<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, 1996

                                       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, 1997: 100.

*    FrontierVision  Capital  Corporation  meets  the  conditions  set  forth in
     General  Instruction  J(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



                                     PART I

Item 1.     BUSINESS.
            General.................................................         4
            Acquisition Strategy....................................         5
            Business Strategy.......................................         5
            Development of the Systems..............................         7
            System Descriptions.....................................         8
            The Cable Television Industry...........................        11
            Programming, Service and Rates..........................        11
            Marketing, Customer Service and Community Relations.....        12
            Technological Developments..............................        13
            Franchises..............................................        14
            Competition.............................................        15
            Employees...............................................        17
            Legislation and Regulation..............................        17

Item 2.     PROPERTIES. ............................................        26

Item 3.     LEGAL PROCEDINGS.  .....................................        26

Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....        26



                                     PART II

Item 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED       
            STOCKHOLDER MATTERS.....................................        27

Item 6.     SELECTED FINANCIAL DATA. ...............................        27

Item 7.     MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS.
            Introduction............................................        29
            Results of Operations...................................        30
            Liquidity and Capital Resources.........................        33

Item 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............        35

Item 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE. ...................        35



                                    PART III

Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
            Directors and Executive Officers of FrontierVision Inc. .        36
            Advisory Committee ......................................        38

                                     


                                       2
<PAGE>



Item 11.    EXECUTIVE COMPENSATION.
            Deferred Compensation Plan...............................        38
            Compensation Committee Interlocks and Insider Participation      39
            Employment Agreement.....................................        39

Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT. .............................................        40

Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........        41



                                     PART IV

Item 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
            FORM 8-K.
            Financial Statements.....................................       42
            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









                                       3
<PAGE>


                                     PART I

Unless the  context  otherwise  requires,  the term  "Company"  or "FVOP"  means
FrontierVision  Operating Partners,  L.P., a Delaware limited  partnership.  The
terms "fiscal" and "fiscal year" refer to FVOP's fiscal year ending December 31.
See  "Glossary"  for the  definition  of  certain  terms used in this Form 10-K.
FrontierVision Capital Corporation  ("Capital") is a wholly-owned  subsidiary of
the Company. Capital has nominal assets and no operations.

Item 1.     BUSINESS

GENERAL

The Company,  headquartered  in Denver,  Colorado,  owns,  operates and develops
cable  television  systems  in  small  and  medium-sized  suburban  and  exurban
communities, primarily concentrated in three operating regions - Ohio (the "Ohio
Systems"),  Kentucky (the "Kentucky  Systems") and New England ("the New England
Systems")  - with a fourth,  smaller  group of cable  television  systems in the
Southeast  (the  "Southeast  Systems").  Including  its initial  acquisition  in
November  1995,   FVOP  has  acquired   systems   serving,   in  the  aggregate,
approximately  365,600  subscribers  and has sold two of its Southeast  Systems,
serving in the aggregate,  approximately 10,400 subscribers,  making the Company
one of the 25 largest multiple system cable operators ("MSOs") in the U.S. As of
December 31, 1996,  FVOP's cable  television  systems (the  "Existing  Systems")
passed  approximately  498,900 homes in eleven  states and served  approximately
356,400  customers,  representing  penetration  of 71.4%.  For the  years  ended
December  31, 1996 and 1995,  the Company  had  revenue of  approximately  $76.5
million  and $4.4  million,  respectively,  and  EBITDA (as  defined  herein) of
approximately $34.4 million and $1.0 million, respectively.

In order to execute the Company's business strategy, James C. Vaughn and John S.
Koo, the Company's  co-founders,  have  assembled a senior  management  group of
eight  individuals  with over 105 years of  collective  experience  in the cable
television industry.  Equity investors in the Company include affiliates of J.P.
Morgan & Co.  Incorporated,  Brown Brothers Harriman & Co., Olympus Partners and
First  Union  Capital  Partners,  Inc.  Including  the $76.0  million of capital
commitments  received in  September  1996,  FVP has obtained  aggregate  capital
commitments of  approximately  $199.4  million,  of which  approximately  $156.5
million had been invested in the Company at December 31, 1996.

The acquisition of the Existing Systems represents the substantial completion of
the first phase of the Company's business plan. Through its core acquisitions in
Ohio,  Kentucky  and  New  England,  the  Company  has  established  significant
subscriber  mass and has positioned  itself as a dominant cable operator in each
of its primary  operating  regions.  The Company is currently the second largest
MSO in the state of Maine, the second largest MSO in Kentucky and a top five MSO
in southern  Ohio.  In the  Southeast,  the Company has  accumulated  attractive
systems which it expects to consolidate  with  subsequent  system  acquisitions,
trade for systems within the Company's primary operating regions or sell.

The next phase of the Company's  business plan will focus on the  acquisition of
contiguous cable systems,  the integration of business  operations,  significant
investment  in  technical  plant and the  development  of  additional  cable and
telecommunications  services.  The Company  expects its  geographically  focused
acquisition  program to facilitate the acquisition of neighboring  cable systems
that are  locally-owned,  operated  by smaller  MSOs or  comprise  non-strategic
assets of larger MSOs.  Many of these systems could be readily  integrated  into
the Company's regional operating  infrastructure,  eliminating customer service,
technical support and office administration functions previously required by the
potential seller. By eliminating headends and centralizing  distribution through
larger systems and increasing  channel  capacities through selective upgrade and
rebuild  activity,  the Company  believes that it can efficiently  introduce new
video and  broadband  telecommunications  services,  increase  service rates and
develop  significant  ancillary  revenue  streams,  thus  maximizing  its growth
opportunities.


                                       4
<PAGE>

ACQUISITION STRATEGY

The  Company  focuses  on  cable  television   systems  in  selected  small  and
medium-sized  suburban and exurban markets.  The Company seeks to exploit unique
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,  cable operators have recently begun to face the threat of competition
from new market entrants, including telephone company video programming services
and  DBS  services,  and  many  smaller  MSOs,   particularly  those  that  were
acquisitive during the late 1980's and purchased systems at prices significantly
higher than those paid by FVOP, are either seeking liquidity for their investors
or are constrained from accessing additional capital to upgrade or rebuild aging
plant  to  remain   competitive   with  other   video   programming   providers.
Additionally,  the Company  believes  that many of these  smaller  companies are
often  unable to  respond  to the  technological  changes  facing  the cable and
telecommunications  industries  and are  thus  generally  poorly  positioned  to
develop new broadband service revenue in the future.

At the same time that "financial  players" and smaller cable operators,  many of
whom were  acquisitive  during the late 1980's and  purchased  systems at prices
significantly  higher  than  those paid by FVOP,  are  seeking to exit the cable
television business,  larger MSOs are directing their finite human and financial
resources to the major urban and suburban markets. Large MSOs are divesting less
strategic  systems or are  trading  them for more  strategic  assets in what the
Company  believes is an effort to conserve  capital,  to  rationalize  their own
geographic clusters and to increase subscriber density in their larger urban and
suburban systems.

The convergence of these market forces has resulted in both a large inventory of
cable systems for sale in small to medium-sized  markets, and a relatively small
pool of capable  buyers.  As a result of this  supply and  demand  anomaly,  the
Company has been able to selectively  acquire cable  properties at  historically
attractive   prices.  The  aggregate  purchase  price  paid  (net  of  aggregate
disposition  proceeds  of  approximately  $15.0  million) by the Company for the
Existing Systems was  approximately  $551.0 million,  representing an average of
8.7 times the pro forma  acquisition  cash  flow (as  defined)  of the  Existing
Systems.

The Company believes that other acquisition  opportunities exist and the Company
is  continuously  exploring  opportunities  with other cable  television  system
owners and operators.  Although the Company does not currently  have  definitive
agreements to acquire  systems other than those  described  herein,  the Company
intends to continue to pursue, on an opportunistic  basis,  additional strategic
acquisitions  of  significant  size as well as  smaller  "fill-in"  acquisitions
within its existing  operating  regions to further enhance their operational and
financial performance.

BUSINESS STRATEGY

The  Company's   objective  is  to  acquire  at  least  500,000  subscribers  in
geographically  concentrated clusters of 100,000 subscribers or more. FVOP seeks
to maximize enterprise value by acquiring cable television systems at attractive
prices in geographically  rational clusters to realize economies of scale and by
improving system management to enhance  operating  profit.  The Company believes
that it can  generate  significant  financial  returns  over a four- to six-year
investment  horizon  through the  liquidation  of its  properties  in either the
private or public  market.  To achieve its  objective,  the Company  pursues the
following business strategies:

TARGET  CLUSTERS IN SMALL AND  MEDIUM-SIZED  MARKETS.  The Company has  acquired
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--moderate  to high


                                       5
<PAGE>



household growth,  economic stability,  attractive  subscriber  demographics and
favorable potential for additional  clustering--and  that in such markets (i) it
will face less  direct  competition,  (ii) it will  maintain  higher  subscriber
penetration  levels and lower  customer  turnover,  and (iii) its  overhead  and
certain operating costs will generally be lower than those in larger markets.

GROW  THROUGH  STRATEGIC  AND  OPPORTUNISTIC   ACQUISITIONS.   The  Company  has
systematically  implemented a focused  acquisition  and  consolidation  strategy
within its three primary operating regions of Ohio, Kentucky and New England and
its systems group in the Southeast. The Company will continue to seek to acquire
systems,  both "fill-in"  acquisitions of smaller systems as well as "strategic"
acquisitions  of larger size,  that can be readily  integrated into its existing
system clusters. The Company may also pursue acquisitions outside of its primary
operating  regions that can either be resold at higher  prices or exchanged  for
systems that are contiguous to its primary clusters.

IMPLEMENT  OPERATING  EFFICIENCIES.  The Company  seeks to  implement  extensive
management,  operational and technical changes in its acquired systems which are
designed to improve  operating  efficiencies,  enhance  operating  cash flow and
operating   margins  and  reduce  overhead   through   economies  of  scale.  By
centralizing and upgrading customer service functions,  streamlining engineering
and technical  support and  installing  state-of-the-art  telephone,  management
information  systems  ("MIS") and billing  systems,  the Company seeks to reduce
administrative costs while providing a higher level of customer service. Through
December 31, 1996, the Company has  consolidated  certain  customer  service and
sales offices operated by its predecessors and expects ultimately to consolidate
its  existing  thirty-five  offices  into  four  regional  service  centers  and
approximately  fifteen local payment offices. In addition,  the Company plans to
interconnect 42 of the existing 199 headends that serve the Existing Systems. By
serving more  subscribers  from  centralized  distribution  points,  the Company
expects to reduce  technical  maintenance  costs,  improve  reliability and more
cost-effectively introduce new services.

FOCUS ON THE CUSTOMER.  By centralizing  customer service at the regional level,
functions that directly impact subscribers--customer service,  administration of
customer  accounts  and  technical  support--are  implemented  more  quickly and
effectively. As a result of its consolidation efforts, the Company has been able
to enhance  customer  service by increasing hours of operations for its customer
service functions, better coordinating technical service and installation calls,
improving   employee  training  and  oversight  and  standardizing   maintenance
procedures.

PROMOTE AND EXPAND  SERVICE  OFFERINGS.  The Company  aggressively  promotes and
expands   services  to  add  and  retain  customers  and  increase  revenue  per
subscriber.  Through a  coordinated  array of  marketing  techniques,  including
door-to-door sales, telemarketing, direct mail, print and broadcast advertising,
flyers and billing  inserts and  cross-channel  promotion,  the Company seeks to
increase basic and premium service  penetration by expanding the programming and
pricing  options  available  to its  customers,  creating  new basic and premium
packages and launching lower priced premium channels such as Disney,  Starz! and
Encore.  For example,  in the fourth quarter of 1996,  the Company  launched the
"Ultimate TV" package, a multi-service programming package consisting of several
lower  priced  premium  services,  to  approximately  65,000  of its  customers.
Supported by direct mail and  telemarketing,  the "Ultimate TV" promotion  added
approximately  9,400 pay units.  In 1997,  the Company  will open a  centralized
tele-marketing  center to further  enhance  marketing,  account  collection  and
customer satisfaction.

As systems are  consolidated  and  technically  enhanced,  FVOP also  expects to
expand  addressability,  which is  available  currently  in systems only serving
approximately  33.3% of the Company's  subscribers,  to increase revenue derived
from  pay-per-view  movies and events and new pay services  such as  interactive
video games. In addition,  the Company has increased  advertising sales staffing
and  upgraded  advertising  insertion  equipment  to increase  advertising  spot
revenue in  existing  properties  and newly  acquired  systems.  As systems  are
integrated  into larger,  contiguous  system  clusters  that expand  advertising
market delivery,  FVOP plans to intensify local spot advertising  sales efforts,
which  generated  only $.82 per  subscriber per month during the last quarter of
1996.

                                       6
<PAGE>

STRATEGICALLY  UPGRADE SYSTEMS.  The Company intends to selectively  upgrade its
cable systems to increase channel capacities, enhance signal quality and improve
technical  reliability.  The Company  believes such technical  upgrades will not
only  enhance  the  potential  for  increasing  revenue,  but also will  improve
customer and community  relations and further  solidify the Company's  incumbent
position as the preeminent  provider of video services in its operating regions.
In addition, by implementing a hybrid fiber  optic-backbone/coaxial cable design
across the majority of its cable plant,  the Company will  effectively  position
itself for its planned introduction of new broadband and interactive services in
certain  markets.  In 1997 the Company  expects to invest $16.8 million in plant
rebuild  and  upgrades,  fiber  interconnection  and  channel  additions  and an
additional  $4.0 million for digital and analog  converters.  Also in 1997,  the
Company  has  planned  trials of  digital  programming  and  Internet  access in
selected systems with the objective of a broader roll-out in 1998.

Additional  potential for increased  revenue will result as the Company develops
broadband  service  capability  for the  transmission  of video,  voice and data
services. Creating full service broadband terrestrial and satellite networks and
interconnecting  contiguous  cable  systems will enable the  Company's  regional
systems to offer a wide range of new  services.  These  service  offerings  will
include  multi-channel   pay-per-view,   interactive  video  games,  advertising
insertion and the delivery of videotext or other information services.  Over the
longer term, potential  applications for fiber  interconnected  networks include
competitive  telephone  access,   distance  learning,  long  distance  telephone
backhaul, PCS and ESMR interconnection and energy management and monitoring.

DEVELOPMENT OF THE SYSTEMS

The Existing Systems. The Company commenced operations in November 1995 with the
acquisition of certain cable television  systems from United Video  Cablevision,
Inc. (the "UVC  Systems") in Maine and Ohio for an aggregate  purchase  price of
approximately  $121.8  million,  and certain other cable systems from Longfellow
Cable Company, Inc. (the "Longfellow Systems") in central Maine for an aggregate
purchase  price of  approximately  $6.1  million.  During 1996,  the Company has
continued to grow through  acquisitions.  FVOP acquired certain cable television
systems  from  (i) C4  Media  Cable  Southeast,  Limited  Partnership  (the  "C4
Systems") on February 1, 1996 for an aggregate  purchase price of  approximately
$47.6 million (subject to adjustment), (ii) Americable International Maine, Inc.
(the "Americable  Systems") on March 29, 1996 for an aggregate purchase price of
approximately  $4.8 million,  (iii) Cox  Communications  (the "Cox  Systems") on
April 9, 1996 for an aggregate  purchase price of approximately  $135.9 million,
(iv) Phoenix Grassroots Cable Systems, LLC (the "Grassroots  Systems") on August
29, 1996 for an aggregate  purchase  price of  approximately  $9.7 million,  (v)
Triax Southeast Associates, L.P. (the "Triax Systems") on October 7, 1996 for an
aggregate purchase price of approximately $85.9 million (subject to adjustment),
(vi) American Cable Entertainment of Kentucky-Indiana,  Inc. (the "ACE Systems")
on October  9, 1996 for an  aggregate  purchase  price of  approximately  $147.4
million, (vii) SRW, Inc.'s Penn/Ohio Cablevision, L.P. (the "Penn/Ohio Systems")
on October  31,  1996 for an  aggregate  purchase  price of  approximately  $3.8
million,  and (viii) SRW,  Inc.'s  Deep Creek  Cable TV,  L.P.  (the "Deep Creek
System") on December 23, 1996 for an aggregate  purchase price of  approximately
$3.0 million (subject to adjustment). Through December 31, 1996, the Company has
paid consideration of approximately $566.0 million, before disposition proceeds,
for such systems,  which at the date of acquisition served approximately 365,600
basic  subscribers.  The aggregate  consideration  paid to acquire these systems
represents an average of approximately  8.7 times the pro forma acquisition cash
flow of the systems.  In addition,  the Company  sold  systems  serving,  in the
aggregate, approximately 10,400 basic subscribers located in Chatsworth, Georgia
and  Woodstock  and New Market,  Virginia  during the third  quarter of 1996 for
aggregate  disposition proceeds of approximately $15.0 million. The UVC Systems,
the  Longfellow  Systems,  the  Americable  Systems and the  Grassroots  Systems
contributed 66,500 subscribers to the New England Systems.  The UVC Systems, the
Triax Systems,  the Cox Systems and the Penn/Ohio  Systems  contributed  111,600
subscribers to the Ohio Systems.  The Cox Systems, the ACE Systems and the Triax
Systems  contributed  118,200  subscribers  to the  Kentucky  Systems and the C4
Systems,  the  Triax  Systems,  and the  Penn/Ohio  Systems  contributed  69,300
subscribers to the Southeast Systems.

                                       7
<PAGE>

PENDING  ACQUISITIONS.  The Company is currently  focusing on the acquisition of
geographically  contiguous  cable systems or cable systems in close proximity to
its  Existing  Systems.  In  early  1997,  the  Company   anticipates   spending
approximately   $64.7  million  to  close  up  to  eight  additional   "fill-in"
acquisitions,  each of which are under contract or letter of intent,  of systems
which  served,  in the  aggregate,  approximately  44,100 basic  subscribers  at
December 31, 1996.  The aggregate  consideration  expected to be paid to acquire
these  systems  represents an average of  approximately  7.6 times the pro forma
acquisition cash flow of the systems.  Of the total  subscribers to be acquired,
approximately 27,000 would be added to the Ohio Systems,  11,000 to the Kentucky
Systems  and 6,100 to the  Southeast  Systems.  On March 20,  1997,  the Company
closed the acquisition of cable television  system assets serving  approximately
7,000 basic  subscribers  in Kentucky from  Bluegrass  Cable  Partners,  Limited
Partnership for a cash purchase price of $9.9 million.

While there can be no assurance  that any or all of these  acquisitions  will be
consummated  and  while  there  can  be  no  assurances  that  the  Company  can
successfully  integrate any acquired  business  with its existing  operations or
realize any efficiencies  therefrom,  the Company intends to aggressively pursue
these opportunities.  In addition, the Company intends to continue to pursue, on
an opportunistic basis,  additional  strategic  acquisitions of significant size
and smaller  "fill-in"  acquisitions  within its existing  operating  regions to
further  enhance the  operational  and financial  performance  of its geographic
clusters and to obtain subscriber  densities sufficient to support telephony and
new broadband services.

SYSTEM DESCRIPTIONS

The Company's cable television systems consist of three primary  clusters--Ohio,
Kentucky  and New  England--with  a  fourth,  smaller  group of  systems  in the
Southeast.  The following chart provides certain operating and technical profile
statistics as of and for the year ended December 31, 1996:

                            COMBINED EXISTING SYSTEMS
<TABLE>
<CAPTION>

                                                                      Ohio       Kentucky    New England    Southeast      Existing
                                                                   Systems       Systems       Systems       Systems        Systems
                                                                  ------------------------------------------------------------------
<S>                                                               <C>            <C>            <C>           <C>           <C>    
Homes passed                                                      157,600        151,400        95,200        94,700        498,900
Basic subscribers                                                 113,500        117,700        67,100        58,100        356,400
Basic penetration                                                   72.0%          77.7%         70.5%         61.4%          71.4%
Premium units                                                      51,600         43,100        27,800        29,600        152,100
Premium penetration                                                 45.5%          36.6%         41.4%         50.9%          42.7%
Avg. monthly revenue per basic subscriber (1)                     $ 29.53      $   31.78     $   28.58      $  26.82      $   29.73
Number of headends                                                     53             36            70            40            199
Percentage of subscribers with at least 54 channel capacity         52.7%          57.0%         48.3%         27.3%          49.1%

 (1) Average  monthly  revenue per  subscriber  equals  revenue for the month ended  December 31, 1996 divided by the number of  
     subscribers  generating  revenue during such period.
</TABLE>

OHIO SYSTEMS.  As of December 31, 1996,  the Ohio Systems  passed  approximately
157,600  homes and served  approximately  113,500 basic  subscribers  and 51,600
premium  units.  The majority of the Ohio Systems are located within a 60 minute
driving distance of either Columbus or Toledo.  In addition to those subscribers
located  in  exurban  Columbus  and  Toledo,  Ohio,  certain  of  the  Company's
subscribers  residing  along the Ohio River in Ohio,  Kentucky and West Virginia
are served from a single regional office located in Chillicothe,  Ohio. The 1996
median household  income in the Ohio cluster exceeds U.S.  averages for counties
with less than 100,000 households ("Comparable Counties"),  according to Equifax
National Decision Systems, 1996.  Approximately 87% of the counties in which the
Company has  systems  have fewer than  100,000  households.  However,  household
growth rates in the areas  served by the Ohio Systems are  projected to lag that
of Comparable Counties over the next five years.

                                       8
<PAGE>

Approximately 52.7% of the current plant design for the Ohio Systems is at least
54  channels,  including  a  fiber-to-the-feeder  550  MHz  design  in  Ashland,
Kentucky. Upon completion of its current rebuild of the Chillicothe,  Washington
Court House and Greenfield,  Ohio Systems,  the Company will serve approximately
37.5% of its  subscribers  in the Ohio  Systems  with plant having at least a 78
channel  capacity  and 79.5% with at least a 54 channel  capacity.  The  Company
plans to utilize  excess  channel  capacity to  introduce  new basic and premium
services. Although the Ohio Systems' basic penetration rate at December 31, 1996
was above  the Ohio  state  average  of 65.6%,  their pay  penetration  rate was
approximately  27.7% below the Ohio state average pay penetration  rate of 63.0%
according to Warren Publishing, Inc.'s TELEVISION AND CABLE FACTBOOK, 1997.

Also as part of its technical improvement program, the Company plans to increase
the deployment of addressable converters,  which were available to only 24.0% of
the Ohio Systems  subscribers  as of December 31,  1996,  and more  aggressively
market  pay-per-view  and other  interactive  services  such as video games.  In
addition,  the Company  plans to leverage the existing  centralized  advertising
facilities  and  advertising  sales  personnel  acquired  from  Cox to  increase
advertising  revenue  in all of the Ohio  Systems  where  such  efforts  had not
existed prior to acquisition.

KENTUCKY  SYSTEMS.  As  of  December  31,  1996,  the  Kentucky  Systems  passed
approximately  151,400 homes and served approximately  117,700 basic subscribers
and 43,100  premium  units.  The  majority  of the  Company's  Kentucky  Systems
subscribers,  serviced  from a regional  customer  service  center in  Richmond,
Kentucky, 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 current plant design for the Kentucky  Systems is at
least 54  channels,  including  fiber-to-the-feeder  550 MHz  design  systems in
Nicholasville  and Cynthiana,  Kentucky and 750 MHz design in Madison,  Indiana.
Upon completion of its current rebuild of the Winchester,  Kentucky system,  the
Company will serve  approximately 29.8% of its Kentucky Systems subscribers with
at least 78 channel capacity plant. In addition, 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
facilites.  The Kentucky  Systems will then be  effectively  positioned to offer
broadband  telecommunications  services 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
Systems. While the Kentucky Systems' basic penetration rate at December 31, 1996
was  marginally  greater than the  Kentucky  state  average of 76.9%,  their pay
penetration  rate was  approximately  24.7% below the Kentucky state average pay
penetration rate of 48.6% according to Warren  Publishing,  Inc.'s  TELEVISION &
CABLE FACTBOOK, 1997.

Also as part of its technical improvement program, the Company plans to increase
the deployment of addressable converters,  which were available to only 58.0% of
the Kentucky Systems  subscribers as of December 31, 1996, and more aggressively
market pay-per-view and other interactive  services.  Additionally,  the Company
plans  to  leverage  the  existing   centralized   advertising   facilities  and
advertising sales personnel acquired from ACE to increase advertising revenue in
all of the  Kentucky  Systems  where  such  efforts  had not  existed  prior  to
acquisition.

NEW ENGLAND  SYSTEMS.  As of December 31, 1996,  the New England  Systems passed
approximately 95,200 homes and served approximately 67,100 basic subscribers and
27,800 premium units. The New England Systems are comprised primarily of systems
located in  communities in southern and coastal Maine and central New Hampshire.
The  majority  of the Maine  systems  are  located  within a 60 minute  drive of
Portland  and  Bangor  in  predominantly  blue-collar,   middle  income  bedroom
communities.  In addition,  the Company  serves  resort  communities  in Maine's
Carrabassett  Valley that include  Sugarloaf/USA  and Sunday River.  Most of the
approximately  4,900 subscribers in New Hampshire are within commuting  

                                       9
<PAGE>

distance of Laconia,  Plymouth and  Littleton,  New  Hampshire.  The 1996 median
household income and projected household growth rates (from 1996 to 2001) in the
areas  served by the New  England  Systems  meet or  exceed  U.S.  averages  for
Comparable Counties, according to Equifax National Decision Systems, 1996.

Approximately  48.3% of the current  plant  design for the New  England  Systems
offers at least 54 channels.  Upon  completion  of the plant rebuild and upgrade
projects  in  Rockland,   Calais,   Bridgeton,   Freeport  and  Portage,  Maine,
approximately  18.5% of the plant in the New England  systems  will have channel
capacities  of 78 channels or higher and  approximately  64.3% will be served by
plant offering at least 54 channels. The Company plans to utilize excess channel
capacity by introducing new basic and premium services. The New England Systems'
basic and pay penetration rates are 11.6% and 1.7% below the Maine state average
penetration  rates  of  79.8%  and  42.1%,  respectively,  according  to  Warren
Publishing, Inc.'s TELEVISION & CABLE FACTBOOK, 1997.

The Company has begun to introduce  addressability in the New England Systems to
improve revenue derived from pay-per-view and other interactive services such as
video games,  including The Sega Channel.  As of December 31, 1996, only 6.0% of
the New England subscribers had access to addressable  services.  As systems are
interconnected and consolidated,  the Company will more aggressively pursue spot
advertising  revenue,  which  accounted for only $.15 per  subscriber  per month
during the last quarter of 1996.

SOUTHEAST  SYSTEMS.  As of December  31,  1996,  the  Southeast  Systems  passed
approximately 94,700 homes and served approximately 58,100 basic subscribers and
29,600 premium units.  The Southeast  Systems are comprised of groups of systems
located in the  following  states:  (i)  Tennessee,  which served  approximately
16,500 basic subscribers; (ii) North Carolina, which served approximately 14,800
basic  subscribers;  (iii)  Virginia,  which served  approximately  19,800 basic
subscribers;  and (iv)  Maryland/Pennsylvania,  which served approximately 7,000
basic  subscribers.  The Tennessee systems are located primarily in Greeneville,
Tennessee and  surrounding  communities,  the North Carolina  systems near Rocky
Mount, North Carolina and the Virginia systems in 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  1990 to 2001) in the areas  served by the  Southeast  Systems
exceed U.S.  averages for  Comparable  Counties,  according to Equifax  National
Decision Systems, 1996.

The Company plans either to consolidate  further the Southeast  Systems  through
acquisitions,  trade  certain of the systems for  properties  within its primary
clusters in Ohio,  Kentucky and New England,  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.
Approximately  27.3% of the current plant design for the Southeast Systems 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.

PENDING  ACQUISITIONS.  In early 1997, the Company  expects to close up to eight
additional  acquisitions,  which are under  contract  or  letter of  intent,  of
geographically  contiguous  cable systems or cable systems in close proximity to
its Existing  Systems  which served as of December 31, 1996,  in the  aggregate,
approximately 44,100 basic subscribers. Of the total subscribers to be acquired,
approximately  27,000 will be added to the Ohio Systems,  11,000 to the Kentucky
Systems and 6,100 to the  Southeast  Systems.  These systems  possess  technical
profiles  generally  consistent  with the  profiles for the  Company's  Existing
Systems. There can be no assurance that any or all of these acquisitions will be
consummated  and  while  there  can  be  no  assurances  that  the  Company  can
successfully  integrate any acquired  business  with its existing  operations or
realize any efficiencies  therefrom,  the Company intends to aggressively pursue
these  opportunities.  On March 20, 1997, the Company closed the  acquisition of
cable television system assets 


                                       10
<PAGE>

serving  approximately  7,000 basic subscribers in Kentucky from Bluegrass Cable
Partners, Limited Partnership for a cash purchase price of $9.9 million.

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
WTBS and WGN), (iii) various  satellite-delivered,  non-broadcast channels (such
as Cable News Network ("CNN"),  MTV: Music Television,  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  ("HBO"),  Showtime  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.   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."

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  


                                       11
<PAGE>

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 three
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.   Going  forward,  the  Company  intends  to  negotiate
programming contract renewals both directly and through the consortium to obtain
the best possible  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.  A substantial  portion of
these  retransmission  consent  agreements  were  required to be renewed  before
December 1996, at which time the Company renewed or renegociated such agreements
through December 1999 under  substantially  the same terms. See "Legislation and
Regulation".

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 WTBS and 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, Cinemax, Showtime,
The  Movie  Channel,   Starz!  and  The  Disney  Channel.   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, 1996, the average monthly rate for the
Existing  Systems was $24.41 for the basic and  expanded  basic  service  tiers.
These rates  reflect  reductions  effected  in response to the Cable  Television
Consumer  Protection  and  Competition  Act  of  1992  (the  "1992  Cable  Act")
re-regulation of cable television  industry rates, and in particular,  the FCC's
rate  regulations  implementing  the 1992 Cable Act,  which became  effective in
1993. A one-time  installation  fee,  which may be waived 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."

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)  


                                       12
<PAGE>

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.

The Telemarketing Center,  located in Pittsfield,  Massachusetts,  is to provide
the outbound  telemarketing  support for all  operating  regions.  The facility,
expected to be fully  operational by the second quarter of 1997,  will initially
be  staffed by up to 26  telemarketers  with  capacity  to support up to 50 such
personnel.  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,  an  aggressive  initiative  has been
undertaken  to  maintain  and  improve  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 recently hired experienced  community relations personnel
in the  Maine,  Ohio and  Kentucky  regions  to  enhance  local  visibility  and
long-term relationships.

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,
Company management carefully assesses (i) subscribers' demand for more channels,
(ii)    requirements    in   connection   with   franchise    renewals,    (iii)
currently-available  competing  technologies,  (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.

                                       13
<PAGE>



<TABLE>
<CAPTION>


                                    ----------------------------------------------------------
                                   Up to 32    33 to 53     54 to 77     78 to 112
                                   Channels    Channels     Channels     Channels       Total
                                     ---         ----         ----         ----         ----- 
<S>                                   <C>        <C>          <C>          <C>          <C>   
Miles of plant                        517        8,501        4,562        1,358        14,938
% of total miles of plant            3.5%        56.9%        30.5%         9.1%        100.0%
% of total basic subscribers         4.0%        46.9%        31.5%        17.6%        100.0%
</TABLE>

The Company's systems have an average capacity by subscriber of approximately 53
channels  and  delivered  an  average  of 41  channels  of  programming  to  its
subscribers  as of  December  31,  1996.  Approximately  33.3% 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
to automatically 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  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  set-top  boxes  and high  speed  cable  modems  have  become
commercially  viable.  These  developments will increase  services  available to
cable  subscribers and may allow the introduction of alternative  communications
delivery  systems  for data and voice.  The Company  plans to test such  digital
technology  and cable  modems  during  1997.  The test  results  will be used to
formulate the Company's  business  strategy for the launch of these new services
in the future.

FRANCHISES

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

As of December 31, 1996, the Company held 416 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  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 87.0% of the Company'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, 1996.


                                       14
<PAGE>
<TABLE>
<CAPTION>

                                --------------------------------------------------------------------
                                                  Percentage of                        Percentage
                                 Number of          of Total        Number of         of Franchised
Year of Franchise Expiration    Franchises         Franchises      Subscribers         Subscribers                  
-----------------------             ---              -----           -------              ----- 
<C>                                 <C>               <C>            <C>                   <C>  
1997 through 2001                   179               43.0%          133,600               42.8%
2002 and  thereafter                237               57.0%          178,300               57.2%
                                    ---              -----           -------              ----- 
             Total                  416              100.0%          311,900              100.0%
</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."

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.  It  is  possible  that  a
franchising  authority  might  grant  a  second  franchise  to  another  company
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.  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
competitive costs. The  Telecommunications  Act of 1996 (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 


                                       15
<PAGE>

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.

The FCC and the  Congress  have  adopted  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  the  owners  of  DBS  dishes  through
conventional,  medium and  high-powered  satellites.  DBS systems are increasing
channel capacity and are providing movies, broadcast stations, and other program
services comparable to those of cable television systems.  Currently,  Primestar
Partners (a consortium  comprised of cable  operators and a satellite  company),
DirecTV (which includes AT&T Corp. as an investor),  and EchoStar Communications
Corp.  ("EchoStar")  are providing  nation-wide DBS services,  with each company
offering  in excess of 100  channels of video  programming  to  subscribers.  In
addition,  American Sky  Broadcasting  ("ASkyB"),  a joint  venture  between MCI
Telecommunication  Corp. and News Corp.,  is currently  constructing  satellites
that reportedly,  when operational,  will provide  approximately 200 channels of
DBS  service  nationwide.  Recently  ASkyB  announced  that it will  merge  with
EchoStar. There are other companies that are currently providing or are planning
to provide domestic DBS services.

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 upfront  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 has lost  less than one  percent  of its  customers  to date to DSS
providers.  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 recently
adopted  new  regulations  allocating  frequencies  in the 28 GHz band for a new
multichannel  wireless  video  service  similar to MMDS.  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  service   requires
unobstructed "line of sight"  transmission paths, the ability of MMDS 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 has  limited,  and is 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 (MMDS ) transmission. Cable
television systems could be placed at a competitive disadvantage if the delivery
of video  programming  services by LECs becomes  widespread,  since LECs are not
required,  under certain  circumstances,  to obtain local  franchises to deliver
such video  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 and telephony services also pose strategic disadvantages for cable
operators seeking to compete with LECs that provide video services.  The Company
believes,  however,  


                                       16
<PAGE>

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 are 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. The Company has  initiated  discussions
with such carriers regarding possible joint ventures.

Other  new  technologies,   including   Internet-based   services,   may  become
competitive with services that cable  television  systems can offer. The FCC has
authorized  television  broadcast  stations  to  transmit  textual  and  graphic
information  useful  both to  consumers  and  businesses.  The FCC also  permits
commercial and noncommercial FM stations to use their subcarrier  frequencies to
provide nonbroadcast services including data 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.  LECs and other common  carriers  provide  facilities for the
transmission  and  distribution  to homes  and  businesses  of  video  services,
including interactive  computer-based services like the Internet, data and other
nonvideo  services.  The FCC has held 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, 1996, the Company had  approximately  521  equivalent  full-time
employees,  seven of whom belonged to a collective  bargaining unit. The Company
considers its relations with its employees to be good.

LEGISLATION AND REGULATION

The cable  television  industry  currently  is  regulated by the FCC and certain
state and local governments.  In addition,  legislative and regulatory proposals
under  consideration by the Congress and federal agencies may materially  affect
the cable television industry.

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  television  systems.  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 television  industry.  The
following is a summary of federal laws and regulations  materially affecting the
growth and  operation  of the cable  television  industry and a  description  of
certain state and local laws.

THE COMMUNICATIONS ACT AND FCC REGULATIONS

THE TELECOMMUNICATIONS ACT OF 1996. The 1996 Telecom Act, which became effective
on  February  8,  1996,  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.  The
new law  requires  many of these  


                                       17
<PAGE>

rulemakings to be completed in a very limited period of time. The following is a
brief summary of the important features of the 1996 Telecom Act that will affect
the cable and telephone industries.

CABLE COMMUNICATIONS. The 1996 Telecom Act deregulates cable programming service
tier ("CPST") rates for most MSOs  (including the Company) after March 31, 1999,
except that such rates are immediately  deregulated for certain small operators.
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  eliminates  the right of  individual  customers  to file rate
complaints with the FCC concerning certain CPSTs and requires the FCC to issue a
final order within 90 days after  receipt of CPST rate  complaints  filed by any
franchising  authority  after the date of enactment of the 1996 Telecom Act. The
1996 Telecom Act also modifies the existing statutory provisions governing cable
system   technical   standards,   equipment   compatibility,   customer   notice
requirements  and program access,  permits  certain  operators to include losses
incurred  prior to  September  1992 in setting  regulated  rates and repeals the
three-year anti-trafficking  prohibition adopted in the 1992 Cable Act. The 1996
Telecom Act prohibits certain local  restrictions that impair a viewer's ability
to receive video programming services using HSDs and over-the-air  antennae, and
the FCC adopted  regulations  implementing  this provision that preempt  certain
local  restrictions  on satellite and  over-the-air  antenna  reception of video
programming services, including zoning, land-use or building regulations, or any
private  covenant,  homeowners'  association  rule  or  similar  restriction  on
property within the exclusive use or control of the antenna user.

The 1996 Telecom Act  eliminates the  requirement  that LECs obtain FCC approval
under Section 214 of the  Communications  Act before providing video services in
their telephone service areas and removes 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
nondiscriminatory  basis. Under certain limited  circumstances,  cable operators
also may elect to offer services  through open video  systems.  The 1996 Telecom
Act also prohibits a local telephone  company from acquiring a cable operator in
its telephone service area except in limited circumstances.

TELEPHONE. The 1996 Telecom Act removes barriers to entry in the local telephone
exchange  market that is now  monopolized  by the seven  Regional Bell Operating
Companies  ("RBOCs")  and other  LECs by  preempting  state and local  laws that
restrict competition and by requiring LECs to provide  nondiscriminatory  access
and interconnection to potential competitors,  such as cable operators, wireless
telecommunications  providers and long distance companies. At the same time, the
new law  eliminates the  prospective  effects of the AT&T, GTE and McCaw consent
decrees  and permits  the RBOCs to enter the market for long  distance  services
(through  a  separate   subsidiary)  after  they  satisfy  certain   competitive
requirements  intended to open the local telephone  markets to competition.  The
1996  Telecom  Act also  permits  interstate  utility  companies  to  enter  the
telecommunications market for the first time.

While  the  1996   Telecom  Act  imposes   new   requirements   with  regard  to
interconnection,  it also  directs  the FCC to  substantially  relax much of its
regulation  of  telecommunications  providers.  The new law also  eliminates  or
streamlines many of the requirements applicable to local exchange carriers, such
as the  requirement to obtain prior approval of the extension or construction of
telephone  plant. In addition,  the 1996 Telecom Act requires the FCC and states
to review  universal  service  programs  and to  encourage  access  to  advanced
telecommunications services by schools, libraries and other public institutions.

                                       18
<PAGE>

OTHER  COMMUNICATIONS  SERVICES.  The 1996 Telecom Act also contains  provisions
regulating the content of video programming and computer services. Specifically,
the new law  prohibits  the use of  computer  services  to  transmit  "indecent"
material to minors.  Several special  three-judge  federal  district courts have
issued preliminary  injunctions enjoining the enforcement of these provisions as
unconstitutional  to the extent  they  regulated  the  transmission  of indecent
material.  The United States  Supreme  Court  recently  announced  that it would
review one of these  decisions.  The 1996  Telecom Act also  requires the FCC to
prescribe  guidelines  for a ratings  system  for  violent  and  indecent  video
programming (unless video programming  distributors adopt voluntary  guidelines)
and requires all new television sets to contain a so-called  "V-chip" capable of
blocking  all  programs  with a given  rating.  The new law  also  substantially
relaxes current  broadcast  ownership rules by eliminating,  among other things,
the statutory broadcast/cable  television  cross-ownership  restriction that had
been  codified by the 1984 Cable Act and by directing  the FCC to eliminate  its
network/cable  cross-ownership  regulation  and  review  the  need  for its rule
prohibiting broadcast/cable cross-ownership.

RATE REGULATION. The 1992 Cable Act authorized rate regulation for certain cable
communications  services and  equipment in  communities  that are not subject to
"effective  competition"  as defined by federal  law.  Under the 1992 Cable Act,
virtually all cable television systems were subject to rate regulation for basic
cable service and equipment by local  officials  under the oversight of the FCC,
which prescribed  detailed  guidelines for such rate regulation.  The 1992 Cable
Act also required the FCC to resolve  complaints  about rates for nonbasic cable
programming  services  (other than  programming  offered on a per channel or per
program basis) and to reduce any such rates found to be  unreasonable.  The 1992
Cable Act  limited the  ability of cable  television  systems to raise rates for
basic and  certain  cable  programming  services  (collectively  the  "Regulated
Services") and eliminated the 5% annual basic service rate increase permitted by
the 1984 Cable Act  without  local  approval.  Cable  services  offered on a per
channel (a la carte) or per program (pay-per-view) basis are not subject to rate
regulation by either local franchising authorities or the FCC.

The 1996 Telecom Act  deregulates  rates for CPSTs after March 31, 1999 for most
MSOs (including the Company) and, for certain small cable operators, immediately
eliminates  rate  regulation  of CPSTs  and,  in  certain  circumstances,  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.

On April 1, 1993,  the FCC  adopted  regulations  pursuant to the 1992 Cable Act
governing the rates  charged to customers for Regulated  Services and ordered an
interim  freeze  on  these  rates  effective  April  5,  1993.  The  FCC's  rate
regulations  became effective on September 1, 1993 and the FCC's rate freeze was
extended until the earlier of May 15, 1994 or the date on which a cable system's
basic service rate was regulated by a franchising authority.

In  implementing  the 1992  Cable Act,  the FCC  adopted a  benchmark  method of
regulating  rates for Regulated  Services.  Cable operators with rates above the
allowable  level under the FCC's  benchmark  methodology  may justify such rates
using a  cost-of-service  methodology.  As of September 1, 1993, cable operators
subject to rate  regulation  whose then current  rates were above FCC  benchmark
levels were required,  absent a successful  cost-of-service  showing,  to reduce
those  rates to the  benchmark  level or by up to 10% of the  rates in effect on
September 30, 1992,  whichever  reduction was less, adjusted for equipment costs
and inflation and programming  modifications  occurring  subsequent to September
30, 1992. Effective May 15, 1994, the FCC modified its benchmark  methodology to
require reductions of up to 17% of the 


                                       19
<PAGE>

rates for  Regulated  Services in effect on  September  30,  1992,  adjusted for
inflation,  channel  modifications,  equipment  costs and  increases  in certain
operating costs. The FCC's modified benchmark regulations were designed to cause
an  additional  7% reduction in the rates for  Regulated  Services on top of any
rate reductions implemented under the FCC's initial benchmark regulations.

The  FCC's  initial  "going-forward"  regulations  limited  rate  increases  for
Regulated  Services after the  establishment of an initial  regulated rate to an
inflation-indexed  amount  plus  increases  for  channel  additions  and certain
external  costs beyond the cable  operator's  control,  such as franchise  fees,
taxes and increased programming costs. Under these regulations,  cable operators
are entitled to take a 7.5% markup on certain  programming  cost  increases.  In
November 1994, the FCC authorized an alternative three-year flat fee markup plan
for charges  relating to new channels added to the CPST.  Under this alternative
methodology, cable operators may charge customers for channels added to the CPST
after May 14, 1994 at a monthly rate of up to $0.20 per added  channel,  up to a
total of  $1.20  plus an  additional  $0.30  for  programming  license  fees per
customer over the first two years of the three-year period.  Cable operators may
charge an additional  $0.20 plus the cost of the  programming  in the third year
(1997) for one additional channel added in that year.  Alternatively,  operators
may increase rates by the amount of any  programming  license fees in connection
with such added  channels,  provided  that the total  monthly rate  increase per
customer for the added channels,  including  license fees, does not exceed $1.50
over the first two years,  and $1.70,  plus any increase in the license fees for
the added channels,  in the third year.  Operators must make a one-time election
for each  system to use either  the flat fee  adjustment  or the 7.5%  markup on
programming  cost  increases for all channels added after December 31, 1994. The
FCC is  currently  considering  whether to modify or  eliminate  the  regulation
allowing  operators  to  receive  the  7.5%  markup  on  increases  in  existing
programming license fees.

In November  1994, the FCC adopted  regulations  permitting  cable  operators to
create new product  tiers  ("NPTs")  that are not subject to rate  regulation if
certain  conditions are met. The FCC also revised its previously  adopted policy
and  concluded  that  packages  of a la  carte  services  are  subject  to  rate
regulation by the FCC as CPSTs.  Because of the uncertainty created by the FCC's
prior a la carte  package  guidelines,  the FCC allows  cable  operators,  under
certain circumstances, to treat previously offered a la carte packages as NPTs.

In September 1995, the FCC authorized a new,  alternative method of implementing
rate  adjustments  which allows cable  operators to increase rates for Regulated
Services  annually  on the  basis  of  projected  increases  in  external  costs
(inflation, costs of programming,  franchise-related  obligations and changes in
the number of  regulated  channels)  rather than on the basis of cost  increases
incurred in the preceding  calendar  quarter.  Under the annual rate  adjustment
methodology,  operators  electing not to recover all of their  accrued  external
costs and inflation  pass-throughs each year may recover them (with interest) in
subsequent years.

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 recently  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.

                                       20
<PAGE>

Franchising  authorities  are  empowered  to  regulate  the  rates  charged  for
additional outlets and for the installation, lease and sale of equipment used by
customers to receive the basic 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. The FCC recently  revised its  regulations  to permit  operators to compute
regulated  equipment rates by aggregating costs of broad categories of equipment
at the franchise, system, regional or company level.

Cable  operators  required  to  reduce  rates  may also be  required  to  refund
overcharges  with interest.  Rate  reductions will not be required where a cable
operator can demonstrate that rates for Regulated  Services are reasonable using
the FCC's  cost-of-service  rate regulations which require,  among other things,
the  exclusion of 34% of system  acquisition  costs  related to  intangible  and
tangible assets used to provide Regulated  Services.  The FCC's  cost-of-service
regulations  contain  a  rebuttable   presumption  of  an  industry-wide  11.25%
after-tax  rate of return on an operator's  allowable rate base, but the FCC has
initiated a further  rulemaking in which it proposes to use an operator's actual
debt cost and capital  structure to determine an  operator's  cost of capital or
rate of return.

"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 does 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.  The Company cannot predict the extent to which
this provision of the 1992 Cable Act and the  corresponding  FCC rules may cause
customers to discontinue  optional  nonbasic  service tiers in favor of the less
expensive basic cable service.

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 whether pursuant to the mandatory carriage or retransmission
consent  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
WTBS),  commercial  radio  stations  and certain low power  television  stations
carried  by such  systems  after  October  6,  1993.  In April  1993,  a special
three-judge   federal   district   court   issued  a  decision   upholding   the
constitutional  validity of the mandatory signal carriage requirements.  In June
1994,  the United States  Supreme Court vacated this decision and remanded it to
the district  court to  determine,  among other  matters,  whether the statutory
carriage  requirements  are necessary to preserve the economic  viability of the
broadcast  industry.  In December  1995, the district court upheld the mandatory
carriage  requirements of the 1992 Cable Act. The United States Supreme Court is
currently  reviewing  this  decision.  The Company  cannot  predict the ultimate
outcome of this  litigation.  Pending  final  action by the Supreme  Court,  the
mandatory broadcast signal carriage requirements remain in effect.

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, 


                                       21
<PAGE>

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.  In August 1996, a federal
appellate  court  generally  upheld the  constitutionality  of these  designated
channel provisions,  but indicated that in certain situations the requirement to
provide such channels might be found unconstitutional. 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. In January 1995, the FCC 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
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  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  in the  range  of 3% to 5% of  "revenue"  (as
defined by each franchise  agreement).  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 


                                       22
<PAGE>

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 somewhat 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.

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  new  law  eliminates  federal  legal  barriers  to
competition in the local telephone and cable communications businesses, preempts
legal barriers to competition  that  previously  existed in state and local laws
and   regulation   and  sets   basic   standards   for   relationships   between
telecommunications providers. 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 and, in some cases, states are
required  to conduct  numerous  rulemaking  proceedings  to  implement  the 1996
Telecom  Act.  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 have appealed these  regulations,
and the appeals have been consolidated and will be reviewed by the United States
Court of Appeals for the Eighth  Circuit  which has stayed the FCC's pricing and
nondiscrimination  regulations.  The ultimate outcome of these rulemakings,  and
the  ultimate  impact of the 1996 Telecom Act or any final  regulations  adopted
pursuant to the new law on the Company or its business,  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.  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 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 


                                       23
<PAGE>

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.  Additionally,  within two years of  enactment of the 1996 Telecom Act,
the FCC is  required  to adopt 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  five years after  enactment of the 1996 Telecom Act, and any 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 on the effective
date of the new FCC regulations.

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 to offer exclusive programming arrangements to their affiliates. 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, technical standards, consumer
equipment compatibility and obscene or indecent programming.

OTHER FCC REGULATIONS.  The FCC has numerous rulemaking proceedings pending that
will implement  various  provisions of 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,  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 the fairness doctrine and rules governing political
broadcasts,  limitations on  advertising  contained in  nonbroadcast  children's
programming, consumer protection and customer service, leased commercial access,
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  the
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,  or 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.  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  


                                       24
<PAGE>

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,  ASCAP  and BMI.  In
October 1989, the special rate court of the United States District Court for the
Southern  District of New York imposed interim rates on the cable industry's use
of ASCAP-controlled  music. The same federal district court recently 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   processing   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, no state in which the Company operates has
enacted such state level  regulation.  The Company cannot predict whether any of
the 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.


                                       25
<PAGE>

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  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  "--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 PROCEDINGS

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.



                                       26
<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 table presents selected  financial data derived from the Company's
financial  statements as of and for the year ended December 31, 1996 and for the
period from April 17, 1995 (inception)  through December 31, 1995 and which have
been audited by KPMG Peat Marwick LLP, independent certified public accountants,
and selected unaudited  operating data for such periods.  Selected financial and
operating  data  presented for the three months ended  December 31, 1996 has not
been audited.  This  information,  as of and for the three months ended December
31,  1996 and for the years ended  December  31,  1996 and 1995  represents  the
financial data of certain of the Existing Systems subsequent to their respective
dates of  acquisition.  The financial  data include the results of operations of
the UVC Systems and the  Longfellow  Systems during the period in 1995 when such
systems were owned by the Company.  The  statement of  operations  data for 1996
include the results of operations of the C4 Systems, the Americable Systems, the
Cox Systems,  the Grassroots Systems,  the Triax Systems,  the ACE Systems,  the
Penn/Ohio  Systems,  and the Deep Creek  Systems from the date that such systems
were purchased by the Company.

The following table also presents combined  historical  financial data as of and
for the years ended December 31, 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  "Management's  Discussion  and Analysis of Financial  Condition and
Results  of  Operations"  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.





                                       27
<PAGE>



<TABLE>
<CAPTION>



                                               ------------------------------------------------------------------------------------
                                                                 FVOP                                     Predecessor Systems
                                               ---------------------------------------      ----------------------------------------
                                             For the Three   For the Year From April 17,   For the Year   For the Year  For the Year
                                             Months Ended       Ended    1995 (inception)     Ended          Ended         Ended
                                              December 31,   December 31,  to December 31, December 31,   December 31,  December 31,
                                                 1996            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 ...................................    $  30,257         76,464          4,369        109,765        105,368         96,171
Operating expenses ........................       15,524         39,181          2,311         62,098         58,643         52,702
Corporate administrative expenses .........          959          2,930            127           --             --             --
Depreciation and amortization .............       12,950         35,336          2,308         42,354         46,345         41,863
Pre-acquisition expenses ..................         --             --              940           --             --             --
                                               ---------      ---------      ---------      ---------      ---------      ---------
Operating income/(loss) ...................          824           (983)        (1,317)         5,313            380          1,606
Interest expense, net (5) .................      (10,805)       (22,422)        (1,386)       (37,898)       (34,506)       (31,230)
Other income/(expenses) ...................         (297)          (396)          --           (4,409)        (2,570)        (3,450)
                                               ---------      ---------      ---------      ---------      ---------      ---------
Net income/(loss) .........................    $ (10,278)       (23,801)        (2,703)       (36,994)       (36,696)       (33,074)
                                               =========      =========      =========      =========      =========      =========
BALANCE SHEET DATA (END OF PERIOD):
Total assets ..............................    $ 549,168        549,168        143,512        288,253        228,820        181,899
Total debt ................................      398,194        398,194         93,159        270,418        266,297        255,319
Partners' capital .........................      130,003        130,003         46,407

FINANCIAL RATIOS AND OTHER DATA:
EBITDA (6) ................................    $  13,774         34,353            991         47,667         46,725         43,469
EBITDA margin .............................         45.5%         44.9%          22.7%          43.4%          44.3%          45.2%
Total debt to EBITDA (7) ..................         6.75           6.75
EBITDA to interest expense (8) ............         1.45           1.45
Net cash flows from operating activities ..    $   8,766         18,911          1,907
Net cash flows from investing activities ..     (232,016)      (418,215)      (131,345)
Net cash flows from financing activities ..      221,844        400,293        132,088
Deficiency of earnings to fixed charges (9)       10,278         23,801          2,703

OPERATING STATISTICAL DATA (END OF
  PERIOD EXCEPT AVERAGE):
Homes passed ..............................      498,900        498,900        125,300
Basic subscribers .........................      356,400        356,400         92,700
Basic penetration .........................        71.4%          71.4%          74.0%
Premium units .............................      152,100        152,100         35,700
Premium penetration .......................        42.7%          42.7%          38.5%
Average monthly revenue per basic
  subscriber (10) .........................    $   29.73          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.  


                                       28
<PAGE>

(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 of $10,805,  $22,422,  and $1,386 is net of interest income
of $161, $471 and $60.
(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 "Senior Credit Facility") and the Indenture  governing the 11%
Senior  Subordinated  Notes due 2006 (the "the Note 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.
(7) For purposes of this computation, EBITDA is annualized for the quarter ended
December 31,  1996,  and certain pro forma  adjustments  are made to include the
pre-acquisition results of operations for those systems purchased by the Company
during the quarter.  This  presentation  is  consistent  with the  incurrence of
indebtedness  test in the Note  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 is annualized for the quarter ended
December 31,  1996,  and certain pro forma  adjustments  are made to include the
pre-acquisition results of operations for those systems purchased by the Company
during  the  quarter.  Interest  expense is  annualized  for the  quarter  ended
December 31, 1996, and adjusted for interest expense on the subordinated note to
UVC. This ratio is commonly used in the cable  television  industry as a measure
of interest 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   capitalized   interest   expense)  and  (ii)
amortization of deferred financing costs.
(10) Average  monthly  revenue per basic  subscriber  for the year and the three
months  ended  December  31, 1996 and for the period from  inception  (April 17,
1995) to  December  31,  1995  equals  revenue  for the last month of the period
divided by the average number of basic subscribers for 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.  Important factors that could cause
or contribute to such differences or changes include those discussed under "Risk
Factors" in the Company's  post-effective  amendment to Form S-1 filed March 27,
1997 (Commission file no. 333-9535).

The Company commenced  operations in November 1995. The Company acquired the UVC
Systems on November 9, 1995, the Longfellow Systems on November 21, 1995, 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 Systems on December 23, 1996, for
aggregate     consideration    of    approximately     $564.9    million.    See
"Business--Development  of the Systems--The  Existing 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.

As a result of the Company's  limited  operating  history,  the Company believes
that its results of operations  for the year ended December 31, 1996 and for the
period ended  December 31, 1995 are not  indicative of the Company's  results of
operations in the future. The three month period ended December 31, 1996, is the
only period that includes all of the Existing Systems,  although certain systems
were purchased  during 


                                       29
<PAGE>

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,
1996,  is the  first  period  that  represents  the full  integration  of the C4
Systems,  the Americable  Systems,  the Cox Systems,  and the Grassroots Systems
into the  operations  of the  Company,  although  the  Grassroots  Systems  were
purchased  during  the  period and are  reflected  only for that  portion of the
period that such systems were owned by the Company.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

                            --------------------------------------------------------------------------------------------------------
                                   Three Months Ended      Three Months Ended        Twelve Months Ended  Period From April 17, 1995
                                   December 31, 1996         September, 1996         December 31, 1996      to December 31, 1995 (a)
                            --------------------------------------------------------------------------------------------------------
                                  Amount   % of Revenue    Amount    % of Revenue    Amount    % of Revenue    Amount   % of Revenue
                                --------        -----     --------        -----     --------        -----     --------       -----  
Amounts in thousands
<S>                               <C>           <C>       <C>             <C>       <C>             <C>       <C>             <C>   
Revenue                           30,257        100.0%    $ 18,668        100.0%    $ 76,464        100.0%    $  4,369        100.0%
Expenses
   Operating expenses             15,524         51.3        9,989         53.5       39,181         51.2        2,311         52.9
   Corporate expenses                959          3.2          706          3.8        2,930          3.8          127          2.9
   Depreciation and
    amortization expenses         12,950         42.8        8,791         47.1       35,336         46.2        2,308         52.8
   Pre-acquisition expenses           --           --           --           --           --           --          940         21.5
                                --------        -----     --------        -----     --------        -----     --------       -----  
Total expenses                    29,433         97.3       19,486        104.4       77,447        101.3        5,686        130.1
                                --------        -----     --------        -----     --------        -----     --------       -----  
Operating income (loss)              824          2.7         (818)        (4.4)        (983)        (1.3)      (1,317)       (30.1)
Interest expense, net            (10,805)       (35.7)      (4,313)       (23.1)     (22,422)       (29.3)      (1,386)       (31.7)
Other Expenses                      (297)        (1.0)         (99)        (0.5)        (396)        (0.5)          --           --
                                --------        -----     --------        -----     --------        -----     --------       -----  
Net loss                        ($10,278)       (34.0%)   ($ 5,230)       (28.0%)   ($23,801)       (31.1%)   ($ 2,703)      (61.9%)
                                ========        =====     ========        =====     ========        =====     ========       =====  
Other Data:
EBITDA (b)                      $ 13,774         45.5%    $  7,973         42.7%    $ 34,353         44.9%    $    991         22.7%
</TABLE>
                                                                         
--------
(a) Reflects the historical  financial  statements for the period from inception
    (April 17, 1995) through December 31, 1995.
(b) 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
    Credit Facility and Note Indenture contain certain covenants,  compliance of
    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 to either 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.

ACTUAL

The Company  continues its strategy of consolidating  headends and regionalizing
its customer  service,  local  advertising  and marketing  and sales  functions.
Towards that end, the Company hired several  management-level  personnel  during
the third  and  fourth  quarters  of 1996 and early  1997;  marketing  and sales
managers with  significant  experience in cable  television were employed in the
Maine,  Ohio  and  Kentucky  operating  regions,   the  corporate  and  regional
engineering  staff  was  augmented  with  experienced   personnel  charged  with
implementing the Company's headend  consolidation and technical upgrade program,
individuals in charge of coordinating public and government relations were hired
in the  Maine,  Ohio  and  Kentucky  operating  regions  and the  Company  hired
experienced  personnel  to  establish  an  in-house   telemarketing  center  and
centralized  advertising sales function. In addition,  the Company has dedicated
financial and human resources to focus on the evaluation and introduction of new
broadband  services such as Internet  access,  alternative  telephone access and
digital  programming on certain systems owned by the Company.  The Company plans
to initiate  trials in selected  systems of such new business  opportunities  to
evaluate a broader roll-out to the Company's customers in the future.

                                       30
<PAGE>

After acquisition of the Existing  Systems,  the Company  intensified  marketing
efforts in  conjunction  with new channel  launches of basic,  tiered  basic and
premium  services.   The  Company's   initial   activities  in  this  area  were
concentrated  in the New  England  and Ohio  Systems  where in 1996 the  Company
introduced  between 3 and 7 new basic and tiered  basic  channels to over 50% of
its subscribers.  The channel line-up enhancements were augmented by direct mail
promotions  and  follow-up  tele-marketing  campaigns and enabled the Company to
raise its average  combined  basic and tier service  rates in those systems from
$23.38  per  month in May to $25.36  per month in  December.  During  1996,  the
Company also launched its "Ultimate TV" service, a premium  programming  package
consisting  of several  premium  services and offered at a discount  from retail
rates  to  approximately  65,000  subscribers,  resulting  in  the  addition  of
approximately  9,400 pay units.  Although  there can be no  assurances as to the
long-term  effect of these  activities,  the  Company  plans to  continue  these
marketing efforts. During 1997, the Company expects to launch expanded basic and
tiered basic service  throughout  its systems and to introduce the "Ultimate TV"
service to an additional 140,000 subscribers.

To supplement  its  marketing  activities,  the Company  expects to complete the
construction  of a centralized  telemarketing  facility  located in  Pittsfield,
Massachusetts  during the second quarter of 1997. The Company  expects that this
center,  to be  staffed  initially  by 20 to 25  telemarketers,  will  allow the
Company to  efficiently  introduce  its new  programming  offerings  to maximize
productivity,  marketing  costs and  revenue.  In addition to pay and basic unit
acquisition  activities,  telemarketing  personnel  are  expected  to  assist in
delinquent  account collection  activities,  customer  satisfaction  surveys and
other targeted marketing campaigns.

During late February and early March of 1997,  certain of the communities served
by the Company in Ohio,  Kentucky and Indiana  along the Ohio River  experienced
devastating floods. The effect of the flooding on the Company's cable television
infrastructure,  as well as its effect on the  Company's  subscribers  living in
these communities, is unknown. The Company is currently evaluating the immediate
as well as long-term  financial  effect of the flooding  and is  evaluating  its
options relative to insurance coverage and ongoing operations.

THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH THREE MONTHS ENDED  SEPTEMBER
30, 1996

The  Company  generated  revenue  in the amount of $30.3  million  for the three
months ended  December 31,  1996,  and $18.7  million for the three months ended
September 30, 1996.  Operating and corporate  expenses totaled $16.5 million for
the quarter  ended  December 31, 1996,  and $10.7  million for the quarter ended
September 30, 1996,  and EBITDA totaled $13.8 million for the three months ended
December  31, 1996 and $8.0 million for the three  months  ended  September  30,
1996.  Increases in revenue,  operating  and  corporate  expenses and EBITDA are
primarily  attributable to the acquisition of the Triax Systems, the ACE Systems
and the Penn/Ohio Systems during October 1996.

As a  percentage  of  revenue,  the  Company  incurred  operating  expenses  and
corporate expenses of approximately 51.3% and 3.2%, respectively,  for the three
months ended December 31, 1996 and approximately  53.5% and 3.8%,  respectively,
for the three months ended September 30, 1996.  Operating  margins (revenue less
operating  expense as a percent of revenue) of 48.7% for the three  months ended
December 31, 1996 and 46.5% for the three months ended  September 30, 1996,  and
EBITDA  margins  (EBITDA as a percent of revenue) of 45.5% for the three  months
ended December 31, 1996 and 42.7% for the three months ended  September 30, 1996
were generated by the Company.  Such  increases in operating  margins and EBITDA
margins  represent the initial effects of customer  service  consolidation,  the
elimination of duplicative functions in the Existing Systems and the realization
of efficiencies  in corporate  support  functions,  as well as the effect of the
roll-out of new programming packages and services and increased  advertising and
pay-per-view revenue generated during the fourth quarter.

Although  there can be no  assurance,  the  Company  believes  that  EBITDA will
continue to increase with the realization of additional revenue  attributable to
continued subscriber growth through certain pending 


                                       31
<PAGE>

acquisitions,  with increased marketing  activities and expense control programs
and with expected ongoing service rate increases.

Interest  expense was $10.8 million for the three months ended December 31, 1996
and $4.3 million for the three months ended  September 30, 1996. The increase in
the cost of capital relative to the Company's revenue represents the issuance of
the 11% Senior Subordinated Notes due 2006 (the "Notes") in October 1996.

TWELVE  MONTHS ENDED  DECEMBER 31, 1996  COMPARED WITH THE PERIOD FROM APRIL 17,
1995 (INCEPTION) TO 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.  These  increases were
attributable  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  reflects  operations  for the  following
systems from the date of their respective  acquisitions:  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 Systems on December 23, 1996.

Operating and corporate  expenses were reduced to 55.0% of revenue in the twelve
months  ended  December  31,  1996 from 55.8% of  revenue  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.

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

COMBINED HISTORICAL ACQUIRED PREDECESSOR SYSTEMS

The  discussion  of the results of operations  for the years ended  December 31,
1995, 1994 and 1993 is based on the combined  historical results of the acquired
Predecessor Systems (the UVC Systems,  the Cox Systems,  the C4 Systems, the ACE
Systems and the Triax Systems), which do not reflect changes in the operation or
management  of the  acquired  Predecessor  Systems  that the Company has made or
intends to make and are not  necessarily  indicative  of the results  that would
have been  achieved  had such  systems  been owned and  operated  by the Company
during the periods presented. See "Selected Financial Data."

YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994

Revenue increased to $114.0 million (including $4.2 million  attributable to the
operations of the UVC Systems for the period after  acquisition  by the Company)
in the year  ended  December  31,  1995 from  $105.4  million  in the year ended
December 31, 1994 due to increases in service rates,  internal subscriber growth
and the  acquisition  of  approximately  9,000  subscribers in the Triax Systems
during the first quarter of 1995.  For the UVC Systems,  the Cox Systems and the
C4 Systems,  during this period,  basic  subscribers  increased by approximately
2.9%,  primarily in the Cox Systems and the C4 Systems,  which grew by 1,800 and
1,200  subscribers,   respectively.  Over  this  period,  the  number  of  basic
subscribers  and  premium  units  increased  by  approximately  7.1% and  13.1%,
respectively,  for the ACE  Systems  and the Triax  Systems.  Basic  penetration
improved to 71.1% at  year-end  1995 from 69.7% at  year-end  1994,  and premium
penetration  over the period  declined to 42.1% at  year-end  1995 from 45.9% at
year-end 1994, for the UVC Systems,  the Cox Systems and the C4 Systems. For the
Triax Systems and the ACE Systems,  basic 


                                       32
<PAGE>

penetration  improved to approximately 73.2% at year-end 1995 from approximately
71.9% at year-end 1994, and premium  penetration  increased to 44.9% at year-end
1995 from 42.5% at year-end  1994.  Operating  expenses grew at rates  generally
approximating  revenue  growth,  increasing  to $64.5  million  (including  $2.4
million  attributable  to the operations of the UVC Systems for the period after
acquisition  by the  Company)  in the year ended  December  31,  1995 from $58.6
million in the year ended December 31, 1994.  EBITDA  increased to $49.5 million
in 1995  (including  $1.8  million  attributable  to the  operations  of the UVC
Systems for the period after  acquisition  by the Company) from $46.7 million in
1994.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO THE YEAR ENDED DECEMBER 31, 1993

Revenue  increased  to $105.4  million in the year ended  December 31, 1994 from
$96.2  million in the year ended  December 31, 1993,  primarily due to growth in
the number of basic  subscribers and premium units as well as the integration of
system  acquisitions.  In 1993, the Triax Systems completed three  acquisitions,
totaling over 23,000  subscribers,  90% of which were acquired in December 1993.
For the UVC Systems,  the Cox Systems and the C4 Systems,  basic subscribers and
premium  units  increased  over the  period  by  approximately  2.9% and  20.9%,
respectively.  For the ACE Systems and the Triax Systems,  basic subscribers and
premium  units  increased  over the  period  by  approximately  4.1% and  17.2%,
respectively. Basic penetration improved to 70.1% at year-end 1994 from 69.0% at
year-end 1993, while premium penetration  increased to 45.9% from 42.1% over the
same period for the UVC Systems, the Cox Systems and the C4 Systems. For the ACE
Systems and the Triax Systems,  basic penetration  improved to 71.9% at year-end
1994 from 69.3% at year-end 1993, while premium  penetration  increased to 42.5%
from 36.4% over the same period. In spite of these increases, revenue growth was
limited by regulations  relating to basic service rates which were instituted by
the 1992 Cable Act. See "Legislation and Regulation" for a further discussion of
recent  cable  television  regulation.  Operating  expenses  increased  to $58.6
million in the year ended December 31, 1994 from $52.7 million in the year ended
December 31, 1993.  Increases in expenses were partially  attributable to higher
administrative costs of complying with regulatory  reporting  requirements under
the 1992 Cable Act, as well as the  addition  of new  services  and  shifting of
service tiers in response to regulation.  As a result, EBITDA increased modestly
to $46.7 million in 1994 from $43.5 million in 1993.

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.   The  Company  has  financed  these
expenditures to date through a combination of cash from operations, indebtedness
from outside  sources and equity capital from its partners.  The Company intends
to  continue  to  finance  such  expenditures  in the future  though  these same
sources.

On April 9, 1996,  the  Company  entered  into the $265.0  million  Amended  and
Restated  Credit  Agreement  with The Chase  Manhattan  Bank, as  Administrative
Agent, J.P. Morgan Securities Inc., as Syndication Agent, CIBC Inc., as Managing
Agent, and the other lenders signatory thereto.  The Company used these proceeds
to refinance an existing $130.0 million senior credit  facility,  to finance the
purchase of the Cox Systems and for general  business  purposes.  As of December
31, 1996, borrowings under the Senior Credit Facility totaled $190.0 million.

The  Senior  Credit  Facility  includes  a  $75.0  million,  8.25-year  reducing
revolving  credit  facility  ("Revolving  Credit  Facility"),  a $100.0 million,
8.25-year term loan ("Facility A Term Loan") and a $90.0 million, 9.25-year term
loan  ("Facility  B Term  Loan").  At  December  31,  1996,  the  Company had no
outstanding  borrowings  under the Revolving  Credit  Facility,  $100.0  million
outstanding  under the Facility A Term Loan and $90.0 million  outstanding under
the Facility B Term Loan.  The weighted  average  interest rates at December 31,
1996 on the  outstanding  borrowings  under  the  Facility  A Term  Loan and the
Facility  B Term Loan were  approximately  8.35% and  8.88%,  respectively.  The
Company  has entered  into  


                                       33
<PAGE>

interest rate protection  agreements to hedge the underlying LIBOR rate exposure
for $170.0 million of borrowings through November 1999 and October 2000.

In general,  the Senior 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 Senior  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 is  compliance  with the
terms of the Senior Credit Facility.

The Senior  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  Senior  Credit  Facility,  the
Administrative  Agent is entitled to replace the general  partner of the Company
with its designee.

In  addition,  during the year ended  December 31,  1996,  the Company  received
approximately  $107.4 million of equity  contributions  from its partners.  Such
equity  contributions  and  senior  debt,  along with cash flow  generated  from
operations,  has been sufficient to finance capital improvement projects as well
as acquisitions. The Company has adequately serviced its debt load in accordance
with the provisions of the Senior Credit  Facility from EBITDA of  approximately
$34.4 million generated by the Company for the year ended December 31, 1996.

On September 30, 1996, the Company amended the Senior Credit Facility  primarily
to allow the issuance of $200.0 million aggregate principal amount of the Notes.
The Notes  mature on October 15, 2006 and bear  interest at 11%,  with  interest
payments due  semiannually  commencing on April 15, 1997. The public offering of
the  Notes  was  consummated  on  October  7,  1996  and  the  net  proceeds  of
approximately  $192.5 million  received by the Company was fully expended in the
acquisition  of the Triax  Systems and the ACE Systems on October 7 and 9, 1996,
respectively.  The 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 Notes,  the  Partnership
entered into deferred  interest  rate setting  agreements to reduce the interest
rate  exposure  related to the 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 Notes.

In addition, in connection with the acquisition of the ACE Systems and the Triax
Systems,  the Company received additional equity  contributions of approximately
$40.0  million.  On March 11, 1997,  FVP called an  additional  $15.0 million of
contributions and currently has available for use an additional $21.0 million in
commitments,  the net proceeds of which will be  contributed to the Company over
time to fund future  acquisitions.  Substantially  all of the $15.0  million has
been  collected as of March 26, 1997.  The size of the equity  commitments to be
made  available  to the Company may be reduced if no later than six months after
August  15,1996,  FVP and its  advisory  committee  (the  "Advisory  Committee")
determine  that  the  remaining   commitments  exceed  the  Company's  projected
requirements.  Such remaining  commitments will expire on June 30, 1997, subject
to  election  by FVP,  and  approval  by the  Advisory  Committee  to extend the
commitment period to June 30, 1998.

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 (the
"UVC Note").  It is possible that the Company will cause the  conversion of $5.0
million  aggregate  principal  amount of the UVC Note into  limited  partnership
interests of the Company and repay the balance of the UVC Note. In addition, the
Company may pay off the UVC Note at any time. However, as of March 31, 1997, the
UVC Note had not yet been  converted  or repaid,  and the  Company is  currently
considering all options related thereto.

The Company had capital  expenditures  of $9.3 million  during the twelve months
ended  December  31,  1996,   primarily   consisting  of  expenditures  for  the
construction  and  expansion  of the  delivery  system;  


                                       34
<PAGE>

additional  costs were  incurred  related to the  expansion of customer  service
facilities.  In addition,  the Company  capitalized  approximately  $2.0 million
attributable  to the cost of obtaining  certain  franchise,  leasehold and other
long-term  agreements.  The Company  expects to spend in excess of $50.0 million
over the next two years for  capital  improvement  related  projects  consisting
primarily of  installation  of fiber optic cable and microwave  links which will
allow for the  anticipated  reduction  in the  number of  headends,  analog  and
digital converter boxes which will allow the Company to more effectively  market
premium and pay-per-view  services and the continued deployment of coaxial cable
to build-out  existing systems.  Capital expended during the twelve months ended
December 31, 1996 represents the first phase of the Company's  strategic capital
improvement plan.


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.




                                       35
<PAGE>




                                     PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS OF FRONTIERVISION INC.

FVOP's sole general partner is FrontierVision Partners, L.P. ("FVP"), whose 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 Capital, respectively, is set forth below:

FRONTIERVISION INC.
Name                     Age    Position
----------------------   ---    -----------------------------------------------
James C. Vaughn          51     President, Chief Executive Officer and Director
John S. Koo              35     Senior Vice President, Chief Financial Officer,
                                 Secretary and Director
William J. Mahon, Jr.    55     Vice President of Operations
David M. Heyrend         46     Vice President of Engineering
William P. Brovsky       40     Vice President of Marketing and Sales
James W. McHose          33     Vice President and Treasurer
Richard G. Halle         33     Vice President of Business Development
Todd E. Padgett          31     Vice President of Finance

FRONTIERVISION CAPITAL CORPORATION
Name                     Age    Position
----------------------   ---    -----------------------------------------------
James C. Vaughn          51     President, Chief Executive Officer and Director
John S. Koo              35     Senior Vice President, Chief Financial Officer,
                                Secretary and Director
James W. McHose          33     Vice President and Treasurer

JAMES  C.  VAUGHN,  President,   Chief  Executive  Officer  and  a  Director  of
FrontierVision  Inc.  and  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 Capital and 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.

WILLIAM J. MAHON, JR., Vice President of Operations of FrontierVision Inc. since
December 1995, has over fifteen years of cable television  operations management
experience.  Prior to joining the Company, 


                                       36
<PAGE>

Mr. Mahon served as Vice  President of  Operations  for UVC, a top 50 MSO,  from
1990 to  1995,  where  he was  responsible  for  the  day-to-day  operations  of
approximately 130 cable systems located in twelve states. From 1983 to 1989, Mr.
Mahon served as President and General Manager of Heritage Cable Vision, a 90,000
subscriber  MSO.  Mr.  Mahon is a member of the Society of Cable  Engineers  and
serves  on  the  Board  of  Directors  of  the  New  England  Cable   Television
Association.

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.

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  tele-marketing  operations for Denver and
its suburban markets.

JAMES W. MCHOSE, Vice President and Treasurer of FrontierVision Inc. and Capital
since July 1996, 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. Prior to joining the Company, 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 Finance of FrontierVision Inc. since January
of 1997 and Director of Finance of FrontierVision Inc. since July 1995, has over
six years of project management and corporate finance  experience.  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.

                                       37
<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 its  other  most  highly  compensated
officers  receiving  compensation  in excess of $100,000 for  services  rendered
during the fiscal years ended December 31, 1996 and 1995.

<TABLE>
<CAPTION>
                                                                         Summary Compensation Table


                                                                               
                                                                             ---------------------------------------------------
                                                                                   Annual Compensation                  
                                                                             -------------------------------            All Other
Name and Principal Position                                                  Year        Salary           Bonus     Compensation (1)
---------------------------                                                  ----        -------         ------           -----

<S>                                                                          <C>         <C>              <C>             <C>  
James C. Vaughn                                                              1996        283,885          (2)             7,882
          President and Chief Executive Officer                              1995        169,635        110,000 (3)

John S. Koo                                                                  1996        170,192          (2)             4,760
          Senior Vice President, Chief Financial Officer and Secretary       1995         93,416         90,000 (3)
--------
</TABLE>
(1)  Consists of FVP's contributions to the 401(k) Plan.
(2)  Bonuses  for  Messrs.  Vaugn  and Koo for 1996  have  not yet been  finally
     determined.
(3)  Bonus paid for the  employment  contract  year ending April 16,  1996.  Mr.
     Vaughn and Mr. Koo deferred $35,000 and $50,000, respectively, of the bonus
     to the Deferred Compensation Plan described below.

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 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.  


                                       38
<PAGE>

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 ten  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  "See  Certain   Relationships   and  Related
Transactions."

EMPLOYMENT AGREEMENT

James. C. Vaughn has entered into an employment  agreement with FVP, dated as of
April 17, 1995 (the "Employment  Agreement").  The Employment Agreement provides
that Mr.  Vaughn will be employed as President  and Chief  Executive  Officer of
FVP. The Employment Agreement establishes a base salary to be paid to Mr. Vaughn
each year which is  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).  Mr. Vaughn's base salary may from time to
time be  increased  if FVP shall deem it  advisable  to do so. For the  contract
period  beginning  April 17, 1996,  Mr.  Vaughn's base salary was  $286,000.  In
addition,  he is  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's bonus for the contract period beginning April 17, 1996,
has not yet been determined.  If FVP terminates Mr. Vaughn's  employment without
"cause" (as defined in the Employment Agreement), then Mr. Vaughn is entitled to
receive a severance payment equal to 25% of his then base salary. Mr. Vaughn has
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.






                                       39
<PAGE>




Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
          MANAGEMENT

The following  table sets forth,  as of December 31, 1996, (i) the percentage of
the  total  partnership  interests  of the  Company  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 the
Company's partnership interests and (ii) the percentage of the equity securities
of  FrontierVision  Inc.,  FVP GP, FVP and the Company owned by each director or
executive officer of FrontierVision Inc. named in the Summary Compensation Table
and by all  executive  officers of the Company as a group.  For a more  detailed
discussion  of the  ownership of the Company,  see  "Certain  Relationships  and
Related Transactions."

<TABLE>
<CAPTION>


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

FVP GP, L.P. (1)                                  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                                                        0.00%
group
</TABLE>
----------
(1)  FVOP's sole general  partner  (owning  99.9% of the  partnership  interests
     therein) is FVP, a Delaware  limited  partnership,  and FVOP's sole limited
     partner   (owning   0.1%  of  the   partnership   interests   therein)   is
     FrontierVision  Operating Partners, Inc., a Delaware corporation which is a
     wholly owned  subsidiary of FVP, FVP's sole general  partner  (owning 1% of
     the  partnership   interests   therein)  is  FVP  GP,  a  Delaware  limited
     partnership,  FVP's  limited  partners  (owning  99%  of  the  partnerships
     interests  therein)  are 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,  FVP GP's  limited  partners  (owning  99% of the
     partnership interests therein) consist of various institutional  investors,
     James C. Vaughn and John S. Koo.






                                       40
<PAGE>




Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company's sole general partner  (owning 99.9% of the  partnership  interests
therein)  is  FVP.  The  Company's  sole  limited  partner  (owning  0.1% of the
partnership interests therein) is FrontierVision Operating Partners, Inc., 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, 1996,  J.P.  Morgan  Investment  Corporation  and First Union
Capital Partners, Inc. have committed approximately $45,502,845 and $30,000,000,
respectively, to FVP. As of December 31, 1996, FrontierVision Inc. has committed
approximately $20,343 to FVP, representing  commitments of approximately $13,563
and $6,780 by James C. Vaughn and John S. Koo,  respectively,  who are directors
of  FrontierVision  Inc. Such capital  commitments  are contributed as equity to
FVOP in connection  with the closing of acquisitions by FVOP. As of December 31,
1996, J.P. Morgan Investment Corporation and First Union Capital Partners,  Inc.
have paid $35,278,231 and $22,894,737 of such commitments, respectively, to fund
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.

Morgan  Guaranty  Trust  Company  of New  York,  an  affiliate  of  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 Senior 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  Notes.  There  are no other
arrangements  between the  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.




                                       41
<PAGE>




                                     PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON 
         FORM 8-K
<TABLE>
<CAPTION>


(A) (1)  Financial Statements.  The following financial statements are included in Item 8 of Part II:
                                                                                                                  PAGE
             <S>                                                                                                   <C>    
             FrontierVision Operating Partners, L.P. and Subsidiary
                 Independent Auditors' Report                                                                     F-3
                 Consolidated Balance Sheets as of December 31, 1996 and 1995                                     F-4
                 Consolidated Statements of Operations for the year ended December 31, 1996 and
                     the period from inception (April 17, 1995) through December 31, 1995                         F-5
                 Consolidated Statements of Partners' Capital for the year ended December 31, 1996 
                     and the period from inception (April 17, 1995) through December 31, 1995                     F-6
                 Consolidated Statements of Cash Flows for the year ended December 31, 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,  1996 and July 26, 1996  (inception)                        F-19 
                 Statement of Operations for the period from July 26,  1996  (inception) through
                    December 31, 1996                                                                             F-20
                 Statement of Owner's Equity for the period from July 26, 1996 (inception) through 
                    December 31, 1996                                                                             F-21
                 Statement  of Cash  Flows 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 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



                                       42
<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

      (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>

      (3)  LIST OF EXHIBITS.
<TABLE>
                                                          
             <S>     <C>                                                
             3.1     The Company's Agreement of Limited Partnership. (1)
             3.2     Certificate of Limited Partnership of the Company.  (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, 
</TABLE>


                                       43
<PAGE>
<TABLE>

             <S>     <C>    
                     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)
             12.1    Statement of Computation of Ratios.  
             16.1    Report of change in accountants.  (2)
             27.2    Financial Data Schedule as of and for the period ended December 31, 1996.

             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.
             (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.
</TABLE>

   (B)   REPORTS ON FORM 8-K.

          1.   Item 2, Form 8-K dated  October 7, 1996.  Substantially  the same
               financial  information required by Item 7 was previously reported
               in the Registrants'  Registration Statement on Form S-1 (File No.
               333-9535) and, therefore,  pursuant to General Instruction B.3 of
               Form 8-K, an additional  report of such  information was not made
               in the Form 8-K. 

          2. Item 4, Form 8-K dated October 22, 1996.

   (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.

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).

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.

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.  


                                       46
<PAGE>

ESMR - Enhanced specialized mobile radio, a wireless  telecommunications service
using digital technology to provide enhanced mobile telecommunications services,
including  two-way  radio  dispatch and paging  services.  ESMR  services may be
interconnected with the public switched telephone network.

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.

Internet --A worldwide collection of communications networks.

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.


                                       47
<PAGE>

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.

Pro Forma  Acquisition  Cash Flow -- Net  income of a system,  as of the date of
acquisition of such system, before interest, taxes,  depreciation,  amortization
and corporate administrative expenses.

Rebuild -- The  replacement  or upgrade of an existing  cable system  usually to
improve either its technological  performance,  or expand the channel, 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>


<TABLE>
<CAPTION>
                                                                                                        PAGE

FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
<S>                                                                                                      <C>   
   Independent  Auditors' Report                                                                         F-3 
   Consolidated  Balance Sheets as of December 31, 1996 and 1995                                         F-4  
   Consolidated  Statements  of  Operations  for the year ended December 31, 1996 and for the 
     period from inception  (April 17, 1995) through December 31, 1995                                   F-5 
   Consolidated Statements of Partners'  Capital for the year ended December 31, 1996 and for the
     period from  inception  (April 17,  1996)  through  December  31, 1995                              F-6
   Consolidated  Statements  of Cash Flows for the year ended  December 31, 1996 and for the 
     period from inception (April 17, 1996) 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, 1996 and uly 26, 1996  (inception)                                  F-19 
   Statement of Operations for the period from July 26, 1996 (inception)through December 31, 1996        F-20
   Statement of Owner's Equity for the period from July 26, 1996 (inception) through December            F-21
      31, 1996
   Statement of Cash Flows for the period from July 26, 1996 (inception) through December 31,            F-22
     1996
   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 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>
<CAPTION>
                                                                                                         PAGE

C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP
<S>                                                                                                      <C>
   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

</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  subsidiary as of December 31, 1996 and 1995, and
the related  consolidated  statements  of  operations,  cash flows and partners'
capital  for the year ended  December  31,  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 subsidiary as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for the year ended December
31,  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 12, 1997














                                      F-3
<PAGE>




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

<TABLE>
<CAPTION>
                                                                -------------------------
                                                                December 31,  December 31,
                                                                   1996           1995
                                                                 --------      --------

                                    ASSETS

<S>                                                              <C>              <C>  
Cash and cash equivalents                                        $  3,639         2,650
Accounts receivable, net of allowance for doubtful accounts
   of $322 and $40                                                  4,544           358         
Other receivables                                                     846         1,667    
Prepaid expenses and other                                          2,231           201
Investment in cable television systems, net:
   Property and equipment                                         199,461        42,917
   Franchise costs                                                248,055        50,270
   Covenants not to compete                                        12,650             -      
   Subscriber lists                                                36,321        29,000
   Goodwill                                                        27,879         4,094
                                                                 --------      --------
      Total investment in cable television systems, net           524,366       126,281
                                                                 --------      --------
Deferred financing costs, net                                      13,042         2,853
Earnest money deposits                                                500         9,502
                                                                 --------      --------
      Total assets                                               $549,168       143,512
                                                                 ========      ========


                   LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                                                 $  1,994         1,606
Accrued liabilities                                                10,825         1,558
Subscriber prepayments and deposits                                 1,862           362
Accrued interest payable                                            6,290           420
Debt                                                              398,194        93,159
                                                                 --------      --------
     Total liabilities                                            419,165        97,105
                                                                 --------      --------
Partners' capital:
   FrontierVision Partners, L.P.                                  129,874        46,361
   FrontierVision Operating Partners, Inc.                            129            46
                                                                 --------      --------
      Total partners' capital                                     130,003       46,407
                                                                 --------      --------
Commitments


      Total liabilities and partners' capital                    $549,168       143,512
                                                                 ========      ========

</TABLE>



          See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>




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



<TABLE>
<CAPTION>

                                                  ------------------------------
                                                                     For the Period
                                                                     From Inception
                                             For the Year Ended     (April 17, 1995 --
                                                December 31,       see Note 1) through
                                                    1996            December 31, 1995
                                                                
                                                  --------              --------
<S>                                               <C>                      <C>  
Revenue                                           $ 76,464                 4,369
Expenses:
    Operating expenses                              39,181                 2,311
    Corporate administrative expenses                2,930                   127
    Depreciation and amortization                   35,336                 2,308
    Pre-acquisition expenses                          --                     940
                                                  --------              --------
        Total expenses                              77,447                 5,686
                                                  --------              --------

Operating loss                                        (983)               (1,317)
Interest expense, net                              (22,422)               (1,386)
Other expense                                         (396)                 --
                                                  --------              --------
Net loss                                          $(23,801)               (2,703)
                                                  ========              ========
</TABLE>

                                                           






























          See accompanying notes to consolidated financial statements.





                                      F-5
<PAGE>




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

<TABLE>
<CAPTION>




                                              -------------------------------------------------
                                                                FrontierVision
                                           FrontierVision         Operating
                                            Partners, L.P.      Partners, Inc.
                                          (General Partner)    (Limited Partner)        Total
                                              ---------           ---------           ---------
<S>                                           <C>                <C>                 <C>    
Balance, at inception
      (April 17, 1995 -- see Note 1)          $    --                  --                  --
      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
                                              =========           =========           =========


</TABLE>



























          See accompanying notes to consolidated financial statements.



                                      F-6
<PAGE>




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

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

                                                                          ---------           ---------
Cash Flows From Operating Activities:
<S>                                                                       <C>                    <C>    
  Net loss                                                                $ (23,801)             (2,703)
  Adjustments to reconcile net loss to net
       cash flows from operating activities:
       Depreciation and amortization                                         35,336               2,308
       Net loss on disposal of assets                                           388                --
       Amortization of deferred debt issuance costs                             999                  69
       Interest expense deferred and included in
           long-term debt                                                       924                   0
       Changes in operating assets and liabilities, net of
           effect of acquisitions:
           Accounts receivable                                               (1,946)               (261)
           Receivable from seller                                             1,377                --
           Prepaid  expenses and other                                       (1,266)                 75
           Accounts  payable and accrued liabilities                          3,423               1,637
           Subscriber prepayments and deposits                               (2,393)                362
           Accrued interest payable                                           5,870                 420
                                                                          ---------           ---------
               Total adjustments                                             42,712               4,610
                                                                          ---------           ---------
               Net cash flows from operating activities                      18,911               1,907
                                                                          ---------           ---------
Cash Flows From Investing Activities:
  Capital expenditures                                                       (9,304)               (573)
  Cash paid for franchise costs                                              (2,009)               --
  Earnest money deposits                                                       (500)             (9,502)
  Proceeds from disposition of cable television systems                      15,065                --
  Cash paid in acquisitions of cable television systems                    (421,467)           (121,270)
                                                                          ---------           ---------
                Net cash flows from investing activities                   (418,215)           (131,345)
                                                                          ---------           ---------
Cash Flows From Financing Activities:
  Debt borrowings                                                           137,700              85,900
  Payments on debt borrowings                                               (33,600)               --
  Proceeds of issuance of Senior Subordinated Notes                         200,000                --
  Principal payments on capital lease obligations                               (16)               --
  Increase in deferred financing fees                                        (5,163)             (2,922)
  Offering costs related to Senior Subordinated Notes                        (6,025)               --
  Partner capital contributions                                             107,397              49,110
                                                                          ---------           ---------
                Net cash flows from financing activities                    400,293             132,088
                                                                          ---------           ---------

Net Increase in Cash and Cash Equivalents                                       989               2,650
Cash and Cash Equivalents, at beginning of period                             2,650                --
                                                                          ---------           ---------
Cash and Cash Equivalents, end of period                                  $   3,639               2,650
                                                                          =========           =========
Supplemental Disclosure of Cash Flow Information:
  Cash paid for interest:                                                 $  15,195                 957
                                                                          =========           =========

</TABLE>






          See accompanying notes to consolidated financial statements.





                                      F-7
<PAGE>




             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              Amounts in Thousands


(1)    THE COMPANY

ORGANIZATION AND CAPITALIZATION

FrontierVision  Operating  Partners,  L.P. (the "Company") is a Delaware limited
Partnership  formed on July 14, 1995 for the purpose of acquiring  and operating
cable  television  systems.  As of December  31,  1996,  the  Company  owned and
operated cable  television  systems in three primary  operating  regions - Ohio,
Kentucky  and New  England - 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 sole general partner, FrontierVision Partners, L.P. ("FVP"), a Delaware
Company.  FVOP Inc. is a wholly owned  subsidiary of FVP. During the period from
January 1, 1996 to December  31, 1996 the Company  received  additional  capital
contributions of approximately $107,397 from its partners. FVP allocates certain
administrative expenses to FVOP which are included as capital contributions from
its partners.  Such expense  allocations were  approximately $735 and $1,228 for
the periods ended December 31, 1996 and 1995, respectively.

FrontierVision  Capital  Corporation  (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 the 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.

PRE-ACQUISITION EXPENSES

The  Company  had no  substantive  operations  of its own  until the date of the
acquisitions  described in Note 3. 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, 1995 and 1996  reflects  earnest
money  deposits  paid  by FVP  on  behalf  of the  Company  related  to  planned
acquisitions  (see Note 3).  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.




                                      F-8
<PAGE>




             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands


(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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
$1,577 and $39 for the periods ended December 31, 1996 and 1995.

Depreciation and amortization are computed using the  straight-line  method over
the following estimated useful lives:

                                          -------------------------------------
                                         December 31,      December 31,
                                             1996             1995        Life
                                          ---------          ------      -------
Property and equipment                    $ 217,148          43,906      8 years
Less - Accumulated depreciation             (17,687)           (989)
                                          ---------          ------           
                                          $ 199,461          42,917
                                          =========          ======

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.  Amounts are being amortized using the  straight-line  method over
the following periods,  which for franchise costs consider the Company's ability
to renew existing franchise agreements:

                                     -----------------------------------------
                                    December 31,      December 31,
                                        1996             1995         Life
                                     ---------           -----        ----
Franchise costs                      $ 258,453          50,834       15 years
Less - Accumulated amortization        (10,398)           (564)
                                     ---------           -----
                                     $ 248,055           50,270
                                     =========           =====


Covenants not to compete             $  14,934              --       5 years
Less - Accumulated amortization         (2,284)             --
                                     ---------           -----
                                    $  12,650               --
                                     =========           =====


Subscriber lists                     $  41,777          29,707       7 years
Less - Accumulated amortization         (5,456)           (707)
                                     ---------           -----
                                     $  36,321          29,000
                                     =========           =====

Goodwill                             $  28,845           4,140       15 years
Less - Accumulated amortization           (966)            (46)
                                     ---------           -----
                                     $  27,879           4,094
                                     =========           =====



                                      F-9
<PAGE>



             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

DEFERRED FINANCING COSTS

Deferred financing costs are being amortized using the straight line method over
the life of the loans:

                                      ---------------------------------------
                                      December 31,   December 31,
                                         1996           1995          Life
                                      --------          -----         ----
Deferred financing costs              $ 14,110          2,922       1-9 years
Less -- Accumulated amortization        (1,068)           (69)
                                      --------          -----
                                      $ 13,042          2,853
                                      ========          =====

REVENUE RECOGNITION

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

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.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

The Financial  Accounting Standards Board ("FASB") issued Statement of Financial
Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of Long-Lived
Assets and for  Long-Lived  Assets to be  Disposed  Of" ("SFAS  121"),  which is
required to be adopted by affected  companies for fiscal years  beginning  after
December  15,  1995.  SFAS 121  requires  that  long-lived  assets  and  certain
identifiable  intangibles  to be held and used by the  Company be  reviewed  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount of an asset may not be  recoverable.  The  Company  adopted the
principles of this  statement on January 1, 1996. The provisions of SFAS 121 did
not have an effect on the Company's  reported results of operations or financial
condition through December 31, 1996.

RECLASSIFICATION

Certain  amounts  have  been  reclassified  for  comparability   with  the  1996
presentation.

(3)      ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

The  Company has  completed  several  acquisitions  from its  inception  through
December  1996.  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 fair values
at the respective dates of acquisition.




                                      F-10
<PAGE>




             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands

(3)      ACQUISITIONS AND DISPOSITIONS (continued)

On November 9, 1995,  the Company  purchased  certain  cable  television  system
assets, primarily in Maine and Ohio, from United Video Cablevision, Inc. ("UVC")
for a purchase price of approximately $121,800, excluding working capital.

On November 21, 1995,  the Company  acquired  certain  cable  television  assets
located in Maine from Longfellow  Cable Company,  Inc. and two of its affiliates
for a purchase price of approximately $6,100, excluding working capital.

On February 1, 1996,  the Company  acquired  certain  cable  television  assets,
primarily in Virginia and Tennessee,  from C4 Media Cable Southeast L.P. ("C4"),
for a purchase price of approximately $47,600 (subject to adjustment), excluding
working capital.  As of December 31, 1995, the Company had advanced $2,502 as an
earnest money deposit related to this transaction.

On April 9, 1996, the Company acquired  certain cable television  system assets,
primarily in Ohio, from  affiliates of Cox  Communications,  Inc.  ("Cox") for a
purchase price of  approximately  $135,900,  excluding  working  capital.  As of
December 31, 1995,  the Company had advanced  $7,000 as an earnest money deposit
related to this transaction.

On October 7, 1996,  the  Company  acquired  certain  cable  television  assets,
primarily in Kentucky and Ohio, from Triax Southeast Associates, L.P. ("Triax"),
for purchase price of approximately  $85,900 (subject to adjustment),  excluding
working capital.

On October 9, 1996,  the  Company  acquired  certain  cable  television  assets,
primarily  in  Kentucky  and  Indiana,  from  American  Cable  Entertainment  of
Kentucky-Indiana,  Inc. ("ACE") for a purchase price of approximately  $147,400,
excluding working capital.

During  1996,  in  addition to the  transactions  mentioned  above,  the Company
acquired certain cable television assets, located in Maine, New Hampshire, Ohio,
Pennsylvania,  and  Maryland  for a  purchase  price of  approximately  $21,300,
excluding working capital.

The combined  purchase  price of these  acquisitions  have been allocated to the
acquired assets and liabilities as follows:

                                                  ---------------------------
                                                     1996            1995
                                                 Acquisitions     Acquisitions
                                                   ---------       ---------
Property, plant and equipment                      $ 169,240          43,333
Franchise Costs                                      215,329          50,748
Subscriber Lists                                      12,070          29,707
Covenant not to compete                               16,041            --
Goodwill                                              25,396           4,140
                                                   ---------       ---------
  Subtotal                                           438,076         127,928
                                                   ---------       ---------
Net working capital (deficit)                         (7,107)            542
Less - Earnest money deposits applied                 (9,502)
Less - Subordinated promissory note to seller           --            (7,200)
                                                   ---------       ---------
  Total cash paid for acquisitions                 $ 421,467         121,270
                                                   =========       =========




                                      F-11
<PAGE>




             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands

(3)      ACQUISITIONS AND DISPOSITIONS (continued)

The Company has reported the operating results of its acquired cable systems and
disposed  cable systems from the date of their  respective  acquisition  and has
reported  the  operating  results  of  its  disposed  cable  systems  up to  the
respective  disposal date.  Unaudited pro forma summarized  operating results of
the  Company,  assuming the UVC, C4, Cox,  Triax and ACE  acquisitions  had been
consummated on January 1, 1995, are as follows:

<TABLE>
<CAPTION>

                                                                 Twelve Months Ended December 31, 1996
                                                              -------------------------------- ------- 
                                                             Historical                       Pro Forma
                                                              Results        Acquisitions (a)  Results
                                                              --------         -------         ------- 
<S>                                                           <C>               <C>            <C>    
Revenue                                                       $ 76,464          44,627         121,091
Operating, selling, general and administrative expenses        (42,111)        (23,412)        (65,523)
Depreciation and amortization                                  (35,336)        (22,207)        (57,543)
                                                              --------         -------         ------- 
Operating income (loss)                                           (983)           (992)         (1,975)
Interest and other expenses                                    (22,818)        (20,769)        (43,587)
                                                              --------         -------         ------- 
Net loss                                                      $(23,801)        (21,761)        (45,562)
                                                              ========         =======         ======= 

</TABLE>
<TABLE>
<CAPTION>

                                                                Twelve Months Ended December 31, 1995
                                                              ---------------------------------------- 
                                                                                              Pro Forma
                                                              Results        Acquisitions (a)  Results
                                                              --------         -------         ------- 
<S>                                                           <C>              <C>             <C>    
Revenue                                                       $  4,369         106,204         110,573
Operating, selling, general and administrative expenses         (2,438)        (60,100)        (62,538)
Depreciation and amortization                                   (2,308)        (55,213)        (57,521)
Pre-acquisition expenses                                          (940)           --              (940)
                                                              --------         -------         ------- 
Operating income (loss)                                         (1,317)         (9,109)        (10,426)
Interest and other expenses                                     (1,386)        (39,001)        (40,387)
                                                              --------        -------- 
Net loss                                                      $ (2,703)        (48,110)        (50,813)
                                                              ========         =======         ======= 
</TABLE>

(a) Represents acquistions  consummated on or before December 31, 1996 (UVC, C4,
Cox, Triax and ACE).

The  pro  forma  financial   information  presented  above  is  not  necessarily
indicative  of the  operating  results that would have occurred had the UVC, C4,
Cox, Triax and ACE  acquisitions  actually been  consummated on January 1, 1995.
Furthermore,  the above pro forma  financial  information  does not  include the
effect of certain  acquisitions  or  dispositions of cable systems because these
transactions were not material on an individual or aggregated basis.

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-12
<PAGE>





             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands

(4)    DEBT

The Company's debt was comprised of the following:
<TABLE>
<CAPTION>

                                                                                 -----------------------
                                                                               December 31,    December 31,
                                                                                   1996           1995
                                                                                 --------       --------
Bank Credit Facility (a) --
<S>                                                                              <C>             <C>                  
  Revolving credit loan, due June 30, 2004,  interest based
     on various  floating rate options (8.69% weighted  average on $50,000
     and 8.50% weighted average on $5,900 at December 31, 1995),
     payable monthly                                                             $   --           55,900
  Term loans, due June 30, 2004, interest based on various
     floating rate options(8.6% and 8.69% weighted average at
     December 31, 1996 and 1995, respectively), payable monthly                   190,000         30,000
11% Senior Subordinated Notes due 2006 (b)                                        200,000           --
Subordinated promissory notes to UVC, due December 31,
    2004, with interest as described below (c)                                      8,124          7,200
Capital lease obligations, monthly payments of $3, including average
  interest at 9.1%, due November 1998 and May 1999                                     70             59
                                                                                 --------       --------
Total debt                                                                       $398,194         93,159
                                                                                 ========       ========
</TABLE>

(a)      Bank Credit Facility.

As       of December 31, 1995,  the Company had entered into a credit  agreement
         (the "Senior Credit Facility") with a maximum  availability of $130,000
         of which $30,000 was available in term loans and $100,000 was available
         as a revolving  line of credit.  The Company had drawn  $30,000 in term
         loans and $55,900  under the revolver as of December 31, 1995. On April
         9, 1996,  the  Company  entered  into an Amended  and  Restated  Credit
         Facility increasing the available Senior Debt by $135,000,  for a total
         availability  of  $265,000.  Under  the  Amended  and  Restated  Credit
         Facility,  the Company has $100,000 available under the Facility A Term
         Loan,  $75,000  available  under the Revolving  Credit Loan and $90,000
         available  under the Facility B Term Loan. The Facility A Term Loan and
         the  Revolving  Credit  Loan both mature on June 30,  2004.  Escalating
         principal payments are due quarterly beginning September 30, 1998 under
         the Facility A Term Loan with  quarterly  principal  reductions  of the
         Revolving Credit Loan also beginning September 30, 1998. The Facility B
         Term Loan matures June 30, 2005 with 91% of the principal  being repaid
         in the last four quarters of the term of the facility. On September 30,
         1996,  the Company  amended the Amended and  Restated  Credit  Facility
         primarily  to allow for the  issuance  of the 11%  Senior  Subordinated
         Notes (the "Notes").
         
         Under the terms of the  Amended  and  Restated  Credit  Facility,  with
         certain exceptions,  the Company has a mandatory prepayment  obligation
         upon any sale of new  partnership  interests and the sale of any of its
         operating systems. Further,  beginning with the year ended December 31,
         1998, the Company is required to make  prepayments  equal to 50% of its
         excess cash flow, as defined in the credit agreement.  The Company also
         pays  commitment  fees of 1/2% per  annum,  on the  average  unborrowed
         portion of the total amount  available  for  borrowings  under the bank
         credit facility.





                                      F-13
<PAGE>




             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands

(4)    DEBT (continued)

         The Amended and Restated  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, fixed charges ratio, and capital expenditures.
         In addition,  the Senior Credit  Facility has  restrictions  on certain
         Partnership distributions.  As of December 31, 1996, the Company was in
         compliance  with the  financial  covenants  of the Amended and Restated
         Credit Facility.

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

         In order to convert certain of the interests  payable at variable rates
         under the Amended and Restated  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
         agreement.  Through the year ended  December 31, 1996,  the Company had
         recognized an increase in interest expense of  approximately  $195 as a
         result of these interest rate swap agreements.

(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,  the
         Partnership  entered into deferred interest rate setting  agreements to
         reduce the  Partnership's  interest  rate exposure in  anticipation  of
         issuing the Notes. The cost of such agreements amounting to $1,390 will
         be 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  FrontierVision  Capital  Corporation)  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  Note Indenture (the  "Indenture")  also requires the
         Company  to  maintain  compliance  with  covenants  relating  to  total
         indebtedness.  In addition,  the Indenture has certain  restrictions on
         distributions,  mergers,  asset  sales and  changes  in  control of the
         Company.  As of December 31, 1996,  the Company was in compliance  with
         the financial covenants of the Indenture.

(c)      Subordinated Promissory Note to UVC

         The  subordinated  promissory  note to UVC bears interest at 9% for the
         first  three  years.  At the end of each  subsequent  year,  the annual
         interest  rate   increases  2%  per  year.   Under  the  terms  of  the
         subordinated   promissory   note,  the  Company  may  issue  additional
         subordinated   promissory   notes  rather  than  making  cash  interest
         payments.  In  this  event,  the  subordinated  promissory  note  bears
         interest equal to the annual  interest of the original  promissory note
         plus 2.5% for the first three



                                      F-14
<PAGE>




             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands

(4)    DEBT (continued)

         years and 3% for each of the subsequent  years.  Further,  in the event
         the Company's  leverage ratio exceeds certain  specified  amounts,  the
         interest rate also increases by 2%. Under the terms of the subordinated
         promissory note, the Company can prepay the balance at any time.

The debt of the Company matures as follows:

                Year ended December 31 --
                1997                        $     33
                1998                           3,709
                1999                           9,353
                2000                          13,350
                2001                          17,350
                Thereafter                   354,399
                                            --------
                                            $398,194

(5)      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>
<CAPTION>

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

(6)     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  debt  instruments  is based on the
borrowing rates that approximate existing rates at December 31, 1996; therefore,
there is no material  difference in the fair market value and the carrying value
of such debt instruments.

(7)    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 year ended December 31, 1996 and for the
period from inception (April 17, 1995) to December 31, 1995 was $2,365 and $194,
respectively.




                                      F-15
<PAGE>




             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands

(7)    COMMITMENTS AND CONTINGENCIES (continued)

Estimated  future  noncancelable  lease  payments  under such lease  obligations
subsequent to December 31, 1996 are as follows:

                        Year ended December 31 --
                        1997                    $  480
                        1998                       344
                        1999                       260
                        2000                       170
                        2001                       131
                        Thereafter                 288
                                                ------
                                                $1,673
                                                ======
                                             
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 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  monthly rates no higher than $1.24 per  subscriber  per channel,  the
rates are deemed to be reasonable.

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  provisions of the 1992
Cable Act.  However,  the Company's rates for Regulated  Services are subject to
review  by the  FCC,  if a  complaint  has  been  filed,  or if the  appropriate
franchise  authority  has  certified  the system.  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.




                                      F-16
<PAGE>




             FRONTIERVISION OPERATING PARTNERS, L.P. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                              Amounts in Thousands

(7)    COMMITMENTS AND CONTINGENCIES (continued)

The  Company's  agreements  with  franchise  authorities  require the payment of
annual fees which  approximate 5% 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 period of up to fifteen years.

(8)      SUBSEQUENT EVENTS (unaudited)

On March 11,  1997,  FVP called an  additional  $15,000  of the equity  offering
commitment. As of March 26, 1997 substantially all of this capital call had been
received by FVP.

On December 18, 1996, the Company entered into an asset purchase  agreement with
Bluegrass  Cable  Partners,  Limited  Partnership,   to  acquire  certain  cable
television  assets,  primarily in Northern Kentucky for a cash purchase price of
$9,900.  As of December  31, 1996,  the Company had advanced  $500 as an earnest
money deposit  related to this  transaction.  On March 20, 1997, the acquisition
was consummated.

Subsequent to December 31, 1996,  the Company  entered into letters of intent or
asset purchase agreements to acquire certain cable television systems, primarily
located in Ohio and  Kentucky,  in seven  separate  transactions,  for aggregate
consideration of approximately  $54.8 million.  The transactions are expected to
close by the third quarter of 1997.






                                      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,  1996 and July 26,  1996  (inception)  and the
related  statements of operations,  cash flows and owner's equity 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,  1996 and July 26,  1996  (inception)  and the
results  of its  operations  and its cash  flows  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 12, 1997





                                      F-18
<PAGE>




                       FRONTIERVISION CAPITAL CORPORATION
                                  BALANCE SHEET

<TABLE>
<CAPTION>

                                                                                    ------------------
                                                                                December 31,    July 26,
                                                                                    1996    1996 (inception)
                                                                                    -----        -----
                                ASSETS

<S>                                                                                 <C>          <C>     
Cash                                                                                $ 188           --
                                                                                    -----        -----   
                                                                                            
Receivable from affiliate for issuance of common stock - collected subsequent
     to balance sheet date                                                             --          100
                                                                                    -----        -----
            Total assets                                                            $ 188          100
                                                                                    =====        =====


                        LIABILITIES AND OWNER'S EQUITY

Payable to FVOP                                                                     $ 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                                                                (12)          --
                                                                                    -----        -----
          Total owner's equity                                                         88          100
                                                                                    -----        -----
          Total liabilities and owner's equity                                      $ 188          100
                                                                                    =====        =====

</TABLE>





















                 See accompanying note to financial statements.



                                      F-19
<PAGE>




                       FRONTIERVISION CAPITAL CORPORATION
                             STATEMENT OF OPERATIONS



                                        -------------
                                        For the period
                                         from July 26,
                                       1996 (inception)
                                           through
                                         December 31,
                                            1996        
                                          -------- 

Revenue                                      $ --

General and administrative expenses
                                               12
                                             ---- 
   Net loss                                  $(12)
                                             ====

































                 See accompanying note to financial statements.


                                      F-20
<PAGE>



                       FRONTIERVISION CAPITAL CORPORATION
                           STATEMENT OF OWNER'S EQUITY


<TABLE>
<CAPTION>

                                               ----------------------------------------------------
                                               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
                                               =====          =====           =====           =====
</TABLE>








































                 See accompanying note to financial statements.


                                      F-21
<PAGE>



                       FRONTIERVISION CAPITAL CORPORATION
                             STATEMENT OF CASH FLOWS



                                                                   -------------
                                                                  For the period
                                                                   from July 26,
                                                                    1996 through
                                                                    December 31,
                                                                       1996
                                                                          -----
Cash flows from operating activities:
      Net loss                                                            $ (12)
      Decrease in receivable from affiliate                                 100
                                                                          -----
      Net cash flows used in operating activities                            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                                   188
Cash and cash equivalents, at beginning of period                          --
                                                                          -----
Cash and cash equivalents, at end of period                               $ 188
                                                                          =====






























                 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.
FrontierVision  Capital  Corporation  has  nominal  assets and does not have any
material operations.



                                      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.


                                      F-30
<PAGE>




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

(2) COMMITMENTS (continued)

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.

(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                          $    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                                                               $383
                                                                            ====

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

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

(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

(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

(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 and 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

(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

(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

(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

(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 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 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>


                                                                 
                          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 12, 1997, we reported on the consolidated  balance sheets of
FrontierVision  Operating  Partners,  L.P. and subsidiary  (the "Company") as of
December  31,  1996  and  1995,  and  the  related  consolidated  statements  of
operations,  cash flows and  partners'  capital for the year ended  December 31,
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
1996. 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 12, 1997




                                      S-2
<PAGE>




            FRONTIERVISION OPERERATING PARTNERS, L.P. AND SUBSIDIARY
                        VALUATION AND QUALIFYING ACCOUNTS
                              Amounts in Thousands


<TABLE>
<CAPTION>


                                                        --------------------------------------------------------
                                                                      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           $    --            58           (18)            40
    December 31, 1995

Year ended December 31, 1996
                                                         $    40           627          (345)           322



</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, 1997.


FRONTIERVISION OPERATING PARTNERS, L.P.
                    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, 1997
--------------------------- Executive Officer (Principal
James C. Vaughn             Executive Officer)
                            

/s/  JOHN S. KOO            Senior Vice President and Chief     March 27, 1997
--------------------------- Financial Officer (Principal
John S. Koo                 Financial Officer)
                          


/s/  JAMES W. MCHOSE        Vice President and Treasurer         March 27, 1997
--------------------------- (Principal Accounting Officer)
James W. McHose                     


FRONTIERVISION CAPITAL CORP.

/s/  JAMES C. VAUGHN        President and Chief                  March 27, 1997
--------------------------- Executive Officer, Director 
James C. Vaughn             (Principal Executive Officer)        
                                            


/s/  JOHN S. KOO            Senior Vice President and Chief      March 27, 1997
--------------------------- Financial Officer, Director
John S. Koo                 (Principal Financial Officer)                
                                            


/s/  JAMES W. MCHOSE        Vice President and Treasurer         March 27, 1997
--------------------------- (Principal Accounting Officer)
James W. McHose