basic  service
revenues.  Franchise fee expense for the years ended  December 31, 1995 and 1994
was $327,088 and $303,375, respectively.



                                      F-50
<PAGE>



                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (continued)

Such  franchises  have varying lives and are renewable at the  discretion of the
franchise's governing boards. For financial statement purposes,  franchise costs
acquired in connection  with the purchase of cable  systems are being  amortized
over the remaining  average lives of the related cable television  franchises at
the  date  of  acquisition,   which  approximates  7  to  13  years.   Franchise
amortization  expense  for the  years  ended  December  31,  1995  and  1994 was
$1,063,501 in each year.

ACQUISITION COSTS:

Acquisition  costs are those costs  incurred  related to the  acquisition of new
systems. For financial statement purposes, such costs are amortized by using the
straight-line  method over 10 years.  Amortization expense for acquisition costs
for the years ended  December  31,  1995 and 1994 was  $274,050,  and  $274,050,
respectively.

COVENANTS NOT TO COMPETE:

The  portion of the  purchase  price of  systems  allocated  to  non-competition
agreements  with  former  owners  is  capitalized  and  amortized  by using  the
straight-line  method over the life of the agreements.  Amortization expense for
non-competition agreements for the year ended December 31, 1994 was $238,000.

INCOME TAXES:

The partnership does not pay federal income tax, but is a pass through entity so
that partners are taxed on their share of partnership earnings.  Partnership net
income or loss is allocated to each partner under a formula  established  in the
partnership agreement.

CASH EQUIVALENTS:

For cash flow purposes, cash equivalents are cash and cash items with a maturity
of less than 90 days.

USE OF ESTIMATES:

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect certain  reported amounts and  disclosures.  Accordingly,  actual results
could differ from those estimates.

(2) ACCOUNTS RECEIVABLE, NET

Following is a summary of accounts receivable at December 31, 1995 and 1994:


                                                     --------------------------
                                                       1995             1994
                                                     ---------        ---------
Trade Accounts                                       $ 175,671        $ 146,239
Other                                                      281              642
Related Parties (4)                                        -0-          194,873
Less: Allowance for Doubtful Accounts (4)               (7,129)        (200,729)
                                                     ---------        ---------
                                                     $ 168,823        $ 141,025
                                                     =========        =========




                                      F-51
<PAGE>



                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) NOTES PAYABLE

Following is a summary of notes payable at December 31, 1995 and 1994:
<TABLE>
<CAPTION>

                                                          --------------------------
                                                              1995          1994
                                                          -----------    -----------
<S>                                                       <C>            <C>
Senior loan payable to Philips, due September 30,
1990, interest due at prime + 2.25%, secured by
substantially all assets of the partnership and the
pledge of partnership interests. In addition, the loan
is collateralized by the pledge of all stock held in
C4 Media Cable, Inc. and C4 Media Cable,
Employees Investment Corporation by the President
and Chairman of C4 Media Cable, Inc.                      $44,185,831    $44,185,831
Junior Loan payable to Philips, due September 30,
1990 interest due at 20%, secured by substantially
all assets of the partnership and the pledge of
partnership interests. In addition, the loan is
collateralized by the pledge of all stock held in
C4 Media Cable, Inc. and C4 Media Cable Employees
Investment  Corporation by the President and Chairman
of C4 Media Cable, Inc.                                    15,980,013     15,980,013
                                                          -----------    -----------
     Total                                                $60,165,844    $60,165,844
                                                          ===========    ===========
</TABLE>

The  Philips  notes  contain  performance  covenants  concerning  homes  passed,
subscriber  levels,  miles of plant,  etc.,  some of which the  Partnership  had
violated as of December  31,  1995 and 1994.  Philips has not waived  compliance
with these provisions.

All notes  payable and accrued  interest to Philips were due September 30, 1990.
Philips has not  extended  the due date of the notes and has the right to demand
payment at any time. A significant  amount of accrued interest and principle was
paid  when  substantially  all  operating  assets of the  Partnership  were sold
February 1, 1996. See note 7.

(4) RELATED PARTY TRANSACTIONS

Effective  October 30,  1992,  C4 Media  Cable,  Inc.  was replaced by Southeast
Cable, Inc., a corporate  affiliate of Philips, as the managing general partner.
Effective May 10, 1992 under the  provisions of an agreement  with Philips,  the
Partnership  terminated its management  agreement with C4 Media Cable,  Inc. and
entered into a management  agreement  with DMC for a term  extending to December
30, 1993. At December 30, 1993 the management agreement was assigned to CAB III.
The agreement  provides for fixed fees and the  reimbursement of direct expenses
incurred on behalf of the  Partnership as defined in the  agreement.  Management
fees paid under these  agreements for the years ended December 31, 1995 and 1994
were $545,641 and $550,214,  respectively. Other fees and expense reimbursements
paid under the  agreements  for the years ended  December 31, 1995 and 1994 were
$120,000 and are included in Other Operating Expenses.

Other related  parties  include  Caribbean Cable TV ("CCTV") and MCT Cablevision
("MCT").  Related party lending was done without independent  business judgment,
terms,  collateral  or a method of  settlement.  Due to the manner in which this
lending was done and questions surrounding the collectability of these accounts,
all the related  party  receivables  were reserved in the allowance for doubtful
accounts  prior to 1994 and were written off in 1995.  See note 2. Related party
receivables at December 31, 1994 were as follows:




                                      F-52
<PAGE>




                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) RELATED PARTY TRANSACTIONS (continued)


                                                                        --------
                                                                          1994
                                                                        --------
CCTV                                                                    $ 23,965
MCT                                                                       35,968
C4 Media Cable, Inc.                                                     134,940
                                                                        --------
                                                                        $194,873
                                                                        ========

The Partnership  purchased  leasehold  improvements  from J-D Partnership,  Ltd.
("J-D") for the  Lockney,  Texas  office of $5,366 on April 24,  1995.  J-D is a
limited partnership 99% owned by James and Denise Doucette (Doucette).  Doucette
is also the managing  general  partner and owns 62% of CAB III, as well as being
the sole stockholder of DMC, an S-Corporation. The Partnership paid a management
fee to Doucette of $10,900 for the year ended December 31, 1994.

(5) COMMITMENTS

The Company has certain  obligations  under pole rental  agreements,  tower site
leases,  etc. for assets  utilized in the  operation  of the systems.  These are
mostly short term  agreements.  Expenses  charged to operations  for the periods
ended December 31, 1995 and 1994 were $536,368 and $518,837,  respectively,  and
are included in Other Operating Expenses.

(6) CONTINGENCIES

The  Company  is to a  significant  degree  self-insured  for  risks  consisting
primarily  of physical  loss to property  and plant.  The headend  equipment  is
insured, but the plant itself is not and represents a potential exposure for the
Company.  Management is of the opinion that the various  systems'  distance from
each other make the likelihood of a complete loss to the plant unlikely.

(7) SUBSEQUENT EVENT AND CONSIDERATION OF ABILITY TO CONTINUE AS A GOING CONCERN

The  accompanying   financial   statements  have  been  prepared   assuming  the
Partnership will continue as a going concern which  contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.

On February 1, 1996  substantially  all assets of the  Partnership  were sold to
FrontierVision  Operating Partners,  L.P. The agreement had a stated sales price
of $48,000,000 and a net payment amount of $46,237,708  after escrow holdback of
$1,375,200  and  other  adjustments.  At the date of the  auditors'  report  the
Partnership  was still liable for the  remaining  balance of the note payable to
Philips with no  significant  assets to satisfy that  liability,  and the escrow
items remain open.

An unaudited  pro forma  consolidated  balance  sheet is presented  below giving
effect to the sale as if it had occurred  December 31, 1995  including  escrowed
items.  The pro forma  information  is presented  for the purpose of  additional
analysis  and  is  not a  required  part  of the  basic  consolidated  financial
statements.




                                      F-53
<PAGE>




                  C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) SUBSEQUENT EVENT AND CONSIDERATION OF ABILITY TO CONTINUE AS A GOING CONCERN
    (continued)

                                                                   ------------
                                                                    Pro Forma
                                                                    Unaudited
                                                                       1995
                                                                   ------------
Current Assets                                                     $    685,773
Other Assets                                                          1,392,514
                                                                   ------------
     Total Assets                                                  $  2,078,287
                                                                   ============
Current Liabilities                                                $ 45,303,939
Partners' Deficit                                                   (43,225,652)
                                                                   ------------
     Total Liabilities and Partners' Deficit                       $  2,078,287
                                                                   ============

The  Partnership  has been unable to pay all of its  principle  and  interest as
required under its loan agreements since the loans matured September 30, 1990.

These  conditions raise  substantial  doubt about the  Partnership's  ability to
continue as a going concern. The historical consolidated financial statements do
not include any  adjustments  that might result from this sale of assets or this
uncertainty.  Management has not fully evaluated the options for the Partnership
subsequent to the sale.



                                      F-54
<PAGE>




                        INDEPENDENT AUDITORS' REPORT

American Cable Entertainment of Kentucky-Indiana, Inc.

We have audited the accompanying  balance sheets of American Cable Entertainment
of  Kentucky-Indiana,  Inc. (the "Company") as of December 31, 1995 and 1994 and
the related  statements of operations,  shareholders'  deficiency and cash flows
for each of the  three  years in the  period  ended  December  31,  1995.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our 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 from
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,  such  financial  statements  present  fairly,  in all material
respects,   the  financial   position  of  American   Cable   Entertainment   of
Kentucky-Indiana,  Inc. as of December  31, 1995 and 1994 and the results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1995 in conformity with generally accepted accounting principles.

The accompanying  financial statements have been prepared assuming that American
Cable Entertainment of Kentucky-Indiana,  Inc. will continue as a going concern.
As discussed  in Note 1 to the  financial  statements,  the Company is unable to
meet its scheduled debt maturity repayments which raises substantial doubt about
the Company's ability to continue as a going concern.  Consequently, the Company
has entered  into an  agreement  to sell  substantially  all of its assets,  has
entered into  agreements  with its creditors who have  consented,  under certain
circumstances, to forbear taking any action against the Company pending the sale
of the Company's assets and has filed a prepackaged  bankruptcy under Chapter 11
of the Federal  Bankruptcy Code.  Management's  plans in regard to these matters
are described  further in Note 1. The accompanying  financial  statements do not
purport to reflect or provide for the consequences of the sale of the Company or
the  filing  of  the  prepackaged  bankruptcy.  In  particular,  such  financial
statements do not purport to show the realizable  value of assets or liabilities
on a  liquidation  basis nor do they include any  adjustments  that might result
from the outcome of these uncertainties.

The  accompanying  balance sheet as of September 30, 1996, and the statements of
operations,  cash flows and  shareholders'  deficiency for the nine-month period
ended  September  30,  1996 were not audited by us and,  accordingly,  we do not
express an opinion on them. As described in Note 10, these  unaudited  financial
statements  have not been prepared in accordance with Statement of Position 90-7
"Financial  Reporting by Entities in Reorganization  under the Bankruptcy Code,"
which is required under generally  accepted  accounting  principles for entities
that have filed petitions with the Bankruptcy  Court and expect to reorganize as
going concerns under Chapter 11. Pre-petition  liabilities subject to compromise
by  the  Bankruptcy  Court  as of the  bankruptcy  filing  date  have  not  been
segregated  on the  September  30, 1996 balance  sheet or reported  based on the
expected  amount  of  the  allowed  claims.  Expenses  directly  related  to the
reorganization  of the Company  since the filing of the  prepackaged  bankruptcy
have not been  separately  disclosed and interest on the  Company's  Step Coupon
Senior  Subordinated Notes and Junior  Subordinated  Debentures  continued to be
accrued during the bankruptcy  period although such interest was not probable of
being paid in the future.



DELOITTE & TOUCHE LLP
Stamford, CT
March 15, 1996 (Except for Note 1, as to 
which the date is August 1, 1996.)




                                      F-55
<PAGE>





             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                  -------------    -------------    -------------
                                                   September 30,    December 31,     December 31,
                                                       1996            1995              1994        
                                                  -------------    -------------    -------------
                                                     Unaudited
                               ASSETS

<S>                                               <C>              <C>              <C>        
INVESTMENT IN CABLE TELEVISION SYSTEMS:
Land and land improvements                        $     247,561    $     247,561    $     247,561

Vehicles                                              1,811,308        1,702,997        1,507,850
Buildings and improvements                            1,007,624          998,414          967,794
Office furniture and equipment                          812,985          802,377          733,465
CATV distribution systems and related
  equipment                                          55,094,378       51,757,161       49,161,506
                                                  -------------    -------------    -------------
Total Fixed Assets                                   58,973,856       55,508,510       52,618,176
Less accumulated depreciation                        32,840,157       28,897,790       23,683,730
                                                  -------------    -------------    -------------
Total Fixed Assets-- net                             26,133,699       26,610,720       28,934,446
Franchise costs-- net                                   278,753        2,785,425        5,964,805
Subscriber lists-- net                                  154,331        1,543,307        3,531,021
Covenant not to compete-- net                             8,068           80,682          242,045
                                                  -------------    -------------    -------------
Investment in cable television systems-- net         26,574,851       31,020,134       38,672,317
GOODWILL-- net                                        3,499,898        3,579,784        3,686,299
DEFERRED CHARGES-- net                                  134,767          371,691          963,949
CASH AND CASH EQUIVALENTS                               907,718        3,704,823        3,427,849
ACCOUNTS RECEIVABLE-- less allowance for
  doubtful accounts of $313,661 in 1996, $240,212
  in 1995 and $195,736 in 1994                          859,836          304,734          276,709
PREPAID AND OTHER                                       387,763          197,802          194,514
                                                  -------------    -------------    -------------
TOTAL ASSETS                                      $  32,364,833    $  39,178,968    $  47,221,637
                                                  =============    =============    =============

                    LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES:
Notes and loans payable                           $ 187,404,112    $ 182,430,902    $ 167,707,411
Accrued interest-- Senior debt                                0        1,314,032          329,004                        
Accrued interest -- Senior/Junior Subordinated
  Debentures                                         10,537,714        3,068,862        4,345,047
Accounts payable and accrued expenses                 5,019,665        4,244,348        3,973,224                 
Unearned income                                         146,702          124,109          124,344
Converter deposits                                      126,852          134,366          136,588
                                                  -------------    -------------    -------------
Total Liabilities                                   203,235,045      191,316,619      176,615,618
                                                  -------------    -------------    -------------
COMMITMENTS (See Note 7)
SHAREHOLDERS' DEFICIENCY:
Capital stock-- all series                               10,000           10,000               26
Additional paid-in capital                            1,490,000        1,490,000        1,499,974
Deficit                                            (172,370,212)    (153,637,651)    (130,893,981)
                                                  -------------    -------------    -------------
Total shareholders' deficiency                     (170,870,212)    (152,137,651)    (129,393,981)
                                                  -------------    -------------    -------------
TOTAL LIABILITIES AND SHAREHOLDERS'               $  32,364,833    $  39,178,968    $  47,221,637
                                                  =============    =============    =============
DEFICIENCY

</TABLE>







                        See notes to financial statements




                                      F-56
<PAGE>





             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                        ------------     ------------     ------------     ------------
                                           For the
                                         Nine Months     For the Year     For the Year    For the Year
                                            Ended           Ended            Ended           Ended
                                        September 30,     December 31,     December 31,    December 31,
                                             1996            1995             1994            1993
                                        ------------     ------------     ------------     ------------
                                          Unaudited

<S>                                     <C>              <C>              <C>              <C>         
Revenue                                 $ 22,911,386     $ 28,088,127     $ 25,879,525     $ 24,976,818
                                        ------------     ------------     ------------     ------------
Costs and expenses:
Operating expenses                         8,681,583       10,880,854        9,388,813        8,699,878
Selling, general and administrative
 expenses                                  3,884,865        4,948,493        4,912,150        4,743,783
Management fees                              696,942          842,644          819,095          749,305
Depreciation and amortization              8,265,739       11,284,315       18,054,371       18,231,734
Expenses incurred in connection with
override and forbearance agreements          912,865          557,664                0                0
                                        ------------     ------------     ------------     ------------
Total costs and expenses                  22,441,994       28,513,970       33,174,429       32,424,700
                                        ------------     ------------     ------------     ------------
Operating income (loss)                      469,392         (425,843)      (7,294,904)      (7,447,882)
Interest expense-- net                    19,201,953       22,366,189       20,241,202       18,410,503
Net gain on sale of cable television
  system and marketable securities                 0           48,362        1,266,020                0
                                        ------------     ------------     ------------     ------------
NET LOSS                                $(18,732,561)    $(22,743,670)    $(26,270,086)    $(25,858,385)
                                        ============     ============     ============     ============



</TABLE>



























                       See notes to financial statements.




                                      F-57
<PAGE>





             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                     STATEMENTS OF SHAREHOLDERS' DEFICIENCY
               FOR THE NINE MONTHS ENDED September, 1996 Unaudited
              AND THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>

                                             --------------------------------------------------------------------------------------
                                                        Common Stock
                                             -------------------------------------------------     
                                                Number of
                                                 Shares                             Additional                            Total
                                               Issued and             Par             Paid-in                          Shareholders'
                                               Outstanding           Value            Capital          Deficit          Deficiency
                                             ----     -------    ---     -------    -----------     -------------     -------------
                                                  Class              Class
                                             ----     -------    ---     -------         
                                              A          D        A         D
                                             ----     -------    ---     -------        
<S>                                          <C>     <C>        <C>     <C>        <C>             <C>               <C>           
Balance at January 1, 1993                    255                $26                $ 1,499,974     $ (78,765,510)    $ (77,265,510)

Net Loss                                                                                              (25,858,385)      (25,858,385)
                                             ----     -------    ---     -------    -----------     -------------     -------------
Balance at December 31, 1993                  255                 26                  1,499,974      (104,623,895)     (103,123,895)

Net Loss                                                                                              (26,270,086)      (26,270,086)
                                             ----     -------    ---     -------    -----------     -------------     -------------
Balance at December 31, 1994                  255                 26                  1,499,974      (130,893,981)     (129,393,981)

Net Loss                                                                                              (22,743,670)      (22,743,670)

Recapitalization of Common Stock             (254)     99,999    (26)    $10,000         (9,974)
                                             ----     -------    ---     -------    -----------     -------------     -------------

Balance at December 31, 1995                    1      99,999      0      10,000      1,490,000      (153,637,651)     (152,137,651)

Net Loss Unaudited                                                                                    (18,732,561)      (18,732,561)
                                             ----     -------    ---     -------    -----------     -------------     -------------

Balance at September 30, 1996
Unaudited                                       1      99,999    $ 0     $10,000    $ 1,490,000     $(172,370,212)    $(170,870,212)
                                             ====     =======    ===     =======    ===========     =============     =============
</TABLE>























                        See notes to financial statements




                                      F-58
<PAGE>





             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 ------------      ------------      ------------      ------------
                                                                    For the
                                                                  Nine Months      For the Year      For the Year      For the Year
                                                                     Ended            Ended             Ended             Ended
                                                                 September  30,    December 31,      December 31,      December 31,
                                                                      1996             1995              1994              1993
                                                                 ------------      ------------      ------------      ------------
                                                                   Unaudited
<S>                                                              <C>               <C>               <C>               <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                         $(18,732,561)     $(22,743,670)     $(26,270,086)     $(25,858,385)
Adjustments to reconcile net loss to net
   cash (used in) provided by operating
   activities:
   Depreciation                                                     3,980,667         5,257,085         6,397,956         5,452,940
   Amortization                                                     4,285,072         6,027,230        11,656,415        12,778,794
   Accretion of discount on step coupon
      senior subordinated notes                                     8,583,143        10,171,124         9,519,095         8,189,478
   Accretion of discount on junior
      subordinated debentures                                       4,429,619         5,416,469         4,820,269         4,231,918
   Net gain on sale of cable television
      system, marketable securities, and other
      assets                                                                0           (48,362)       (1,266,020)
   Change in assets and liabilities:
      Decrease (increase) in accounts
         receivable                                                  (555,102)          (28,025)          (94,868)           23,917
      Decrease (increase) in prepaid and other
         assets                                                      (189,961)           (3,288)           51,799           (59,414)
      (Decrease) increase in accounts payable
         and accrued expenses                                         775,317           271,124          (414,333)          169,808
      (Decrease) increase in accrued
         interest-senior debt                                      (1,314,032)          985,028           129,505
       Increase (decrease) in converter
         deposits                                                      (7,514)           (2,222)             (237)           (9,384)
       Increase (decrease) in unearned income                          22,593              (235)          (91,827)            9,518
                                                                 ------------      ------------      ------------      ------------
Net cash  provided by operating
  activities                                                        1,277,241         5,302,258         4,437,668         4,929,190
                                                                 ------------      ------------      ------------      ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
   Additions to reception and distribution
      facilities and equipment                                     (3,471,098)       (2,933,359)       (3,605,498)       (5,083,401)
   Net proceeds from sale of assets                                         0            48,362         1,523,137
                                                                 ------------      ------------      ------------      ------------
Net cash used in investing activities                              (3,471,098)       (2,884,997)       (2,082,361)       (5,083,401)
                                                                 ------------      ------------      ------------      ------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
   Payments on senior bank loan                                      (229,016)       (1,262,542)         (309,165)
   Payments on senior revolving credit
      facility                                                        (55,862)         (131,616)           (3,668)
   Payments on senior secured notes                                  (315,121)         (742,447)          (20,712)
   Increase in deferred charges                                              0                           (186,563)             (598)
   (Decrease) increase in obligations under
      capital lease                                                    (3,249)           (3,682)            7,281
                                                                 ------------      ------------      ------------      ------------
Net cash used in financing activities                                (603,248)       (2,140,287)         (512,827)             (598)
                                                                 ------------      ------------      ------------      ------------
Net (decrease) increase in cash and cash
    equivalents                                                    (2,797,105)          276,974         1,842,480          (154,809)
Cash and cash equivalents at beginning of
    period                                                          3,704,823         3,427,849         1,585,369         1,740,178
                                                                 ------------      ------------      ------------      ------------
Cash and cash equivalents at end of period                       $    907,718      $  3,704,823      $  3,427,849      $  1,585,369
                                                                 ============      ============      ============      ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest                         $  6,002,809      $  6,900,613      $  5,952,791      $  6,038,557
                                                                 ============      ============      ============      ============
Cash paid for restructuring costs                                     912,865                 0                 0                 0
                                                                 ============      ============      ============      ============
</TABLE>
                                                                            


                    See notes to financial statements




                                      F-59
<PAGE>





             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                       Unaudited as to September 30, 1996

(1) DEBT MATURITIES AND THE SALE OF THE COMPANY

During the fourth quarter of 1995 the Company's senior debt obligations  matured
without being paid. In addition,  the Company failed to make the full payment of
interest on the Step Coupon Senior Subordinated Notes which became due in 1995.

Prompted by these payment  defaults,  effective  December 31, 1995, the Company,
its shareholders,  and Kentucky-Indiana Management Company, Inc. ("KYMC"), which
acts as manager for the Company,  entered into two  agreements:  a  "Forbearance
Agreement" with its senior lenders; and an "Override Agreement" with the holders
of its Senior Subordinated and Junior Subordinated Notes.

Under the terms of the  Forbearance  Agreement the senior lenders have agreed to
forebear  in the  exercise  of their  rights and  remedies  with  respect to the
payment  default  described  above as well as defaults  with  respect to certain
specified  financial  covenants,  through  September  30, 1996 which  allows the
Company  time to sell its  assets in an  orderly  manner.  It  contains  certain
financial  covenants as well as procedures that the Company and KYMC have agreed
to follow during the sales  process.  Subsequent to September 30, 1996,  certain
financial covenants, which the Company is currently in default upon, revert back
to the terms in the original agreements.

The Override Agreement requires that the Company undertake to sell substantially
all of its assets,  and to enter into a contract for sale and to consummate that
sale in accordance with an agreed upon time schedule.  It also contains  certain
financial covenants and procedures to be followed.

Effective  July 15, 1996, the Company  entered into an asset purchase  agreement
with FrontierVision Operating Partners, L.P.  ("FrontierVision") for the sale of
substantially  all of the assets of the  Company  for $146  million,  subject to
certain purchase price adjustments. Due to the expected shortfall of payments to
existing  creditors  from the sale  proceeds,  the Company  filed a  prepackaged
bankruptcy  under  Chapter 11 of the  Federal  Bankruptcy  code with the Federal
Bankruptcy  court  on  August  1,  1996.  Management  anticipates  the  sale  to
FrontierVision  to be consummated in the fourth quarter of 1996,  subject to the
required regulatory approvals and the approval of the bankruptcy court.

As a result of the matters discussed above,  Management does not believe that it
is practical to estimate the fair value of the Company's debt facilities.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The  accompanying  financial  statements  have been prepared in accordance  with
generally accepted accounting  principles  applicable to a going concern,  which
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal  course of business.  Accordingly,  the  financial  statements do not
reflect adjustments or provide for the potential consequences of the sale of the
Company's assets. In particular, the financial statements do not purport to show
the realizable value of assets on a liquidation  basis or their  availability to
satisfy liabilities.

The  accompanying  balance  sheet as of September  30, 1996,  the  statements of
operations,  and cash flows for the nine months ended September 30, 1996 and the
statement of  shareholders'  deficiency for the nine months ended  September 30,
1996 are unaudited but, in the opinion of management, include all





                                      F-60
<PAGE>




             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                       Unaudited as to September 30, 1996

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

adjustments   (consisting  only  of  normal  recurring  adjustments)  which  are
necessary to present fairly the results for these interim  periods in accordance
with Generally Accepted Accounting  Principles,  except as disclosed in Note 10.
The interim  financial  information as of and for the years ended  September 30,
1996 included within the notes to the financial statements is also unaudited.

FORMATION OF COMPANY

On November 7, 1989 cable systems were  purchased  from Centel Cable  Television
Company to form Simmons Cable TV of Kentucky-Indiana,  Inc. (the "Company"). The
Company owns and operates  cable  systems in Kentucky and Indiana.  On April 12,
1994  the  Company  changed  its  name  to  American  Cable   Entertainment   of
Kentucky-Indiana, Inc.

MANAGEMENT ESTIMATES

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

INVESTMENT IN CABLE TELEVISION SYSTEMS

Reception and  distribution  facilities  and  equipment  additions are stated at
cost.  Depreciation is provided using the  straight-line  method over the useful
lives of the  assets  (four to ten years for CATV  distribution  facilities  and
related  equipment,  vehicles,  building  improvements  and office furniture and
equipment; forty years for buildings).  Included in depreciation expense for the
year ended December 31, 1994 were  write-offs  related to a rebuilt cable system
of $942,850.

Franchise acquisition costs are amortized over the average remaining term of the
franchises as of November 7, 1989 of seven years using the straight-line method,
Accumulated  amortization of franchise costs at September 30, 1996, December 31,
1995 and 1994 aggregated $21,976,905, $19,470,233 and $16,290,853, respectively.

Covenants not to compete are  amortized  over the life of the  agreements  (five
years).  Accumulated  amortization  of such  covenants  at  September  30, 1996,
December  31,  1995  and  1994  aggregated  $798,749,   $726,315  and  $564,772,
respectively.

Subscriber  lists are amortized over seven years.  Accumulated  amortization  of
subscriber  lists at September 30, 1996,  December 31, 1995 and 1994  aggregated
$13,759,669, $12,370,693 and $10,382,979, respectively.

Deferred charges consist of $882,408 of  organizational  costs and $3,616,230 of
loan  acquisition  costs at September 30, 1996. The loan  acquisition  costs are
amortized  over the average life of the related debt, and  organizational  costs
are amortized over five years.  Accumulated  amortization at September 30, 1996,
December  31,  1995  and  1994  was   $4,363,871,   $4,126,947  and  $3,534,689,
respectively.






                                      F-61
<PAGE>




             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                       Unaudited as to September 30, 1996

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Goodwill  is  amortized  over  forty  years.  Accumulated  amortization  of
goodwill at September 30, 1996, December 31, 1995 and 1994 aggregated  $760,711,
$680,825 and $574,310, respectively.

VALUATION OF INTANGIBLE ASSETS

The Company,  on an annual  basis,  undertakes a review and valuation of the net
carrying value, recoverability and write-off of all categories of its intangible
assets.  The Company in its  valuation  considers  current  market values of its
properties,  competition,  prevailing  economic  conditions,  government  policy
including taxation,  and the Company's and the industry's historical and current
growth  patterns,  as well as the  recoverability  of the cost of its intangible
assets based on a comparison of estimated undiscounted operating cash flows.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and liquid investments with a maturity
of three months or less from the date of purchase.

INCOME TAXES

The  Company  has  elected to be taxed as an S  Corporation  under the  Internal
Revenue Code and, accordingly,  pays no federal income taxes. The income or loss
of the  Company  for its tax year is passed  through to its  shareholder(s)  and
reported in the income tax returns of the shareholder(s).

SUBSCRIPTION REVENUES

Subscription  revenues received in advance of services rendered are deferred and
recorded in income in the period in which the related services are provided.

CONCENTRATIONS OF CREDIT RISK

Financial  instruments that potentially subject the Company to concentrations or
credit risk consist  principally of trade receivables.  Concentrations of credit
risk with  respect to trade  receivables  are limited due to the large number of
customers comprising the Company's customer base.

DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS

The  carrying   amount  reported  in  the  balance  sheets  for  cash  and  cash
equivalents,   accounts  receivable,   accounts  payable  and  accrued  expenses
approximates fair value because of the immediate or short-term maturity of these
financial instruments. Management does not believe it is practicable to estimate
the fair value of the Company's debt facilities. (See Note 4).

(3) DISPOSITIONS

On June 30, 1994 the Company sold its cable  television  system serving  Jackson
County, Kentucky. The carrying value of the assets sold at the date of sale, net
of accumulated depreciation and amortization was as follows:




                                      F-62
<PAGE>




             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                       Unaudited as to September 30, 1996

(3) DISPOSITIONS (continued)

Reception and distribution facilities and equipment                      $69,527
Franchise cost                                                            55,714
Goodwill and other intangible assets                                      50,300

The net loss on this  transaction was $157,630,  recognized in 1994.  Additional
proceeds of $48,362 were received in 1995 and recorded as a gain.

On October 17, 1994 the Company  tendered all of its holding in QVC, Inc., which
resulted in a gain of $1,423,650.

These  transactions  are reflected in the statements of operations for the years
ended December 31, 1995 and 1994.

(4) NOTES AND LOANS PAYABLE

Notes and loans  payable at September  30, 1996,  December 31, 1995 and 1994 are
comprised of the following: 
<TABLE>
<CAPTION>

                                              ------------     ------------     ------------
                                              September 30,     December 31,    December 31,
                                                  1996              1995            1994
                                              ------------     ------------     ------------
<S>                                           <C>              <C>              <C>    
Senior Debt
  Bank Credit Agreement (a)                   $ 23,199,277     $ 23,428,293     $ 24,690,835
  Revolving Credit Facility (b)                  5,658,854        5,714,716        5,846,332
  Senior Secured Notes (c)                      31,921,720       32,236,841       32,979,288
Step Coupon Senior Subordinated Notes (d)       83,593,122       78,016,664       66,137,000
Junior Subordinated Debentures (e)              43,030,789       43,030,789       38,046,675
Capitalized lease obligation                           350            3,599            7,281
                                              ------------     ------------     ------------
                                              $187,404,112     $182,430,902     $167,707,411
                                              ============     ============     ============
</TABLE>

(a) The Company has a credit  agreement  with Crestar Bank  providing  for total
    borrowings of  $25,000,000.  This agreement  provided for interest up to 1.5
    percentage  points over the bank's prime rate (or from 1.0 to 2.5 percentage
    points over LIBOR).  Interest  only was payable  quarterly in arrears on the
    last day of March, June, September and December, and at the end of any LIBOR
    borrowing  period.  The total commitment  terminated at its maturity date of
    October 31, 1995. Upon the payment default at maturity,  the default rate of
    prime  plus  4% was  charged.  Upon  the  effective  date  of  the  Override
    Agreement, interest is payable monthly at the rate of 11.75% per annum.

(b) The Company has a  revolving  credit  facility  with Sanwa  Business  Credit
    Corporation  which originally  provided for borrowings of up to $15,000,000.
    The total  commitment  was  reduced  to  $7,000,000  in early  1994,  and in
    December 1994,  the balance of the unused  commitment  was  terminated.  The
    agreement  provided for interest of up to 1.5 points over the Sanwa's  prime
    rate (or from 1.0 to 2.5 percentage points over LIBOR). Interest was payable
    quarterly in arrears on the last day of March, June, September and December,
    and at  the  end  of  any  LIBOR  borrowing  period.  The  total  commitment
    terminated  at its  maturity  date of October  31,  1995.  Upon the  payment
    default at maturity, the default rate of prime plus 4% was charged. Upon the
    effective date of the Override Agreement, interest is payable monthly at the
    rate of 11.75% per annum.




                                      F-63
<PAGE>




             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                       Unaudited as to September 30, 1996

(4) NOTES AND LOANS PAYABLE (continued)

(c) Senior  Secured  Notes were issued on November 7, 1989  bearing  interest at
    10.125% and matured November 7, 1995. The interest rate increased to 10.225%
    effective January 1, 1991. Interest only was payable quarterly in arrears on
    the last day of  March,  June,  September  and  December.  Upon the  payment
    default at maturity, interest was charged at 12.25%. Upon the effective date
    of the Override Agreement, interest is payable monthly at the rate of 11.75%
    per annum.

(d) Step  Coupon  Senior  Subordinated  Notes due April 30,  1996 were issued on
    November  7,  1989 in the  principal  amount  of  $66,137,000  with a stated
    interest rate of 15.7472%.  Interest  accreted and compounded semi- annually
    through  October 31, 1994.  Although  interest  payments of $5,125,618  were
    payable  semi-annually   beginning  April  30,  1995  until  maturity,  only
    $1,300,000 of interest has been paid.  These notes were issued with warrants
    to  purchase  up to 150  shares of Class C  Non-voting  Common  Stock for an
    aggregate  exercise price of $330,000.  As a result of the  recapitalization
    (See Note 5), the number of shares the  warrant  holders  were  entitled  to
    purchase  was  increased  to 58,531  shares of the Class C stock.  There are
    certain  restrictions  as to when the  warrants may be  exercised,  and they
    expire on  November  7, 2001.  Total  proceeds  from the  issuance  of these
    warrants   amounted  to  $200,000.   Accreted   interest  was   $17,456,122,
    $11,879,664  and  $1,708,540  at September  30, 1996,  December 31, 1995 and
    December 31, 1994, respectively.

(e) Junior Subordinated Debentures due October 31, 1997, were issued on November
    7, 1989 for $20,800,000, bearing interest at 13.1%. Interest is deferred and
    compounds  annually  on  September  30 of each  year and is  payable  on the
    maturity  date.  On the maturity  date,  the Company shall pay as additional
    interest on the Notes, an amount equal to the greater of 4% of net operating
    income of the Company  from  November  7, 1989  through  and  including  the
    maturity  date,  or 15% of the fair market value of the  Company,  but in no
    event shall the amount exceed $2,153,000.  Accreted and accrued interest was
    $29,729,270, $25,299,651 and $19,883,183 at September 30, 1996, December 31,
    1995 and  December  31,  1994,  respectively.  These  notes were issued with
    warrants to purchase up to 595 shares of common stock and up to 1,000 shares
    of 6%  non-cumulative  preferred  stock.  These warrants are  exercisable in
    whole or in part through November 7, 1999 for an aggregate exercise price of
    $2,000,000. Upon exercise, the warrants can be converted into either Class A
    Voting  Stock  or Class B  Non-Voting  Stock at the  option  of the  warrant
    holder. Shares will be issued in the ratio of .595 shares of common stock to
    each share of preferred stock. As a result of the recapitalization (See Note
    5), the number of shares the warrant  holders were  entitled to purchase was
    increased to 233,359 shares of common stock,  in the ratio of 233.359 shares
    of common stock to each share of preferred  stock.  Total  proceeds from the
    issuance of these warrants amounted to $1,200,000.

The Senior  Subordinated  and Junior  Subordinated  Notes will  continue to earn
interest at the rate of 15.5% and 13.1%,  respectively,  although, unless any of
certain specified  defaults occur, net proceeds of a sale will be distributed as
provided for in the Override  Agreement.  The Company leased  equipment  under a
lease  agreement  which is  classified as a capital  lease.  The lease term is 3
years and expires in December, 1996.

In 1989 the Company entered into an interest cap agreement and an interest floor
agreement  covering  $25,000,000 of borrowings  which expired  November 1, 1994.
Under the cap agreement, Fleet Bank, (as successor to Bank of New England), made
payments to the Company on a quarterly  basis in an amount equal to  $25,000,000
multiplied  by the excess of the then  current  three  month LIBOR rate over 9%.
Under the floor  agreement,  the  Company  made  payments  to Crestar  Bank on a
quarterly  basis in an amount equal to $25,000,000  multiplied by the difference
between the then  current  three month LIBOR rate and 8%, to the extent that the
three  month  LIBOR rate is less than 8%.  Approximately $793,000 was charged to
interest expense and paid in 1994 relating to the floor agreement.


                                      F-64
<PAGE>



             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                       Unaudited as to September 30, 1996

(4) NOTES AND LOANS PAYABLE (continued)

The Senior Debt and Senior  Subordinated  Notes are secured by substantially all
the  assets of the  Company.  The  Company's  debt  agreements  contain  certain
restrictive covenants requiring the maintenance of minimum subscriber levels and
certain  financial  ratios.  The Company has not been in compliance with certain
covenants in its debt agreements,  including the timely payment of principal and
interest. (See Note 1).

DEBT MATURITIES

All of the  Company's  debt is due  upon  the  consummation  of the  sale of the
Company in accordance with the Forbearance  and Override  Agreements.  (see Note
1).

(5) CAPITAL STOCK

The  Company's  Board of  Directors  adopted a  resolution  on December 31, 1995
which,  among other  things,  established a new class of common stock (Class D),
and authorized the exchange of the  outstanding  Class A shares for one share of
Class A and 99,999 shares of Class D.  Additional  shares of Class B and Class C
stock were authorized as well. The Company's  Certificate of  Incorporation  was
amended on February 29, 1996 to reflect these changes.

Capital  stock of the Company at December 31, 1994 and prior to the December 31,
1995 resolution noted above, consisted of the following:

                                                     Number of Shares
                                                -------------------------
                                                              Issued and
                                                Authorized    Outstanding
                                                ----------    -----------
           Common Stock
              Class A-- $.10 par value               850          255
              Class B-- $.10 par value               595
              Class C-- $.10 par value               150
              6% Non-cumulative Preferred
                 Stock $1,000 par value            1,000
                                           

Capital  stock  of  the  Company  after  the  recapitalization  consists  of the
following at September 30, 1996 and December 31, 1995:

                                                  Number of Shares
                                              -------------------------
                                                            Issued and
                                              Authorized    Outstanding
                                              ----------    -----------
         Common Stock
              Class A-- $.10 par value          233,360               1
              Class B-- $.10 par value          231,940
              Class C-- $.10 par value           58,531
              Class D-- $.10 par value           99,999          99,999
         6% Non-cumulative Preferred
              Stock $1,000 par value              1,000

The Class A common stock is voting.  The Class B, Class C and Class D shares are
non-voting.  Class B shares are convertible into Class A shares at a rate of one
for one. See Note 4 for  disclosure  of warrants for unissued  capital  stock at
September 30, 1996, December 31, 1995 and 1994.




                                      F-65
<PAGE>




             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                       Unaudited as to September 30, 1996

(6) TRANSACTIONS WITH RELATED PARTIES

KYMC  acts as  manager  for the  Company.  In  accordance  with  the  management
agreement,  KYMC is paid a  management  fee  equal  to 3% of total  revenue  (as
defined in the management  agreement) plus out-of-pocket  expenses not to exceed
1% of total revenue.  The management fee for the nine months ended September 30,
1996 and the  years  ended  December  31,  1995,  1994  and  1993 was  $696,942,
$842,644, $819,095 and $749,305 respectively.

Included in accounts  payable  and  accrued  expenses at December  31, 1994 is a
payable in the amount of $151,190 to Scott Cable Communications, Inc. ("Scott"),
an affiliated Company, for certain  administrative costs paid by Scott on behalf
of the Company.

(7) COMMITMENTS

The Company rents pole space, office space and equipment under operating leases.
Future  minimum  payments,  by year and in the  aggregate,  under  noncancelable
operating leases with terms of one year or more are as follows:

                          1996                $132,081
                          1997                 104,417
                          1998                  59,412
                          1999                  56,006
                          2000                  45,182
                          Thereafter            53,675
                                              --------
                          Total               $450,773
                                              ========

Rent expense for the nine months  ended  September  30, 1996 and the years ended
December 31, 1995, 1994 and 1993 was $165,497,  $202,652,  $204,164 and $207,901
respectively.

(8) 401K RETIREMENT/SAVINGS PLAN

The Company's employees are covered by a 401(k) retirement/savings plan covering
all  employees who meet service  requirements.  Total plan expenses for the nine
months ended  September 30, 1996 and the years ended December 31, 1995, 1994 and
1993 was $5,049, $7,660, $5,769 and $7,099, respectively.

(9) REGULATORY MATTERS

On October 5, 1992,  Congress enacted the Cable Television  Consumer  Protection
and  Competition  Act of 1992 (the "1992 Cable Act") which  regulates  the cable
television industry.  Pursuant to the 1992 Cable Act, the Federal Communications
Commission (the "FCC") has issued numerous  regulations which include provisions
regarding rates and other matters.  As a result of these rules,  the Company was
required to reduce many of its basic service rates effective  September 1, 1993,
and again on August 1, 1994.

On June 5, 1995, the FCC extended  regulatory  relief to small cable  operators.
All of the Company's cable systems qualified for this regulatory  relief,  which
allows for greater flexibility in establishing rates (including  increases).  On
February 8, 1996, Congress enacted the 1996  Telecommunications Act which, among
other things,  immediately  deregulated  all levels of service except  broadcast
basic service for small cable  operators  for which all of the  Company's  cable
systems qualified.



                                      F-66
<PAGE>
             AMERICAN CABLE ENTERTAINMENT OF KENTUCKY-INDIANA, INC.
                          NOTES TO FINANCIAL STATEMENTS
                       Unaudited as to September 30, 1996

(10)  Sale  of  the  Company's  Cable  Television  Systems  and  Emergence  from
Bankruptcy (Unaudited)

As described in Note 1, the Company filed a prepackaged bankruptcy under Chapter
11 of the Federal Bankruptcy Code on August 1, 1996. The prepackaged bankruptcy,
which  was  agreed  to  by  the  Company,   the  Company's  Step  Coupon  Senior
Subordinated  Noteholders  and the Company's  Junior  Subordinated  Noteholders,
called for,  among other  things:  the sale of the  Company's  cable  television
systems to  FrontierVision;  the payment in full of the Senior  Debtholders from
the proceeds of the sale; the payment in full of trade creditors in the ordinary
course of business;  and the allocation of the remaining sale proceeds among the
Step Coupon Senior Subordinated Noteholders, the Junior Subordinated Noteholders
and KYMC.

On  October 9, 1996 the  Company  consummated  the sale of its cable  television
systems to  FrontierVision  for $146 million,  subject to certain purchase price
adjustments and  effectively  emerged from the  prepackaged  bankruptcy.  Senior
Debtholders and trade creditors were paid in full as a result of the prepackaged
bankruptcy.  Step Coupon Senior  Subordinated  Noteholders,  Junior Subordinated
Noteholders and KYMC, with aggregate debt of $137,161,625, at September 30, 1996
were paid  $78,343,097,  as a result of the prepackaged  bankruptcy.  During the
nine months ended  September  30, 1996 the Company  incurred  expenses  totaling
$912,865 in connection with the Forbearance  Agreement,  the Override  Agreement
and in connection with the reorganization of the Company under Chapter 11.

Under Generally Accepted Accounting Principles, entities in reorganization under
the  bankruptcy  code are required to comply with the provisions of Statement of
Position  90-7  "Financial  Reporting  by Entities in  Reorganization  Under the
Bankruptcy Code" ("SOP 90-7"), which requires, among other things: a segregation
of  liabilities  subject  to  compromise  by  the  Bankruptcy  Court  as of  the
bankruptcy filing date; the reporting of prepetition liabilities on the basis of
the expected amount of the allowed claims;  and separate  disclosure of expenses
directly  related to the  reorganization  of the Company.  Given the sale of the
Company's cable television  systems and the Company's  emergence from bankruptcy
on October 9, 1996, the Company's unaudited  financial  statements as of and for
the nine months ended  September  30, 1996 have not been  prepared in accordance
with SOP 90-7. These unaudited interim  financial  statements have been prepared
in accordance with the basis of presentation indicated in Note 2.



                                     


                                      F-67
<PAGE>



                               

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Triax Southeast Associates, L.P.:

We have audited the accompanying  balance sheets of Triax Southeast  Associates,
L.P. (a Delaware limited  partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital and cash flows for the years
ended  December 31, 1995,  1994 and 1993.  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 Triax Southeast  Associates,
L.P. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years ended  December 31, 1995,  1994 and 1993, in conformity
with generally accepted accounting principles.

                                                            ARTHUR ANDERSEN LLP

Denver, Colorado,
February 27, 1996.






                                      F-68
<PAGE>







                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                       -------------------------------------------------------------
                                                                                                           December 31,
                                                                       September 30,           ------------------------------------
                                                                           1996                     1995                    1994
                                                                       ------------            ------------            ------------
                                                                         Unaudited
                              ASSETS
<S>                                                                    <C>                     <C>                     <C>         
Cash                                                                   $    852,907            $  3,380,723            $    699,077
Receivables, net of allowance of $7,747, $29,985 and
    $52,302 at September 30, 1996 and December 31, 1995 and
    1994, respectively                                                      703,356                 600,866                 542,832
Prepaid Expenses                                                            100,628                 167,908                 174,821
Inventory                                                                      --                   346,274                 444,624
Property, Plant and Equipment, net                                       35,966,591              38,761,227              36,496,820
Purchased Intangibles, net                                                8,292,119               9,542,002              10,105,115
Other Assets, net                                                           959,186                 933,591               1,118,718
                                                                       ------------            ------------            ------------
TOTAL ASSETS                                                           $ 46,874,787            $ 53,732,591            $ 49,582,007
                                                                       ============            ============            ============

            LIABILITIES AND PARTNERS' CAPITAL
Accrued Interest Expense                                               $     24,924            $    258,223            $    168,559
Accounts Payable and Other Accrued Expenses                               1,611,149               1,710,636               1,962,757
Subscriber Prepayments and Deposits                                          58,724                  71,105                  42,470
Payable to Affiliates                                                       274,686                 239,021                 227,355
Debt                                                                     37,242,965              42,546,539              35,787,218
                                                                       ------------            ------------            ------------
Total Liabilities                                                        39,212,448              44,825,524              38,188,359
Partners' Capital:
    General Partner                                                         (63,376)                (50,929)                (26,063)
     Limited Partners                                                     7,725,715               8,957,996              11,419,711
                                                                       ------------            ------------            ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL                                $ 46,874,787            $ 53,732,591            $ 49,582,007
                                                                       ============            ============            ============

</TABLE>
























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




                                      F-69
<PAGE>





                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                -----------------------------------------------------------------------------------
                                                 Nine Months
                                                    Ended                                        December 31,
                                                 September 30,          -----------------------------------------------------------
                                                     1996                    1995                    1994                  1993
                                                -------------           -------------          -------------            -----------
                                                  Unaudited

<S>                                             <C>                     <C>                     <C>                     <C>        
REVENUES                                        $ 14,520,733            $ 17,780,041            $ 15,057,652            $ 7,810,891
                                                ------------            ------------            ------------            -----------
EXPENSES:
  Programming                                      2,892,862               3,400,604               2,661,058              1,128,730
  Operating, selling, general
     and administrative                            3,953,135               5,104,803               4,489,003              2,268,325
  Overhead expenses paid to
     affiliate                                       221,847                 211,993                 176,705                 74,393
  Management fees paid to
     affiliate                                       726,036                 888,996                 752,882                390,545
  Depreciation and amortization                    5,505,387               7,344,035               6,252,573              3,307,310
                                                ------------            ------------            ------------            -----------
                                                  13,299,267              16,950,431              14,332,221              7,169,303
Operating Income                                   1,221,466                 829,610                 725,431                641,588
Loss on sale of assets                               244,180                    --                      --                     --
Interest Expense, net                              2,222,014               3,316,191               2,359,980              1,056,256
                                                ------------            ------------            ------------            -----------
NET LOSS                                        $ (1,244,728)           $ (2,486,581)           $ (1,634,549)           $  (414,668)
                                                ============            ============            ============            ===========

</TABLE>






























              The accompanying notes to financial statements are an
                       integral part of these statements.




                                      F-70
<PAGE>





                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                         STATEMENTS OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>

                                                ------------------------------------------------------
                                                 General             Limited
                                                 Partner             Partners                  Total
                                                --------           ------------           ------------
<S>                                             <C>                <C>                    <C>         
Balances, December 31, 1992                     $ (5,571)          $  6,448,436           $  6,442,865
   Contributions                                    --                7,000,000              7,000,000
   Net loss                                       (4,147)              (410,521)              (414,668)
                                                --------           ------------           ------------
Balances, December 31, 1993                       (9,718)            13,037,915             13,028,197
   Net loss                                      (16,345)            (1,618,204)            (1,634,549)
                                                --------           ------------           ------------
Balances, December 31, 1994                      (26,063)            11,419,711             11,393,648
   Net loss                                      (24,866)            (2,461,715)            (2,486,581)
                                                --------           ------------           ------------
Balances, December 31, 1995                      (50,929)             8,957,996              8,907,067
  Net loss unaudited                             (12,447)            (1,232,281)            (1,244,728)
                                                --------           ------------           ------------
Balances, September 30, 1996 unaudited          $(63,376)          $  7,725,715           $  7,662,339
                                                ========           ============           ============



</TABLE>


































              The accompanying notes to financial statements are an
                       integral part of these statements.



                                      F-71
<PAGE>





                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                 -------------------------------------------------------------
                                                  Nine Months
                                                     Ended                     Years Ended December 31,
                                                 September 30,    --------------------------------------------
                                                      1996            1995            1994           1993
                                                  -----------     -----------     -----------     ------------
                                                  (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                               <C>             <C>             <C>             <C>          
   Net loss                                       $(1,244,728)    $(2,486,581)    $(1,634,549)    $   (414,668)
   Adjustments to reconcile net loss to net
      cash flows from operating activities:
      Depreciation and amortization                 5,505,387       7,344,035       6,252,573        3,307,310
      Write-off of assets                               9,111
      (Increase) decrease in receivables, net        (102,490)        (58,034)          6,042         (345,197)
      (Increase) decrease in prepaid expenses          67,280           6,913        (128,309)         (20,657)
      (Decrease) increase in accrued interest
         expense                                     (233,299)         89,664          26,923          (45,894)
      (Decrease) increase in accounts payable
         and other accrued expenses                   (99,487)       (252,121)        803,714          274,125
      (Decrease) increase in subscriber
         prepayments and deposits                     (12,381)         28,635          (3,886)          17,495
      (Decrease) increase in payable to
         affiliates                                    35,665          11,666          72,286           30,849
                                                  -----------     -----------     -----------     ------------
      Net cash flows from operating activities      3,925,058       4,684,177       5,394,794        2,803,363
                                                  -----------     -----------     -----------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of properties, including
      purchased intangibles                          (184,000)     (6,065,116)        (74,203)     (25,342,487)
   Purchase of property, plant and equipment       (1,420,160)     (2,369,183)     (3,643,894)      (1,269,346)
   Proceeds from sale of property, plant and          108,043
      equipment                                          --              --              --               --
   (Increase) decrease in inventory                   346,274          98,350         263,815         (610,502)
    Increase in franchise costs and other assets     (183,457)        (10,387)       (121,663)            --
                                                  -----------     -----------     -----------     ------------
      Net cash flows from investing activities     (1,333,300)     (8,346,336)     (3,575,945)     (27,222,335)
                                                  -----------     -----------     -----------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from borrowings                              --         9,400,000       1,000,000       19,400,000
   Repayment of borrowings                         (5,020,000)     (2,880,000)     (2,500,000)      (1,400,000)
   Partners' contributions                               --              --              --          7,000,000
   Cash paid for loan costs                              --           (66,520)       (117,107)        (340,789)
   Repayment of capital lease obligations             (99,574)       (109,675)        (60,007)         (24,725)
                                                  -----------     -----------     -----------     ------------
      Net cash flows from financing activities     (5,119,574)      6,343,805      (1,677,114)      24,634,486
                                                  -----------     -----------     -----------     ------------
NET INCREASE IN CASH                               (2,527,816)      2,681,646         141,735          215,514
CASH, beginning of period                           3,380,723         699,077         557,342          341,828
                                                  -----------     -----------     -----------     ------------
CASH, end of period                               $   852,907     $ 3,380,723     $   699,077     $    557,342
                                                  ===========     ===========     ===========     ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
    Cash paid during the period for interest      $ 2,549,048     $ 3,268,546     $ 2,333,057     $  1,102,150
                                                  ===========     ===========     ===========     ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
  AND FINANCING ACTIVITIES:
    Acquisitions with capital leases              $      --       $   164,996     $   233,047     $     66,236
                                                  ===========     ===========     ===========     ============
    Note issued for acquisition of properties     $      --       $   184,000     $      --       $       --
                                                  ===========     ===========     ===========     ============

</TABLE>




              The accompanying notes to financial statements are an
                       integral part of these statements.




                                      F-72
<PAGE>





                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                          NOTES TO FINANCIAL STATEMENTS

(1) THE PARTNERSHIP

ORGANIZATION AND CAPITALIZATION

Triax  Southeast  Associates,  L.P. (the  "Partnership")  is a Delaware  limited
partnership formed January 23, 1992 for the purpose of acquiring,  constructing,
owning, and operating cable television  systems,  located primarily in Kentucky,
North  Carolina,  West Virginia and Ohio. The  Partnership  was  capitalized and
commenced  operations  on July 28,  1992,  with  $7,000,000  of limited  partner
contributions  and a $70,000 demand  non-interest  bearing note from its general
partner,  Triax Southeast  General  Partner,  L.P.  ("Southeast,  G.P.").  Triax
Investors Southeast,  L.P.  ("Investors"),  a limited partnership in which Triax
Southeast Associates,  Inc. ("Southeast Inc."), a Delaware  corporation,  is the
general partner, contributed $1,000,000 to the Partnership.

Southeast Inc. is a wholly owned subsidiary of Triax Communications  Corporation
("TCC"),  a  Delaware   corporation.   Southeast  Inc.  contributed  capital  of
$1,000,000  and a $59,500  demand  non-interest  bearing note to Investors for a
general partnership  interest.  In addition,  Southeast Inc.  contributed a $700
demand  non-interest  bearing note to Southeast,  G.P. for a general partnership
interest. Investors contributed a $59,500 demand non-interest bearing note for a
limited partner interest in Southeast, G.P.

On  December  15,  1993,  the  Partnership  Agreement  was  amended  to  reflect
additional  capital  contributions  of $7,000,000 by certain  limited  partners.
Southeast Inc. contributed  $1,250,000 to Investors,  who in turn contributed an
additional $1,250,000 to the Partnership.

The Partnership Agreement, as amended, provides that at any time after April 30,
1997,  upon notice from a majority of the limited  partners  that they desire to
cause a sale of the  Partnership's  assets and business (or all of the interests
in the  Partnership),  TCC may  purchase  all of the  Partnership's  assets  and
business (or all of the interests in the  Partnership),  subject to the approval
of the  majority of limited  partners.  In addition,  after July 31, 1998,  each
limited partner who has made capital  contributions  in excess of $1,000,000 may
cause the sale of the  Partnership's  assets and business and liquidation of the
Partnership.  The above dates may be  extended to 1998 or 1999 to coincide  with
the  revised  termination  date  of  one of the  limited  partner's  partnership
agreement, if and when the limited partner extends the termination date.

ALLOCATION OF PROFITS, LOSSES AND DISTRIBUTIONS

Profits

The Partnership Agreement,  as amended,  provides that profits will be allocated
as follows:  (i) 1% to the general partner and 99% to the limited partners until
profits allocated to them equal losses previously allocated; (ii) to the limited
partners until the limited  partners have been allocated  profits equal to a 12%
per annum cumulative  preferred return on their capital  contributions  plus the
amount of losses  previously  allocated;  then, (iii) 20% to the general partner
and 80% to the limited partners.





                                      F-73
<PAGE>




                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                          NOTES TO FINANCIAL STATEMENTS

(1) THE PARTNERSHIP (continued)

Losses

The Partnership Agreement, as amended, provides that losses will be allocated 1%
to the general partner and 99% to the limited  partners,  except no losses shall
be  allocated  to any limited  partner  which would cause the limited  partner's
capital  account  to become  negative  by an  amount  greater  than the  limited
partner's  share  of  the  Partnership's  "minimum  gain"  (the  excess  of  the
Partnership's  nonrecourse debt over its adjusted basis in the assets encumbered
by nonrecourse debt), as defined, plus any amount of Partnership debt assumed by
the limited partner or any amount the limited partner is obligated to contribute
to the Partnership; then 100% to the general partner.

Distributions

The Partnership  Agreement,  as amended,  provides that  Distributable  Cash, as
defined,  will be distributed  as follows:  (i) to the partners in proportion to
their Capital Contribution  Accounts, as defined, until the balances are reduced
to zero; (ii) to the limited partners until the limited partners have received a
12% per annum  cumulative  preferred return on their capital  contributions  and
then, (iii) 20% to the general partner and 80% to the limited partners.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

INTERIM FINANCIAL STATEMENTS

The financial  statements and related  footnote  disclosures as of September 30,
1996 and for the  nine  months  ended  September  30,  1996  are  unaudited.  In
management's  opinion,  the unaudited  financial  statements as of September 30,
1996 and for the nine months ended  September  30, 1996 include all  adjustments
necessary for a fair  presentation.  Such adjustments were of a normal recurring
nature.

REVENUE RECOGNITION

Revenues are  recognized in the period the related  services are provided to the
subscribers.

INCOME TAXES

No provision has been made for federal, state or local income taxes because they
are the  responsibility  of the individual  partners.  The principal  difference
between  net  income or loss for  income tax and  financial  reporting  purposes
results from the use of accelerated depreciation for tax purposes.




                                      F-74
<PAGE>




                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                          NOTES TO FINANCIAL STATEMENTS

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

INVENTORY

Inventory is carried at historical  cost, which  approximates  market value, and
consists primarily of installation materials and addressable trap changers.

PROPERTY, PLANT AND EQUIPMENT

Property,  plant and  equipment are stated at cost.  Replacements,  renewals and
improvements  are  capitalized and costs for repairs and maintenance are charged
directly to expense when  incurred.  The  Partnership  capitalized  a portion of
technician  and  installer  salaries to property , plant,  and  equipment  which
amounted to approximately  $299,692 for the nine months ended September 30, 1996
and  $283,000  and  $422,000  for the years  ended  December  31, 1995 and 1994,
respectively.  Depreciation and amortization are computed using the straightline
method over the following estimated useful lives:
<TABLE>
<CAPTION>


                                  -------------------------------------------------------------
                                                            December 31,
                                   September 30,   -----------------------------
                                      1996             1995             1994           Life
                                  ------------     ------------     ------------   ------------
                                    Unaudited
<S>                               <C>              <C>              <C>              <C>       
Property, plant and equipment     $ 52,400,285     $ 51,188,466     $ 43,704,363     5-10 years
Less: Accumulated depreciation     (16,433,694)     (12,427,239)      (7,207,543)
                                  ------------     ------------     ------------
                                  $ 35,966,591     $ 38,761,227     $ 36,496,820
                                  ============     ============     ============
</TABLE>

PURCHASED INTANGIBLES

Purchased  intangibles are being amortized using the  straight-line  method over
the following estimated useful lives:
<TABLE>
<CAPTION>

                                  ----------------------------------------------------------
                                                            December 31,
                                 September 30,     -----------------------------
                                     1996              1995             1994           Life
                                 ------------      ------------     ------------     --------
                                    Unaudited
<S>                               <C>              <C>              <C>              <C>     
Franchise costs                   $ 13,026,848     $ 13,026,720     $ 11,832,807     10 years
Noncompete agreements                  850,000          850,000        1,700,000     3 years
                                  ------------     ------------     ------------
                                    13,876,848       13,876,720       13,532,807
Less: Accumulated amortization      (5,584,729)      (4,334,718)      (3,427,692)
                                  ------------     ------------     ------------
                                  $  8,292,119     $  9,542,002     $ 10,105,115
                                  ============     ============     ============
</TABLE>

During 1995, the Partnership  wrote-off  approximately  $1,000,000 of noncompete
agreements,  and the  associated  accumulated  amortization,  as the  noncompete
agreements had expired.

IMPAIRMENT OF LONG-LIVED ASSETS

The  Financial  Accounting  Standards  Board  ("FASB")  has issued  Statement of
Financial Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for  Long-Lived  Assets To Be Disposed Of" ("SFAS  121").  SFAS 121 requires
that long-lived assets and certain identifiable  intangibles to be held and used
by  an  entity  be  reviewed  for  impairment  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  SFAS 121 is required to be adopted by the Company in fiscal  1996.
Management  believes the adoption of SFAS 121 will not have a material impact on
the financial statements.


                                      F-75
<PAGE>



                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                          NOTES TO FINANCIAL STATEMENTS

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

OTHER ASSETS

Other  assets  are being  amortized  using  the  straight-line  method  over the
following estimated useful lives:


                      -------------------------------------------------------
                                             December 31,
                      September 30,   ---------------------------
                          1996            1995          1994         Life
                      -----------     ------------   ------------   --------
                        Unaudited
Loan costs            $ 1,111,608     $ 1,111,608    $ 1,084,999     5 years
Organization costs        441,435         441,435        441,435     5 years
Other                     187,204           3,875            --      10 years
                      -----------     -----------     ----------
                        1,740,247       1,556,918      1,526,434
Less: Accumulated
  amortization           (781,061)       (623,327)      (407,716)
                      -----------     -----------     ----------
                      $   959,186     $   933,591     $1,118,718
                      ===========     ===========     ==========

(3) ACQUISITIONS

On February 28, 1995, the Partnership  acquired certain cable television systems
and related assets of Rodgers Cable TV, Inc. ("Rodgers").  The purchase price of
approximately  $5,700,000,  including  closing  costs,  was accounted for by the
purchase method of accounting and allocated as follows:

Property, plant and equipment                                         $4,580,000
Franchise costs                                                        1,019,400
Non-compete                                                              100,600
                                                                      ----------
     Total cash paid                                                  $5,700,000
                                                                      ==========

On March 31, 1995, the Partnership acquired cable television systems and related
assets of Green  Tree Cable  T.V.,  Inc.  The  purchase  price of  approximately
$570,000,  including  closing costs, was accounted for by the purchase method of
accounting.

On December 15, 1993,  the  Partnership  acquired cable  television  systems and
related assets of C4 Media Cable South, L.P. for approximately $17 million,  and
on December 21, 1993,  acquired  additional cable  television  system assets and
related  liabilities  of Charter  Cable,  Inc. for  approximately  $6.5 million.
Acquisition-related  fees totaled approximately  $700,000. The acquisitions were
financed by  additional  limited  partners'  contributions  of $7  million,  the
drawdown by the Partnership of $17.6 million under its amended  Revolving Credit
and Term Loan and available cash of $750,000.  The  acquisitions  were accounted
for by the purchase method of accounting and allocated as follows:

Property, plant and equipment                                        $20,144,000
Franchise costs                                                        2,756,000
Non-compete                                                              600,000
                                                                     -----------
     Total cash paid                                                 $23,500,000
                                                                     ===========




                                      F-76
<PAGE>




                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                          NOTES TO FINANCIAL STATEMENTS

(4) DEBT

Debt consisted of the following at September 30, 1996, and December 31, 1995 and
1994, respectively.

<TABLE>
<CAPTION>

                                                    ----------------------------------------------
                                                                           December 31,
                                                    September 30,    -----------------------------
                                                        1996             1995             1994
                                                    ------------     ------------      -----------
                                                     Unaudited
<S>                                                  <C>              <C>              <C>     
Revolving Credit and Term Loan, interest
    payable quarterly based on varying interest
    rate options                                     $37,000,000      $42,020,000      $35,500,000
Note Payable to seller                                      --            184,000             --
Vehicle leases                                           242,965          342,539          287,218
                                                     -----------      -----------      -----------
                                                     $37,242,965      $42,546,539      $35,787,218
                                                     ===========      ===========      ===========
</TABLE>

The Revolving  Credit and Term Loan Agreement,  as amended through  February 28,
1995 (the "Revolver"),  is collateralized by all property,  plant and equipment,
inventory  and  accounts  receivable  of the  Partnership  and all rights  under
present and future permits,  licenses and franchises. On September 30, 1995, the
outstanding  principal was converted  into a term loan with  quarterly  payments
from  December 31, 1995 through June 30, 2002.  Commencing  in 1996,  within 120
days after the close of the fiscal year, the  Partnership  must make a mandatory
prepayment  in an amount equal to 50% of the excess cash flow,  as defined,  for
the prior  year.  A  commitment  fee of 1/2% per annum is  charged  on the daily
unused portion of the commitment amount.

The  Partnership  entered into LIBOR  interest  rate  agreements  with the banks
related to the Revolver.  The Partnership fixed the interest rate on $40 million
at 7.21% for the  period  from June 4, 1996 to  August 5,  1996.  The  remaining
outstanding balance bears interest at prime plus 1%.

On July 1, 1994 the Partnership  paid $135,000 for an interest rate cap of 7% on
the LIBOR rate on $18 million  effective  July 1, 1994 through July 1, 1996, and
on March 27, 1995,  paid  $62,000 for an interest  rate cap of 7.5% on the LIBOR
rate on $10 million effective March 27, 1995 through March 27, 1997.

The loan agreement  contains  certain  covenants,  the more significant of which
include  leverage  and  interest  coverage  ratios  and  limitations  on capital
expenditures.

Debt maturities required as of December 31, 1995 are as follows:

                                Year          Amount
                                ---------------------
                                1996      $ 3,174,759
                                1997        4,731,241
                                1998        5,578,235
                                1999        6,842,304
                                2000        7,920,000
                          Thereafter       14,300,000
                                          -----------
                                          $42,546,539
                                          ===========

(5) RELATED PARTY TRANSACTIONS

TCC provides  management  services to the  Partnership  for a fee equal to 5% of
gross revenues,  as defined.  The Partnership  incurred management fees totaling
$726,036 for the nine months ended  September 30, 1996,  and $888,996,  $752,882
and $390,545 in 1995, 1994 and 1993, respectively.


                                      F-77
<PAGE>



                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                          NOTES TO FINANCIAL STATEMENTS

(5) RELATED PARTY TRANSACTIONS (continued)

TCC also  allocates  certain  overhead  expenses  to the  Partnership,  based on
proportionate  subscriber revenues,  which primarily relate to employment costs,
which expenses are limited to 1.25% of gross revenues.  These overhead  expenses
amounted to $168,609 for the nine months ended September 30, 1996, and $211,993,
$176,705 and $74,393 in 1995, 1994 and in 1993, respectively.

TCC was paid  acquisition fees of $235,000 in 1993 related to the acquisition of
certain  assets.  Such  fees  are  included  in  purchased  intangibles  in  the
accompanying  balance  sheets.  TCC may be paid a  disposition  fee of 1% of the
sales price of the Partnership  after certain approvals of the limited partners,
and after certain other conditions are met.

The Partnership  purchases  programming  from TCC at TCC's cost,  which includes
volume discounts TCC might earn.

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS

The  carrying  amounts  of cash and cash  equivalents  approximates  fair  value
because  of the nature of the  investments  and the  length of  maturity  of the
investments.

The estimated  fair value of the  Partnership's  debt  instruments  are based on
borrowing  rates that would be equal to existing rates,  therefore,  there is no
material difference in the fair market value and the current value.

(7) REGULATORY MATTERS

In October 1992,  Congress enacted the Cable Television Consumer and Competition
Act of 1992 (the "1992  Cable  Act") which  greatly  expanded  federal and local
regulation  of the  cable  television  industry.  In  April  1993,  the  Federal
Communications Commission ("FCC") adopted comprehensive  regulations,  effective
September 1, 1993,  governing  rates charged to subscribers  for basic cable and
cable programming  services (other than programming  offered on a per-channel or
per-program basis). The FCC implemented regulation which allowed cable operators
to  justify  regulated  rates in excess of the FCC  benchmarks  through  cost of
service  showings at both the franchising  authority level for basic service and
to the FCC in response to complaints on rates for cable programming services.

On February 22, 1994,  the FCC issued  further  regulations  which  modified the
FCC's  previous  benchmark  approach,  adopted  interim  rules to govern cost of
service  proceedings  initiated by cable operators,  and lifted the stay of rate
regulations  for small cable systems,  which were defined as all systems serving
1,000 or fewer subscribers.

On November 10, 1994, the FCC adopted "going  forward" rules that provided cable
operators with the ability to offer new product tiers priced as operators elect,
provided  certain limited  conditions are met, permit cable operators to add new
channels at reasonable prices to existing cable  programming  service tiers, and
created an  additional  option  pursuant to which small cable  operators may add
channels to cable programming service tiers.

In May 1995,  the FCC adopted small  company  rules that provided  small systems
regulatory   relief  by  implementing  an  abbreviated   cost  of  service  rate
calculation  method.  Using  this  methodology,  for small  systems  seeking  to
establish  rates no higher  than $1.24 per  channel,  the rates are deemed to be
reasonable.





                                      F-78
<PAGE>




                        TRIAX SOUTHEAST ASSOCIATES, L.P.
                          NOTES TO FINANCIAL STATEMENTS

(7) REGULATORY MATTERS (continued)

In February 1996, the  Telecommunications  Act of 1996 was enacted which,  among
other things,  deregulated  cable rates for small  systems on their  programming
tiers.

To date,  the FCC's  regulations  have not had a material  adverse effect on the
Partnership  due  to  the  lack  of  certifications  by  the  local  franchising
authorities.


                                      F-79
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Cox Communications, Inc.

We have  audited  the  accompanying  combined  statement  of net  assets  of Cox
Communications, Inc.'s ("CCI") Central Ohio Cluster as of December 31, 1996, and
the related combined statements of income, changes in net assets, and cash flows
for the year then ended.  These financial  statements are the  responsibility of
CCI's management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion,  the combined  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  combined  financial  position  of Cox
Communications,  Inc.'s  Central  Ohio  Cluster at December  31,  1996,  and the
combined  results of its  operations and its cash flows for the year then ended,
in conformity with generally accepted accounting principles.

As  discussed  in Note 1, CCI sold the assets  and  certain  liabilities  of the
Central Ohio Cluster.



DELOITTE & TOUCHE LLP

August 29, 1997
(December 19, 1997 as to the second paragraph in Note 1)
Atlanta, Georgia






                                      F-80
<PAGE>


                              CENTRAL OHIO CLUSTER
                        COMBINED STATEMENTS OF NET ASSETS

<TABLE>
                                                            -------------------------------------
                                                             September 30,            December 31,
                                                                 1997                    1996
                                                               --------------------------------
                                                             (Unaudited)
                                                                    (Thousands of Dollars)


                                 ASSETS
<S>                                                             <C>                    <C>     
Cash                                                            $     28               $    239
Accounts receivable, less allowance for doubtful
     accounts of  $87 and $66                                      2,511                  2,310
Net plant and equipment                                           24,278                 24,512
Intangible assets                                                148,284                151,263
Other assets                                                         853                  1,448
                                                                --------               --------

     Total assets                                               $175,954               $179,772
                                                                ========               ========

                       LIABILITIES AND NET ASSETS
Accounts payable and accrued expenses                           $    667               $  1,245
Deferred income                                                    1,416                  1,430
Deferred income taxes                                             62,294                 63,442
Other liabilities                                                    399                    191
Amounts due to Affiliates                                         29,571                 35,107
                                                                --------               --------
     Total liabilities                                            94,347                101,415

Net assets                                                        81,607                 78,357
                                                                --------               --------

     Total liabilities and net assets                           $175,954               $179,772
                                                                ========               ========



</TABLE>



















                   See notes to combined financial statements.

                                      F-81
<PAGE>


                              CENTRAL OHIO CLUSTER
                          COMBINED STATEMENTS OF INCOME
<TABLE>


                                        ----------------------------------------------------------
                                        Nine Months Ended    Nine Months Ended       Year Ended
                                           September 30,        September 30,        December 31,
                                               1997                1996                 1996
                                            ----------         --------------       -------------
                                          (Unaudited)           (Unaudited)
                                                            (Thousands of Dollars)

<S>                                         <C>                <C>                   <C>      
Revenues                                    $ 25,486           $   23,389             $ 31,749
                                                                                 
Costs and expenses:
   Operating                                   8,387                7,371               10,132
   Selling, general and administrative         3,408                3,772                5,143
   Depreciation                                3,735                3,579                4,846
   Amortization                                2,979                2,979                3,972
                                               -----                -----                -----                                    
Operating income                               6,977                5,688                7,656
Interest expense with affiliates              (1,443)              (1,851)              (2,346)
Other, net                                       (25)                   6                    5
                                               -----                -----                -----                                    
Income before income taxes                     5,509                3,843                5,315
Income taxes                                  (2,259)              (1,576)              (2,176)
                                               -----                -----                -----                                    
Net income                                   $ 3,250              $ 2,267              $ 3,139
                                               =====                =====                =====


</TABLE>


























                   See notes to combined financial statements.


                                      F-82
<PAGE>


                              CENTRAL OHIO CLUSTER
                  COMBINED STATEMENTS OF CHANGES IN NET ASSETS



                                              ---------------------
                                              (Thousands of Dollars)
                                              ---------------------

Balance at December 31, 1995                       $ 75,218
  Net income                                          3,139
                                                     ------
Balance at December 31, 1996                         78,357
  Net income (Unaudited)                              3,250
                                                     ------
Balance at September 30, 1997 (Unaudited)          $ 81,607
                                                     ======































                   See notes to combined financial statements.


                                      F-83
<PAGE>


                              CENTRAL OHIO CLUSTER
                        COMBINED STATEMENTS OF CASH FLOWS

<TABLE>

                                                               ----------------------------------------------------
                                                              Nine Months          Nine Months 
                                                                 Ended                Ended              Year Ended
                                                             September 30,         September 30,         December 31,
                                                                 1997                  1996                 1996
                                                             ---------------       --------------        -----------
                                                              (Unaudited)           (Unaudited)
                                                                              (Thousands of Dollars)
Cash flows from operating activities
<S>                                                            <C>                  <C>                  <C>     
Net income                                                     $  3,250             $  2,267             $  3,139
Adjustments to reconcile net income to net cash
provided
  by operating activities:
    Depreciation                                                  3,735                3,579                4,846
    Amortization                                                  2,979                2,979                3,972
    Deferred income taxes                                        (1,148)              (1,245)              (1,849)
(Increase) decrease in accounts receivable                         (201)                 155                 (120)
Decrease in other assets                                            595                  348                  206
Increase (decrease) in accounts payable and accrued expenses       (592)                 289                  803
Other, net                                                          208                  (20)                 (42)
                                                               --------             --------             --------
       Net cash provided by operating activities                  8,826                8,352               10,955
                                                               --------             --------             --------
Cash flows from investing activities
Capital expenditures                                             (3,501)              (2,549)              (2,939)
                                                               --------             --------             --------
       Net cash used in investing activities                     (3,501)              (2,549)              (2,939)
                                                               --------             --------             --------
Cash flows from financing activities
Decrease in amounts due to Affiliates                            (5,536)              (4,933)              (7,777)
                                                               --------             --------             --------
       Net cash provided by financing activities                 (5,536)              (4,933)              (7,777)
                                                               --------             --------             --------
Net increase (decrease) in cash                                    (211)                 870                  239
Cash at beginning of period                                         239                 --                   --
                                                               --------             --------             --------
Cash at end of period                                          $     28             $    870             $    239
                                                               ========             ========             ========


Cash paid during the period for:
     Interest                                                  $     17             $     11             $     14
     Income taxes                                                   788                  852                  905

</TABLE>











                   See notes to combined financial statements.


                                      F-84
<PAGE>


                              CENTRAL OHIO CLUSTER
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                   (Information as of and for the Nine Months
                     Ended September 30, 1997 is unaudited)


(1)    ORGANIZATION AND BASIS OF PRESENTATION

The combined  financial  statements  represent  the combined  operations  of Cox
Communications,   Inc.'s  ("CCI")  cable   television   systems   serving  eight
communities  in Central  Ohio  (collectively  referred to as the  "Central  Ohio
Cluster").  These cable  television  systems  were  acquired by CCI, an indirect
75.3% owned subsidiary of Cox Enterprises,  Inc. ("CEI"),  from the Times Mirror
Company ("Times  Mirror") in connection  with CCI's  acquisition of Times Mirror
Cable  Television,  Inc.  ("TMCT") on February 1, 1995. The historical  combined
financial  statements  do not  necessarily  reflect the results of operations or
financial  position that would have existed had the Central Ohio Cluster been an
independent company. All significant intercompany accounts and transactions have
been  eliminated  in the  combined  financial  statements  of the  Central  Ohio
Cluster.

On December 19, 1997, CCI sold the assets and certain liabilities of the Central
Ohio Cluster to FrontierVision Operating Partners, L.P. for approximately $204.0
million.


(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Central Ohio Cluster  bills its  customers in advance;  however,  revenue is
recognized as cable television services are provided.  Receivables are generally
collected within 30 days.  Credit risk is managed by  disconnecting  services to
customers who are delinquent  generally greater than 75 days. Other revenues are
recognized as services are provided.  Revenues  obtained from the  connection of
customers to the cable  television  systems are less than related direct selling
costs; therefore, such revenues are recognized as services are provided.

Plant and Equipment

Depreciation  is computed using  principally the  straight-line  method at rates
based upon estimated  useful lives of five to 20 years for building and building
improvements,  five to 12 years for  cable  television  systems  and three to 10
years for other plant and equipment.

The costs of initial cable television connections are capitalized as cable plant
at standard  rates for the Central Ohio  Cluster's  labor and at actual cost for
materials  and  outside  labor.  Expenditures  for  maintenance  and repairs are
charged to operating  expense as incurred.  At the time of  retirement,  sale or
other  disposition  of  property,  the  original  cost and  related  accumulated
depreciation are written off.

Intangible Assets

Intangible  assets  consist of goodwill and cable  television  franchise  rights
recorded in  connection  with the  acquisition  of the Central Ohio Cluster from
TMCT and are amortized on a straight-line  basis over 40 years. The Central Ohio
Cluster assesses on an on-going basis the  recoverability  of intangible  assets
based on estimates of future undiscounted cash flows for the applicable business
acquired compared to net book value. The Central Ohio Cluster also evaluates the
amortization  period  of  intangible  assets  to  determine  whether  events  or
circumstances warrant revised estimated of useful lives.






                                      F-85
<PAGE>


                              CENTRAL OHIO CLUSTER
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                   (Information as of and for the Nine Months
                     Ended September 30, 1997 is unaudited)


(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Impairment of Long-Lived Assets

Effective  January 1, 1996,  the  Central  Ohio  Cluster  adopted  Statement  of
Financial  Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of  Long-Lived  Assets  and for  Long-Lived  Assets  to be  Disposed  Of."  This
statement  requires that long-lived  assets and certain  intangibles be reviewed
for  impairment  when  events or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable,  with any impairment  losses
being reported in the period in which the recognition criteria are first applied
based on the fair value of the asset.  Long-lived assets and certain intangibles
to be disposed of are  required to be reported at the lower of carrying  amounts
or fair value less cost to sell.

Income Taxes

The  accounts  of the Central  Ohio  Cluster  are  included in the  consolidated
federal  income tax return and certain state income tax returns of CEI.  Current
federal and state  income tax expenses  and  benefits  have been  allocated on a
separate  return basis to the Central Ohio Cluster based on the current year tax
effects of the inclusion of its income, expenses and credits in the consolidated
income tax returns of CEI or based on separate state income tax returns.

Deferred income tax assets and liabilities  arise from temporary  differences in
the financial  reporting and income tax basis of assets and  liabilities.  These
differences primarily result from property and intangible assets.

Fees and Taxes

The Central Ohio Cluster  incurs  various fees and taxes in connection  with the
operations of its cable  television  systems,  including  franchise fees paid to
various  franchise  authorities,  copyright  fees  paid  to the  U.S.  Copyright
Tribunal and business and  franchise  taxes paid to the State of Ohio. A portion
of these  fees and  taxes are  passed  through  to the  Central  Ohio  Cluster's
subscribers.  Amounts  collected from subscribers are recorded as a reduction of
operating expenses.

Pension, Postretirement and Postemployment Benefits

CCI generally  provides defined pension benefits to substantially  all employees
based on years of service and compensation during those years. CCI also provides
certain health care and life insurance  benefits to  substantially  all retirees
and  employees  through  certain CEI plans.  Expense  related to the CCI and CEI
plans is allocated to the Central Ohio Cluster through the intercompany account.
The amount of the allocations is generally based on actuarial  determinations of
the effects of the Central Ohio Cluster employees' participation in the plans.

Use of Estimates

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



                                      F-86
<PAGE>


                              CENTRAL OHIO CLUSTER
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                   (Information as of and for the Nine Months
                     Ended September 30, 1997 is unaudited)


(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The unaudited combined financial  statements as of and for the nine months ended
September  30,  1997  and  1996,  in the  opinion  of  management,  include  all
adjustments,  consisting only of normal recurring  adjustments,  necessary for a
fair  presentation of the financial  position and results of operations for this
period.  Operating  results for nine  months  ended  September  30, 1997 are not
necessarily indicative of the results that may be expected for the entire year.


(3)    CASH MANAGEMENT SYSTEM

The Central Ohio Cluster  participates in CEI's cash management system,  whereby
the bank sends daily notification of checks presented for payment. CEI transfers
funds from other sources to cover the checks presented for payment.


(4)    PLANT AND EQUIPMENT

                                             ----------------- -----------------
                                             September 30,        December 31,
                                                 1997                 1996
                                              --------             ---------
                                                          (In Thousands)
Land                                           $    313             $    311
Buildings and building improvements                 990                1,033
Transmission and distribution plant              43,531               41,329
Miscellaneous equipment                           2,343                1,478
Construction in progress                            531                  825
                                               --------             --------
     Plant and equipment, at cost                47,708               44,976
Less accumulated depreciation                   (23,430)             (20,464)
                                               --------             --------
     Net plant and equipment                   $ 24,278             $ 24,512
                                               ========             ========


(5)    INTANGIBLE ASSETS

                                        ----------------------------------
                                        September 30,         December 31,
                                            1997                  1996
                                          ----------            ---------
                                                   (In Thousands)
Goodwill                                 $ 158,876             $ 158,876
Less accumulated amortization              (10,592)               (7,613)
                                         ---------             ---------
  Net intangible assets                  $ 148,284             $ 151,263
                                         =========             =========




                                      F-87
<PAGE>


                              CENTRAL OHIO CLUSTER
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                   (Information as of and for the Nine Months
                     Ended September 30, 1997 is unaudited)


(6)    INCOME TAXES

Current and deferred income tax expenses (benefits) are as follows:

                                    ------------------------------------------
                                    Nine months ended          Year ended
                                    September 30, 1997      December 31, 1996
                                          -------                -------
                                                  (In Thousands)
Current:
  Federal                                 $ 2,906                $ 3,289
  State                                       520                    736
                                          -------                -------
     Total current                          3,426                  4,025
                                          -------                -------
Deferred:
  Federal                                  (1,119)                (1,385)
  State                                       (48)                  (464)
                                          -------                -------
     Total deferred                        (1,167)                (1,849)
                                          -------                -------
     Net income tax expense               $ 2,259                $ 2,176
                                          =======                =======


Income  tax  expense  differs  from the amount  computed  by  applying  the U.S.
statutory  federal income tax rate (35%) to income (loss) before income taxes as
a result of the following items:

<TABLE>
                                                      -------------------------------------------
                                                         Nine months ended           Year ended
                                                        September 30, 1997       December 31, 1996
                                                              ------               ------
                                                                     (In Thousands)
Computed tax expense at federal statutory
<S>                                                           <C>                  <C>   
       rates on income before income taxes                    $1,928               $1,860
State income taxes, net of federal tax benefit                   307                  177
Other, net                                                        24                  139
                                                              ------               ------
       Net income tax expense                                 $2,259               $2,176
                                                              ======               ======
</TABLE>

Significant  components  of  the  net  deferred  tax  liability  consist  of the
following:

                                        ---------------------------------------
                                      Nine months ended           Year ended
                                       September 30, 1997     December 31, 1996
                                            --------              --------
                                                   (Thousands of Dollars)

Plant and equipment                         $ (5,618)             $ (5,787)
Franchise rights                             (57,569)              (58,638)
Other                                            893                   983
                                            --------              --------
     Net deferred tax liability             $(62,294)             $(63,442)
                                            ========              ========


(7)    RETIREMENT PLANS

Qualified Pension Plan

Effective January 1, 1996, CCI established the Cox Communications,  Inc. Pension
Plan (the "CCI Plan"), a qualified  noncontributory defined benefit pension plan
for  substantially  all of CCI's employees  including the Central Ohio Cluster's
employees. Plan assets consist primarily of common stock, investment-



                                      F-88
<PAGE>

                              CENTRAL OHIO CLUSTER
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                   (Information as of and for the Nine Months
                     Ended September 30, 1997 is unaudited)


(7)    RETIREMENT PLANS (CONTINUED)

grade  corporate  bonds,   cash  and  cash   equivalents  and  U.S.   government
obligations. The CCI Plan calls for benefits to be paid to eligible employees at
retirement based primarily upon years of service with CCI and compensation rates
near  retirement.  The funded status of the portion of the CCI Plan covering the
employees of the Central Ohio Cluster is not determinable. The fair value of the
CCI Plan assets was greater than the projected benefit obligation as of December
31, 1996.

Total  pension  expense  attributable  to the Central  Ohio  Cluster  employees'
participation  in the CCI  Plan was  $33,000  for the nine  month  period  ended
September 30, 1997 and $158,000 for the year ended December 31, 1996.

The assumptions used in the actuarial computations at December 31, 1996 were:

Discount rate                                                   7.75%
Rate of increase in compensation levels                         5.50%
Expected long-term rate of return on plan assets                9.00%

Other Retirement Plans

CEI provides  certain health care and life insurance  benefits to  substantially
all retirees of CEI and its  subsidiaries.  Postretirement  expense allocated to
the Central  Ohio  Cluster by CEI was $13,000  for the nine month  period  ended
September  30, 1997 and $15,000 for the year ended  December 31,  1996.  CEI has
been  contributing  additional  amounts  to the Cox  Pension  Plan Trust to fund
health care benefits  pursuant to Section  401(h) of the Internal  Revenue Code.
CEI is funding  benefits  to the extent  contributions  are tax  deductible.  In
general,  retiree health benefits are paid as covered expenses are incurred. The
funded status of the  postretirement  plan covering the employees of the Central
Ohio  Cluster  is  not  determinable.  The  accumulated  postretirement  benefit
obligation for the  postretirement  plan of CEI substantially  exceeded the fair
value of assets held in the Cox Pension Plan Trust at December 31, 1996.

In addition,  substantially all of Central Ohio Cluster's employees are eligible
to participate in the savings and investment plan of CEI. Under the terms of the
plan,  the Central Ohio Cluster  matches 50% of employee  contributions  up to a
maximum of 6% of the employee's base salary.  The Central Ohio Cluster's expense
under the plan was $57,000 for the  nine-month  period ended  September 30, 1997
and $83,000 for the year ended December 31, 1996.


(8)    TRANSACTIONS WITH AFFILIATED COMPANIES

The Central Ohio Cluster  borrows funds for working capital and other needs from
CCI. Certain management services are provided to the Central Ohio Cluster by CCI
and CEI. Such services  include legal,  corporate  secretarial,  tax,  treasury,
internal  audit,  risk  management,  benefits  administration  and other support
services.  The Central Ohio Cluster was  allocated  expenses for the nine months
ended  September  30,  1997  and  for  the  year  ended  December  31,  1996  of
approximately  of  $604,000  and  $1,320,000,  respectively,  related  to  these
services.  Allocated  expenses  are based on  management's  estimate of expenses
related to the  services  provided  to the Central  Ohio  Cluster in relation to
those provided to other divisions of CCI and CEI. Management believes that these
allocations were made on a reasonable  basis.  However,  the allocations are not
necessarily  indicative  of the level of expenses  that might have been incurred
had the Central Ohio Cluster contracted directly with third parties.  Management
has not made a


                                      F-89
<PAGE>

                              CENTRAL OHIO CLUSTER
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                   (Information as of and for the Nine Months
                     Ended September 30, 1997 is unaudited)


(8)    TRANSACTIONS WITH AFFILIATED COMPANIES (CONTINUED)

study or any attempt to obtain quotes from third  parties to determine  what the
cost of obtaining such services from third parties would have been. The fees and
expenses to be paid by the Central Ohio Cluster various transactions,  including
those described above. At December 31, 1996 and September 30, 1997,  outstanding
amounts  due to  affiliates  bear  interest at fifty  basis  points  above CCI's
commercial paper borrowings. This rate as of September 30, 1997 and December 31,
1996 was 6.32% and 6.6%, respectively.

In accordance  with the  requirements of SFAS No. 107,  "Disclosures  About Fair
Value of Financial Instruments," the Central Ohio Cluster has estimated the fair
value of its  intercompany  advances  and notes  payable.  Given the  short-term
nature of these advances, the carrying amounts reported in the statements of net
assets approximate fair value.


(9)    COMMITMENTS AND CONTINGENCIES

The Central Ohio Cluster leases office facilities and various items of equipment
under  noncancelable  operating  leases.  Rental expense under operating  leases
amounted to $259,000  for the nine month  period  ended  September  30, 1997 and
$331,000 for the year ended December 31, 1996.  Future minimum lease payments as
of September 30, 1997 for all noncancelable operating leases are as follows:

                                   1997                       $   18
                                   1998                           40
                                   1999                           31
                                   2000                           31
                                   2001                           31
                                   2002                            7
                                                              ------
                                     Total                    $  158
                                                              ======

The FCC has adopted rate regulations  required by the Cable Television  Consumer
Protection  and  Competition  Act of 1992 (the "1992 Cable  Act").  Beginning in
September  1995, the FCC authorized a method of  implementing  rate  adjustments
which allows cable operators to increase rates for  programming  annually on the
basis of proposed  increases in external  costs rather than on the basis of cost
increases incurred in the preceding quarter. Local franchising  authorities have
the ability to obtain  certification  from the FCC to regulate  rates charged by
the Central Ohio Cluster for basic cable  services  and  associated  basic cable
services equipment.  In addition,  the rates charged by the Central Ohio Cluster
for cable  programming  services  ("CPS") can be regulated by the FCC should any
franchising  authority of the Central Ohio Cluster file rate complaints with the
FCC. To date,  the local  franchising  authorities  for the Central Ohio Cluster
have not become  certified by the FCC to regulate  rates for basic cable service
and associated basic cable services  equipment and no complaints have been filed
by customers  with the FCC  regarding  rates  charged for CPS.  Though rates for
basic and CPS are  presently  not  regulated,  management  of the  Central  Ohio
Cluster  believes  the rates  charged  for basic and CPS comply in all  material
respects with the 1992 Cable Act and that should such rates become  regulated in
the future the impact on the financial  position and results of operation of the
Central Ohio Cluster would not be material.




                                      F-90
<PAGE>


                              CENTRAL OHIO CLUSTER
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                   (Information as of and for the Nine Months
                     Ended September 30, 1997 is unaudited)


(9)    COMMITMENTS AND CONTINGENCIES (CONTINUED)

On February 1, 1996,  Congress  passed the  Telecommunications  Act of 1996 (the
"1996  Act"),  which was signed into law by the  President  on February 8, 1996.
Among other  provisions,  the 1996 Act  deregulates  the CPS tier of large cable
television  operators  on March 31,  1999 and upon  enactment,  the CPS rates of
small cable television operators,  where a small cable operator serves 50,000 or
fewer subscribers,  revises the procedures for filing a CPS complaint and adds a
new effective competition test.



                                      F-91
<PAGE>



                                                                 
                          FINANCIAL STATEMENT SCHEDULES



FRONTIERVISION OPERATING PARTNERS, L.P.                                    PAGE

Independent Auditors' Report                                                S-2

Schedule II:  Valuation and Qualifying Accounts                             S-3








                                      S-1
<PAGE>





                          INDEPENDENT AUDITORS' REPORT

Under date of March 16, 1998, we reported on the consolidated  balance sheets of
FrontierVision  Operating Partners,  L.P. and subsidiaries (the "Company") as of
December  31,  1997  and  1996,  and  the  related  consolidated  statements  of
operations,  cash flows and partners'  capital for the years ended  December 31,
1997 and 1996 and the period from inception  (April 17, 1995 see Note 1) through
December 31, 1995,  as contained in this annual report on Form 10-K for the year
1997. In connection with our audits of the aforementioned  financial statements,
we also  audited  the related  financial  statement  schedule on Page S-3.  This
financial statement schedule is the responsibility of the Company's  management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion,  such financial statement schedule,  when considered in relation
to the basic financial  statements  taken as a whole,  presents  fairly,  in all
material respects, the information set forth therein.


                                             KPMG PEAT MARWICK LLP

Denver, Colorado
March 16, 1998



                                      S-2
<PAGE>


            FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                              Amounts in Thousands



<TABLE>

                                                        --------------------------------------------------------
                                                                       Charge to
                                                        Beginning     Costs and        Deductions/      Balance at
                                                       of Period       Expenses         Writeoffs     End of Period
                                                        --------------------------------------------------------

Allowance for uncollectible trade receivables:

<S>                                                       <C>              <C>                <C>             <C>   
Period from inception (April 17, 1995) through                                                                 
    December 31, 1995                                   $   --              58              (18)              40
   

Year ended December 31, 1996                            $   40           1,072             (345)             767
                                                                                                            

Year ended December 31, 1997                            $  767           1,761           (1,888)             640


</TABLE>





















                 See accompanying independent auditors' report.


                                      S-3
<PAGE>

                                   SIGNATURES
Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934 (the "Exchange  Act"),  the Registrants have duly caused this report
to be signed on their behalf by the undersigned,  thereunto duly authorized,  on
March 27, 1998.


                 FRONTIERVISION OPERATING PARTNERS, L.P.
                 By:      FrontierVision Holdings, L.P., its general partner,
                      By:     FrontierVision Partners, L.P., its general partner
                      By:     FVP GP, L.P., its general partner
                      By:     FrontierVision Inc., its general partner
                      By:     /s/  JAMES C. VAUGHN
                              --------------------
                              James C. Vaughn
                              President and Chief Executive Officer

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


FRONTIERVISION OPERATING PARTNERS, L.P.
Signature                       Title                             Date

/s/  JAMES C. VAUGHN            President and Chief               March 27, 1998
------------------------        Executive Officer (Principal
James C. Vaughn                 Executive Officer)
                                

/s/  JOHN S. KOO                Senior Vice President and Chief   March 27, 1998
------------------------        Financial Officer (Principal
John S. Koo                     Financial Officer)


/s/   ALBERT D. FOSBENNER       Vice President and Treasurer      March 27, 1998
-------------------------       (Principal Accounting Officer)
Albert D. Fosbenner                         



FRONTIERVISION CAPITAL CORP.

/s/  JAMES C. VAUGHN            President and Chief               March 27, 1998
-------------------------       Executive Officer, Director
James C. Vaughn                 (Principal Executive Officer)
                                            


/s/  JOHN S. KOO                Senior Vice President and Chief   March 27, 1998
----------------                Financial Officer, Director
John S. Koo                     (Principal Financial Officer)
                                            


/s/   ALBERT D. FOSBENNER       Vice President and Treasurer      March 27, 1998
-------------------------       (Principal Accounting Officer)
Albert D. Fosbenner