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                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
                       FOR ANNUAL AND TRANSITION REPORTS
                      PURSUANT TO SECTIONS 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                             ---------------------
 
(Mark One)
 
      /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 1998
 
    / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
 
                 For the transition period from             to
                        Commission File Number 333-20307
                            ------------------------
 
                          POLAND COMMUNICATIONS, INC.
 
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<CAPTION>
<S>                                           <C>
                  NEW YORK                                     06-1070447
      (State or Other Jurisdiction of                       (I.R.S. Employer
       Incorporation or Organization)                     Identification No.)
            ONE COMMERCIAL PLAZA                                 06103
           HARTFORD, CONNECTICUT                               (Zip Code)
  (Address of Principal Executive Offices)
</TABLE>
 
                            ------------------------
 
       Registrant's telephone number, including area code (860) 549-1674
          Securities registered pursuant to Section 12(b) of the Act:
 
TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH REGISTERED
 
               None                                           None
 
          Securities registered pursuant to Section 12(g) of the Act:
                                 Not Applicable
 
    Indicate by check mark (X) whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes /X/    No / /
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
 
    State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the common equity was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of filing. (See definition of affiliate in Rule
405.)
 
                                      Zero
 
The number of shares outstanding of Poland Communications, Inc.'s common stock
as of December 31, 1998 was:
 
                             Common Stock   18,948
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
                                     None.
 
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<PAGE>
                                     PART I
 
    Poland Communications, Inc. ("PCI") is a New York corporation and
wholly-owned subsidiary of @ Entertainment, Inc. ("@ Entertainment"), a Delaware
corporation whose common stock is listed on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") National Market and
traded under the symbol ATEN. References to the "Company" mean PCI and its
subsidiaries.
 
               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
    Certain statements in this Annual Report on Form 10-K constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, that are not historical facts but rather reflect
the Company's current expectations concerning future results and events. Words
such as "believes," "expects," "intends," "plans," "anticipates," "likely,"
"will", "may", "shall", and similar expressions are intended to identify such
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company (or entities in which
the Company has interests), or industry results, to differ materially from
future results, performance or achievements expressed or implied by such
forward-looking statements.
 
    READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS WHICH REFLECT MANAGEMENT'S VIEW ONLY AS OF THE DATE OF THIS ANNUAL
REPORT ON FORM 10-K. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE
THE RESULT OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE
MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS, CONDITIONS OR CIRCUMSTANCES.
 
    The risks, uncertainties and other factors that might cause such differences
include, but are not limited to: (i) general economic conditions in Poland and
in the pay television business in Poland; (ii) changes in regulations the
Company operates under; (iii) uncertainties inherent in new business strategies,
including new product launches and development plans, which the Company has not
used before; (iv) rapid technology changes; (v) changes in, or failure or
inability to comply with government regulations; (vi) the development and
provision of programming for new television and telecommunications technologies;
(vii) the continued strength of competitors in the multichannel video
programming distribution industry and satellite services industry and the growth
of satellite delivered programming; (viii) future financial performance,
including availability, terms and deployment of capital; (ix) the ability of
vendors to deliver required equipment, software and services on schedule at the
budgeted cost; (x) the Company's ability to attract and hold qualified
personnel; (xi) changes in the nature of strategic relationships with joint
ventures; (xii) the overall market acceptance of those products and services,
including acceptance of the pricing of those products and services; (xiii) and
acquisition opportunities.
 
                                 EXCHANGE RATE
 
    In this Annual Report on Form 10-K, references to "U.S. dollars" or "$" are
to U.S. currency, references to "Deutsche-Marks" or "DM" are to German currency,
and references to "zloty" or "PLN" are to Polish currency. The Company has
presented its primary consolidated financial statements in accordance with
generally accepted accounting principles in the U.S. in U.S. dollars. Amounts
originally measured in zloty for all periods presented have been translated into
U.S. dollars.
 
    For your convenience, this Annual Report contains certain zloty amounts not
derived from the consolidated financial statements which have been translated
into U.S. dollars. Readers should not assume that the zloty amounts actually
represent such U.S. dollar amounts or could be, or could have been, converted
into U.S. dollars at the rates indicated or at any other rate. Unless otherwise
stated, such U.S. dollar amounts have been derived by converting from zloty to
U.S. dollars at the rate of PLN 3.504 = $1.00, the exchange rate quoted by the
National Bank of Poland at noon on December 31, 1998. This rate may differ from
the actual rates in effect during the periods covered by the financial
information discussed
 
                                       1
<PAGE>
herein. The Federal Reserve Bank of New York does not certify for customs
purposes a noon buying rate for zloty.
 
ITEM 1. BUSINESS
 
GENERAL
 
    The Company operates the largest cable television system in Poland with
approximately 1,592,000 homes passed and approximately 935,300 total subscribers
as of December 31, 1998. The Company's cable subscribers are located in regional
clusters encompassing eight of the ten largest cities in Poland, including those
cities which the Company believes provide the most favorable demographics for
cable television in the country. The Company believes that additional subscriber
growth can be achieved through a combination of increased penetration, new
network expansion and acquisitions. As at December 31, 1998 the Company had
invested more than $144 million to construct fiber-optic cable networkS which it
believes are among the most technologically advanced in Poland and are
comparable to modern cable networks in the U. S. The networks constructed by the
Company provide excess channel capacity and are designed to maximize
reliability. It is the Company's policy to upgrade as rapidly as possible
substandard networks that it has acquired.
 
    Over the past three years, the Company has experienced rapid growth in
revenues and subscribers, both through acquisitions and through expansions of
its own cable networks, resulting in an average increase in revenues of 42% and
total cable subscribers of 33% per year.
 
OPERATING STRATEGY
 
    With the fall of Communist rule in 1989, the Company believed that it could
gain significant market advantages by becoming one of the first cable operators
to establish a high-quality cable television system in Poland. The Company
believes that it has achieved its initial goals of rapidly increasing its
coverage areas, establishing its business reputation, and providing a
high-quality signal, wide channel offerings and quality of service comparable to
that provided by world-class cable operators.
 
    Having established itself as the leading cable television service provider
in Poland, the Company's current strategic objective is to increase cash flow
and enhance the value of its cable networks. To accomplish this objective, the
Company's business and operating strategy in the cable television business is
to:
 
    PROVIDE COMPELLING PROGRAMMING.  The Company currently provides the Wizja TV
programming package, which currently consists of 19 television channels of
primarily Polish-language programming, to its cable subscribers. The Company
believes that this selection of high-quality Polish-language programming will
provide it with a significant competitive advantage in increasing its cable
subscriber base.
 
    INCREASE PRICING AND MAXIMIZE REVENUE PER CABLE SUBSCRIBER.  The Company has
implemented a pricing strategy designed to increase revenue per subscriber and
to achieve real profit margin increases in U.S. dollar terms. In connection with
this pricing strategy, the Company intends to continue to introduce new program
offerings and to improve its services. As a result, the Company has experienced
and expects that it will continue to experience subscriber termination rates
above historical levels resulting from the implementation of its pricing
strategy. The Company generally receives a premium for its cable television
services over the prices charged by its competitors, particularly poor-quality
small operators. Despite its generally higher price levels, the Company has
achieved significant growth in penetration and market share while maintaining
relatively low annual cable television subscriber termination rates (also known
in the cable television industry as "churn"). The Company believes its ability
to successfully command higher prices reflects its higher levels of customer
service, broader selection of quality programming and the greater technical
quality of its cable television networks.
 
                                       2
<PAGE>
    EXPAND REGIONAL CLUSTERS.  The Company's strategy is to continue to expand
the coverage areas of its regional clusters, both through selected building of
its existing networks and acquisitions. The Company intends to expand primarily
in areas where it can fill-in existing regional clusters and into cities and
towns adjacent to its regional clusters through the continued building of its
existing networks. The Company also plans to expand its regional clusters
through the continued acquisition of smaller cable television operators. In
addition, in markets where the Company has established operations, it intends to
selectively build its system in parallel to competitors ("overbuild") in an
effort to consolidate the market. By implementing this strategy for expanding
its regional clusters, the Company believes it can limit its per-subscriber
building costs and realize significant synergies from leveraging its existing
infrastructure and asset base, both in terms of personnel and in terms of
capital costs. Because the Company has a management structure and operating
systems in place in each of its regional clusters, it is able to realize
significant cash flow margins from each dollar of revenue generated through the
addition of subscribers to its existing regional clusters.
 
    INCREASE SUBSCRIBER PENETRATION.  The Company believes the most profitable
means of expanding its cable television business is to leverage its investment
in its cable networks by increasing the percentage of homes passed which
subscribe ("subscriber penetration") in its regional clusters. Once a building
with multiple apartment units is passed by the Company's cable television
networks, the Company can add subscribers who generate average annual
subscription revenue of approximately $80 in return for an average capital
investment of approximately $20 per subscriber. The Company plans to increase
subscriber penetration by (A) executing an aggressive sales, marketing and
promotional strategy using the Company's highly-trained and commissioned Polish
sales force, with particular emphasis on Company-wide quarterly remarketing
campaigns, (B) continuing to enhance the Company's program offerings,
particularly through expanding Wizja TV's channel line-up, and (C) applying
prompt, courteous and professional customer service standards.
 
    REALIZE ADDITIONAL OPERATING EFFICIENCIES.  The Company aggressively seeks
to realize operating efficiencies in both its acquired as well as its existing
cable networks by, among other things, eliminating redundant satellite signal
receivers, combining customer service offices and reducing administrative
personnel. The Company generally has been able to eliminate personnel in its
acquired cable television systems by managing the systems with experienced
personnel from one of its existing regional clusters. The Company can also
generally reduce the technical personnel necessary to operate acquired systems
after connecting them to the Company's existing satellite signal receivers or,
if required, rebuilding them to the Company's standards. The Company also
intends to reduce the number of employees through consolidation of its existing
clusters of regional operations from eight to four, and through centralizing its
subscriber management and customer support services in the call center. The call
center is operational for cable customers in the Katowice regional cluster and
is expected to be operational for all cable customers by the end of 1999. The
call center will also be used by @ Entertainment for servicing its D-DTH
customers. The call center is located in Katowice, a low cost area of Poland,
and will consolidate the functions of the Company's existing regional customer
service centers. Moreover, the Company believes the centralization of service
functions will improve the general level of customer service available to
subscribers. The Company is also in the process of installing an integrated
management information system for both its billing and accounting systems, which
is designed to further improve employee productivity and customer service. The
Company believes that its size and market share give it a competitive advantage
by creating economies of scale, including minimized building and reduced
operating costs per subscriber and volume price discounts for programming and
construction expenditures. The Company's size also provides it with the
operating leverage to spread certain expenses (such as promotional materials,
advertisements, local programming and sales materials) over its large number of
subscribers. These economies of scale should continue to improve as its
subscriber base increases.
 
                                       3
<PAGE>
REGIONAL CLUSTERS
 
    The Company has established eight regional clusters for its cable television
business encompassing eight of the ten largest cities in Poland, which the
Company believes, are among those with the strongest economies and most
favorable demographics for cable television in the country. The following table
illustrates certain operating data of each of the Company's existing regional
clusters. The Company is planning to consolidate its existing eight clusters
down to four.
 
              OVERVIEW OF THE COMPANY'S EXISTING CABLE SYSTEMS (1)
 
<TABLE>
<CAPTION>
                                                                                                                 AVERAGE
                                                                                                                 MONTHLY
                                                                                                              SUBSCRIPTION
                                                                                                                 REVENUE
                                                                                                                   PER
                                                                                                                  BASIC
                                                TOTAL       HOMES        TOTAL        BASIC         BASIC      SUBSCRIBER
REGION                                          HOMES       PASSED    SUBSCRIBERS  SUBSCRIION(2)  PENETRAT         (2)
--------------------------------------------  ----------  ----------  -----------  ------------  -----------  -------------
<S>                                           <C>         <C>         <C>          <C>           <C>          <C>
Gdansk......................................     280,000     239,856     154,315       121,846        50.80%    $    7.80
Szczecin....................................     160,000      76,050      64,714        48,639        63.96%         5.90
Katowice....................................   1,200,000     498,903     252,954       204,249        40.94%         6.61
Krakow......................................     400,000     144,114      71,866        62,179        43.15%         7.41
Warsaw......................................     800,000     259,050     127,485       103,536        39.97%         7.63
Lublin......................................     120,000      90,244      74,160        38,536        42.70%         7.25
Wroclaw.....................................     624,000     222,300     145,698       119,239        53.64%         5.05
Bydgoszcz...................................     134,000      61,464      44,148        40,155        65.33%         4.90
                                              ----------  ----------  -----------  ------------       -----        ------
Total.......................................   3,718,000   1,591,981     935,340       738,379        46.38%         6.68(3)
                                              ----------  ----------  -----------  ------------  -----------  -------------
                                              ----------  ----------  -----------  ------------  -----------  -------------
</TABLE>
 
------------------------
 
(1) All data at, or for the year ended December 31, 1998.
 
(2) Includes "basic" and "intermediate" packages. For a description of these
    packages, see the section entitled "Service and Fees" that follows.
 
(3) Represents a weighted average for the Company based on the total number of
    basic subscribers at December 31, 1998.
 
ACQUISITIONS
 
    The Company regularly evaluates potential acquisitions of cable networks.
The Company currently has no definitive agreement with respect to any material
acquisition, although from time to time it has discussions with other companies
and assesses opportunities on an ongoing basis. The Company may be required to
apply for the approval of the Polish Anti-Monopoly Office with respect to any
acquisitions it wishes to consummate.
 
SERVICES AND FEES
 
    The Company charges cable television subscribers an initial installation fee
and fixed monthly fees for their choice of service packages and for other
services such as premium channels and rental of remote control devices. The
Company currently offers three packages of cable television service: a "basic
package" throughout the Company's cable television systems, and "broadcast" and
"intermediate" packages in selected areas of Poland. On December 31, 1998,
approximately 74.7% of the Company's subscribers received the "basic package",
approximately 4.3% received the "intermediate package" and approximately 21.0%
received the "broadcast package" of service.
 
                                       4
<PAGE>
    BASIC PACKAGE.  The "basic package" includes approximately 30 to 70
channels. This package generally includes all Polish terrestrial broadcast
channels, most major European satellite programming legally available in Poland,
regional and local programming and, on most of its cable networks, Wizja TV,
including @ Entertainment's proprietary Polish-language channel, Atomic TV. The
Company's "basic package" offerings vary by location. With the launch of Wizja
TV across the Company's cable networks on June 5, 1998, all of the Wizja TV
programming, other than Wizja 1 and the HBO Poland Service, a Polish-language
premium movie channel owned in part by Home Box Office, became part of the
"basic package."
 
    INTERMEDIATE PACKAGE.  The "intermediate package" includes approximately 17
to 24 channels. This package is offered for monthly fees equal to approximately
one-half of the amount charged for the "basic package." The "intermediate
package" is designed to compete with small cable operators on a basis of price,
using a limited programming offering. The Company's "intermediate package"
offerings vary by location.
 
    BROADCAST PACKAGE.  The "broadcast package" includes 6 to 12 broadcast
channels with clear reception for monthly fees which are substantially less than
the amounts charged for the "intermediate package."
 
    PREMIUM AND OTHER SERVICES.  For an additional monthly charge, certain of
the Company's cable networks currently offer three premium television
services--Wizja 1, HBO Poland service (a Polish-language premium movie channel
owned in part by Home Box Office) and Canal+ Polska--to customers on a monthly
basis. For 1998, the Company experienced churn in premium services with
penetration falling by 8,464 subscribers or 18.8% from 1997. The Company is
planning to encrypt the HBO service on cable and install analog decoders for all
premium channel subscribers during 1999. The Company plans to create additional
premium channels that will also be offered to cable customers for an additional
charge.
 
    Other optional services include additional outlets and stereo service, which
enables a subscriber to receive 12 or more radio channels in stereo. Cable
television subscribers who require the use of a tuner to receive certain of the
Company's cable services are charged an additional fee of approximately $1.10
per month. Installation fees vary according to the type of connection required
by a cable television subscriber. The standard initial installation fee is
currently approximately $21 for building with multiple apartments and
approximately $42 for single family dwellings, but such fees may be subject to
reductions as a result of promotional campaigns.
 
    PRICING STRATEGY.  Prior to December 1996, the Company's cable television
pricing strategy was designed to keep its profit margin relatively constant in
U.S. dollar terms in more mature systems and to increase rates in more recently
acquired or rebuilt systems. The Company has historically experienced annual
churn rates of less than 10%, and has been able to pass on the effects of
inflation through price increases. In 1997, the churn rate increased to 12.2%,
though it would have been 9.8% had the Company not disconnected approximately
17,000 non-paying subscribers in one of its acquired and rebuilt networks. For
the year ended December 31, 1998, the Company's churn rate was 15.25% due
primarily to the implementation of its current pricing strategy. This pricing
strategy commenced in January 1997 and is designed to increase revenue per
subscriber and to achieve real profit margin increases in U.S. dollar terms. The
Company expects that it will continue to experience churn rates above historical
levels during the implementation of its current pricing strategy. The Company
expects to offer promotional incentives in certain areas of the country from
time to time in connection with its marketing.
 
    Cable television subscribers are billed monthly in advance and, as is
customary in Poland, most of the Company's customers pay their bills through
their local post office or bank. The Company has strict enforcement policies to
encourage timely payment. Such policies include notices of late payment, visits
from service personnel, and ultimately, disconnection for nonpaying customers 90
days after a bill becomes due. The Company's system architecture in most
networks enables it to promptly shut off service to nonpaying customers and is
designed to reduce non-authorized use of its cable systems. The Company
 
                                       5
<PAGE>
does not consider bad debt to be material to its operations. The Company's bad
debt expense has historically averaged approximately 1.3% of revenue.
 
SALES AND MARKETING
 
    The Company's sales and marketing process is divided into four parts:
 
    - operating area development;
 
    - new market sales;
 
    - remarketing sales and
 
    - customer service.
 
    OPERATING AREA DEVELOPMENT.  The operating area development process in
Poland is very different from that in Western cable television markets because a
Polish cable operator's geographic build is dependent on reaching agreements
with individual cooperative authorities rather than upon the issuance of an
operating area development permit for a region by the government. The
cooperative authorities make decisions on behalf of the residents, including
decisions as to the carriers of cable television. The Company's operating area
development process begins with targeting a multiple apartment complex, followed
by negotiations with the relevant cooperative authority, and ultimately involves
reaching an agreement with the cooperative authority to allow construction and
installation of the cable television network. The Company's strategy is to
identify those geographic areas and apartment complexes with the most favorable
demographic characteristics, highest population densities and lowest levels of
competition from other cable operators.
 
    NEW MARKET SALES.  After an agreement with a cooperative authority has been
reached and construction of the cable network infrastructure has been completed,
the Company focuses its efforts on direct, door-to-door sales to individual
households. While the Company utilizes advertising in a variety of media
(including television, radio, newspapers, magazines, cooperative and association
publications, billboards, bus shelter posters and taxi placards) to build
general awareness and recognition of the advantages of its cable television
services, direct sales is the primary focus of the Company's marketing efforts.
The distribution of promotional materials (via direct mail, leaflets and door
hangers) begins several days in advance of the arrival of the Company's sales
force. The materials provide for telephone and mail response, but are designed
so that the potential customer expects a direct sales visit. The Company's sales
force consists of native Poles who are trained in professional sales skills,
personal interaction, product knowledge and appearance. All sales persons are
compensated by direct sales commissions and incentive bonuses. Such employees
are hired, trained and managed by Company managers whose incentive compensation
is tied directly to sales results. New market sales tend to be highly seasonal,
with the fourth calendar quarter being the most active sales period.
 
    REMARKETING SALES.  After new areas have been marketed, Company remarketing
efforts focus on attracting new subscribers and selling additional products and
services, such as premium channels and stereo services, to existing subscribers.
Direct door-to-door remarketing sales are enhanced through advertising on the
Company's proprietary channels, bill inserts, door hangers, coupons, prizes and
contests, as well as advertising in other media accessible to the general
public. Company-wide remarketing campaigns are conducted quarterly and seasonal
promotions coincide with holidays and cultural events. Sales people are entitled
to additional incentive commissions for remarketing sales.
 
    CUSTOMER SERVICE.  By implementing a Western-style customer care program
that includes such features as courteous customer service representatives,
prompt responses to service calls and overall reliability, the Company has
introduced a quality of service generally not found in Polish consumer markets.
The Company generally guarantees service within 24 hours of a subscriber
request. @ Entertainment has established a customer service facility within the
call center for both the cable and digital satellite
 
                                       6
<PAGE>
direct-to-home ("D-DTH") businesses. The call center provides telemarketing and
sales and service support and includes specialized billing software with on-line
real time access to customer accounts, designed to provide better access to
customer information and to improve customer service. The call center is
operational for cable customers in the Katowice regional cluster and D-DTH
customers and is expected to be operational for all cable customers by the end
of 1999.
 
    The Company believes that its customer care program gives it a distinct
competitive advantage over other cable providers in the Polish market, has
contributed to the Company's low churn rate and has been a primary motivation
for consumers to select the Company as their cable television provider when
provided with a choice.
 
TECHNOLOGY AND INFRASTRUCTURE
 
    The Company believes the fiber-optic cable television networks that it has
constructed, which serve approximately 67% of its subscribers, are among the
most technologically advanced in Poland and are comparable to modern cable
television networks in the U.S. All of the Company's networks that have been
constructed by the Company have bandwidths of at least 550 MHz, with one network
as high as 1 GHz. New portions of the networks which are currently being
constructed are being designed to have minimum bandwidths of 860 MHz. The
Company's goal is to upgrade any portion of its cable television networks that
have bandwidths below 550 MHz (generally acquired from other entities) to at
least 860MHz in an effort to reduce the number of satellite receivers and parts
inventory required in the networks. The Company uses fiber-optic and coaxial
cables, electronic components and connectors supplied by leading Western firms
in its cable television networks.
 
    The Company's cable television networks, in most cases, use a combination of
fiber optic and coaxial cables in groups of 2,000 homes. The Company uses a
"switched-star" configuration for its cable television networks by installing a
discreet drop cable which runs from a secure lockbox to each home (as opposed to
a loop system which feeds multiple homes from a single cable), allowing the
Company to more efficiently disconnect non-paying customers, add or remove
service options to individual homes and audit its systems to detect theft of
signal. Where required, high-quality tuners are used in cable television
subscriber homes. The Company intends to introduce set-top decoders for all
premium channel subscribers during 1999, allowing premium channel signals to be
encrypted for increased security.
 
    The Company's cable television networks were constructed with the
flexibility and capacity to be cost-effectively reconfigured. These networks
could be reconfigured to offer an array of interactive and integrated
entertainment, telecommunications and information services, including combined
telephone and cable television services and digital data transmission, if the
Company decides to pursue such ancillary sources of revenue in the future. The
Company's systems provide excess channel capacity and are designed to maximize
reliability. Most of the Company's cable networks currently have the ability to
carry 40 to 60 television channels. The Company operates its systems at
approximately 49% to 69% of channel/ bandwidth capacity. Two-way capability can
be added to most of the Company's networks at limited cost to provide
addressable and interactive services in the future. The cable television
networks constructed by the Company meet or exceed the technical standards
established by Polish regulatory authorities, and the Company's policy is to
upgrade as rapidly as possible substandard cable television networks obtained in
acquisitions. The Company is considering teaming arrangements with certain
Western telecommunication companies in order to create one or more consortia to
bid on regional telephone licenses, utilizing excess capacity from the Company's
cable networks.
 
    The Company has been able to avoid constructing its own underground conduits
in certain areas by entering into a series of agreements with regional and local
branches of the Polish national telephone company (known in the Polish
telecommunications industry as "TPSA") which permit the Company to use TPSA's
conduit infrastructure for an indefinite period of time or for fixed periods up
to 20 years. The Company also has agreements to undertake joint construction
with TPSA and other utilities for new
 
                                       7
<PAGE>
conduits in certain areas. These agreements represent a major advantage to the
Company since they permit the Company to minimize the costly and time-consuming
process of building new conduit infrastructure where TPSA conduit infrastructure
exists and provide for joint construction with TPSA and other utilities of
conduit infrastructure where none currently exists. At December 31, 1998,
approximately 56.5% of the Company's cable television plant had been constructed
utilizing pre-existing conduits of TPSA. A substantial portion of the Company's
contracts with TPSA permit termination by TPSA without penalty at any time
either immediately upon the occurrence of certain conditions or upon provision
of three to six months' notice without cause.
 
    Generally speaking, TPSA may terminate a conduit agreement immediately (and
without penalty) if:
 
    - The Company does not have a valid permit from the Polish State Agency of
      Radio Communications authorizing the construction and operation of a cable
      television network in a specified geographic area covering the subscribers
      to which the conduit delivers the signal;
 
    - the Company's cable network serviced by the conduit does not meet the
      technical specifications required by the Polish Communications Act of
      1990;
 
    - the Company does not have a contract with the cooperative authority
      allowing for the installation of the cable network; or
 
    - the Company does not pay the rent required under the conduit agreement.
 
    As of December 31, 1998, TPSA was legally entitled to terminate conduit
agreements covering approximately 74,000 or 8% of the Company's subscribers.
 
    The Company estimates that at the end of December 1998 it had over 4,378
kilometers of cable television plant constructed and that the fiber-optic
backbone of its networks was substantially complete. The Company expects that
its future capital expenditures for the cable business will consist primarily of
capital needed for the incremental addition of new buildings with multiple
apartment units and cable television subscribers to its existing networks for
building or rebuilding associated with the acquisition of new cable television
systems, and for other capital costs in connection with such acquisitions. From
its existing infrastructure base, the Company's incremental build cost to add an
adjacent apartment building or additional subscribers in buildings with multiple
apartments to existing networks averages approximately $200 per subscriber
(subscribers in apartment buildings represent more than 96% of the Company's
total subscribers). The Company believes that several primary factors contribute
to its favorable cost structure. The significant density of homes per kilometer
of cable plant in the Company's core markets and the Company's conduit
agreements substantially reduce its build costs. Moreover, the Company believes
that the size of its construction program allows it to negotiate attractive
construction labor contracts and discounts on materials.
 
COMPETITION
 
    The multi-channel pay television industry in Poland has been, and is
expected to remain, highly competitive. The Company competes with other cable
television operators as well as with companies employing numerous other methods
of delivering television signals to subscribers. The extent to which the
Company's multi-channel pay television services are competitive with alternative
delivery systems depends, in part, upon the Company's ability to provide a
greater variety of Polish-language programming at a reasonable price than the
programming and prices available through alternative delivery systems.
 
    The Company believes that competition in the cable television industry is
primarily based upon price, program offerings, customer service, and the quality
and reliability of cable networks. Operators of small cable networks, which are
active throughout Poland, pose a competitive threat to the Company because they
often incur lower capital expenditures and operating costs and therefore have
the ability to charge lower fees to subscribers than the Company. While these
operators often do not meet the technical
 
                                       8
<PAGE>
standards for cable systems under Polish law, enforcement of regulations
governing technical standards has historically been poor. Regardless of the
enforcement of these laws and regulations, the Company expects that operators of
small cable networks will continue to remain a competitive force in Poland.
 
    In addition, certain of the Company's competitors or their affiliates have
greater experience in the cable television industry and have significantly
greater resources (including financial resources and access to international
programming sources) than the Company. The largest competitors of the Company in
Poland include. Bresnan Communications, which owns at least three cable systems
(including Aster City Cable Sp. z o.o.) and Multimedia Polska S.A., a Polish
entity. In addition, the Company understands that a number of cable operators in
Poland (led by Bresnan Communications) have formed, or are in the process of
forming, a consortium for the joint creation and production of Polish-language
programming.
 
    The Company's cable television business also competes with companies
employing other methods of delivering television signals to subscribers, such as
terrestrial broadcast television signals and analog direct-to-home ("A-DTH")
television services, digital direct-to-home ("D-DTH") services (including @
Entertainment's D-DTH service) and multi-channel multi-point distribution
systems ("MMDS").
 
    Pay television services also face competition from a variety of other
sources of news, information and entertainment such as newspapers, cinemas, live
sporting events, interactive computer programs and home video products such as
video cassette recorders. The extent of this type of competition depends upon,
among other things, the price, variety and quality of programming offered by pay
television services and the popularity of television itself.
 
TRADEMARKS
 
    The Company, either itself or through its subsidiaries, has filed or is in
the process of filing for registration of its various trademarks. The PTK logo
was registered for use in connection with television and programming services in
July 1997. Trademark applications are pending in Poland for other variations of
PTK trademarks.
 
EMPLOYEES
 
    At December 31, 1998, the Company had approximately 950 permanent full-time
employees and approximately 45 part-time employees. In addition, as of that date
the Company employed approximately 68 salesmen who received both commissions and
a nominal salary, and from time to time the Company employs additional salesmen
on an as needed, commission only basis. None of the Company's employees are
unionized. The Company believes that its relations with its employees are good.
 
                                       9
<PAGE>
                                   REGULATION
 
    GENERAL
 
    The operation of cable television systems in Poland is regulated under the
Polish Communications Act of 1990 (the "Communications Act") and the Polish
Radio and Television Act of 1992 (the "Television Act"). These are administered
by:
 
    - The Polish Minister of Communications;
 
    - The Polish State Agency of Radio Communications ("PAR");
 
    - The Polish National Radio and Television Council (the "Council"); and
 
    Cable television operators in Poland are required to obtain permits from PAR
to install and operate cable television systems and must register certain
programming that they transmit over their networks with the Council.
 
    In contrast to cable television regulatory schemes in the U.S. and in
certain other Western nations, neither the Minister of Communications nor PAR
currently has the authority to regulate the rates charged by operators of cable
television. However, excessive rates could be challenged by the Polish
Anti-Monopoly Office should they be deemed to constitute monopolistic or other
anti-competitive practices. Cable television operators in Poland also are
subject to the Law on Copyright and Neighboring Rights of 1994 (the "Copyright
Act") which provides intellectual property rights protection to authors and
producers of programming. Under the terms of the Television Act, broadcasters in
Poland are regulated by, and must obtain a broadcasting license from the
Council.
 
COMMUNICATIONS ACT
 
    PERMITS.  The Communications Act and the required permits issued by PAR set
forth the terms and conditions for providing cable television services,
including:
 
    - the terms of the permits;
 
    - the area covered by the permits;
 
    - technological requirements for cable television networks; and
 
    - restrictions on ownership of cable television operators.
 
    If a cable operator breaches the terms of its permits or the provisions of
the Communications Act, or if such operator fails to acquire permits covering
areas serviced by its networks, PAR can impose penalties on such operator,
including:
 
    - fines;
 
    - the revocation of all permits covering the cable networks where such
      breach occurred; or
 
    - the forfeiture of the cable operator's cable networks.
 
    In addition, the Communications Act provides that PAR may not grant a new
permit to, or renew an expiring permit held by, any applicant that has had, or
that is controlled by an entity that has had, a permit revoked within the
previous five years.
 
    FOREIGN OWNERSHIP RESTRICTIONS.  The Communications Act and applicable
Polish regulatory restrictions provide that permits may only be issued to and
held by Polish citizens, or companies in which foreign persons hold no more than
49% of the share capital, ownership interests and voting rights. In addition, a
majority of the management and supervisory board of any cable television
operator holding permits must be comprised of Polish citizens residing in
Poland. These restrictions do not apply to any permits issued prior to July 7,
1995.
 
                                       10
<PAGE>
    THE COMPANY'S PERMITS AND NEW CORPORATE ORGANIZATIONAL STRUCTURE.  Prior to
the creation of PAR and the permit system, one of the Company's subsidiaries,
Polska Telewizja Kablowa S.A. ("PTK S.A."), received a license to operate cable
television systems in Warsaw, Krakow and the areas surrounding these cities
under the Polish Foreign Commercial Activity Act.
 
    To comply with the foreign ownership requirements discussed above, the
Company created a new entity, Polska Telewizja Kablowa Operator Sp. z o.o. ("PTK
Operator"), which does and will and operate the Company's new or existing cable
networks whose permits are subject to the foreign ownership restrictions
discussed above. PCI will hold a 49% ownership stake in PTK Operator while the
remaining 51% will be held by a Polish entity. PCI will, in turn, hold 49% of
the Polish entity, and the remaining 51% interest in the Polish entity is
expected to be owned in part by a Polish financial company. The Company believes
that this ownership and operating structure complies with the requirements of
Polish law. PAR has granted several permits to the Company and its competitors,
based on the lease of assets, for networks using an ownership and operating
structure substantially similar to the one described above.
 
    Specifically, subsidiaries of the Company have received approximately 106
permits from PAR, covering approximately 674,200 of the Company's approximately
738,400 basic and intermediate subscribers at December 31, 1998, including
approximately 11,701 subscribers for whom the Company's permits are deemed
extended under Polish law pending PAR's response to the Company's permit renewal
applications. However, certain subsidiaries of the Company do not have valid
permits covering certain of the areas in which they operate cable networks. Of
the approximately 64,200 basic and intermediate subscribers at December 31, 1998
located in areas for which subsidiaries of the Company do not currently have
valid permits, approximately 78% are located in areas serviced by recently
acquired or constructed cable networks for which permit applications cannot be
made until all permit requirements are satisfied (including obtaining agreements
with cooperative authorities and the upgrade of the acquired network to meet
technical standards where necessary and satisfying foreign ownership
limitations), and approximately 22% are located in areas serviced by networks
for which subsidiaries of the Company have permit applications pending. These
subsidiaries of the Company have 9 permit applications pending. There can be no
assurance that PAR will issue any or all of the permits for which such
subsidiaries have applied.
 
    The Company may be subject to penalties if PAR or other Polish regulatory
authorities determine that all or part of the Company's ownership and operating
structure violates Polish regulatory restrictions on foreign ownership. The
Company would also be subject to penalties if PAR chooses to take action against
it for operating cable television networks in areas not covered by valid
permits.
 
    Any such actions by PAR or other Polish regulatory authorities would have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
TELEVISION ACT
 
    THE POLISH NATIONAL RADIO AND TELEVISION COUNCIL.  The Council, an
independent agency of the Polish government, was created under the Television
Act to regulate broadcasting in Poland. The Council has regulatory authority
over both the programming that cable television operators transmit over their
networks and the broadcasting operations of broadcasters.
 
    REGISTRATION OF PROGRAMMING.  Under the Television Act, cable television
operators must register each channel and the programming which will be aired on
that channel with the Chairman of the Council prior to transmission. In general,
the Chairman of the Council will refuse registration of programming if:
 
    - the applicant is not legally entitled to use the cable network over which
      the programming will be distributed (I.E., does not have a PAR permit
      covering the network);
 
    - the broadcasting of the programming in Poland would violate Polish law,
      including provisions of the Television Act governing sponsorship,
      advertising and minimum Polish and European content requirements for
      programming broadcast by Polish broadcasters; or
 
                                       11
<PAGE>
    - the transmission of the programming over the cable network would violate
      the Television Act or other provisions of applicable Polish law.
 
    The Company's subsidiaries have registered most of the programming that they
transmit on their cable networks, except programming transmitted on networks for
which they do not have permits. The Chairman of the Council may revoke the
registration of any of the Company's programming, or may not register all
additional programming that the Company desires to transmit over the Company's
networks. In addition, the Council may take action regarding unregistered
programming that the Company transmits over cable networks for which the Company
does not yet have PAR permits. Such actions could include the levying of
monetary fines against the Company, and the seizure of equipment involved in
transmitting such unregistered programming as well as criminal sanctions against
the Company's management. These actions could have a material adverse effect on
the Company's business, financial condition and results of operations.
 
    RESTRICTIONS ON FOREIGN OWNERSHIP OF POLISH BROADCASTERS.  The Television
Act provides that programming may be broadcast in Poland only by Polish entities
in which foreign persons hold no more than 33% of the share capital, ownership
interest and voting rights. In addition, the Television Act and applicable
Polish regulatory restrictions provide that the majority of the management and
supervisory boards of any broadcaster company holding a broadcasting license
must be comprised of Polish citizens residing in Poland. Companies that engage
in broadcasting in Poland are required to obtain a broadcasting license from the
Chairman of the Council under the Television Act. The Council may revoke a
broadcasting license for, among other things:
 
    - violations of the Television Act;
 
    - violations of the terms of the broadcasting license; or
 
    - violations of restrictions on foreign ownership of broadcasters.
 
    If the Polish regulatory authorities were to conclude that the Company's
ownership or distribution structure is not to in compliance with Poland's
regulatory restrictions on foreign ownership, the Company could be forced to
incur significant costs in order to bring its ownership structure and
distribution system into compliance with the applicable regulations and the
Company may be forced to dispose of its ownership interests in various entities.
These regulatory restrictions may materially adversely affect the Company's
ability to enter into relationships with other entities that produce, broadcast
and distribute programming in Poland, which in turn would have a material
adverse effect on the Company's business, results of operations and financial
condition.
 
    REQUIREMENTS CONCERNING PROGRAMS BROADCAST FROM OUTSIDE OF POLAND AND THEIR
POSSIBLE IMPACT ON THE COMPANY. The Television Act does not include regulations
directly applicable to the broadcasting of programs being broadcast from abroad
and received in Poland. Specifically, there are no regulations in force
concerning satellite broadcasting of a program directed to a Polish audience if
the transmission to the satellite for the broadcasting of such program is made
by a foreign broadcaster from outside of Poland. The Company believes that the
Television Act does not apply to such broadcasting and that such activity is not
subject to Polish broadcasting requirements. The Council has not officially
adopted an interpretation of this issue. While there have been no court rulings
on this issue, a subsidiary of Canal+ has filed suit against HBO Polska Sp. z
o.o. and certain Polish cable operators (including subsidiaries of the Company)
alleging violations of the Television Act. See "Item 3. Legal Proceedings."
 
    The Company could become subject to restrictions with respect to its
business in the event that the Polish regulatory authorities were to determine
that an entity which produces or assembles programming entirely in Poland, and
which provides such programming to a third-party for transmission from abroad is
a broadcaster for purposes of the Television Act. The burden of complying with
any such future regulations or any failure to so comply could have a material
adverse effect on the Company's business, results of operations and financial
conditions.
 
                                       12
<PAGE>
COPYRIGHT PROTECTION
 
    PROTECTION OF RIGHTS OF POLISH AUTHORS AND PRODUCERS OF
PROGRAMMING.  Television operators, including cable operators, in Poland are
subject to the provisions of the Polish Copyright Act, which governs the
enforcement of intellectual property rights. Polish copyright law distinguishes
between authors, who are the creators of programming, and producers, who acquire
intellectual property rights in programs created by others. In general, the
holder of a Polish copyright for a program transmitted over the cable networks
of a cable television operator has a right to receive compensation from such
operator or to prevent transmission of the program.
 
    The rights of Polish copyright holders are generally enforced by
organizations for collective copyright administration and protection such as
Zwiazek Autorow i Kompozytorow Scenicznych ("ZAIKS") and Zwiazek Artystow Scen
Polskich ("ZASP"), and can also be enforced by the holders themselves. In
practice, the compensation paid to the holder of a Polish copyright on
programming that is transmitted over a cable television system is usually set by
contract between collective rights organizations such as ZAIKS and ZASP and the
individual cable television operator. Most of the Company's cable subsidiaries
operate under a contract with ZASP and all of its cable subsidiaries operate
under a contract with ZAIKS. In the event that a cable operator transmits
programming in violation of a Polish copyright, either the copyright holder or
the collective rights organization which the copyright holder is a member of may
sue the cable operator for an injunction preventing further violations or an
accounting for profits or damages. In addition, a violation of the Copyright Act
by a cable television operator also constitutes a violation of the
Communications Act and of the operator's permits. See "--Communications Act" for
a discussion of the penalties and consequences associated with violations of the
Communications Act and of a television operator's permits.
 
    PROTECTION OF RIGHTS OF FOREIGN AUTHORS AND PRODUCERS OF
PROGRAMMING.  Foreign authors of programming receive protection under the
Copyright Act for programming that is either:
 
    - originally published in Poland;
 
    - originally published simultaneously in Poland and abroad; or
 
    - originally published in Polish-language form.
 
    In addition, foreign authors of programming receive Polish copyright
protection under the terms of the Berne Convention of 1886 as amended in Paris
in 1971 (the "Berne Convention"), which was adopted by Poland in 1994.
 
    Under the Berne Convention, authors of programming located in other
signatory countries must be extended the same copyright protection over their
programming that Polish authors receive under the Copyright Act. Polish cable
television operators must thus make copyright payments to foreign authors
holding copyrights in programming that is transmitted over the cable networks of
such operators. The Berne Convention, however, does not grant any protection to
foreign producers of programming.
 
    Poland has adopted the Rome Convention, which extends copyright protection
to programs of foreign producers. Poland became bound by its terms on June 13,
1997. The Company currently makes copyright payments to the foreign programmers
requiring these types of payments, such as CNN, Eurosport and the Cartoon
Network.
 
ANTI-MONOPOLY ACT
 
    Competition in Poland is governed by the Anti-Monopoly Act. The
Anti-Monopoly Act established the Anti-Monopoly Office which is responsible for
the detection and regulation of monopolistic and other anti-competitive
practices. The current Polish anti-monopoly laws with respect to the cable and
programming industries are not well established, and the Anti-Monopoly Office
has not articulated comprehensive
 
                                       13
<PAGE>
standards that may be applied in an antitrust review in such industries. In
general, the Anti-Monopoly Act prohibits such anti-competitive arrangements and
practices as:
 
    - monopolistic agreements;
 
    - abuse of dominant market position;
 
    - price-fixing arrangements;
 
    - division of market arrangements; and
 
    - creation of market entry barriers.
 
    If detected, the Anti-Monopoly Office may deem agreements which embody or
employ such practices, as null and void. A finding by the Anti-Monopoly Office
that the Company's past, present or future operations, agreements or strategic
actions constituted violations of the anti-monopoly laws could adversely impact
its business, strategy, financial condition or results of operations.
 
    MARKET DOMINANCE.  Although the Anti-Monopoly Act does not preclude an
enterprise from occupying a dominant market position, any activities by such
enterprise is subject to detailed scrutiny by the Anti-Monopoly Office. Market
dominance is often defined as a company's ability to act independently of
competitors, contractors, and consumers. Companies that have 40% or more of the
market share of the relevant market and do not face significant competition are
usually deemed to have market dominance, and therefore face greater scrutiny
from the Anti-Monopoly Office. The Anti-Monopoly Office has been granted the
power to review a company's past and present activities, including its pricing
policies, for potential anti-competitive behavior.
 
    PRE-NOTIFICATION OF TRANSACTIONS.  The Anti-Monopoly Act requires parties to
certain types of transactions to notify the Anti-Monopoly Office prior to the
consummation of the proposed transaction. Pursuant to the current interpretation
of the Anti-Monopoly Office, transactions between non-Polish parties affecting
market conditions in Poland may also require notification to the Anti-Monopoly
Office. Sanctions for failure to notify the Anti-Monopoly office include the
imposition of fines on parties to the transaction at issue. The Company believes
that it may be required to obtain the Anti-Monopoly Office's approval for future
acquisitions, but the Anti-Monopoly Office may not approve the Company's future
acquisitions and dispositions.
 
    RECENT ANTI-MONOPOLY OFFICE FINDINGS WITH RESPECT TO THE COMPANY AND ITS
SUBSIDIARIES. From time to time, the Company receives inquiries from and is
subject to review by various divisions of the Anti-Monopoly Office. The
Anti-Monopoly Office recently issued a decision that PCI had achieved a dominant
position and abused that dominant position in one of the areas in which it
operates by moving certain satellite channels to a different frequency. A number
of PCI's subscribers, whose television sets are not equipped to receive the new
frequency, received several different channels to replace the channels which had
been moved. The Company appealed both the finding of dominance and the finding
that PCI acted improperly by moving certain channels to the new frequency. The
Anti-Monopoly Court modified the Anti-Monopoly Office's decision by ruling that
PCI had abused its dominant position by moving certain channels to another
frequency without termination of its agreements with subscribers whose
television sets are not equipped to receive the new frequency. The Anti-Monopoly
Court did not impose a fine on the Company or its subsidiaries. The Company
estimates that less than 1% of its subscribers in the area under review have
such television sets and would be affected by the ruling if, in the future, the
Company finds it necessary for technical reasons to move channels to another
frequency. The Company is appealing both the finding of dominance and the
finding that the Company must terminate some of its agreements with certain
subscribers before moving channels to another frequency.
 
    In another market, the Anti-Monopoly Office recently issued a decision that
PCI had achieved a dominant position and abused that dominant position by: (1)
failing to create a uniform system for customer complaints, (2) increasing rates
without providing subscribers a detailed basis for the price
 
                                       14
<PAGE>
increases, and (3) changing the programming line-up without sufficient notice to
subscribers. The Anti-Monopoly Office did not impose a fine in connection with
its decision. The Company is appealing both the finding of dominance and the
finding that it acted improperly in its relations with subscribers.
 
    In another market, the Anti-Monopoly Office recently issued a decision that
PCI had achieved a dominant position and abused that dominant position by
issuing an offer to subscribers for the extended basic package in a certain
form. The Anti-Monopoly Office imposed a fine of 26,700 zloty (approximately
$7,600 at, the December 31, 1998 conversion date). The Company is appealing the
fine, the finding of dominance and the finding that the form of its offer to
subscribers was improper.
 
POLAND'S EU MEMBERSHIP APPLICATION
 
    In 1994 Poland made an official application for membership of the European
Union ("EU"). Negotiations on the terms of Poland's proposed admission to the
commenced in the March 1998. If Poland joins the EU, it would be required to
implement and obey all of the laws and regulations emanating from the European
Commission, including the Television Without Frontiers Directive and EC
competition law in their then current versions.
 
ITEM 2. PROPERTIES
 
    On December 31, 1998, the Company owned equipment used for its cable
television business, including 108 satellite receivers, and approximately 4,378
kilometers of cable plant. The Company has approximately 206 lease agreements
for offices, storage spaces and land adjacent to the buildings. The total area
leased amounts to approximately 26,300 square meters (most of which is land
adjacent to buildings). The areas leased by the Company range from approximately
10 square meters up to more than 1,600 square meters. The agreements are for
specified and unspecified periods of time and those for an unspecified period
may be terminated with relatively short notice periods by either party, usually
three months.
 
    The Company has entered into conduit leases with the TPSA (the Polish
national telephone company) and, in certain cases, with other entities. The
majority of the TPSA leases require the Company to bear the costs of the
maintenance of the cables. The Company may not sublease the conduit or cables or
allow a third party to use the conduits or cables free of charge without TPSA's
consent. The rental charge for the conduit is usually determined on each 100
meters of conduit occupied. The agreements also contain indexation clauses for
rent adjustment purposes based on the change of U.S. dollar exchange rates or on
the increase of real maintenance costs. A substantial portion of the Company's
contracts with TPSA for the use of such conduits permit termination by TPSA
without penalty at any time either immediately upon the occurrence of certain
conditions or upon provision of three to six months' notice without cause. Any
termination by TPSA of such contracts could result in the Company losing its
permits, the termination of agreements with cooperative authorities and
programmers, and an inability to service customers with respect to the areas
where its networks utilize the conduits that were the subject of such TPSA
contracts. For a list of the reasons for which TPSA can terminate a conduit
agreement, the proportion of the Company's cable subscribers serviced by conduit
leases subject to immediate termination and the consequences to the Company of
the loss to those conduit leases, see "Business--Cable Operations--Technology
and Infrastructure."
 
    The Company believes that its existing owned properties, lease agreements
and conduit agreements are adequate for purposes of the Company's cable
television operations, although additional space and conduits will be needed in
the future if the Company consummates further acquisitions of cable television
networks.
 
                                       15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
 
    The Company is involved in litigation from time to time in the ordinary
course of business. In management's opinion, the litigation in which the Company
is currently involved, individually and in the aggregate, is not material to the
Company's business financial condition or results of operations.
 
    Two of the Company's cable television subsidiaries, Telewizja Kablowa
Gosat-Service Sp. z o.o. and PTK, S.A., and four unrelated Polish cable
operators and HBO Polska Sp. z o.o. ("HBO Polska") have been made defendants in
a lawsuit instituted by Polska Korporacja Telewizyjna Sp. z o.o., an indirect
partially-owned subsidiary of Canal + S.A. The lawsuit was filed in the
Provincial Court in Warsaw, XX Economic Division (Sad Wojewodzki w Warszawie,
Wydzial XX Gospodarczy) (the "Court"). The main defendant in the proceedings is
HBO Polska which is accused of broadcasting the HBO television program in Poland
without a license from the Council as required by the Television Act and thereby
undertaking an activity constituting an act of unfair competition. The plaintiff
has asked the Court to order HBO Polska to cease broadcasting of its programming
in Poland until it has received a broadcasting license from the Polish National
Radio and Television Council, and that the defendant cable operators be ordered
(i) to cease carrying the HBO Polska programming on their cable networks in
Poland until HBO Polska has received a broadcasting license from the Polish
National Radio and Television Council, (ii) not to use their current filters for
the purpose of unscrambling the HBO Polska programming, and (iii) in the future,
to use effective encoding systems and systems of controlled access to the HBO
Polska programming. The Company does not believe that the lawsuit will have a
material adverse effect on its business operations.
 
    For a discussion of certain Anti-Monopoly Office's findings relating to the
Company, see "Regulation--Anti-Monopoly Act."
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
NONE.
 
                                       16
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
DESCRIPTION OF CAPITAL STOCK
 
    Set forth below is certain information concerning the Company's capital
stock and a brief summary of the material provisions of the Company's capital
stock, Certificate of Incorporation and By-Laws. This description does not
purport to be complete and is qualified in its entirety by reference to the
Company's Certificate of Incorporation and By-Laws.
 
GENERAL
 
    At March 18, 1999, the Company has authorized stock of 33,000 shares, of
which (i) 27,000 shares are common stock, par value $0.01 per share ("Common
Stock"), (ii) 4,000 shares are Series A Preferred Stock, par value of $1.00 per
share ("Series A Preferred Stock"), and (iii) 2,000 shares are Series C
Preferred Stock, par value of $0.01 per share ("Series C Preferred Stock").
 
    At March 18, 1999 there were (i) 18,948 shares of Common Stock, (ii) 4,000
shares of Series A Preferred Stock, and (iii) 2,000 shares of Series C Preferred
Stock issued, outstanding and fully paid.
 
COMMON STOCK
 
    DIVIDENDS.  Holders of Common Stock are entitled to dividends when, as and
if declared by the Board of Directors.
 
    VOTING RIGHTS.  Holders of Common Stock are entitled to one vote per share
on all matters submitted to the shareholders of the Company. Except as otherwise
required by law, the shares of Series B Preferred Stock are entitled to vote on
an equal basis together with the shares of Common Stock at any annual or special
meeting of the stockholders of the Company, or may act by written consent in the
same manner as the holders of Common Stock.
 
    Under New York law, the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is required to approve, among other things, a
change in the designations, preferences or limitations of the shares of Common
Stock.
 
    LIQUIDATION RIGHTS.  Upon liquidation, dissolution or winding-up of the
Company, the holders of Common Stock are entitled to share ratably all assets
available for distribution after payment in full of, or provision for the
payment in full of, debts and other liabilities of the Company and payment of
distributions to preferred shareholders.
 
SERIES A PREFERRED STOCK
 
    DIVIDENDS.  The holders of Series A Preferred Stock are not entitled to
receive dividends.
 
    VOTING RIGHTS.  The holders of Series A Preferred Stock are not entitled to
vote on any matters submitted to the shareholders of the Company, except as
otherwise required by applicable law.
 
    REDEMPTION.  The Company is required on October 31, 2004 (the "Redemption
Date"), to redeem the Series A Preferred Stock. At the option of the Company,
the Series A Preferred Stock may be redeemed at any prior time, in whole or in
part. The redemption price per share of Series A Preferred Stock is $10,000. Any
shares of Series A Preferred Stock that have at any time been redeemed or
repurchased by the Company will, after such redemption or repurchase, be
cancelled by the Company and will not be available for reissue.
 
                                       17
<PAGE>
    LIQUIDATION.  Upon liquidation, dissolution or winding up of the Company,
after payment in full of, or provision for the payment of, the debts and other
liabilities of the Company, the remaining assets available for distribution to
shareholders will be distributed first to the holders of the Series A Preferred
Stock, to the extent available, in an amount equal to $10,000 per share, but if
the funds available therefor are insufficient, then to the holders of Series A
Preferred Stock on a PRO RATA basis in accordance with the number of shares of
Series A Preferred Stock held by each holder.
 
SERIES B PREFERRED STOCK
 
    Prior to August 6, 1998, @Entertainment held all of the issued and
outstanding shares of the Company's Series B Preferred Stock. On August 6, 1998,
@Entertainment consented to the cancellation of all of the issued and
outstanding shares of the Company's Series B Preferred Stock. The accreted value
of these shares was reclassified as paid-in capital. No shares of the Company's
Series B Preferred Stock are authorized or available for reissuance.
 
SERIES C PREFERRED STOCK
 
    DIVIDENDS.  The holders of Series C Preferred Stock are not entitled to
receive dividends.
 
    VOTING RIGHTS.  The holders of Series C Preferred Stock are not entitled to
vote on any matters submitted to the shareholders of the Company, except as
otherwise required by applicable law.
 
    REDEMPTION.  On the Redemption Date, the Company is required to redeem the
Series C Preferred Stock. At the option of the Company, the Series C Preferred
Stock may be redeemed at any time, in whole or in part. The redemption price per
share of Series C Preferred Stock is $10,000. From and after the close of
business on the Redemption Date, unless there has been a default in the payment
of the redemption price, all rights of holders of shares of Series C Preferred
Stock which shares have been redeemed cease and thereafter such shares will not
be deemed to be outstanding for any purposes whatsoever. Any shares of Series C
Preferred Stock that have at any time been redeemed or repurchased by the
Company will, after such redemption or repurchase, be cancelled by the Company
and will not be available for reissuance.
 
    LIQUIDATION.  Upon liquidation, dissolution or winding up of the affairs of
the Company, after payment or provisions for the payment of the debts and other
liabilities of the Company, the assets then available for distribution to the
shareholders will be distributed first to the holders of the Series A Preferred
Stock, to the extent available, in an amount equal to $10,000 per share, second
to the holders of the Series B Preferred Stock, to the extent available, in an
amount equal to $10,000 per share, and third to the holders of the Series C
Preferred Stock, to the extent available, in an amount equal to $10,000 per
share, but if the funds available thereafter are insufficient, then to the
holders of Series C Preferred Stock on a PRO RATA basis in accordance with the
number of shares held by each holder of Series C Preferred Stock.
 
SERIES D PREFERRED STOCK
 
    All of the authorized shares of Series D Preferred Stock were redeemed on
March 29, 1996 and no such shares are available for reissuance.
 
ITEMS REQUIRING SUPERMAJORITY VOTE UNDER THE CERTIFICATE OF INCORPORATION
 
    The following actions require (i) the affirmative vote of at least four
directors, followed by the affirmative vote of the percentage of issued and
outstanding capital stock entitled to vote thereon at a meeting of the
shareholders as required under the New York Business Corporation Law ("NYBCL"),
if such action is required to be submitted to the shareholders under the NYBCL,
or (ii) if any such action is not approved by at least four directors, then any
such action will require the affirmative vote of at least 61% of the total
voting power of the capital stock issued and outstanding and entitled to vote
thereon,
 
                                       18
<PAGE>
provided however that if board approval of such action is required under the
NYBCL, the action will also require the approval of the Board of Directors at a
special meeting of the Board of Directors (and for no purposes other than the
approval of actions taken pursuant to this subsection (ii)) for which two-fifths
of the total number of directors constitutes a quorum:
 
A. A fundamental change in the business of the Company or any subsidiary;
 
B.  The adoption of, and approval of any modification to, the annual budget of
    the Company for each fiscal year;
 
C.  An expenditure, not accounted for in the budget during any fiscal year, in
    excess of $5 million;
 
D. A merger or other business combination or the sale, lease, transfer or other
    disposition of all or any material portion of the assets;
 
E.  Certain encumbrances;
 
F.  Related-party transactions;
 
G. The issuance by the Company of third-party debt which causes the aggregate of
    all third party debt to exceed $25 million;
 
H. Certain issuances of capital stock;
 
I.  The declaration of dividends or other distributions;
 
J.  The repurchase or optional redemption of any capital;
 
K.  The dissolution or liquidation or voluntary winding-up of the Company;
 
L.  Amending the Company's Certificate of Incorporation or By-Laws;
 
M. The giving of certain guarantees or indemnities;
 
N. The election or removal of the Chief Executive Officer or the Chairman of the
    Board;
 
O. Entering into or modifying a material employment contract;
 
P.  A change in the auditors or fiscal year-end of the Company;
 
Q. Settling or resolving tax claims in excess of $250,000;
 
R. Commencement, prosecution or compromise of material litigation or arbitration
    proceedings; and
 
S.  Taking steps to wind-up, dissolve or voluntarily seek the protection of
    bankruptcy laws.
 
                                       19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
 
    Set forth below are selected consolidated financial data of the Company for
each of the years in the five-year period ended December 31, 1998. The selected
consolidated financial data set forth below has been derived from the
consolidated financial statements of the Company and the notes thereto prepared
in conformity with generally accepted accounting principles as applied in the
United States, which have been audited by the Company's independent public
accountants (the "Consolidated Financial Statements"). The selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included herein.
<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                 ---------------------------------------------------------------
<S>                                              <C>         <C>         <C>          <C>          <C>
                                                    1994        1995        1996         1997          1998
                                                 ----------  ----------  -----------  -----------  -------------
 
<CAPTION>
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                              <C>         <C>         <C>          <C>          <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Cable television revenue.......................  $    8,776  $   18,557  $    24,923  $    37,575  $      52,971
Operating expenses:
  Direct operating expenses....................      (2,119)     (5,129)      (7,193)     (11,416)       (34,843)
  Selling, general and administrative
    expenses(1)................................      (2,818)     (4,684)      (9,289)     (28,165)       (19,559)
  Depreciation and amortization................      (3,459)     (5,199)      (9,788)     (16,231)       (21,635)
                                                 ----------  ----------  -----------  -----------  -------------
Operating (loss)/income........................         380       3,545       (1,347)     (18,237)       (23,066)
 
Interest and investment income.................          78         174        1,274        3,176          1,020
Interest expense...............................      (2,327)     (4,373)      (4,687)     (13,281)       (14,320)
Foreign exchange loss, net.....................         (27)        (17)        (761)      (1,107)          (617)
                                                 ----------  ----------  -----------  -----------  -------------
Loss before income taxes, minority interest and
  extraordinary item...........................      (1,896)       (671)      (5,521)     (29,449)       (36,983)
Income tax (expense)/benefit...................        (803)       (600)      (1,273)         975           (210)
Minority interest..............................         316         (18)       1,890       (3,586)            --
                                                 ----------  ----------  -----------  -----------  -------------
  Loss before extraordinary item...............      (2,383)     (1,289)      (4,904)     (32,060)       (37,193)
Extraordinary item--loss on early
  extinguishment of debt(2)....................          --          --       (1,713)          --             --
                                                 ----------  ----------  -----------  -----------  -------------
  Net loss.....................................      (2,383)     (1,289)      (6,617)     (32,060)       (37,193)
Accretion of redeemable preferred stock........          --          --       (2,870)      (4,194)        (4,106)
Preferred stock dividends......................      (1,811)         --       (1,738)          --             --
Excess of carrying value of preferred stock
  over consideration paid......................          --          --        3,549           --             --
                                                 ----------  ----------  -----------  -----------  -------------
Net loss applicable to holders of common
  stock........................................  $   (4,194) $   (1,289) $    (7,676) $   (36,254) $     (41,299)
                                                 ----------  ----------  -----------  -----------  -------------
                                                 ----------  ----------  -----------  -----------  -------------
Basic and diluted net loss per common share....  $  (310.51) $   (95.67) $   (435.72) $ (1,913.34) $   (2,179.60)
                                                 ----------  ----------  -----------  -----------  -------------
                                                 ----------  ----------  -----------  -----------  -------------
</TABLE>
 
                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                                            AS OF DECEMBER 31,
                                                         --------------------------------------------------------
<S>                                                      <C>        <C>        <C>         <C>         <C>
                                                           1994       1995        1996        1997        1998
                                                         ---------  ---------  ----------  ----------  ----------
 
<CAPTION>
                                                                              (IN THOUSANDS)
<S>                                                      <C>        <C>        <C>         <C>         <C>
Consolidated Balance Sheets Data:
  Cash and cash equivalents............................  $   2,493  $   2,343  $   68,483  $   25,750  $    2,574
  Property, plant and equipment, net...................     33,235     52,320      84,833     109,090     136,868
  Total assets.........................................     47,376     68,058     217,537     189,783     193,785
  Total notes payable..................................     35,988     59,405     130,074     130,110     138,441
  Redeemable preferred stock...........................         --         --      34,955      39,149      30,977
  Total stockholders' equity...........................      1,479        190      31,048       4,219     (13,561)
</TABLE>
 
------------------------
 
(1) The year ended December 31, 1997 includes a non-cash compensation expense of
    $9,425,000 relating to the granting of certain management stock options. See
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations" and Note 12 to the Consolidated Financial Statements.
 
(2) See Note 10 to the Consolidated Financial Statements.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
OVERVIEW
 
    The Company's business consists primarily of the operations of its cable
television systems in Poland.
 
    The Company's revenues have been and will continue to be derived primarily
from monthly subscription fees for cable television services and one-time
installation fees for connection to its cable television networks. The Company
charges cable subscribers fixed monthly fees for their choice of service package
and for other services, such as premium channels, tuner rentals and additional
outlets, all of which are included in monthly subscription fees. The Company
currently offers "broadcast", "intermediate" (in limited areas) and basic
packages of cable service. At December 31, 1998, approximately 75% of the
Company's subscribers received its "basic" package. For the year ended December
31, 1998, approximately 89% of the Company's revenue was derived from monthly
subscription fees. Revenue from installation fees is deferred to the extent it
exceeds direct selling costs and amortized to income over the estimated average
period that new subscribers are expected to remain connected to the Company's
cable system.
 
    When the Company began operations in 1990, revenue from installation fees
exceeded revenue from monthly subscription fees because of the significant
number of new installations and the high amount of the installation fees
relative to the small existing subscriber base. As the Company's cable
subscriber base has grown, aggregate monthly subscription revenue has increased
and installation fees, while currently increasing on an absolute basis, have
declined as a percentage of total revenue. The Company expects that installation
fees will continue to constitute a declining portion of the Company's revenue.
 
    During 1998, management completed several strategic actions in support of
its business and operating strategy. On June 5, 1998, the Company began
providing the Wizja TV programming package, with its initial 11 channel
primarily Polish-language programming, to its basic cable subscribers. Since
that date, the basic Wizja TV package has been expanded to 19 channels.
Management believes that this selection of high-quality primarily
Polish-language programming will provide it with a significant competitive
advantage in increasing its cable subscriber penetration rates.
 
    The Company has implemented a pricing strategy designed to increase revenue
per subscriber and to achieve real profit margin increases in U.S. dollar terms.
The Company has increased the monthly price for the basic package service to
reflect the increased channel availability, and premium channels such as Wizja 1
(which is owned by @ Entertainment) and HBO Poland service (a Polish-language
premium movie
 
                                       21
<PAGE>
channel owned in part by Home Box Office) are each offered to cable customers
for an additional monthly charge. The Company expects that it may continue to
experience increases in its churn rate above historical levels during the
implementation of its current pricing strategy. For the year ended December 31,
1998, the Company's overall churn rate increased to 15.25%, and it experienced
churn in premium services with penetration falling by 8,494 subscribers or 18.8%
from December 31, 1997. The Company is planning to encrypt the HBO Poland
service and install analog decoders for all premium subscribers during 1999.
 
    The Company divides operating expenses into (i) direct operating expenses,
(ii) selling, general and administrative expenses and (iii) depreciation and
amortization expenses. Direct operating expenses consist of programming
expenses, maintenance and related expenses necessary to service, maintain and
operate the Company's cable systems, billing and collection expenses and
customer service expenses. Selling, general and administrative expenses consist
principally of administrative costs, including office related expenses,
professional fees and salaries, wages and benefits of non-technical employees,
advertising and marketing expenses, bank fees and bad debt expense. Depreciation
and amortization expenses consist of depreciation of property, plant and
equipment and amortization of intangible assets.
 
    The Company generated operating losses of $1.3 million for 1996, $18.2
million for 1997 and $23.1 million for 1998, primarily due to the purchase of
Wizja TV programming in 1998 for $12.9 million, increased levels of acquisitions
and related costs, and increases in depreciation and amortization due to growth
in cable systems and goodwill from acquisitions. In addition, for the year ended
December 31, 1997 the Company recorded a one-time charge for non-cash
compensation related to stock options of $9.4 million.
 
    In addition to other operating statistics, the Company measures its
financial performance by EBITDA, an acronym for earnings before interest, taxes,
depreciation and amortization. The Company defines EBITDA to be net loss
adjusted for interest and investment income, depreciation and amortization,
interest expense, foreign currency gains and losses, equity in losses of
affiliated companies, income taxes, extraordinary items, non-recurring items
(e.g., compensation expense related to stock options), gains and losses from the
sale of assets other than in a normal course of business and minority interest.
The items excluded from EBITDA are significant components in understanding and
assessing the Company's financial performance. The Company believes that EBITDA
and related measures of cash flow from operating activities serve as important
financial indicators in measuring and comparing the operating performance of
media companies. EBITDA is not a U.S. GAAP measure of loss or cash flow from
operations and should not be considered as an alternative to cash flows from
operations as a measure of liquidity. The Company reported EBITDA of $8.4
million for 1996, $7.4 million for 1997 and negative $1.4 million for 1998.
 
                                       22
<PAGE>
    An analysis of cable subscriber growth is presented in the table below:
 
<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                        ----------------------------------------
<S>                                                                     <C>           <C>           <C>
                                                                            1998          1997          1996
                                                                        ------------  ------------  ------------
Homes passed..........................................................    1,591,981     1,408,099     1,088,540
Basic subscribers.....................................................      698,342       606,630       437,999
  Subscriber growth
    Organic...........................................................      196,714       135,019        98,213
    Through acquisitions..............................................        7,478       110,919       108,657
    Churn.............................................................     (112,480)(1)     (77,307)(1)     (25,747)
                                                                        ------------  ------------  ------------
    Total net growth..................................................       91,712       168,631       181,123
                                                                        ------------  ------------  ------------
Basic penetration.....................................................         43.9%         43.1%         40.2%
Intermediate subscribers..............................................       40,037        29,653        22,626
                                                                        ------------  ------------  ------------
Basic and intermediate subscribers....................................      738,379       636,283       460,625
                                                                        ------------  ------------  ------------
Broadcast subscribers.................................................      196,961       132,618        78,717
                                                                        ------------  ------------  ------------
Total subscribers.....................................................      935,340       768,901       539,342
                                                                        ------------  ------------  ------------
Premium subscribers--HBO..............................................       36,615        45,109            --
Premium penetration--HBO..............................................          5.2%          7.4%          0.0%
 
Basic revenue / basic subscriber/month................................   $     5.69    $     4.99    $     4.36
Total revenue/ basic subscriber/month.................................   $     6.75    $     6.08    $     6.35
</TABLE>
 
------------------------
 
(1) The increases in churn were mainly due to increases in subscription rates
    and the disconnection of non-paying customers.
 
1998 COMPARED TO 1997
 
    CABLE TELEVISION REVENUE.  Revenue increased $15.4 million or 41.0% from
$37.6 million in 1997 to $53.0 million in 1998. This increase was primarily
attributable to a 16.0% increase in the number of basic and intermediate
subscribers from approximately 636,000 at December 31, 1997 to approximately
738,000 at December 31, 1998, as well as an increase in monthly subscription
rates. The Company introduced the Wizja TV programming package on the Company's
cable systems for basic subscribers on June 5, 1998, and after an initial free
period, significantly increased prices in September 1998. Approximately 91.85%
of the increase in basic subscribers was the result of expansion of the
Company's existing cable networks and the remainder was due to acquisitions.
 
    Revenue from monthly subscription fees represented 85.2% of cable television
revenue for the year ended December 31, 1997 and 88.9% for the year ended
December 31, 1998. Installation fee revenue for 1998 decreased by 66.7% compared
to 1997, from $3.1 million to $1.0 million. During 1998, the Company generated
approximately $3.1 million of additional premium channel subscription revenue as
a result of providing the HBO Poland service and Canal + premium movie channels
to cable subscribers as compared to $1.0 million for the year ended December 31,
1997.
 
    DIRECT OPERATING EXPENSES.  Direct operating expenses increased $23.4
million, or 205.3%, from $11.4 million in 1997 to $34.8 million in 1998,
principally as a result of higher programming expenses related to the newly
introduced Wizja TV programming package, higher levels of technical personnel
and increased maintenance expenses associated with recently acquired networks
which have not yet been integrated within the Company's networks and standards
as well as the increased size of the Company's cable television system. The
Company incurred $12.9 million in programming costs for the purchase of the
Wizja TV programming package from an affiliate of the Company. Direct operating
expenses increased from 30.4% of revenues for 1997 to 65.7% of revenues for
1998.
 
                                       23
<PAGE>
    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses decreased $8.6 million or 30.4% from $28.2 million in
1997 to $19.6 million in 1998. A portion of this decrease was due to non-cash
non-recurring compensation expense of $9.4 million in the year ended December
31, 1997 in connection with stock options granted to certain key executives.
 
    As a percentage of revenue, selling, general and administrative expenses
decreased from 75.0% for 1997 to approximately 36.9% for 1998. However, without
considering the non-cash compensation expense related to the stock options
described above, selling, general and administrative expenses as a percentage of
revenues would have been 50.0% in 1997. This percentage decrease was
attributable to operating efficiencies realized by the Company in 1998.
 
    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense rose
$5.4 million, or 33.3%, from $16.2 million in 1997 to $21.6 million in 1998,
principally as a result of depreciation of additional cable television networks
and the continued build-out of the Company's cable networks and amortization of
goodwill from acquisition. Depreciation and amortization expense as a percentage
of revenues decreased from 43.2% in 1997 to 40.8% in 1998.
 
    INTEREST EXPENSE.  Interest expense increased $1.0 million, or 7.5%, from
$13.3 million in 1997 to $14.3 million in 1998 as a result of interest paid on
loans assumed in acquisitions of subsidiaries and an additional loan draw down
in June 1998.
 
    INTEREST AND INVESTMENT INCOME.  Interest and investment income decreased
$2.2 million, or 68.7%, from $3.2 million in 1997 to $1.0 million in 1998,
primarily due to the reduction in the level of cash available for investment in
1998 as the proceeds from the Company's 9 7/8% Senior Notes due 2003 (the "PCI
Notes") issued in 1996 were used to fund network expansion and operating losses.
 
    FOREIGN EXCHANGE LOSS, NET.  Foreign exchange loss decreased $0.5 million or
45.4% from $1.1 million in 1997 to $0.6 million in 1998, primarily due to more
favorable exchange rate fluctuations.
 
    MINORITY INTEREST.   No minority interest was recorded for the year ended
December 31, 1998, compared to a minority interest expense of $3.6 million for
the corresponding period in 1997. The 1997 expense represents a fourth quarter
adjustment to write off certain receivable balances that were not recoverable.
All minority interests were eliminated in 1998 as the minority interest share of
the losses exceeded the value of the minority interest investments.
 
    NET LOSS.  For 1997 and 1998, the Company had net losses of $32.1 million
and $37.2 million, respectively. These losses were the result of the factors
discussed above.
 
    NET LOSS APPLICABLE TO COMMON STOCKHOLDERS.  Net loss applicable to common
stockholders increased from $36.3 million in 1997 to $41.3 million in 1998 due
to the current year accretion of redeemable preferred stock and the factors
discussed above.
 
1997 COMPARED TO 1996
 
    CABLE TELEVISION REVENUE.  Revenue increased $12.7 million or 51.0% from
$24.9 million in 1996 to $37.6 million in 1997. This increase was primarily
attributable to a 45.2% increase in the number of basic and intermediate
subscribers from approximately 460,000 at December 31, 1996 to approximately
636,000 at December 31, 1997, as well as an increase in monthly subscription
rates. Approximately 69.3% of the increase in basic subscribers was the result
of acquisitions and the remainder was due to build-out of the Company's existing
cable networks.
 
    Revenue from monthly subscription fees represented 87.2% of cable television
revenue for the year ended December 31, 1996 and 90.1% of cable television
revenue for the year ended December 31, 1997. Installation fee revenue for the
year ended December 31, 1997 decreased by 6.3% compared to the year ended
December 31, 1996, from $3.2 million to $3.0 million. During the year ended
December 31, 1997,
 
                                       24
<PAGE>
the Company generated approximately $56,000 of additional premium subscription
revenue and approximately $941,000 of additional premium channel installation
revenue as a result of providing the HBO Poland service pay movie channel to
cable subscribers.
 
    DIRECT OPERATING EXPENSES.  Direct operating expenses increased $4.2
million, or 58.3%, from $7.2 million in 1996 to $11.4 million in 1997,
principally as a result of higher levels of technical personnel and increased
maintenance expenses associated with recently acquired networks as well as the
increased size of the Company's cable television system. Direct operating
expenses increased from 28.9% of revenues for the year ended December 31, 1996
to 30.4% of revenues for 1997.
 
    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses increased $18.9 million or 203.2% from $9.3 million in
1996 to $28.2 million in 1997. A portion of this increase was due to non-cash
compensation expense of $9.4 million in 1997 related to options to purchase
shares granted to key executives. The remainder of the increase was attributable
to an increase in sales and marketing expenses incurred in newly acquired
networks, costs associated with the agreement relating to sale of advertising on
Atomic TV, and costs of launching the distribution of the HBO Poland service
premium pay movie channel. Compensation expense also increased as the Company
established in 1997 a management team of senior executives who have significant
experience in the cable television and programming businesses.
 
    As a percentage of revenue, selling, general and administrative expenses
increased from 37.3% for 1996 to approximately 75.0% for 1997. However, without
considering the non-cash compensation expense related to the stock options
described above, selling, general and administrative expenses as a percentage of
revenues would have been 50.0% in 1997.
 
    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense rose
$6.4 million, or 65.3%, from $9.8 million in 1996 to $16.2 million in 1997,
principally as a result of depreciation of additional cable television systems
acquired and the continued build-out of the Company's networks. Depreciation and
amortization expense as a percentage of revenues increased from 39.3% for the
year ended December 31, 1996 to 43.2% for the year ended December 31, 1997.
 
    INTEREST EXPENSE.  Interest expense increased $8.6 million, or 182.8%, from
$4.7 million in 1996 to $13.3 million in 1997 primarily due to the inclusion of
a full year's interest on PCI Notes, which were issued in October 1996.
 
    INTEREST AND INVESTMENT INCOME.  Interest and investment income increased
$1.9 million, or 146.2%, from $1.3 million in 1996 to $3.2 million in 1997,
primarily due to the income derived from the investment of a portion of the net
proceeds from the issuance of PCI Notes in October 1996.
 
    FOREIGN EXCHANGE LOSS.  Foreign exchange loss increased from $0.8 million in
1996, to $1.1 million in 1997 primarily due to less favorable exchange rate
fluctuations.
 
    MINORITY INTEREST.  Minority interest income was $1.9 million in 1996
compared to minority interest expense of $3.6 million in 1997, resulting from a
fourth quarter adjustment to write off certain receivable balances that were not
recoverable.
 
    EXTRAORDINARY ITEM.  During 1996 the Company prepaid a loan from the
Overseas Private Investment Corporation ("OPIC"), resulting in an extraordinary
loss of $1.7 million, consisting of a prepayment penalty of $147,000 and a
non-cash charge of $1,566,000 to write off deferred financing costs.
 
    NET LOSS.  For 1996 and 1997, the Company had net losses of $6.6 million and
$32.1 million, respectively. These losses were the result of the factors
discussed above.
 
                                       25
<PAGE>
    NET LOSS APPLICABLE TO COMMON STOCKHOLDERS.  Net loss applicable to common
stockholders increased from $7.7 million in 1996 to $36.3 in 1997 million due to
the $2.4 million accretion of redeemable preferred stock and the factors
discussed above.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    The Company has met its cash requirements in recent years primarily with (i)
capital contributions and loans from certain of the Company's former principal
stockholders, including Polish Investments Holding L.P. ("PIHLP"), the Cheryl
Anne Chase Marital Trust ("CAC Trust"), certain members of David T. Chase's
family and family trusts (the "Chase Family") (collectively the "Chase
Entities") and ECO Holdings III Limited Partnership ("ECO"), who became
principal stockholders of @ Entertainment, Inc. pursuant to a reorganization
(the "Former Principal Stockholders"), (ii) borrowings under available credit
facilities, (iii) cash flows from operations, and (iv) the sale of $130 million
aggregate principal amount of PCI's 9 7/8% Senior Notes due to 2003 ("PCI
Notes"). The Company had positive cash flows from operating activities in 1996
and 1998 of $6.1 million and $14.3 million, respectively, primarily due to the
increase of accounts payable and accrued expenses and the deferral of the
payment of interest expense in 1996, and the decrease of amounts due from
affiliates, increase in accounts payable and accrued expenses, and income tax
refunds received in 1998. The Company had negative cash flows from operating
activities for 1997 of $9.6 million, due to the Company's net loss.
 
    Cash used for the purchase and expansion of the Company's cable television
networks was $26.6 million, $33.8 million and $42.6 million in 1996, 1997 and
1998, respectively.
 
    Cash used for the acquisition of subsidiaries, net of cash received, was
$13.3 million, $18.0 million and $17.6 million in 1996, 1997 and 1998,
respectively. The Company spent approximately $3.9 million, $5.9 million and
$8.1 million in 1996, 1997 and 1998, respectively, to upgrade major acquired
networks to meet the Company's technical standards.
 
    During 1996, the Company issued common and preferred stock to certain of the
Former Principal Stockholders for approximately $82 million. On March 29, 1996,
the Company consummated a transaction in which ECO purchased shares of common
and preferred stock of the Company for a price of $65 million. On March 29,
1996, PIHLP purchased additional shares of preferred and common stock of the
Company for an aggregate purchase price of approximately $17 million. The
Company applied approximately $55 million of the proceeds of these transactions
to repay indebtedness owed to Chase American Corporation, which is beneficially
owned by the Chase Family, and approximately $8.5 million to redeem preferred
stock held by PIHLP, which is beneficially owned by the Chase Family.
 
    During 1996, the Company also entered into an agreement with American Bank
in Poland, S.A. ("AmerBank") which provides for a credit facility of
approximately $6.5 million. Interest, based on LIBOR plus 3%, is due quarterly.
All advances under the loan must be repaid by August 20, 1999. All amounts under
this facility were drawn in June 1998.
 
    On October 31, 1996, $130 million aggregate principal amount of the PCI
Notes were sold by the Company to the initial purchaser pursuant to a purchase
agreement. The initial purchaser subsequently completed a private placement of
the PCI Notes. The PCI Notes were issued pursuant to an indenture.
 
    Pursuant to the indenture governing the PCI Notes (the "PCI Indenture"), the
Company is subject to certain restrictions and covenants, including, without
limitation, covenants with respect to the following matters: (i) limitation on
additional indebtedness; (ii) limitation on restricted payments; (iii)
limitation on issuances and sales of capital stock of subsidiaries; (iv)
limitation on transactions with affiliates; (v) limitation on liens; (vi)
limitation on guarantees of indebtedness by subsidiaries; (vii) purchase of PCI
Notes upon a change of control; (viii) limitation on sale of assets; (ix)
limitation on dividends and other payment restrictions affecting subsidiaries;
(x) limitation on investments in unrestricted subsidiaries; (xi) limitation on
lines of business; and (xii) consolidations, mergers and sale of assets. The
Company is in
 
                                       26
<PAGE>
compliance with these covenants. The PCI Indenture limits, but does not
prohibit, the payment of dividends by PCI and the ability of PCI to incur
additional indebtedness. PCI could not pay dividends to @Entertainment as of
December 31, 1998 because certain financial ratios did not meet the minimums
provided in the PCI's indenture. Pursuant to the AmerBank credit facility, the
Company is subject to certain informational and notice requirements but is not
subject to restrictive covenants.
 
    Since the commencement of its operations in 1990, the Company has required
external funds to finance the buildout of its existing networks and to finance
acquisitions of new cable television networks. The Company had relied on the
equity investments and loans from stockholders and their affiliates and
borrowings under available credit facilities to provide the funding for these
activities. The Company does not expect that its former stockholders and their
affiliates will continue to make capital contributions and loans to the Company.
There can be no assurance that the Company's parent, @Entertainment, will make
capital contributions and loans to the Company.
 
    The Company's current strategic objective is to increase cash flow and
enhance the value of its cable networks. To accomplish this objective, the
Company's business and operating strategy in the cable television business is to
(i) provide compelling programming, (ii) increase pricing and maximize revenue
per cable subscriber, (iii) expand its regional clusters, (iv) increase
subscriber penetration, and (v) realize additional operating efficiencies.
 
    The Company is dependent on obtaining new financing to achieve this business
strategy. Future sources of financing for the Company could include public or
private debt offerings or bank financings or any combination thereof, subject to
the restrictions contained in the indentures governing the Company's and
@Entertainment's outstanding senior indebtedness. Moreover, if the Company's
plans or assumptions change, if its assumptions prove inaccurate, if it
consummates unanticipated investments in or acquisitions of other companies, if
it experiences unexpected costs or competitive pressures, or if existing cash,
and projected cash flow from operations prove to be insufficient, the Company
may need to obtain greater amounts of additional financing. While it is the
Company's intention to enter only into new financing or refinancings that it
considers advantageous, there can be no assurance that such sources of financing
would be available to the Company in the future, or, if available, that they
could be obtained on terms acceptable to the Company. The Company is also
dependent on its parent, @Entertainment, to provide financing to achieve the
Company's business strategy. @Entertainment has represented that it will make
such financing available to fund the Company's current business strategy for the
next twelve months.
 
YEAR 2000 COMPLIANCE
 
    The Company is dependent upon computer systems and other technological
devices with imbedded microprocessor chips that are intended to utilize dates
and process data beyond December 31, 1999. In January 1997, the Company
developed a plan to address the impact that potential Y2K problems may have on
Company operations and to implement necessary changes to address such problems.
During the course of the development of its Y2K plan, the Company has identified
certain critical operations, which need to be Y2K compliant for the Company to
operate effectively. These critical operations include accounting and billing
systems, customer service and service delivery systems, and field and headend
devices.
 
    Largely as a result of its high rate of growth over the past few years, the
Company has entered into an agreement to purchase a new system to replace its
current accounting system and an agreement to purchase specialized billing
software for the Company's new customer service and billing center. The vendors
of the new accounting system and of the billing software have confirmed to the
Company that these products are Y2K compliant. The Company has completed the
testing phase of the new accounting system, and the implementation phase was
substantially completed at the end of 1998. The Company expects implementation
of the billing software to be completed for the majority of its cable
subscribers by the end of 1999.
 
                                       27
<PAGE>
    The Company believes that its most significant Y2K risk is its dependency
upon third party programming, software, services and equipment, because the
Company does not have the ability to control third parties in their assessment
and remediation procedures for potential Y2K problems. Should these parties not
be prepared for Y2K conversion, their products or services may fail and may
cause interruptions in, or limitations upon, the Company's provision of the full
range of its cable service to its customers. In an effort to prevent any such
interruptions or limitations, the Company is in the process of communicating
with each of its material third party suppliers of programming, software,
services and equipment to determine the status of their Y2K compliance programs.
The Company expects to complete this process by September 30, 1999, and it
anticipates that all phases of its Y2K plan will be completed by December 31,
1999.
 
    The Company has not yet developed a contingency plan to address the
situation that may result if the Company or its third party suppliers are unable
to achieve Y2K compliance with regard to any products or services utilized in
the Company's operations. The Company does not intend to decide on the
development of such a contingency until it has gathered all of the relevant Y2K
compliance data from its third party suppliers.
 
    The Company has not yet determined the full cost of its Y2K Plan and its
related impact on the financial condition of the Company. The Company has to
date not incurred any replacement or remediation costs for equipment or systems
as a result of Y2K non-compliance. Rather, due to the rapid growth and
development of its cable system the Company has made substantial capital
investments in equipment and systems for reasons other than Y2K concerns. The
total cost of the Company's new accounting system and billing software package
is estimated to be approximately $2,400,000.
 
    The Company believes that any Y2K compliance issues it may face can be
remedied without a material financial impact on the Company, but no assurance
can be made in this regard until all of the data has been gathered from the
Company's third party suppliers. At this date the Company cannot predict the
financial impact on its operations if Y2K problems are caused by products or
services supplied to the Company by such third parties.
 
IMPLEMENTATION OF NEW ACCOUNTING STANDARDS
 
    SFAS No. 130, "Reporting Comprehensive Income," established standards for
the reporting and presentation of comprehensive income and its components in a
full set of financial statements. Comprehensive income encompasses all changes
in stockholders' equity (except those arising from transactions with owners) and
includes net income, net unrealized capital gains or losses on available for
sale securities and foreign currency translation adjustments. As this new
standard only requires additional information in financial statements, it does
not affect the Company's financial position or results of operations.
 
    SFAS No. 131, "Disclosures about Segment of an Enterprise and Related
Information," established standards for the reporting of information relating to
operating segments in annual financial statements, as well as disclosure of
selected information in interim financial reports. This statement supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," which
requires reporting segment information by industry and geographic area (industry
approach). Under SFAS No. 131, operating segments are defined as components of a
company for which separate financial information is available and used by
management to allocate resources and assess performance (management approach).
 
IMPACT OF NEW ACCOUNTING STANDARDS NOT YET ADOPTED
 
    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" which establishes
standards of accounting for these transactions. SFAS No. 133 is effective for
the Company beginning on July 1, 1999. The Company currently has no derivative
instruments or hedging activities.
 
                                       28
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    The principal market risk (I.E., the risk of loss arising from adverse
changes in market rates and prices) to which the Company is exposed is foreign
exchange rate risk from fluctuations in the Polish zloty currency exchange rate.
The Company's long term debt is primarily subject to a fixed rate, and therefore
variations in the interest rate do not have a material impact on net interest
expense.
 
FOREIGN EXCHANGE AND OTHER INTERNATIONAL MARKET RISKS
 
    Operating in international markets involves exposure to movements in
currency exchange rates. Currency exchange rate movements typically affect
economic growth, inflation, interest rates, governmental actions and other
factors. These changes, if material, can cause the Company to adjust its
financing and operating strategies. The discussion of changes in currency
exchange rates below does not incorporate these other important economic
factors.
 
    International operations constitute 100% of the Company's 1998 consolidated
operating loss. Some of the Company's operating expenses and capital
expenditures are expected to continue to be denominated in or indexed in U.S.
dollars. By contrast, substantially all of the Company's revenues are
denominated in zloty. Any devaluation of the zloty against the U.S. dollar that
the Company is unable to offset through price adjustments will require it to use
a larger portion of its revenue to service its U.S. dollar denominated
obligations and contractual commitments.
 
    The Company estimates that a 10% change in foreign exchange rates would
impact reported operating loss by approximately $193,000. In other terms, a 10%
depreciation of the Polish zloty against the U.S. dollar, would result in a
$193,000 increase in the reported operating loss. This was estimated using 10%
of the Company's operating loss after adjusting for unusual impairment and other
items including U.S. dollar denominated or indexed expenses. The Company
believes that this quantitative measure has inherent limitations because, as
discussed in the first paragraph of this section, it does not take into account
any governmental actions or changes in either customer purchasing patterns or
the Company's financing or operating strategies.
 
    The Company does not generally hedge translation risk. While the Company may
consider entering into transactions to hedge the risk of exchange rate
fluctuations, there is no assurance that it will be able to obtain hedging
arrangements on commercially satisfactory terms. Therefore, shifts in currency
exchange rates may have an adverse effect on the Company's financial results and
on its ability to meet its U.S. dollar denominated debt obligations and
contractual commitments.
 
    Poland has historically experienced high levels of inflation and significant
fluctuations in the exchange rate for the zloty. The Polish government has
adopted policies that slowed the annual rate of inflation from approximately
250% in 1990 to approximately 20% in 1996, approximately 14.9% in 1997, and
approximately 11.8% in 1998. The exchange rate for the zloty has stabilized and
the rate of devaluation of the zloty has generally decreased since 1991 and the
zloty has appreciated against the U.S. dollar by approximately 0.9% for the year
ended December 31, 1998. For the first quarter of 1999 the zloty has depreciated
against the U.S. dollar by approximately 13%. Inflation and currency exchange
fluctuations have had, and may continue to have, a material adverse effect on
the business, financial condition and results of operations of the Company.
 
                                       29
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors Poland Communications, Inc.:
 
    We have audited the accompanying consolidated balance sheets of Poland
Communications, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, comprehensive loss, changes in
stockholders' (deficiency)/equity and cash flows for each of the years in the
three-year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company'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 in the United States of America. 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 Poland
Communications, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles in the United States of America.
 
                                          KPMG
 
Warsaw, Poland
March 29, 1999
 
                                       30
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
                                     ASSETS
<TABLE>
<CAPTION>
                                                                                                 DECEMBER, 31
                                                                                            ----------------------
<S>                                                                                         <C>         <C>
                                                                                               1998        1997
                                                                                            ----------  ----------
 
<CAPTION>
                                                                                                (IN THOUSANDS)
<S>                                                                                         <C>         <C>
Current assets:
  Cash and cash equivalents...............................................................  $    2,574  $   25,750
  Accounts receivable, net of allowances for doubtful accounts of $1,095,000 in 1998 and
    $766,000 in 1997......................................................................       2,770       2,120
  Due from affiliate......................................................................          --       2,353
  Other current assets (note 8)...........................................................       1,362       2,233
                                                                                            ----------  ----------
    Total current assets..................................................................       6,706      32,456
                                                                                            ----------  ----------
 
  Property, plant and equipment:
    Cable television system assets........................................................     175,053     134,469
    Construction in progress..............................................................       1,665       1,904
    Vehicles..............................................................................       2,096       2,032
    Other.................................................................................       6,183       3,784
                                                                                            ----------  ----------
                                                                                               184,997     142,189
      Less accumulated depreciation.......................................................     (48,129)    (33,099)
                                                                                            ----------  ----------
      Net property, plant and equipment...................................................     136,868     109,090
 
  Inventories for construction............................................................       8,851       8,153
  Intangibles, net (note 7)...............................................................      34,481      26,318
  Notes receivable from affiliates (note 14)..............................................         449       6,472
  Other assets, net (note 8)..............................................................       6,430       7,294
                                                                                            ----------  ----------
      Total assets........................................................................  $  193,785  $  189,783
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       31
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
                    CONSOLIDATED BALANCE SHEETS (CONTINUED)
 
              LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) / EQUITY
<TABLE>
<CAPTION>
                                                                                                 DECEMBER, 31
                                                                                            ----------------------
<S>                                                                                         <C>         <C>
                                                                                               1998        1997
                                                                                            ----------  ----------
 
<CAPTION>
                                                                                                (IN THOUSANDS)
<S>                                                                                         <C>         <C>
Current liabilities:
    Accounts payable and accrued expenses.................................................  $   13,268  $    6,395
    Current portion of notes payable (note 10)............................................       6,500          --
    Accrued interest (note 10)............................................................       2,140       2,175
    Deferred revenue......................................................................       1,207       1,257
    Income taxes payable..................................................................       3,794       1,765
                                                                                            ----------  ----------
      Total current liabilities...........................................................      26,909      11,592
 
Due to affiliate (note 14)................................................................      17,519          --
Notes payable, less current portion (note 10).............................................     131,941     130,110
                                                                                            ----------  ----------
      Total liabilities...................................................................     176,369     141,702
                                                                                            ----------  ----------
Minority interest.........................................................................          --       4,713
 
Redeemable preferred stock (liquidation value $60,000,000; 6,000 shares authorized, issued
  and outstanding) (note 13)..............................................................      30,977      39,149
 
Commitments and contingencies (note 16)
 
Stockholders' (deficiency)/equity (note 12):
    Common stock, $.01 par value, 27,000 shares authorized; 18,948 shares issued and
      outstanding.........................................................................           1           1
    Paid-in capital.......................................................................      78,380      59,553
    Accumulated other comprehensive income................................................         586          --
    Accumulated deficit...................................................................     (92,528)    (55,335)
                                                                                            ----------  ----------
      Total stockholders' (deficiency)/equity.............................................     (13,561)      4,219
                                                                                            ----------  ----------
      Total liabilities and stockholders' (deficiency)/equity.............................  $  193,785  $  189,783
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       32
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                             ------------------------------------
<S>                                                                          <C>          <C>          <C>
                                                                                1998         1997         1996
                                                                             -----------  -----------  ----------
 
<CAPTION>
                                                                               (IN THOUSANDS, EXCEPT PER SHARE
                                                                                            DATA)
<S>                                                                          <C>          <C>          <C>
Cable television revenue...................................................  $    52,971  $    37,575  $   24,923
 
Operating expenses:
  Direct operating expenses (note 14)......................................       34,843       11,416       7,193
  Selling, general and administrative expenses (note 12)...................       19,559       28,165       9,289
  Depreciation and amortization............................................       21,635       16,231       9,788
                                                                             -----------  -----------  ----------
    Total operating expenses...............................................       76,037       55,812      26,270
                                                                             -----------  -----------  ----------
    Operating loss.........................................................      (23,066)     (18,237)     (1,347)
Interest and investment income.............................................        1,020        3,176       1,274
Interest expense (note 10).................................................      (14,320)     (13,281)     (4,687)
Foreign exchange loss, net.................................................         (617)      (1,107)       (761)
                                                                             -----------  -----------  ----------
  Loss before income taxes, minority interest and extraordinary items......      (36,983)     (29,449)     (5,521)
Income tax (expense)/benefit (note 9)......................................         (210)         975      (1,273)
Minority interest..........................................................           --       (3,586)      1,890
                                                                             -----------  -----------  ----------
  Loss before extraordinary item...........................................      (37,193)     (32,060)     (4,904)
Extraordinary item-loss on early extinguishment of debt (note 10)..........           --           --      (1,713)
                                                                             -----------  -----------  ----------
Net loss...................................................................      (37,193)     (32,060)     (6,617)
Accretion of redeemable preferred stock (note 13)..........................       (4,106)      (4,194)     (2,870)
Preferred stock dividends (note 12)........................................           --           --      (1,738)
Excess of carrying value of preferred stock over consideration paid (note
  12)......................................................................           --           --       3,549
                                                                             -----------  -----------  ----------
Net loss applicable to holders of common stock.............................  $   (41,299) $   (36,254) $   (7,676)
                                                                             -----------  -----------  ----------
                                                                             -----------  -----------  ----------
Basic and diluted loss per common share:
  Loss before extraordinary item...........................................  $ (2,179.60) $ (1,913.34) $  (338.48)
  Extraordinary item.......................................................           --           --      (97.24)
                                                                             -----------  -----------  ----------
Net loss (note 3)..........................................................  $ (2,179.60) $ (1,913.34) $  (435.72)
                                                                             -----------  -----------  ----------
                                                                             -----------  -----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       33
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                                  ---------------------------------
<S>                                                                               <C>         <C>         <C>
                                                                                     1998        1997       1996
                                                                                  ----------  ----------  ---------
 
<CAPTION>
                                                                                           (IN THOUSANDS)
<S>                                                                               <C>         <C>         <C>
Net loss........................................................................  $  (37,193) $  (32,060) $  (6,617)
Other comprehensive income:
  Translation adjustment........................................................         586          --         --
                                                                                  ----------  ----------  ---------
Comprehensive loss..............................................................  $  (36,607) $  (32,060) $  (6,617)
                                                                                  ----------  ----------  ---------
                                                                                  ----------  ----------  ---------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       34
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY / (DEFICIENCY)
<TABLE>
<CAPTION>
                                                                                                          ACCUMULATED
                                            PREFERRED STOCK             COMMON STOCK                         OTHER
                                        ------------------------  ------------------------   PAID-IN     COMPREHENSIVE
                                          SHARES       AMOUNT       SHARES       AMOUNT      CAPITAL        INCOME
                                        -----------  -----------  -----------  -----------  ---------  -----------------
<S>                                     <C>          <C>          <C>          <C>          <C>        <C>
                                                              (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Balance January 1, 1996...............         985    $  10,311       11,037    $   4,993   $   1,544      $      --
  Net loss............................          --           --           --           --          --             --
  Stock dividend......................         166        1,738           --           --      (1,738)            --
  Proceeds from issuance of common and
    preferred stock (note 12).........          --           --        7,911       (4,992)     87,021             --
  Cost of issuance (note 12)..........          --           --           --           --      (1,028)            --
  Allocation of proceeds to preferred
    stock (note 12)...................          --           --           --           --     (32,156)            --
  Preferred stock redemption (note
    12)...............................      (1,151)     (12,049)          --           --       3,549             --
  Accretion of redeemable preferred
    stock (note 13)...................          --           --           --           --      (2,870)            --
                                        -----------  -----------  -----------  -----------  ---------          -----
Balance December 31, 1996.............          --           --       18,948            1      54,322             --
  Net loss............................          --           --           --           --          --             --
  Accretion of redeemable preferred
    stock (note 13)...................          --           --           --           --      (4,194)            --
                                        -----------  -----------  -----------  -----------  ---------          -----
  Stock option compensation expense
    (note 12).........................          --           --           --           --       9,425             --
                                        -----------  -----------  -----------  -----------  ---------          -----
Balance December 31, 1997.............          --           --       18,948            1      59,553             --
  Net loss............................          --           --           --           --          --             --
  Translation adjustment..............                                                                           586
  Capital contribution (note 5).......          --           --           --           --      10,655             --
  Cancellation of Series B redeemable
    preferred stock (note 13).........          --           --           --           --      12,278             --
  Accretion of redeemable preferred
    stock (note 13)...................          --           --           --           --      (4,106)            --
                                        -----------  -----------  -----------  -----------  ---------          -----
Balance December 31, 1998.............          --    $      --       18,948    $       1   $  78,380      $     586
                                        -----------  -----------  -----------  -----------  ---------          -----
                                        -----------  -----------  -----------  -----------  ---------          -----
 
<CAPTION>
 
                                        ACCUMULATED
                                          DEFICIT       TOTAL
                                        ------------  ---------
<S>                                     <C>           <C>
 
Balance January 1, 1996...............   $  (16,658)  $     190
  Net loss............................       (6,617)     (6,617)
  Stock dividend......................           --          --
  Proceeds from issuance of common and
    preferred stock (note 12).........           --      82,029
  Cost of issuance (note 12)..........           --      (1,028)
  Allocation of proceeds to preferred
    stock (note 12)...................           --     (32,156)
  Preferred stock redemption (note
    12)...............................           --      (8,500)
  Accretion of redeemable preferred
    stock (note 13)...................           --      (2,870)
                                        ------------  ---------
Balance December 31, 1996.............      (23,275)     31,048
  Net loss............................      (32,060)    (32,060)
  Accretion of redeemable preferred
    stock (note 13)...................           --      (4,194)
                                        ------------  ---------
  Stock option compensation expense
    (note 12).........................           --       9,425
                                        ------------  ---------
Balance December 31, 1997.............      (55,335)      4,219
  Net loss............................      (37,193)    (37,193)
  Translation adjustment..............           --         586
  Capital contribution (note 5).......           --      10,655
  Cancellation of Series B redeemable
    preferred stock (note 13).........           --      12,278
  Accretion of redeemable preferred
    stock (note 13)...................           --      (4,106)
                                        ------------  ---------
Balance December 31, 1998.............   $  (92,528)  $ (13,561)
                                        ------------  ---------
                                        ------------  ---------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       35
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                ----------------------------------
<S>                                                                             <C>         <C>         <C>
                                                                                   1998        1997        1996
                                                                                ----------  ----------  ----------
 
<CAPTION>
                                                                                          (IN THOUSANDS)
<S>                                                                             <C>         <C>         <C>
Cash flows from operating activities:
  Net loss....................................................................  $  (37,193) $  (32,060) $   (6,617)
  Adjustments to reconcile net loss to net cash provided by /(used in)
    operating activities:
    Minority interest.........................................................          --       3,586      (1,890)
    Depreciation and amortization.............................................      21,635      16,231       9,788
    Amortization of notes payable discount and issue costs....................         881       1,040         166
    Non-cash portion of extraordinary item....................................          --          --       1,566
    Gain on sale of investment securities.....................................          --        (358)         --
    Non-cash stock option compensation expense................................          --       9,425          --
    Other.....................................................................         496          --          --
    Changes in operating assets and liabilities:
      Accounts receivable.....................................................        (650)        433        (796)
      Due from affiliate......................................................      19,872      (2,626)         --
      Other current assets....................................................       1,015        (101)     (1,862)
      Accounts payable and accrued expenses...................................       6,289      (2,584)      3,379
      Income tax payable......................................................       2,029      (2,707)        334
      Accrued interest........................................................         (35)         --       2,175
      Deferred revenue........................................................         (55)        155        (131)
                                                                                ----------  ----------  ----------
        Net cash provided by /(used in) operating activities..................      14,284      (9,566)      6,112
                                                                                ----------  ----------  ----------
Cash flows from investing activities:
      Construction and purchase of property, plant and equipment..............     (42,639)    (33,786)    (26,581)
      Repayment of notes receivable from affiliattes..........................       6,023       2,521          --
      Issuance of notes receivable from affiliates............................          --        (721)     (2,491)
      Purchase of investment securities.......................................          --          --     (25,940)
      Proceeds from maturity of investment securities.........................          --      25,473          --
      Other investments.......................................................          --      (1,200)     (6,000)
      Investments in affiliated companies.....................................          --          56        (580)
      Purchase of subsidiaries, net of cash received..........................     (17,601)    (18,041)    (13,269)
                                                                                ----------  ----------  ----------
        Net cash used in investing activities.................................     (54,217)    (25,698)    (74,861)
                                                                                ----------  ----------  ----------
Cash flows from financing activities:
      Capital contribution....................................................      10,655          --          --
      Net proceeds from issuance of stock.....................................          --          --      81,001
      Redemption of preferred stock...........................................          --          --      (8,500)
      Costs to obtain loans...................................................          --      (1,749)     (6,513)
      Proceeds from issuance of notes payable.................................       6,500          --     136,074
      Repayment of notes payable..............................................        (398)       (720)    (27,893)
      Repayments to affiliates................................................          --          --     (39,280)
                                                                                ----------  ----------  ----------
        Net cash provided by/ (used in) financing activities..................      16,757      (2,469)    134,889
                                                                                ----------  ----------  ----------
        Net decrease in cash and cash equivalents.............................     (23,176)    (37,733)     66,140
Cash and cash equivalents at beginning of year................................      25,750      63,483       2,343
                                                                                ----------  ----------  ----------
Cash and cash equivalents at end of year......................................  $    2,574  $   25,750  $   68,483
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
Supplemental cash flow information:
      Cash paid for interest..................................................  $   13,014  $   12,873  $    2,338
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
      Cash paid for income taxes..............................................  $      589  $    1,732  $    1,184
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       36
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
1. REPORTING ENTITY
 
    Poland Communications, Inc. ("PCI"), is a New York corporation and was
founded in 1990 by David T. Chase, a Polish-born investor. PCI is a wholly-owned
subsidiary of @Entertainment, Inc. ("@ Entertainment"), a Delaware corporation
which is a publicly listed company in the United States. PCI owns 92.3% of the
capital stock of Poland Cablevision (Netherlands) B.V. ("PCBV"), a Netherlands
corporation and first-tier subsidiary of PCI. PCI and PCBV are holding companies
that hold controlling interests in a number of Polish cable television
companies, collectively referred to as the "PTK Companies". All significant
assets and operating activities of PCI and subsidiaries (the "Company") are
located in Poland.
 
    The Company offers pay television services to business and residential
customers in Poland. Its revenues are derived primarily from installation fees
and monthly basic and premium service fees for cable television services.
 
    THE REORGANIZATION
 
    In June 1997, @Entertainment was formed as the parent of PCI to facilitate
an initial public offering of stock in the United States and internationally
(the "IPO"). Before the IPO, all the holders of shares of PCI's common stock and
@Entertainment entered into a Contribution Agreement dated as of June 22, 1997
pursuant to which each holder of shares of PCI's common stock transferred all
shares of PCI common stock owned by it to @Entertainment. In addition, ECO
Holding III Limited ("ECO") transferred all of the outstanding shares of PCI's
series B preferred stock to @Entertainment. All of these transfers (the "Share
Exchange") were designed to qualify as a tax-free exchange under section 351 of
the Internal Revenue Code of 1986, as amended. Each holder of PCI's common stock
received 1,000 shares of common stock of @Entertainment in exchange for each
share of PCI's common stock transferred by it (the "Capital Adjustment"). ECO
also received an equivalent number of shares of @Entertainment's series B
preferred stock in exchange for its PCI series B preferred stock. The
@Entertainment series B preferred stock has identical rights and preferences to
those of the PCI series B preferred stock, except that the ratio for conversion
of such shares into common stock increased from 1:1.9448 to 1:1,944.80 in order
to reflect the Capital Adjustment. The 2,500 outstanding shares of
@Entertainment's series B preferred stock automatically converted into 4,862,000
shares of common stock of @Entertainment upon the closing of the IPO (the
"Automatic Conversion").
 
    On June 20, 1997, Polish Investments Holding LP ("PIHLP"), transferred all
of the outstanding shares of PCI's series C preferred stock to an entity owned
by certain of the beneficial owners of PIHLP and members of their families (the
"Chase Entity"). The Chase Entity, ECO and @Entertainment entered into a
Purchase Agreement dated as of June 22, 1997 (the "Purchase Agreement"). Among
other matters, the Purchase Agreement obligated @Entertainment to purchase all
of the outstanding shares of PCI's series A preferred stock and series C
preferred stock for cash from ECO and the Chase Entity, respectively, at the
closing of the IPO. The aggregate purchase price of $60 million for PCI's series
A preferred stock and series C preferred stock equaled the aggregate purchase
price of such shares as set forth in PCI's certificate of incorporation.
 
    In June 1997, certain employment agreements for the executive officers of
@Entertainment who were employed by PCI and their employee stock option
agreements were assigned to @Entertainment by PCI (the "Assignment"). As part of
the Assignment and the Capital Adjustment, the employment agreements were
amended to provide that each option to purchase a share of PCI's common stock
was exchanged for
 
                                       37
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
1. REPORTING ENTITY (CONTINUED)
an option to purchase 1,000 shares of @Entertainment's common stock with a
proportionate reduction in the per share exercise price.
 
    The Share Exchange, Capital Adjustment, and the Assignment are collectively
referred to as the "Reorganization". As a result of the Reorganization,
@Entertainment owns all of the outstanding shares of common and redeemable
preferred stock of PCI.
 
    PCI's consolidated assets and liabilities were transferred to
@Entertainment, Inc. using PCI's historical cost.
 
    PCBV STOCKHOLDERS' AGREEMENT
 
    The following is a summary of certain aspects of the PCBV Stockholders'
Agreement entered into by PCI, PCBV and PCBV's minority stockholders on March 8,
1990. The minority stockholders own the 7.7% of outstanding PCBV capital stock
that is not owned by PCI.
 
    The PCBV Stockholders' Agreement protects shareholdings of each minority
stockholder from dilution, by requiring that the PCBV shares of each minority
stockholder must continue to represent a constant percentage of the total equity
in PCBV and of the total votes to be cast by the PCBV stockholders on any
subject, regardless of changes to the capital structure of PCBV and regardless
of any additional equity funds that may be contributed to PCBV by PCI.
 
    The PCBV Stockholders' Agreement contains restrictions on the PCBV
stockholders' ability to sell, pledge, hypothecate or otherwise transfer or
encumber their PCBV shares. In addition, PCBV stockholders have the right of
first refusal to purchase PCBV shares upon the death of an individual PCBV
stockholder, and upon the liquidation, dissolution or other termination of a
corporate PCBV stockholder. Furthermore, PCI has the right of first refusal to
purchase PCBV shares from minority stockholders, and the minority stockholders
have the right of first refusal to purchase PCBV shares from PCI, before such
shares can be sold to a third party.
 
    Under the PCBV Stockholder's Agreement, PCI has the option to purchase the
PCBV shares owned by the minority stockholders upon the satisfaction of certain
conditions.
 
    The PCBV Stockholders' Agreement also includes covenants against competition
that limit the ability of each PCBV stockholder to engage directly or indirectly
in any aspect of the cable television business in Poland for a period ending ten
years after such PCBV stockholder ceases to be a PCBV stockholder. PCI has
direct or indirect ownership interests in a number of entities that engage in
certain aspects of the cable television business in Poland. Under the PCBV
Stockholders' Agreement, the minority stockholders have a claim again 7.7% of
the profits and equity of such entities and, under a supplemental agreement, PCI
has agreed to share the profits of these entities with the minority stockholders
on a pro rata basis. In addition, PCI is negotiating to buy, and has made an
offer to buy, the outstanding PCBV shares held by the minority stockholders.
 
2. FINANCIAL POSITION AND BASIS OF ACCOUNTING
 
    These consolidated financial statements have been prepared on a going
concern basis which contemplates the continuation and expansion of trading
activities as well as the realization of assets and liquidation of liabilities
in the ordinary course of business. Cable television operators typically
experience
 
                                       38
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
2. FINANCIAL POSITION AND BASIS OF ACCOUNTING (CONTINUED)
losses and negative cash flow in their initial years of operation due to the
large capital investment required for the construction or acquisition of their
cable networks and the administrative costs associated with commencing
operations. Consistent with this pattern, the Company has incurred substantial
operating losses since inception. Additionally, the Company is currently and is
expected to continue to be highly leveraged. The ability of the Company to meet
its debt service obligations will depend on the future operating performance and
financial results of the Company as well as its ability to obtain additional
financing to support the planned expansion.
 
    The Company's current strategic objective is to increase cash flow and
enhance the value of its cable networks. To accomplish this objective, the
Company's business and operating strategy in the cable television business is to
(i) provide compelling programming, (ii) increase pricing and maximize revenue
per cable subscriber, (iii) expand its regional clusters, (iv) increase
subscriber penetration, and (v) realize additional operating efficiencies. The
Company is dependent on its parent, @Entertainment to provide financing to
achieve this business strategy. @ Entertainment has represented that it will
make such financing available to fund the current business strategy for the next
twelve months and accordingly, management consider it appropriate to prepare the
consolidated financial statements on a going concern basis.
 
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
 
    BASIS OF PRESENTATION
 
    The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America ("U.S. GAAP").
 
    The consolidated financial statements include the financial statements of
Poland Communications, Inc. and its wholly owned and majority owned
subsidiaries. Also consolidated is a 49% owned subsidiary for which the Company
maintains control of operating activities and has the ability to influence the
appointment of members to the Managing Board. All significant intercompany
balances and transactions have been eliminated in consolidation.
 
    CASH AND CASH EQUIVALENTS
 
    Cash and cash equivalents consist of cash and other short-term investments
with original maturities of three months or less.
 
    USE OF ESTIMATES
 
    Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with U.S. GAAP. Actual results could differ from those estimates.
 
    REVENUE RECOGNITION
 
    Revenue is primarily derived from the sale of cable television services to
retail customers in Poland. Revenue from subscription fees is recognized on a
monthly basis as the service is provided. Installation fee revenue, for
connection to the Company's cable television systems, is recognized to the
extent of direct
 
                                       39
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
selling costs and the balance is deferred and amortized into income over the
estimated average period that new subscribers are expected to remain connected
to the systems.
 
    TAXATION
 
    Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
 
    U.S. TAXATION:
 
    PCI is subject to U.S. Federal taxation of its worldwide income. The PTK
Companies and PCBV are foreign corporations, which are not expected to be
engaged in a trade or business within the U.S. or to derive income from U.S.
sources and accordingly, are not subject to U.S. income tax.
 
    FOREIGN TAXATION:
 
    The PTK Companies are subject to corporate income taxes, value added tax
(VAT) and various local taxes within Poland, as well as import duties on
materials imported by them into Poland. Under Polish law, the PTK Companies are
exempt from import duties on certain in-kind capital contributions.
 
    The PTK Companies' income tax is calculated in accordance with Polish tax
regulations. Due to differences between accounting practices under Polish tax
regulations and those required by U.S. GAAP, certain income and expense items
are recognized in different periods for financial reporting purposes and income
tax reporting purposes which may result in deferred income tax assets and
liabilities.
 
    PROPERTY, PLANT AND EQUIPMENT
 
    Property, plant and equipment includes assets used in the development and
operation of the various cable television systems. During the period of
construction, plant costs and a portion of design, development and related
overhead costs are capitalized as a component of the Company's investment in
cable television systems. When material, the Company capitalizes interest costs
incurred during the period of construction in accordance with SFAS No. 34,
"CAPITALIZATION OF INTEREST COST". During 1998, 1997 and 1996, no interest costs
were capitalized.
 
    Cable subscriber related costs and general and administrative expenses are
charged to operations when incurred.
 
    Depreciation is computed for financial reporting purposes using the
straight-line method over the following estimated useful lives:
 
<TABLE>
<S>                                                                <C>
Cable television system assets...................................   10 years
Vehicles.........................................................    5 years
                                                                        5-10
Other property, plant and equipment..............................      years
</TABLE>
 
                                       40
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
    INVENTORIES FOR CONSTRUCTION
 
    Inventories for construction are stated at the lower of cost, determined by
the average cost method, or net realizable value. Inventories are principally
related to construction in the various cable television systems.
 
    GOODWILL AND OTHER INTANGIBLES
 
    Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally ten years, with the exception of amounts paid
relating to non-compete agreements. The portion of the purchase price relating
to non-compete agreements is amortized over the term of the underlying
agreements, generally five years.
 
    The Company has entered into lease agreements with the Polish national
telephone company ("TPSA"), for the use of underground telephone conduits for
cable wiring. Costs related to obtaining conduit and franchise agreements with
housing cooperatives and governmental authorities are capitalized generally over
a period of ten years. In the event the Company does not proceed to develop
cable systems within designated cities, costs previously capitalized will be
charged to expense.
 
    DEFERRED FINANCING COSTS
 
    The costs of obtaining long-term debt are deferred and amortized on an
effective interest basis over the term of the debt. The amortization of these
charges is included in interest on long-term debt.
 
    MINORITY INTEREST
 
    Recognition of the minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests' allocable
portion of the equity of those consolidated subsidiaries.
 
    FOREIGN CURRENCIES
 
    Foreign currency transactions are recorded at the exchange rate prevailing
at the date of the transactions. Assets and liabilities denominated in foreign
currencies are remeasured at the rates of exchange at the consolidated balance
sheet date. Gains and losses on foreign currency transactions are included in
the consolidated statement of operations.
 
    The financial statements of foreign subsidiaries are translated into U.S.
dollars using (i) exchange rates in effect at period end for assets and
liabilities, and (ii) average exchange rates during the period for results of
operations. Adjustments resulting from translation of financial statements are
reflected in accumulated other comprehensive income as a separate component of
stockholders' equity.
 
    Effective January 1, 1998, Poland is no longer deemed to be a highly
inflationary economy. In accordance with this change, the Company established a
new functional currency bases for nonmonetary items in accordance with
guidelines established within EITF Issue 92-4, "ACCOUNTING FOR A CHANGE IN
FUNCTIONAL CURRENCY WHEN AN ECONOMY CEASES TO BE CONSIDERED HIGHLY
INFLATIONARY." That basis is computed by translating the historical reporting
currency amounts of non-monetary items into the local currency at current
exchange rates. As a result of this change, the Company's functional currency
bases
 
                                       41
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
exceeded the local currency tax bases of nonmonetary items. The difference
between the new functional currency and the tax bases have been recognized as
temporary differences.
 
    Prior to January 1, 1998 the financial statements of foreign subsidiaries
were translated into U.S. dollars using (i) exchange rates in effect at period
end for monetary assets and liabilities, (ii) exchange rates in effect at
transaction dates (historical rates) for non-monetary assets and liabilities,
and (iii) average exchange rates during the period for revenues and expenses,
other than those revenues and expenses that relate to non-monetary assets and
liabilities (primarily amortization of fixed assets and intangibles) which are
translated using the historical exchange rates applicable to those non-monetary
assets and liabilities. Adjustments resulting from translation of financial
statements are reflected as foreign exchange gains or losses in the consolidated
statements of operations.
 
    BASIC AND DILUTED NET LOSS PER SHARE
 
    Basic loss per share has been computed by dividing net loss attributable to
common stockholders by the weighted average number of common shares outstanding
during the period. The effect of potential common shares is antidilutive,
accordingly, dilutive loss per share is the same as basic loss per share.
 
    The following table provides a reconciliation of the numerator and
denominator in the loss per share calculation:
 
<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                             ------------------------------------
<S>                                                                          <C>          <C>          <C>
                                                                                1998         1997         1996
                                                                             -----------  -----------  ----------
Net loss attributable to common stockholders (in thousands)................  $   (41,299) $   (36,254) $   (7,676)
                                                                             -----------  -----------  ----------
                                                                             -----------  -----------  ----------
Weighted average number of common shares outstanding.......................       18,948       18,948      17,271
Nominal issuance...........................................................           --           --         346
                                                                             -----------  -----------  ----------
Basic weighted average number of common shares outstanding.................       18,948       18,948      17,617
                                                                             -----------  -----------  ----------
                                                                             -----------  -----------  ----------
Loss per share-basic and diluted...........................................  $ (2,179.60) $ (1,913.34) $  (435.72)
                                                                             -----------  -----------  ----------
                                                                             -----------  -----------  ----------
</TABLE>
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires the Company to make disclosures of fair value information of all
financial instruments, whether or not recognized on the consolidated balance
sheets, for which it is practicable to estimate fair value.
 
    The Company's financial instruments include cash and cash equivalents,
accounts receivable, notes receivable from affiliates, accounts payable and
accrued expenses, due to affiliates, other current liabilities, notes payable
and redeemable preferred stock.
 
    At December 31, 1998 and 1997, the carrying value of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses, and
other current liabilities on the accompanying consolidated balance sheets
approximates fair value due to the short maturity of these instruments.
 
    At December 31, 1998 and 1997, the carrying value of the redeemable
preferred stock has been determined based upon the amount of future cash flows
discounted using the Company's estimated
 
                                       42
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
borrowing rate for similar instruments. It was not practicable to estimate the
fair value of the redeemable preferred stock due to the fact that the
instruments are wholly owned by the Company's parent.
 
    At December 31, 1998, the fair value of the Company's notes payable balance
approximated $119,314,000 based on the last trading price of the notes in 1998.
At December 31, 1997, the fair value of the Company's notes payable balance
approximated $128,420,000 based on the last trading price of the notes in 1997.
It was not practicable to estimate the fair value of due to affiliate and notes
receivable from affiliates due to the nature of these instruments, the
circumstances surrounding their issuance, and the absence of quoted market
prices for similar financial instruments.
 
    IMPAIRMENT OF LONG-LIVED ASSETS
 
    The Company assesses the recoverability of long-lived assets (mainly
property, plant and equipment, intangibles, and certain other assets) on a
regular basis by determining whether the carrying value of the assets can be
recovered over the remaining lives through projected undiscounted future
operating cash flows, expected to be generated by such assets. If an impairment
in value is estimated to have occurred, the assets carrying value is reduced to
its estimated fair value. The assessment of the recoverability of long-lived
assets will be impacted if estimated future operating cash flows are not
achieved.
 
    BUSINESS SEGMENT INFORMATION
 
    On January 1, 1998, the Company adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information." SFAS No. 131 established
standards for the reporting of information relating to operating segments in
annual financial statements. This statement supersedes SFAS No. 14, "Financial
Reporting for Segment of a Business Enterprise," which requires reporting
segment information by industry and geographic area (industry approach). Under
SFAS No. 131, operating segments are defined as components of a company for
which separate financial information is available and used by management to
allocate resources and assess performance (management approach). The Company
operates in one business segment, providing cable television services.
 
    COMMITMENTS AND CONTINGENCIES
 
    Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties, and other sources are recorded when it is
probable that a liability has been incurred and the amount of the assessment can
be reasonably estimated.
 
    ADVERTISING COSTS
 
    All advertising costs of the Company are expensed as incurred.
 
    RECLASSIFICATIONS
 
    Certain amounts have been reclassified in the prior year consolidated
financial statements to conform to the 1998 consolidated financial statement
presentation.
 
                                       43
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
4. VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
                                                                               ADDITIONS
                                                                 BALANCE AT   CHARGED TO     AMOUNTS     BALANCE AT
                                                                  JANUARY 1     EXPENSE    WRITTEN OFF   DECEMBER 31
                                                                 -----------  -----------  -----------  -------------
<S>                                                              <C>          <C>          <C>          <C>
                                                                                    (IN THOUSANDS)
1996
Allowance for Doubtful Accounts................................   $     510    $     358    $     323     $     545
1997
Allowance for Doubtful Accounts................................   $     545    $     494    $     273     $     766
1998
Allowance for Doubtful Accounts................................   $     766    $   1,383    $   1,054     $   1,095
</TABLE>
 
5. ACQUISITIONS
 
    During 1998, the Company made several acquisitions of which details follow.
In each case, the acquisition was accounted for using the purchase method,
whereby the purchase price was allocated to the underlying assets and
liabilities based on their proportionate share of fair values on the date of
acquisition and any excess to goodwill. The results of operations of each of the
business acquired are included in the Company's consolidated financial
statements since the date of acquisition.
 
    In February 1998, the Company acquired a cable television business for
aggregate consideration of approximately $1,574,000. The purchase price exceeded
the fair value of the net liabilities acquired by approximately $2,041,000. In
association with this acquisition, the Company assumed a $2,150,000 loan from
Bank Rozwoju Exportu S.A. (See Note 10).
 
    On August 15, 1998, the Company purchased the remaining approximately 50%
interest in one subsidiary company which was held by unaffiliated third parties
for aggregate consideration of approximately $5,372,000. The purchase price
exceed the fair value of the assets acquired by approximately $1,104,000.
 
    On July 16, 1998 the Company's parent, @ Entertainment, Inc. purchased the
remaining 45.25% interest in a subsidiary of the Company which was held by
unaffiliated third parties for an aggregate purchase price of approximately
$10,655,000 of which approximately $9,490,000 relates to non-compete agreements.
The Company has applied push-down accounting to this transaction on the date of
purchase and therefore the transaction has been recognized in the Company's
consolidated financial statements. The purchase price paid by the Company's
parent has been treated as a capital contribution to the Company. The purchase
price, excluding the amount paid relating to the non-compete agreements,
exceeded the fair value of the assets acquired by approximately $604,000. The
portion of the purchase price relating to the non-compete agreements will be
amortized over the five years term of the agreements.
 
    Additionally, during 1998 the Company acquired certain cable television
system assets and subscriber lists for aggregate consideration of approximately
$2,000,000. The purchase prices did not materially exceed the fair value of the
assets acquired.
 
    Had these acquisitions occurred on January 1, 1997, the Company's pro-forma
consolidated results for the years ended December 31, 1998 and 1997 would not be
materially different from those presented in the consolidated statements of
operations.
 
                                       44
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
5. ACQUISITIONS (CONTINUED)
    Effective January 1, 1997, the Company acquired the remaining 51% of a
subsidiary company for aggregate consideration of approximately $9,927,000. The
acquisition was accounted for as a purchase with the purchase price allocated
among the assets acquired and liabilities assumed based upon the fair values at
the date of acquisition and any excess as goodwill. The purchase price exceeded
the fair value of the net assets acquired by approximately $5,556,000.
 
    In May 1997, the Company acquired a 54.75% ownership interest in a cable
television company for aggregate consideration of approximately $10,925,000. The
acquisition was accounted for as a purchase with the purchase price allocated
among the assets acquired and liabilities assumed based upon the fair values at
the date of acquisition and any excess as goodwill. The results of the acquired
company have been included with the Company's results since the date of
acquisition. The purchase price exceeded the fair value of the net assets
acquired by approximately $9,910,000. Included in minority interest at December
31, 1997 is approximately $450,000 relating to the acquisition of this
subsidiary.
 
    During 1997 the Company acquired certain cable television system assets and
subscriber lists for aggregate consideration of approximately $3,200,000. The
acquisitions were accounted for as a purchase with the purchase price allocated
among the fixed assets acquired based upon their fair values at the dates of
acquisition and any excess to goodwill. The purchase prices exceeded the fair
value of the assets acquired by approximately $548,000.
 
    During 1996, the Company acquired substantially all of the cable television
system assets of twenty-six cable television companies for aggregate
consideration of approximately $15,600,000. The acquisitions were accounted for
as purchases with the purchase price allocated among the assets acquired and
liabilities assumed based upon their fair values at the date of acquisition and
any excess as goodwill. The results of the acquired companies have been included
with the Company's results since their dates of acquisition. The purchase prices
exceeded the fair value of the net assets acquired by approximately $5,800,000.
 
6. DIVESTITURE OF SUBSIDIARY
 
    During February 1998, @ Entertainment, Inc., the Company's parent, purchased
substantially all of the assets and liabilities of one of the Company's
subsidiaries, including a note payable to the Company for $6,527,000, for
consideration of $100. The transfer was accounted for at historical cost in a
manner similar to a pooling of interests. The difference between the amount of
cash disbursed and the fair value of the liabilities assumed and the historical
cost of the net assets acquired, of approximately $3,031,000, was accounted for
as a reduction of the accumulated deficit. Prior period financial statements
have been restated to reflect the transfer.
 
                                       45
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
7. INTANGIBLES
 
    Intangible assets consist of the following:
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          --------------------
<S>                                                                       <C>        <C>
                                                                            1998       1997
                                                                          ---------  ---------
 
<CAPTION>
                                                                             (IN THOUSANDS)
<S>                                                                       <C>        <C>
Conduit and franchise agreements........................................  $   5,409  $   5,391
Goodwill................................................................     17,527     13,338
Non-compete agreements..................................................     19,006      9,406
Other...................................................................      1,336      1,543
                                                                          ---------  ---------
                                                                             43,278     29,678
Less accumulated amortization...........................................     (8,797)    (3,360)
                                                                          ---------  ---------
Net intangible assets...................................................  $  34,481  $  26,318
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
8. OTHER CURRENT AND NON-CURRENT ASSETS
 
    Included in other current assets is $0 and $1,322,000 of VAT receivables as
of December 31, 1998 and 1997, respectively.
 
    Included in other non-current assets at December 31, 1998 and 1997 are
deferred financing costs of $6,289,000 and $7,127,000, respectively relating to
the PCI notes (refer to note 10).
 
9. INCOME TAXES
 
    Income tax (expense)/benefit consists of:
<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                   -------------------------------
<S>                                                                <C>        <C>        <C>
                                                                     1998       1997       1996
                                                                   ---------  ---------  ---------
 
<CAPTION>
                                                                           (IN THOUSANDS)
<S>                                                                <C>        <C>        <C>
Current:
  U.S. Federal...................................................  $      --  $   1,438  $    (714)
  State and local................................................         --         --       (531)
  Foreign........................................................       (210)      (463)       (28)
                                                                   ---------  ---------  ---------
                                                                   $    (210) $     975  $  (1,273)
                                                                   ---------  ---------  ---------
                                                                   ---------  ---------  ---------
</TABLE>
 
    Sources of loss before income taxes and minority interest are as follows:
<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
<S>                                                           <C>         <C>         <C>
                                                                 1998        1997       1996
                                                              ----------  ----------  ---------
 
<CAPTION>
                                                                       (IN THOUSANDS)
<S>                                                           <C>         <C>         <C>
Domestic loss...............................................  $   (6,138) $   (9,913) $  (2,602)
Foreign income loss.........................................     (30,845)    (19,536)    (4,632)
                                                              ----------  ----------  ---------
                                                              $  (36,983) $  (29,449) $  (7,234)
                                                              ----------  ----------  ---------
                                                              ----------  ----------  ---------
</TABLE>
 
                                       46
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
9. INCOME TAXES (CONTINUED)
    Income tax (expense)/benefit was $(210,000), $975,000 and $(1,273,000) for
the years ended December 31, 1998, 1997, and 1996, respectively, and differed
from the amounts computed by applying the U.S. federal income tax rate of 34
percent to pretax loss as a result of the following:
<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                                  --------------------------------
<S>                                                                               <C>         <C>        <C>
                                                                                     1998       1997       1996
                                                                                  ----------  ---------  ---------
 
<CAPTION>
                                                                                           (IN THOUSANDS)
<S>                                                                               <C>         <C>        <C>
Computed "expected" tax benefit.................................................  $   12,574  $  10,013  $   2,460
Non-deductible expenses and other permanent differences.........................       2,911        962        (17)
Change in valuation allowance...................................................      (4,358)    (8,748)    (3,504)
Adjustment for change in functional currency bases..............................     (11,311)        --         --
Adjustment to deferred tax asset for enacted changes in tax rates...............        (695)      (789)        --
Foreign tax rate differences....................................................         606       (463)      (184)
Other...........................................................................          63         --        (28)
                                                                                  ----------  ---------  ---------
                                                                                  $     (210) $     975  $  (1,273)
                                                                                  ----------  ---------  ---------
                                                                                  ----------  ---------  ---------
</TABLE>
 
    The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                              ---------------------
<S>                                                                                           <C>         <C>
                                                                                                 1998       1997
                                                                                              ----------  ---------
 
<CAPTION>
                                                                                                 (IN THOUSANDS)
<S>                                                                                           <C>         <C>
Deferred tax assets:
  Foreign net operating loss carryforwards..................................................  $   13,883  $   4,135
  Domestic net operating loss carry forwards................................................       1,842         --
  Interest income...........................................................................       2,650      1,946
  Service revenue...........................................................................       2,101      1,948
  Accrued liabilities.......................................................................       3,608      2,537
  Deferred costs............................................................................          --        903
  Unrealized foreign exchange losses........................................................       9,066      5,614
  Other.....................................................................................          --        274
                                                                                              ----------  ---------
Total gross deferred tax assets.............................................................      33,150     17,357
Less valuation allowance....................................................................     (21,715)   (17,357)
                                                                                              ----------  ---------
Net deferred tax assets.....................................................................  $   11,435  $      --
                                                                                              ----------  ---------
                                                                                              ----------  ---------
Deferred tax liabilities:
  Fixed assets depreciation.................................................................  $  (11,311) $      --
  Other.....................................................................................        (124)        --
                                                                                              ----------  ---------
                                                                                              ----------  ---------
Total gross deferred tax liabilities........................................................  $  (11,435) $      --
                                                                                              ----------  ---------
                                                                                              ----------  ---------
Net deferred tax liability..................................................................  $       --  $      --
                                                                                              ----------  ---------
                                                                                              ----------  ---------
</TABLE>
 
    The net increase in the valuation allowance for the years ended December 31,
1998, 1997 and 1996 was $4,358,000, $8,748,000 and $3,504,000, respectively. In
assessing the realizability of deferred tax assets,
 
                                       47
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
9. INCOME TAXES (CONTINUED)
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible.
Management considers projected future taxable income and tax planning strategies
in making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred tax
assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net of the
existing valuation allowances at December 31, 1998.
 
    Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of December 31, 1998 will be reported in the consolidated
statement of operations.
 
    Foreign tax loss carryforwards can be offset against the PTK Companies'
taxable income and utilized at a rate of one-third per year in each of the three
years subsequent to the year of the loss. If there is no taxable income in a
given year during the carryforward period, the portion of the loss carryforward
to be utilized is permanently forfeited. For losses incurred in the U.S. taxable
years prior to 1998, loss carryforwards can be applied against taxable income
three years retroactively and fifteen years into the future. For losses incurred
in the U.S. from 1998, loss carry forwards can be applied against taxable income
two years retroactively and twenty years into the future.
 
    At December 31, 1998, the Company has foreign net operating loss
carryforwards of approximately $46,250,000, which expire as follows:
 
<TABLE>
<CAPTION>
                                                                                      (IN
YEAR ENDING DECEMBER 31,                                                          THOUSANDS)
-------------------------------------------------------------------------------  -------------
<S>                                                                              <C>
1999...........................................................................    $  15,344
2000...........................................................................       14,092
2001...........................................................................       16,814
                                                                                 -------------
                                                                                   $  46,250
                                                                                 -------------
                                                                                 -------------
</TABLE>
 
10. NOTES PAYABLE
 
    Notes payable consist of the following:
<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                        ----------------------
<S>                                                                     <C>         <C>
                                                                           1998        1997
                                                                        ----------  ----------
 
<CAPTION>
                                                                            (IN THOUSANDS)
<S>                                                                     <C>         <C>
PCI notes, net of discount............................................  $  129,627  $  129,578
American Bank in Poland S.A. revolving credit loan....................       6,500          --
Bank Rozwoju Exportu S.A. Deutsche-Mark ("DM") facility...............       1,912          --
Other.................................................................         402         532
                                                                        ----------  ----------
Total notes payable...................................................     138,441     130,110
  Less: current portion...............................................      (6,500)         --
                                                                        ----------  ----------
Notes payable, net of current portion.................................  $  131,941  $  130,110
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>
 
                                       48
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
10. NOTES PAYABLE (CONTINUED)
 
PCI NOTES
 
    On October 31, 1996, PCI sold $130,000,000 aggregate principal amount of
Senior Notes ("PCI Notes") to an initial purchaser pursuant to a purchase
agreement. The initial purchaser subsequently completed a private placement of
the PCI Notes. In June, 1997, substantially all of the outstanding PCI Notes
were exchanged for an equal aggregate principal amount of publicly-registered
PCI Notes.
 
    The PCI Notes have an interest rate of 9 7/8% and have a maturity date of
November 1, 2003. Interest is paid on the PCI Notes on May 1 and November 1 of
each year. As of December 31, 1998 and 1997, the Company accrued interest
expense of $2,140,000 and $2,175,000, respectively.
 
    Prior to November 1, 1999, PCI may redeem up to a maximum of 33% of the
initially outstanding aggregate principal amount of the PCI Notes with some or
all of the net proceeds of one or more public equity offerings at a redemption
price equal to 109.875% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption; provided that immediately after
giving effect to such redemption, at least $87 million aggregate principal
amount of the PCI Notes remains outstanding.
 
    The PCI Notes are net of unamortized discount of $373,000 and $422,000 at
December 31, 1998 and 1997, respectively. The effective interest rate of the PCI
Notes is approximately 11.3%.
 
    PCI has pledged to State Street Bank and Trust Company, the trustee for the
PCI Notes (for the benefit of the holders of the PCI Notes) intercompany notes
issued by PCBV, of a minimum aggregate principal amount (together with cash and
cash equivalents of PCI), equal to at least 110% of the outstanding principal
amount of the PCI Notes, and in the aggregate, provide cash collateral or bear
interest and provide for principal repayments, as the case may be, in amounts
sufficient to pay interest on the PCI Notes. Notes payable from PCBV to PCI are
$160,450,000 and $134,509,000 at December 31, 1998 and 1997, respectively.
 
    Pursuant to the PCI Indenture, PCI is subject to certain restrictions and
covenants, including, without limitation, covenants with respect to the
following matters: (i) limitation on additional indebtedness; (ii) limitation on
restricted payments; (iii) limitation on issuances and sales of capital stock of
subsidiaries; (iv) limitation on transactions with affiliates; (v) limitation on
liens; (vi) limitation on guarantees of indebtedness by subsidiaries; (vii)
purchase of PCI Notes upon a change of control; (viii) limitation on sale of
assets; (ix) limitation on dividends and other payment restrictions affecting
restricted subsidiaries; (x) limitation on investments in unrestricted
subsidiaries; (xi) limitation on lines of business; and (xii) consolidations,
mergers and sales of assets. As of December 31, 1998, the Company was in
compliance with such covenants.
 
    Condensed parent only financial statements of Poland Communication, Inc. are
provided in Note 11, in compliance with the requirements of Rule 5-04 and 12-04
of the Securities and Exchange Commission's Regulation S-X.
 
AMERICAN BANK IN POLAND S.A. REVOLVING LOAN FACILITY
 
    The revolving loan facility allowing the Company to borrow up to a maximum
principal amount of $6,500,000 on or before December 31, 1998, was fully drawn
as at December 31, 1998. The facility bears interest at LIBOR plus 3.0% (8.03%
as at December 31, 1998), is repayable in full on August 20, 1999, and is
secured by promissory notes en blanc from certain of the Company's subsidiaries,
and pledges of the shares of certain of the Company's subsidiaries.
 
                                       49
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
10. NOTES PAYABLE (CONTINUED)
BANK ROZWOJU EKSPORTU S.A DEUTSCHE-MARK FACILITY
 
    The Deutsche-Mark facility represents a credit facility of DM 3,948,615 of
which approximately DM 3,204,000 was outstanding at December 31, 1998. The
facility bears interest at LIBOR plus 2.0% (5.25% as at December 31, 1998), is
repayable in full on December 27, 2002, and is ultimately secured by a pledge of
the common shares of one of the Company's subsidiaries.
 
    Interest expense relating to notes payable was approximately $14,320,000,
$13,281,000, and $4,687,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
 
    In 1996, the Company recorded an extraordinary loss related to the early
retirement of debt. The extraordinary loss was comprised of a $147,000
prepayment penalty and a $1,566,000 write-off of deferred financing costs.
 
11. CONDENSED PARENT ONLY FINANCIAL INFORMATION OF PCI
 
    The following parent only condensed financial statements were prepared in
accordance with U.S. GAAP in a manner consistent with the consolidated financial
statements except that all subsidiaries have been accounted for under the equity
method.
 
                       CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                                  ---------------------------------
<S>                                                                               <C>         <C>         <C>
                                                                                     1998        1997       1996
                                                                                  ----------  ----------  ---------
 
<CAPTION>
                                                                                           (IN THOUSANDS)
<S>                                                                               <C>         <C>         <C>
Operating costs and expenses:
  Selling, general and administrative...........................................  $    1,498  $    3,250  $   1,061
                                                                                  ----------  ----------  ---------
  Operating loss................................................................      (1,498)     (3,250)    (1,061)
                                                                                  ----------  ----------  ---------
Interest and investment income..................................................         415       2,619      1,076
Interest expense................................................................     (14,320)    (13,879)    (2,612)
Loss of subsidiaries............................................................     (21,790)    (18,988)    (2,775)
                                                                                  ----------  ----------  ---------
Loss before income taxes........................................................     (37,193)    (33,498)    (5,372)
Income tax benefit/(expense)....................................................          --       1,438     (1,245)
                                                                                  ----------  ----------  ---------
  Net loss......................................................................     (37,193)    (32,060)    (6,617)
Accretion of redeemable preferred stock.........................................      (4,106)     (4,194)    (2,870)
Preferred stock dividends.......................................................          --          --     (1,738)
Excess of carrying value of preferred stock over consideration paid.............          --          --      3,549
                                                                                  ----------  ----------  ---------
Net loss applicable to common stockholders......................................  $  (41,299) $  (36,254) $  (7,676)
                                                                                  ----------  ----------  ---------
                                                                                  ----------  ----------  ---------
</TABLE>
 
                   CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                                  ---------------------------------
<S>                                                                               <C>         <C>         <C>
                                                                                     1998        1997       1996
                                                                                  ----------  ----------  ---------
 
<CAPTION>
                                                                                           (IN THOUSANDS)
<S>                                                                               <C>         <C>         <C>
Net Loss........................................................................  $  (37,193) $  (32,060) $  (6,617)
Other comprehensive income:
  Translation adjustment........................................................         586          --         --
                                                                                  ----------  ----------  ---------
Comprehensive loss..............................................................  $  (36,607) $  (32,060) $  (6,617)
                                                                                  ----------  ----------  ---------
                                                                                  ----------  ----------  ---------
</TABLE>
 
                                       50
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
11. CONDENSED PARENT ONLY FINANCIAL INFORMATION OF PCI (CONTINUED)
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                            ----------------------
<S>                                                                                         <C>         <C>
                                                                                               1998        1997
                                                                                            ----------  ----------
 
<CAPTION>
                                                                                                (IN THOUSANDS)
<S>                                                                                         <C>         <C>
ASSETS
Cash and cash equivalents.................................................................  $      160  $   18,214
Investment securities.....................................................................          --          --
 
Accounts receivable, net..................................................................          60         290
Other current assets......................................................................         148          74
                                                                                            ----------  ----------
Total current assets......................................................................         368      18,578
Other assets..............................................................................       6,289       6,906
Net investment in restricted net assets of wholly-owned subsidiaries......................     102,344     121,977
Net investment in unrestricted net assets of wholly-owned subsidiaries....................      52,032      32,677
Notes receivable from affiliates..........................................................         449          --
                                                                                            ----------  ----------
Total assets..............................................................................  $  161,482  $  180,138
                                                                                            ----------  ----------
                                                                                            ----------  ----------
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)/EQUITY
Accounts payable and accrued expenses.....................................................  $    2,382  $    1,125
Accrued interest..........................................................................       2,140       2,175
Income taxes payable......................................................................       3,417       3,878
Notes payable.............................................................................     136,127     129,592
                                                                                            ----------  ----------
Total liabilities.........................................................................     144,066     136,770
 
Redeemable preferred stock................................................................      30,977      39,149
Stockholders' (deficiency)/equity:
  Common stock, $.01 par value; 27,000 shares authorized, 18,948 shares issued and
    outstanding...........................................................................           1           1
  Paid-in capital.........................................................................      78,380      59,553
Accumulated other comprehensive income....................................................         586          --
  Accumulated deficit.....................................................................     (92,528)    (55,335)
                                                                                            ----------  ----------
Total stockholders' (deficiency)/equity...................................................     (13,561)      4,219
                                                                                            ----------  ----------
Total liabilities and stockholders' (deficiency)/equity...................................  $  161,482  $  180,138
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
                                       51
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
11. CONDENSED PARENT ONLY FINANCIAL INFORMATION OF PCI (CONTINUED)
           CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIENCY)
 
<TABLE>
<CAPTION>
                                       REDEEMABLE                           ACCUMULATED OTHER
                                        PREFERRED     COMMON      PAID-IN     COMPREHENSIVE    ACCUMULATED
                                          STOCK        STOCK      CAPITAL        INCOME          DEFICIT       TOTAL
                                       -----------  -----------  ---------  -----------------  ------------  ----------
<S>                                    <C>          <C>          <C>        <C>                <C>           <C>
                                                                  (IN THOUSANDS)
Balance at January 1, 1996...........   $  10,311    $   4,993   $   1,544      $      --       $  (16,658)  $      190
  Net loss...........................          --           --          --             --           (6,617)      (6,617)
  Stock dividend.....................       1,738           --      (1,738)            --               --           --
  Issuance of stock..................          --       (4,992)     53,837             --               --       48,845
  Preferred stock redemption.........     (12,049)          --       3,549             --               --       (8,500)
  Accretion of redeemable preferred
    stock............................          --           --      (2,870)            --               --       (2,870)
                                       -----------  -----------  ---------          -----      ------------  ----------
Balance at December 31, 1996.........          --            1      54,322             --          (23,275)      31,048
  Net loss...........................          --           --          --             --          (32,060)     (32,060)
  Stock option compensation
    expense..........................          --           --       9,425             --               --        9,425
  Accretion of redeemable preferred
    stock............................          --           --      (4,194)            --               --       (4,194)
                                       -----------  -----------  ---------          -----      ------------  ----------
Balance at December 31, 1997.........   $      --    $       1   $  59,553             --       $  (55,335)  $    4,219
  Net loss...........................          --           --          --             --          (37,193)     (37,193)
  Translation adjustment.............          --           --          --            586               --          586
  Capital contribution...............          --           --      10,655             --               --       10,655
  Cancellation of Series B redeemable
    preferred
    stock............................          --           --      12,278             --               --       12,278
  Accretion of redeemable preferred
    stock............................          --           --      (4,106)            --               --       (4,106)
                                       -----------  -----------  ---------          -----      ------------  ----------
Balance at December 31, 1998.........   $      --    $       1   $  78,380      $     586       $  (92,528)  $  (13,561)
                                       -----------  -----------  ---------          -----      ------------  ----------
                                       -----------  -----------  ---------          -----      ------------  ----------
</TABLE>
 
                                       52
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
11. CONDENSED PARENT ONLY FINANCIAL INFORMATION OF PCI (CONTINUED)
                       CONDENSED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                               -----------------------------------
<S>                                                                            <C>         <C>         <C>
                                                                                  1998        1997        1996
                                                                               ----------  ----------  -----------
Cash flows from operating activities:
  Net loss...................................................................  $  (37,193) $  (32,060) $    (6,617)
  Adjustments to reconcile net loss to net cash (used in)/ provided by
    operating activities:
    Amortization of notes payable discount and issue costs...................         882       1,040          164
    Gain on sale of investment securities....................................          --        (358)          --
    Non-cash stock option compensation.......................................          --       9,425           --
    Loss in subsidiaries.....................................................      21,790      18,988       12,862
  Changes in operating assets and liabilities:
    Accounts receivable......................................................         230        (142)         (35)
    Other current assets.....................................................         (74)        346       (1,300)
    Accounts payable.........................................................       1,257      (1,864)       3,900
    Income taxes payable.....................................................        (461)       (594)       4,472
    Other current liabilities................................................          --          --       (1,045)
                                                                               ----------  ----------  -----------
      Net cash (used in)/ provided by operating activities...................     (13,569)     (5,219)      12,401
                                                                               ----------  ----------  -----------
Cash flows from investing activities:
  Proceeds from maturity of investment securities............................          --      25,473      (25,115)
  Notes receivable from affiliate............................................        (449)      8,491       (8,200)
  Investment in, and loans and advances to subsidiaries......................     (21,013)    (63,826)    (122,337)
                                                                               ----------  ----------  -----------
      Net cash provided by investing activities..............................     (21,462)    (29,862)    (155,652)
                                                                               ----------  ----------  -----------
Cash flows from financing activities
  Proceeds from notes payables...............................................       6,500          --       81,001
  Increase in paid-in capital................................................      10,655          --           --
  Proceeds from notes payables...............................................          --          --      136,074
  Repayment of notes payables................................................        (176)         --      (10,000)
  Cost to obtain loans.......................................................          --      (1,749)     (15,013)
                                                                               ----------  ----------  -----------
      Net cash provided by/(used in) financing activities....................      16,977      (1,749)     192,062
                                                                               ----------  ----------  -----------
      Net (decrease) / increase in cash and cash equivalents.................     (18,054)    (36,830)      48,811
 
Cash and cash equivalents at beginning of year...............................      18,214      55,044        6,233
                                                                               ----------  ----------  -----------
Cash and cash equivalents at end of year.....................................  $      160  $   18,214  $    55,044
                                                                               ----------  ----------  -----------
                                                                               ----------  ----------  -----------
</TABLE>
 
12. STOCKHOLDERS' EQUITY
 
    The Company had outstanding at December 31, 1995, 985 shares of preferred
stock, which was convertible into 812 shares of class A common stock. The
Company had the option of redeeming the preferred stock in whole or in part from
January 1, 1996 through December 31, 2002. However, as discussed below, the
preferred stock was exchanged for new series D preferred stock during March
1996.
 
                                       53
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
12. STOCKHOLDERS' EQUITY (CONTINUED)
    During February 1996, the Company issued to certain stockholders an
additional 2,437 shares of class A common stock in accordance with the
provisions of the Shareholder Agreement dated June 27, 1991. The shares were
issued at a nominal value of $.01 each. Also during February 1996, the Company
issued a stock dividend of 166 shares of series A preferred stock to the
preferred stock stockholder.
 
    During March 1996, the Company completed several transactions including
restating its certificate of incorporation, issuing new shares of stock,
redeeming preferred stock, and the repayment of affiliate debt. The restated
certificate of incorporation of the Company authorized a new class of $.01 par
common stock, $1 par series A preferred stock, $.01 par series B preferred
stock, $.01 par series C preferred stock, and $.01 par series D preferred stock.
All shares of class A and class B common stock previously issued and outstanding
were exchanged for new common stock. All issued and outstanding shares of
preferred stock were exchanged for new series D preferred stock, which was
subsequently redeemed for $8,500,000. Only common stock and series B preferred
stock retained voting rights and only holders of common stock were entitled to
receive dividends. Each series of preferred stock has redemption provisions; the
series B preferred stock was also convertible into common stock.
 
    During March 1996, the Company issued 4,662 shares of common stock, 4,000
shares of series A preferred stock, and 2,500 shares of series B preferred stock
to ECO in exchange for $65,000,000; and 2,000 shares of series C preferred stock
and 812 shares of common stock were issued to PIHLP in exchange for $17,029,000.
The total cost associated with the issuance of such stock was $1,028,000
resulting in net proceeds to the Company of $81,001,000. Of this amount,
$32,156,000 was allocated as the value of the preferred stock representing its
mandatory redemption value on October 31, 2004 discounted at 12%. As discussed
in Note 1, the series A preferred stock and series C preferred stock were
subsequently purchased by the Company's parent, @Entertainment and the Series B
preferred stock was transferred to @Entertainment in exchange for @Entertainment
Series B preferred stock.
 
    As part of the Assignment and the Capital Adjustment discussed in Note 1,
the stock options granted to certain PCI executive officers in January, April
and June of 1997 were amended to provide that each option to purchase a share of
PCI's common stock was exchanged for an option to purchase 1,000 shares of
@Entertainment's common stock, with a proportionate reduction in the per share
exercise price. The exercise prices for certain of these options were
substantially below the IPO price of $21 per share for @Entertainment's common
stock. Accordingly, the Company has recognized approximately $9,425,000 of
non-cash compensation expense included in selling, general, and administrative
expenses during 1997 related to these options representing a portion of
difference between the exercise prices of the options and their fair market
value on the date of grant.
 
13. REDEEMABLE PREFERRED STOCK
 
    The series A, series B and series C preferred stock have a mandatory
redemption date of October 31, 2004. At the option of the Company, the series A,
series B and series C preferred stock may be redeemed at any time in whole or in
part. The redemption price per share of the series A, series B and series C
preferred stock is $10,000.
 
    The preferred stock has been recorded at its mandatory redemption value on
October 31, 2004 discounted at 12% to December 31, 1998. The Company
periodically accretes from paid-in capital an amount that will provide for the
redemption value at October 31, 2004. On August 6, 1998, the Company's
 
                                       54
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
13. REDEEMABLE PREFERRED STOCK (CONTINUED)
parent, @Entertainment, Inc., consented to the cancellation of its 2,500 Series
B redeemable preference shares. The accreted value of those shares at that time,
approximately $12,278,000 was reclassified to paid-in capital. The total amount
recorded for accretion for the years ended December 31, 1998, 1997 and 1996 was
$4,106,000, $4,194,000 and $2,870,000, respectively.
 
14. RELATED PARTY TRANSACTIONS
 
    During the ordinary course of business, the Company enters into transactions
with affiliated parties. The principal related party transactions are described
below.
 
    DUE TO AFFILIATE
 
    Amounts due to affiliate primarily represent advances and payments made on
behalf of the Company by its parent @ Entertainment.
 
    STOCK OPTION COMPENSATION EXPENSE
 
    Included in selling, general and administrative expense in 1997 is
approximately $9,425,000 of compensation expense related to the difference
between the exercise price of certain options issued by @ Entertainment, Inc.
and their fair market value on the date of grant. Since the executives, to whom
the options were issued, spent a portion of their time providing services to the
Company, management allocated a portion of the costs to the Company using what
management believes is a reasonable method of allocation.
 
    PRINT MEDIA SERVICES
 
    An affiliate of the Company provides print media services to the Company.
The Company incurred operating costs related to those services of $4,355,000,
for the year ended December 1998. The Company did not incur any costs from this
affiliate in prior years. Included in accounts payable at December 31, 1998 is
$1,114,000 due to this affiliate.
 
    PROGRAMMING
 
    Affiliates of the Company provide programming to PCI and its subsidiaries.
The Company incurred programming fees from these affiliates of $12,831,000,
$559,000 and $412,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
 
15. STOCK OPTION PLAN
 
    On June 22, 1997, the Company's parent adopted a stock option plan (the
"1997 Plan") pursuant to which @Entertainment's Board of Directors may grant
stock options to officers, key employees and consultants of the Company. The
1997 Plan authorizes grants of options to purchase up to 4,436,000 shares,
subject to adjustment in accordance with the 1997 Plan. At December 31, 1998,
options for 250,000 shares have been granted to employees of PCI.
 
    Stock options are granted with an exercise price that must be at least equal
to the stock's fair market value at the date of grant. With respect to any
participant who owns stock possessing more than 10% of the
 
                                       55
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
15. STOCK OPTION PLAN (CONTINUED)
voting power of all classes of stock of the Company, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market value
on the grant date and the maximum term of an incentive stock option must not
exceed five years. The term of all other options granted under the 1997 Plan may
not exceed ten years. Options become exercisable at such times as determined by
the Board of Directors and as set forth in the individual stock option
agreements. Generally, all stock options vest ratably over 2 to 5 years
commencing one year after the date of grant.
 
    During 1998, there were 250,000 stock options granted to employees of PCI at
an exercise price of $12.00 per share and a remaining contractual life of 9
years. Of this amount, 125,000 options are exercisable as of December 31, 1998.
No options were exercised or forfeited during 1998.
 
    The per share weighted-average fair value of stock options granted during
1998 was $4.12 on the date of grant using the Black Scholes option-pricing model
with the following weighted-average assumptions: expected volatility 43.0%,
expected dividend yield 0.0%, risk-free interest rate of 5.77%, and an expected
life of 4 years.
 
    Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net loss and
net loss per share would have increased to the pro forma amounts indicated
below:
 
<TABLE>
<CAPTION>
                                                                                                      1998
                                                                                               -------------------
<S>                                                                                            <C>
                                                                                                 (IN THOUSANDS,
                                                                                                EXCEPT PER SHARE
                                                                                                      DATA)
Net loss--as reported........................................................................           (37,193)
Net loss--pro forma..........................................................................           (37,965)
Basic and diluted net loss per share--as reported............................................         (2,179.60)
Basic and diluted loss per share--pro forma..................................................         (2,220.34)
</TABLE>
 
16. COMMITMENTS AND CONTINGENCIES
 
    LEASES
 
    The Company leases several offices and warehouses within Poland under
cancelable operating lease terms.
 
    The Company also leases space within various telephone duct systems from
TPSA under cancelable operating leases. The TPSA leases expire at various times,
and a substantial portion of the Company's contracts with TPSA permit
termination by TPSA without penalty at any time either immediately upon the
occurrence of certain conditions or upon provision of three to six months notice
without cause. Refer to Note 16 for further detail.
 
    All of the agreements provide that TPSA is the manager of the telephone duct
system and will lease space within the ducts to the Company for installation of
cable and equipment for the cable television systems. The lease agreements
provide for monthly lease payments that are adjusted quarterly or annually,
except for the Gdansk lease agreement which provides for an annual adjustment
after the sixth year and then remains fixed through the tenth year of the lease.
 
                                       56
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
    Minimum future lease commitments for the aforementioned conduit leases
relate to 1999 only, as all leases are cancelable in accordance with the
aforementioned terms. The future minimum lease commitments related to these
conduit leases approximates $622,000 for the first six months of 1999.
 
    Total rental expense associated with the aforementioned operating leases for
the years ended December 31, 1998, 1997 and 1996 was $2,446,000, $1,423,000 and
$984,000, respectively, related to these leases.
 
    PROGRAMMING COMMITMENTS
 
    The Company has entered into programming agreements with certain third party
content providers. The programming agreements have terms which range from one to
five years and require that payments for programs be paid either at a fixed
amount or based upon the number of subscribers connected to the system each
month. Through the end of the agreement terms, the Company has a minimum
commitment of approximately $2,792,500 in 1999, $3,784,130 in 2000, $4,470,7000
in 2001, $4,872,323 in 2002, $5,077,575 in 2003 and $5,128,250 in 2004. For the
years ended December 31, 1998, 1997 and 1996, the Company incurred programming
fees of approximately $1,320,000, $1,782,000 and $1,758,000, respectively,
pursuant to these agreements.
 
    REGULATORY APPROVALS
 
    The Company is in the process of obtaining permits from the Polish State
Agency for Radiocommunications ("PAR") for several of its cable television
systems. If these permits are not obtained, PAR could impose penalties such as
fines or in severe cases, revocation of all permits held by an operator or the
forfeiture of the operator's cable networks. Management of the Company does not
believe that these pending approvals result in a significant risk to the
Company.
 
    LITIGATION AND CLAIMS
 
    Two of the Company's cable television subsidiaries and four other unrelated
Polish cable operators and HBO Polska Sp. z o.o., have been made defendants in a
lawsuit instituted by Polska Korporacja Telewizyjna Sp. z o.o., a subsidiary of
Canal+. The primary defendant in the proceedings is HBO Polska Sp. z o.o. which
is accused of broadcasting the HBO television program in Poland without a
license from the Council as required by the Radio and Television Act of 1992, as
amended, and thereby undertaking an activity constituting an act of unfair
competition. The Company does not believe that the final disposition of the
lawsuit will have a material adverse effect on its consolidated financial
position or results of operations.
 
    From time to time, the Company is subject to various claims and suits
arising out of the ordinary course of business. While the ultimate result of all
such matters is not presently determinable, based upon current knowledge and
facts, management does not expect that their resolution will have a material
adverse effect on the Company's consolidated financial position or results of
operations.
 
                                       57
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
17. CONCENTRATIONS OF BUSINESS AND CREDIT RISK
 
    USE OF TPSA CONDUITS
 
    The Company's ability to build out its existing cable television networks
and to integrate acquired systems into its cable television networks depends on,
among other things, the Company's continued ability to design and obtain access
to network routes, and to secure other construction resources, all at reasonable
costs and on satisfactory terms and conditions. Many of such factors are beyond
the control of the Company. In addition, at December 31, 1998, approximately
56.5% of the Company's cable plant had been constructed utilizing pre-existing
conduits of TPSA. A substantial portion of the Company's contracts with TPSA for
the use of such conduits permits termination by TPSA without penalty at any time
either immediately upon the occurrence of certain conditions or upon provision
of three to six months' notice without cause. The Company expects to renew these
leases on or before the expiration dates.
 
    LIMITED INSURANCE COVERAGE
 
    While the Company carries general liability insurance on its properties,
like many other operators of cable television systems it does not insure the
underground portion of its cable televisions networks. Accordingly, any
catastrophe affecting a significant portion of the Company's cable television
networks could result in substantial uninsured losses and could have a material
adverse effect on the Company.
 
    YEAR 2000
 
    The Company is dependent upon computer systems and other technological
devices with imbedded microprocessor chips that are intended to utilize dates
and process data beyond December 31, 1999. In January 1997, the Company
developed a plan to address the impact that potential year 2000 problems may
have on Company operations and to implement necessary changes to address such
problems (the "Y2K Plan"). During the course of the development of its Y2K Plan,
the Company has identified certain critical operations, which need to be year
2000 compliant for the Company to operate effectively. These critical operations
include accounting and billing systems, customer service and service delivery
systems, and field and headend devices.
 
    Largely as a result of its high rate of growth over the past few years, the
Company has entered into an agreement to purchase a new system to replace its
current accounting system and an agreement to purchase specialized billing
software for the Company's new customer service and billing center. The vendors
of the new accounting system and of the billing software have confirmed to the
Company that these products are year 2000 compliant. The Company has completed
the testing phase of the new accounting system, and the implementation phase was
substantially completed at the end of 1998. The Company expects implementation
of the billing software to be completed for the majority of its cable
subscribers by the end of 1999.
 
    The Company believes that its most significant year 2000 risk is its
dependency upon third party programming, software, services and equipment,
because the Company does not have the ability to control third parties in their
assessment and remediation procedures for potential year 2000 problems. Should
these parties not be prepared for year 2000 conversion, their products or
services may fail and may cause interruptions in, or limitations upon, the
Company's provision of the full range of its cable service to its customers. In
an effort to prevent any such interruptions or limitations, the Company is in
the process of communicating with each of its material third party suppliers of
programming, software, services and
 
                                       58
<PAGE>
                          POLAND COMMUNICATIONS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
17. CONCENTRATIONS OF BUSINESS AND CREDIT RISK (CONTINUED)
equipment to determine the status of their year 2000 compliance programs. The
Company expects to complete this process by September 30, 1999, and it
anticipates that all phases of its Y2K Plan will be completed by December 31,
1999.
 
    The Company has not yet developed a contingency plan to address the
situation that may result if the Company or its third party suppliers are unable
to achieve year 2000 compliance with regard to any products or services utilized
in the Company's operations. The Company does not intend to decide on the
development of such a contingency until it has gathered all of the relevant Year
2000 compliance data from its third party suppliers.
 
    The Company has not yet determined the full cost of its Y2K Plan and its
related impact on the financial condition of the Company. The Company has to
date not incurred any replacement or remediation costs for equipment or systems
as a result of year 2000 non-compliance. Rather, due to the rapid growth and
development of its cable system the Company has made substantial capital
investments in equipment and systems for reasons other than year 2000 concerns.
The total cost of the Company's new accounting system and billing software
package is estimated to be approximately $2,400,000.
 
    The Company believes that any year 2000 compliance issues it may face can be
remedied without a material financial impact on the Company, but no assurance
can be made in this regard until all of the data has been gathered from the
Company's third party suppliers. At this date the Company cannot predict the
financial impact on its operations if year 2000 problems are caused by products
or services supplied to the Company by such third parties.
 
    CREDITWORTHINESS
 
    All of the Company's customers are located in Poland. As is typical in this
industry, no single customer accounted for more than five percent of the
Company's sales in 1998 or 1997. The Company estimates an allowance for doubtful
accounts based on the credit worthiness of its customers as well as general
economic conditions. Consequently, an adverse change in those factors could
effect the Company's estimate of its bad debts.
 
                                       59
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Poland Cablevision (Netherlands) B.V.:
 
    We have audited the accompanying consolidated balance sheets of Poland
Cablevision (Netherlands) B.V. and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of operations, comprehensive loss,
changes in stockholders' deficiency and cash flows for each of the years in the
three-year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company'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 in the United States of America. 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 Poland
Cablevision (Netherlands) B.V. and subsidiaries as of December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1998, in conformity with
generally accepted accounting principles in the United States of America.
 
                                          KPMG
 
Warsaw, Poland
March 29, 1999
 
                                       60
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                            ----------------------
<S>                                                                                         <C>         <C>
                                                                                               1998        1997
                                                                                            ----------  ----------
 
<CAPTION>
                                                                                                (IN THOUSANDS)
<S>                                                                                         <C>         <C>
                                          ASSETS
Current assets:
  Cash and cash equivalents...............................................................  $    1,463  $    4,951
  Accounts receivable, net of allowances for doubtful accounts of $708,000 in 1998 and
    $608,000 in 1997......................................................................       1,904       1,222
  Other current assets (note 6)...........................................................         535       1,283
                                                                                            ----------  ----------
    Total current assets..................................................................       3,902       7,456
                                                                                            ----------  ----------
Property, plant and equipment:
  Cable television system assets..........................................................     136,833     108,475
  Vehicles................................................................................       1,704       1,619
  Other...................................................................................       5,832       3,246
                                                                                            ----------  ----------
                                                                                               144,369     113,340
      Less accumulated depreciation.......................................................     (40,041)    (27,378)
                                                                                            ----------  ----------
  Net property, plant and equipment.......................................................     104,328      85,962
Inventories for construction..............................................................       6,638       5,887
Intangibles, net (note 6).................................................................      13,711       9,887
                                                                                            ----------  ----------
      Total assets........................................................................  $  128,579  $  109,192
                                                                                            ----------  ----------
                                                                                            ----------  ----------
 
                         LIABILITIES AND STOCKHOLDERS' DEFICIENCY
 
Current liabilities:
  Accounts payable and accrued expenses...................................................  $    7,809  $    2,592
  Deferred revenue........................................................................         565         609
                                                                                            ----------  ----------
    Total current liabilities.............................................................       8,374       3,201
                                                                                            ----------  ----------
Due to affiliate (note 8).................................................................      26,491      14,505
Notes payable to affiliates (note 8)......................................................     160,830     134,509
                                                                                            ----------  ----------
    Total liabilities.....................................................................     195,695     152,215
                                                                                            ----------  ----------
Minority interest.........................................................................          --       2,523
 
Commitments and contingencies (notes 10 and 11)
 
Stockholders' deficiency:
  Capital stock par value, $0.50 par; 200,000 shares authorized, issued and outstanding...         100         100
  Paid-in capital.........................................................................      14,589       4,713
  Accumulated other comprehensive income..................................................         424          --
  Accumulated deficit.....................................................................     (82,229)    (50,359)
                                                                                            ----------  ----------
    Total stockholders' deficiency........................................................     (67,116)    (45,546)
                                                                                            ----------  ----------
    Total liabilities and stockholders' deficiency........................................  $  128,579  $  109,192
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       61
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                ----------------------------------
<S>                                                                             <C>         <C>         <C>
                                                                                   1998        1997        1996
                                                                                ----------  ----------  ----------
 
<CAPTION>
                                                                                          (IN THOUSANDS)
<S>                                                                             <C>         <C>         <C>
Cable television revenue......................................................  $   36,038  $   28,818  $   22,882
 
Operating expenses:
  Direct operating expenses (note 8)..........................................      23,705       8,215       6,427
  Selling, general and administrative expenses (note 8).......................      14,349      16,007       7,885
  Depreciation and amortization...............................................      15,033      12,770       9,003
                                                                                ----------  ----------  ----------
    Total operating expenses..................................................      53,087      36,992      23,315
                                                                                ----------  ----------  ----------
    Operating loss............................................................     (17,049)     (8,174)       (433)
Interest income...............................................................         130         186         183
Interest expense (note 8).....................................................     (12,975)    (11,253)    (10,058)
Foreign exchange loss, net....................................................         (78)     (1,425)       (938)
                                                                                ----------  ----------  ----------
  Loss before income taxes and minority interest..............................     (29,972)    (20,666)    (11,246)
Income tax expense (note 7)...................................................         (52)       (175)        (21)
Minority interest.............................................................      (1,846)        794         988
                                                                                ----------  ----------  ----------
  Loss before extraordinary item..............................................     (31,870)    (20,047)    (10,279)
Extraordinary item-loss on early extinguishment of debt (note 9)..............      --          --          (1,713)
                                                                                ----------  ----------  ----------
  Net loss....................................................................  $  (31,870) $  (20,047) $  (11,992)
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
  Basic and diluted net loss per common share:
    Loss before extraordinary item............................................  ($  159.35) ($  100.24) ($   51.39)
    Extraordinary item........................................................          --          --       (8.57)
                                                                                ----------  ----------  ----------
    Net loss..................................................................  $  (159.35) $  (100.24) $   (59.96)
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       62
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                ----------------------------------
<S>                                                                             <C>         <C>         <C>
                                                                                   1998        1997        1996
                                                                                ----------  ----------  ----------
 
<CAPTION>
                                                                                          (IN THOUSANDS)
<S>                                                                             <C>         <C>         <C>
Net loss......................................................................  $  (31,870) $  (20,047) $  (11,992)
Other comprehensive income:
  Translation adjustment......................................................         424          --          --
                                                                                ----------  ----------  ----------
Comprehensive loss............................................................  $  (31,446) $  (20,047) $  (11,992)
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       63
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
 
<TABLE>
<CAPTION>
                                                                                            ACCUMULATED
                                                 CAPITAL STOCK                                 OTHER
                                                      PAR         PAID-IN   ACCUMULATED    COMPREHENSIVE
                                                     VALUE        CAPITAL     DEFICIT         INCOME         TOTAL
                                                ---------------  ---------  ------------  ---------------  ----------
<S>                                             <C>              <C>        <C>           <C>              <C>
                                                                           (IN THOUSANDS)
Balance January 1, 1996.......................     $     100     $      --   $  (18,320)     $      --     $  (18,320)
  Net loss....................................            --            --      (11,992)            --        (11,992)
                                                       -----     ---------  ------------         -----     ----------
Balance December 31, 1996.....................           100            --      (30,312)            --        (30,212)
  Net loss....................................            --            --      (20,047)            --        (20,047)
  Stock option compensation expense...........            --         4,713           --          4,713             --
                                                       -----     ---------  ------------         -----     ----------
Balance December 31, 1997.....................           100         4,713      (50,359)            --        (45,546)
  Net loss....................................            --            --      (31,870)            --        (31,870)
  Capital contribution (note 4)...............            --         9,876           --             --          9,876
  Translation adjustment......................            --            --           --            424            424
                                                       -----     ---------  ------------         -----     ----------
Balance December 31, 1998.....................     $     100     $  14,589   $  (82,229)     $     424     $  (67,116)
                                                       -----     ---------  ------------         -----     ----------
                                                       -----     ---------  ------------         -----     ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       64
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                ----------------------------------
<S>                                                                             <C>         <C>         <C>
                                                                                   1998        1997        1996
                                                                                ----------  ----------  ----------
 
<CAPTION>
                                                                                          (IN THOUSANDS)
<S>                                                                             <C>         <C>         <C>
Cash flows from operating activities:
  Net loss....................................................................  $  (31,870) $  (20,047) $  (11,992)
  Adjustments to reconcile net loss to net cash provided by operating
    activities:
    Minority interest.........................................................       1,846        (794)       (988)
    Depreciation and amortization.............................................      15,033      12,770       9,003
    Non-cash portion of extraordinary item....................................          --          --       1,566
    Interest expense added to notes payable to affiliates.....................      12,921      11,253       7,844
    Non-cash stock option compensation expense................................          --       4,713          --
    Other.....................................................................         496          --          --
    Changes in operating assets and liabilities:
      Accounts receivable.....................................................        (682)       (507)       (439)
      Other current assets....................................................         753         396        (328)
      Accounts payable and accrued expenses...................................       5,205        (111)       (447)
      Deferred revenue........................................................         (46)       (214)       (310)
      Amounts due to affiliates...............................................      11,986       3,346       8,589
                                                                                ----------  ----------  ----------
        Net cash provided by operating activities.............................      15,642      10,805      12,498
                                                                                ----------  ----------  ----------
Cash flows from investing activities:
      Construction and purchase of property, plant and equipment..............     (32,530)    (27,734)    (21,065)
      Purchase of intagible assets............................................          --        (500)         --
      Other investments.......................................................          --          --         171
      Purchase of subsidiaries, net of cash received..........................      (9,876)         --      (7,657)
                                                                                ----------  ----------  ----------
        Net cash used in investing activities.................................     (42,406)    (28,234)    (28,551)
                                                                                ----------  ----------  ----------
Cash flows from financing activities:
      Repayment of notes payable..............................................          --          --     (11,670)
      Capital contribution....................................................       9,876          --          --
      Proceds from borrowings from affiliates.................................      13,400      15,365      32,460
                                                                                ----------  ----------  ----------
        Net cash provided by financing activities.............................      23,276      15,365      20,790
                                                                                ----------  ----------  ----------
Net (decrease)/increase in cash and cash equivalents..........................      (3,488)     (2,064)      4,737
Cash and cash equivalents at beginning of year................................       4,951       7,015       2,278
                                                                                ----------  ----------  ----------
Cash and cash equivalents at end of year......................................  $    1,463  $    4,951  $    7,015
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
Supplemental cash flow information:
        Cash paid for interest................................................  $       --  $       --  $    2,067
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
        Cash paid for income taxes............................................  $      231  $      175  $      282
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       65
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
 
    REPORTING ENTITY AND DESCRIPTION OF BUSINESS
 
    Poland Cablevision (Netherlands) B.V. ("PCBV"), a Netherlands corporation,
is a holding company that holds a controlling interest in several Polish cable
television operators (collectively referred to as the "PTK Companies"). Poland
Cablevision (Netherlands) B.V. and subsidiaries (the "Company") is 92.3% owned
by Poland Communications, Inc. ("PCI"), who is in turn, owned 100% by
@Entertainment, Inc. a Delaware corporation which is a publicly listed company
in the United States.
 
    The Company offers cable television services to residential and business
customers in Poland. All significant assets and operating activities of the
Company are located in Poland.
 
    BASIS OF PRESENTATION
 
    The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America.
 
    The consolidated financial statements include the financial statements of
the Company and its wholly owned and majority owned foreign subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
 
    CASH EQUIVALENTS
 
    For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investment balances with original maturities of
three months or less to be cash equivalents.
 
    USE OF ESTIMATES
 
    Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with U.S. GAAP. Actual results could differ from those
estimates.
 
    REVENUE RECOGNITION
 
    Revenue is primarily derived from the sale of cable television services to
retail customers in Poland. Revenue from subscription fees is recognized on a
monthly basis, as the service is provided. Installation fee revenue, for
connection to the Company's cable television systems, is recognized to the
extent of direct selling costs and the balance is deferred and amortized into
income over the estimated average period that new subscribers are expected to
remain connected to the system.
 
    TAXATION
 
    Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
 
                                       66
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
    NETHERLANDS TAXATION:
 
    The income tax treaty currently in force between the Netherlands and the
United States provides that the Netherlands may impose a withholding tax at a
maximum rate of 5% on dividends paid by PCBV to its stockholders.
 
    FOREIGN TAXATION:
 
    The PTK Companies are subject to corporate income taxes, value added tax
(VAT) and various local taxes within Poland, as well as import duties on
materials imported by them into Poland. Under Polish law, the PTK Companies are
exempt from import duties on certain in-kind capital contributions.
 
    The PTK Companies' income tax is calculated in accordance with Polish tax
regulations. Due to differences between accounting practices under Polish tax
regulations and those required by U.S. GAAP, certain income and expense items
are recognized in different periods for financial reporting purposes and income
tax reporting purposes which may result in deferred income tax assets and
liabilities.
 
PROPERTY, PLANT AND EQUIPMENT
 
    Property, plant and equipment includes assets used in the development and
operation of the various cable television systems. During the period of
construction, plant costs and a portion of design, development and related
overhead costs are capitalized as a component of the Company's investment in
cable television systems. When material, the Company capitalizes interest costs
incurred during the period of construction in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 34, "CAPITALIZATION OF INTEREST
COST". During 1998, 1997 and 1996, no interest costs were capitalized.
 
    Depreciation is calculated for financial reporting purposes using the
straight-line method over the following estimated useful lives:
 
<TABLE>
<S>                                                                <C>
Cable television system assets...................................  10 years
Vehicles.........................................................  5 years
                                                                   5-10
Other property, plant and equipment..............................  years
</TABLE>
 
    INVENTORIES FOR CONSTRUCTION
 
    Inventories for construction are stated at the lower of cost, determined by
the average cost method, or net realizable value. Inventories are principally
related to work-in-progress in the various cable television systems.
 
    GOODWILL AND OTHER INTANGIBLES
 
    Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally ten years.
 
    The Company has entered into lease agreements with the Polish national
telephone company ("TPSA"), for the use of underground telephone conduits for
cable wiring. Costs related to obtaining conduit and franchise agreements with
housing cooperatives and governmental authorities are capitalized and amortized
generally over a period of ten years. In the event the Company does not proceed
to develop cable systems within designated cities, costs previously capitalized
will be charged to expense.
 
                                       67
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
    MINORITY INTEREST
 
    Recognition of the minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests' allocable
portion of the equity of those consolidated subsidiaries.
 
    FOREIGN CURRENCIES
 
    Foreign currency transactions are recorded at the exchange rate prevailing
at the date of the transactions. Assets and liabilities denominated in foreign
currencies are remeasured at the rates of exchange at the consolidated balance
sheet date. Gains and losses on foreign currency transactions are included in
the consolidated statement of operation.
 
    The financial statements of foreign subsidiaries are translated into U.S.
dollars using (i) exchange rates in effect at period end for assets and
liabilities, and (ii) average exchange rates during the period for results of
operations. Adjustments resulting from translation of financial statements are
reflected in accumulated other comprehensive income as a separate component of
stockholders' equity.
 
    Effective January 1, 1998, Poland is on longer deemed to be a highly
inflationary economy. In accordance with this change, the Company established a
new functional currency basis for nonmonetary items in accordance with
guidelines established within EITF Issue 92-4, "ACCOUNTING FOR A CHANGE IN
FUNCTIONAL CURRENCY WHEN AN ECONOMY CEASES TO BE CONSIDERED HIGHLY
INFLATIONARY." That basis is computed by translating the historical reporting
currency amount of non-monetary items into the local currency at current
exchange rates. As a result of this change, the Company's functional currency
bases exceeded the local currency tax bases of non-monetary items. The
difference between the new functional currency and the tax bases have been
recognized as temporary differences.
 
    Prior to January 1, 1998 the financial statements of foreign subsidiaries
were translated into U.S. dollars using (i) exchange rates in effect at period
end for monetary assets and liabilities, (ii) exchange rates in effect at
transaction dates (historical rates) for non-monetary assets and liabilities,
and (iii) average exchange rates during the period for revenues and expenses,
other than those revenues and expenses that relate to non-monetary assets and
liabilities (primarily amortization of fixed assets and intangibles) which are
translating using the historical exchange rates applicable to those non-monetary
assets and liabilities. Adjustments resulting from translation of financial
statements are reflected as foreign exchange gains or losses in the consolidated
statements of operations.
 
    BASIC AND DILUTED NET LOSS PER SHARE
 
    Basic loss per share has been computed by dividing net loss attributable to
common stockholders by the weighted average number of common shares outstanding
during the period. The Company does not have any potential common shares,
accordingly, dilutive loss per share is the same as basic loss per share.
 
    FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    SFAS No. 107, "DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS"
requires the Company to make disclosures of fair value information of all
financial instruments, whether or not recognized on the consolidated balance
sheets, for which it is practicable to estimate fair value.
 
    The Company's financial instruments include cash and cash equivalents,
accounts receivable, other current assets, accounts payable and accrued
expenses, due to affiliates and notes payable to affiliate.
 
                                       68
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
    As of December 31, 1998 and 1997, the carrying value of the cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses, and the
other current assets on the consolidated balance sheets approximates fair value
due to the short maturity of these instruments.
 
    It was not practicable to estimate the fair value of amounts due to or from
affiliates and notes payable to affiliate due to the nature of these
instruments, the circumstances surrounding their issuance, and the absence of
quoted market prices for similar financial instruments.
 
    IMPAIRMENT OF LONG-LIVED ASSETS
 
    PCBV assesses the recoverability of long-lived assets (mainly property,
plant and equipment and intangibles) on a regular basis by determining whether
the carrying value of the assets can be recovered over the remaining lives
through projected undiscounted future operating cash flows expected to be
generated by such assets. If an impairment in value is estimated to have
occurred, the assets carrying value is reduced to its estimated fair value. The
assessment of the recoverability of long-lived assets will be impacted if
estimated future operating cash flows are not achieved.
 
    COMMITMENTS AND CONTINGENCIES
 
    Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties, and other sources are recorded when it is
probable that a liability has been incurred and the amount of the assessment can
be reasonably estimated.
 
    ADVERTISING COSTS
 
    All advertising costs of the Company are expensed as incurred.
 
    RECLASSIFICATIONS
 
    Certain amounts have been reclassified in the prior consolidated financial
statements to conform to the 1998 consolidated financial statement presentation.
 
2. FINANCIAL POSITION AND BASIS OF ACCOUNTING
 
    These consolidated financial statements have been prepared on a going
concern basis which contemplates the continuation and expansion of trading
activities as well as the realization of assets and liquidation of liabilities
in the ordinary course of business. Cable television operators typically
experience losses and negative cash flow in their initial years of operation due
to the large capital investment required for the construction or acquisition of
their cable networks and the administrative costs associated with commencing
operations. Consistent with this pattern, the Company has incurred substantial
operating losses since inception. Additionally, the Company is currently and is
expected to continue to be highly leveraged. The Company's continuation as a
going concern is dependent on its ability to generate sufficient cash flows to
meet its obligations on a timely basis and its parent's continued support
through the provision of financing. The present intention of PCI, the Company's
parent, is not to seek repayment of the notes payable by the Company to PCI
until the Company generates sufficient cash flow or liquidity to support such
repayments. (See note 8).
 
                                       69
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
3. VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
                                                                                 ADDITIONS
                                                                 BALANCE AT     CHARGED TO       AMOUNTS       BALANCE AT
                                                                  JANUARY 1       EXPENSE      WRITTEN OFF     DECEMBER 31
                                                                -------------  -------------  -------------  ---------------
<S>                                                             <C>            <C>            <C>            <C>
                                                                                       (IN THOUSANDS)
1996
Allowance for Doubtful Accounts...............................    $     510      $     240      $     313       $     437
1997
Allowance for Doubtful Accounts...............................    $     437      $     442      $     271       $     608
1998
Allowance for Doubtful Accounts...............................    $     608      $     742      $     642       $     708
</TABLE>
 
4. ACQUISITIONS
 
    Effective January 1, 1998, the Company has applied push-down accounting to
the 1997 acquisition by the Company's parent, Poland Communications, Inc., of
the remaining 51% of a subsidiary of the Company for aggregate consideration of
approximately $9,927,000. The acquisition has been accounted for as a purchase
with the purchase price allocated among the assets acquired and liabilities
assumed based upon the fair values at the date of acquisition and any excess to
goodwill. The consideration paid by the Company's parent has been treated as a
January 1, 1998 capital contribution to the Company. The purchase price exceeded
the fair value of the net assets acquired by approximately $5,556,000. Prior
period financial statements have not been restated to reflect the push-down
accounting of this transaction on the date of acquisition.
 
    During 1998, the Company acquired certain cable television assets and
subscriber list for aggregate consideration of approximately $1,400,000. The
acquisitions have been accounted for as purchases with the purchase price
allocated among the fixed assets acquired based upon their fair values at date
of acquisition and any excess to goodwill. The purchase prices did not
materially exceed the fair value of the assets acquired.
 
    During 1997, the Company acquired certain cable television system assets and
subscriber lists for aggregate consideration of approximately $2,500,000. The
acquisitions have been accounted for as purchases with the purchase price
allocated among the fixed assets acquired based upon their fair values at date
of acquisition and any excess to goodwill. The purchase prices exceeded the fair
value of the assets acquired by approximately $500,000.
 
    During 1996, the Company acquired substantially all of the cable television
assets of eighteen cable television companies for aggregate consideration of
approximately $9,400,000. The acquisitions have been accounted for as purchases
with the purchase price allocated among the assets acquired and liabilities
assumed based upon their fair values at the date of acquisition. The results of
the acquired companies have been included in the Company's results since their
dates of acquisition. The purchase prices exceeded the fair value of the net
assets acquired by approximately $5,800,000.
 
5. OTHER CURRENT ASSETS
 
    Included in other current assets is $0 and $914,000 of VAT receivables as of
December 31, 1998 and 1997, respectively.
 
                                       70
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
6. INTANGIBLES
 
    Intangible assets are carried at cost and consist of the following:
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          --------------------
<S>                                                                       <C>        <C>
                                                                            1998       1997
                                                                          ---------  ---------
 
<CAPTION>
                                                                             (IN THOUSANDS)
<S>                                                                       <C>        <C>
Conduit and franchise agreements........................................  $   4,436  $   4,418
Goodwill................................................................     12,081      6,499
Other...................................................................      1,001        997
                                                                          ---------  ---------
                                                                             17,518     11,914
Less accumulated amortization...........................................     (3,807)    (2,027)
                                                                          ---------  ---------
Net intangible assets...................................................  $  13,711  $   9,887
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
7. INCOME TAXES
 
    PCBV is required to file a separate Netherlands tax return which does not
include the operating results of the PTK Companies. Income tax expense consisted
of the following:
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED
                                                                                DECEMBER 31,
                                                                       -------------------------------
<S>                                                                    <C>        <C>        <C>
                                                                         1998       1997       1996
                                                                       ---------  ---------  ---------
 
<CAPTION>
                                                                               (IN THOUSANDS)
<S>                                                                    <C>        <C>        <C>
Current:
Netherlands..........................................................  $      --  $     (38) $      (9)
Foreign jurisdictions................................................        (52)      (137)       (12)
                                                                       ---------  ---------        ---
                                                                       $     (52) $    (175) $     (21)
                                                                       ---------  ---------        ---
                                                                       ---------  ---------        ---
</TABLE>
 
    The majority of the 1998 income tax expense is applicable to one Polish
subsidiary which cannot, under Polish tax regulations, utilize the benefit of
other subsidiaries' tax loss carryforwards.
 
    Income tax expense was $(52,000), $(175,000) and $(21,000) for the years
ended December 31, 1998, 1997 and 1996, respectively, and differed from the
amounts computed by applying the U.S. federal income tax rate of 34 percent to
pretax loss as a result of the following:
 
<TABLE>
<CAPTION>
                                                                                        YEAR ENDED DECEMBER 31,
                                                                                    -------------------------------
                                                                                      1998       1997       1996
                                                                                    ---------  ---------  ---------
<S>                                                                                 <C>        <C>        <C>
                                                                                            (IN THOUSANDS)
Computed "expected" tax benefit...................................................  $  10,190  $   7,026  $   3,824
Non-deductible expenses and other permanent differences...........................        841     (3,522)      (434)
Change in valuation allowance.....................................................     (2,918)    (4,000)    (3,636)
Adjustment for change in functional currency bases................................      8,287         --         --
Adjustment to deferred tax asset for enacted changes in tax rates.................       (478)       (92)        --
Foreign tax rate differences......................................................        599        413        225
                                                                                    ---------  ---------  ---------
                                                                                    $     (52) $    (175) $     (21)
                                                                                    ---------  ---------  ---------
                                                                                    ---------  ---------  ---------
</TABLE>
 
                                       71
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
7. INCOME TAXES (CONTINUED)
    The tax effect of temporary differences and carryforwards which give rise to
deferred tax assets and liabilities are as follows:
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          ---------------------
                                                                             1998       1997
                                                                          ----------  ---------
<S>                                                                       <C>         <C>
                                                                             (IN THOUSANDS)
Deferred tax assets:
  Unrealized foreign exchange losses....................................  $    8,445  $   4,800
  Accrued expenses......................................................       1,393        800
  Tax loss carryforwards................................................       9,967      3,000
                                                                          ----------  ---------
Total deferred tax asset................................................      19,805      8,600
  Less valuation allowance..............................................     (11,518)    (8,600)
                                                                          ----------  ---------
Net deferred tax assets.................................................  $    8,287  $      --
                                                                          ----------  ---------
                                                                          ----------  ---------
Deferred tax liabilities:
Fixed assets depreciation...............................................  $   (8,287) $      --
                                                                          ----------  ---------
Total gross deferred tax liabilities....................................  $   (8,287) $      --
                                                                          ----------  ---------
                                                                          ----------  ---------
Net deferred tax liability..............................................  $       --  $      --
                                                                          ----------  ---------
                                                                          ----------  ---------
</TABLE>
 
    In assessing the recoverability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
projected future taxable income and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, management believes that it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowance at December 31, 1998.
 
    Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of December 31, 1998 will be reported in the consolidated
statement of operations.
 
    Foreign tax loss carryforwards can be offset against the PTK Companies'
taxable income and utilized at a rate of one-third per year in each of the three
years subsequent to the year of the loss. If there is no taxable income in a
given year during the carryforward period, the portion of the loss carryforward
to be utilized is permanently forfeited. During 1998, approximately $3,700,000
of net operating loss carryforwards available to the PTK Companies forfeited.
 
                                       72
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
7. INCOME TAXES (CONTINUED)
    At December 31, 1998, the PTK Companies had net operating loss carryforwards
of approximately $29,269,000, which will expire as follows:
 
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,                                                       (IN THOUSANDS)
------------------------------------------------------------------------------
<S>                                                                             <C>
1999..........................................................................    $   11,176
2000..........................................................................         9,936
2001..........................................................................         8,157
                                                                                     -------
                                                                                  $   29,269
                                                                                     -------
                                                                                     -------
</TABLE>
 
8. RELATED PARTY TRANSACTIONS
 
    During the ordinary course of business, the Company enters into transactions
with entities under common control of the stockholders and affiliated parties.
The principal related party transactions are described below.
 
    NOTES PAYABLE TO AFFILIATE
 
    Notes payable to affiliate of $160,830,000 and $134,509,000 at December 31,
1998 and 1997, respectively, consists of an unsecured demand note and unpaid
interest due to PCI. The notes between PCI and PCBV are revolving credit
facilities which call for the borrower to pay 10% interest, payable monthly, on
the outstanding principal amount and contain standard events of default for
related-party indebtedness. All of these notes become due on June 30, 2001.
 
    Interest expense of $12,974,000, $11,253,000 and $7,844,000 was incurred by
the Company in connection with affiliate borrowings during the years ended
December 31, 1998, 1997 and 1996, respectively. Of this expense, $12,974,000,
$11,253,000 and $7,844,000, has been added to the loan balance for the years
ended December 31, 1998, 1997 and 1996, respectively.
 
    Using the funds provided in the aforementioned notes between PCI and PCBV,
PCBV has entered into a series of 10% grid notes with certain of its
subsidiaries. PCBV's intercompany notes have been pledged for the benefit of
holders of the publicly-registered PCI notes.
 
    Pursuant to the PCI Indenture, PCBV is subject to certain restriction,
including, without limitation, restriction with respect to the following
matters: (i) limitation on additional indebtedness; (ii) limitation on
restricted payments; (iii) limitation on issuances and sales of capital stock of
subsidiaries; (iv) limitation on transactions with affiliates; (v) limitation on
liens; (vi) limitation on guarantees of indebtedness by subsidiaries; (vii)
purchase of PCI Notes upon a change of control; (viii) limitation on sale of
assets; (ix) limitation on dividends and other payment restrictions affecting
subsidiaries; (x) limitation on investments in unrestricted subsidiaries; (xi)
limitation on lines of business; and (xii) consolidations, mergers and sales of
assets.
 
    PCI's present intention is not to seek repayment of the aforementioned
affiliate notes payable until the Company generates sufficient cash flow or
liquidity to support such repayments.
 
                                       73
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
8. RELATED PARTY TRANSACTIONS (CONTINUED)
    DUE TO AFFILIATE
 
    Amounts due to affiliate of $26,491,000 and $14,505,000 at December 31, 1998
and 1997, respectively, are non-interest bearing and primarily represent amounts
owed to PCI for management fees, purchases and services. Payment of management
consulting fees are contingent until such time as net income of the PTK
Companies' is sufficient to service the fee.
 
    SERVICE AND OVERHEAD ALLOCATION AGREEMENTS
 
    PCI entered into service agreements with PCBV and other of its direct and
indirect subsidiaries pursuant to which PCI provides various services, including
administrative, technical, managerial, financial, operational and marketing
services to each of the subsidiaries and PCBV serves as PCI's agent. PCI also
entered into a service agreement, dated December 31, 1995, with PCBV and ETV,
whereby PCBV is the principal service provider and PCI acts as agent to PCBV.
 
    The Service Agreements also typically require the subsidiaries to reimburse
PCBV for any reasonable out-of-pocket expenses incurred by PCBV or PCI, acting
as agent for PCBV, including salaries and benefits, housing allowances, travel
expenses, and equipment supply or other goods costs. The agreements expired on
December 31, 1997, but were automatically extended for successive one-year
periods unless a party gives notice on or before January 31, in which case the
agreement will terminate at the end of the calendar year during which such
notice was provided.
 
    PCI entered into a Corporate Overhead Allocation Agreement dated January 1,
1996 (the "Allocation Agreement") with certain of its direct or indirect
subsidiaries, including PCBV. The Allocation Agreement provides that costs
incurred by PCI or PCBV, acting as PCI's agent, with regard to the Service
Agreements and as otherwise requested by the PTK Companies shall be allocated
and charged to particular PTK Companies in the event they are directly
attributable to such subsidiaries, and shall otherwise be allocated equally
among each of the PTK Companies. With regard to services rendered and costs
incurred by subsidiaries for the benefit of some or all of the PTK Companies,
which include costs associated with maintaining a central office in Warsaw,
legal expenses, expenses relating to governmental relationships and approvals,
programming services, accounting, management information systems services, and
salaries associated with personnel whose duties clearly benefit other PTK
Companies, the Allocation Agreement provides that such expenses shall be
allocated between the PTK Companies. The Allocation Agreement terminates on
December 31, 1997, but is automatically renewed for successive one-year periods
unless at least thirty days written notice of termination is provided by PCI or
PCBV or any subsidiary, with respect to itself.
 
    Pursuant to guidance within SFAS No. 51, "FINANCIAL REPORTING BY CABLE
TELEVISION COMPANIES", certain reimbursed overhead costs of $152,000, $637,000
and $950,000 at December 31, 1998, 1997 and 1996, respectively, have been
capitalized and are included in investment in cable television system assets.
The remaining overhead costs allocated to the Company of $1,477,000, $1,470,000
and $1,162,000 during the years ended December 31, 1998, 1997 and 1996,
respectively, are included in corporate administration and operating expenses.
 
    STOCK OPTION COMPENSATION EXPENSE
 
    Included in selling, general and administrative expense in 1997 is
approximately $4,713,000 of compensation expense related to the difference
between the exercise price of certain options issued by
 
                                       74
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
8. RELATED PARTY TRANSACTIONS (CONTINUED)
@Entertainment, Inc. and their fair market value on the date of grant. Since the
executives, to whom the options were issued, spent a portion of their time
providing services to the Company, management allocated a portion of the costs
to the Company using what management believes is a reasonable method of
allocation.
 
    MANAGEMENT AGREEMENT
 
    The PTK Companies entered into management consulting agreements with PCI to
recommend, advise, and consult the PTK Companies as to design, construction,
development, and operation of the cable television systems. The agreements
typically provide that the subsidiary will pay to PCI an annual consulting fee
of $320,000 when and to the extent that the subsidiary's net income exceeds
zero. These contingent management consulting fees payable to PCI are reflected
in amounts "due to affiliate" in the accompanying consolidated balance sheets.
The management agreements also provide for an initial term ending as of the end
of the calendar year during which they became effective, and provide for
successive renewals for one-year periods unless the agreement is terminated in
writing with at least thirty days notice by either party. Management consulting
fees charged to corporate administration expense were $1,440,000, $1,440,000 and
$1,520,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
 
    PRINT MEDIA SERVICES
 
    An affiliate of the Company provides print media services to the Company.
The Company incurred operating costs related to those services of $2,943,000 for
the year ended December 1998. The Company did not incur any costs from this
affiliate in prior years. Included in accounts payable at December 31, 1998 is
$1,114,000 due to this affiliate. The Company did not incur any costs from this
affiliate in prior years.
 
    PROGRAMMING
 
    Affiliates of PCI provides programming to the PTK Companies. The Company
incurred programming fees from this affiliate of $8,651,000, $500,000 and
$412,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
 
9. EXTRAORDINARY ITEM
 
    In 1996 the Company recorded an extraordinary loss related to the early
retirement of debt. The extraordinary loss was comprised of a $147,000
prepayment penalty and a $1,566,000 write-off of deferred financing costs.
 
10. COMMITMENTS AND CONTINGENCIES
 
    LEASES
 
    The Company leases several offices and warehouses within Poland under
cancelable operating lease terms.
 
    The Company also leases space within various telephone duct systems from
TPSA under cancelable operating leases. The TPSA leases expire at various times,
and a substantial portion of the Company's contracts with TPSA permit
termination by TPSA without penalty at any time either immediately upon the
occurrence of certain conditions or upon provision of three to six months notice
without cause. All of the agreements provide that TPSA is the manager of the
telephone duct system and will lease space within the
 
                                       75
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
ducts to the Company for installation of cable and equipment for the cable
television systems. The lease agreements provide for monthly lease payments that
are adjusted quarterly or annually, except for the Gdansk lease agreement, which
provides for an annual adjustment after the sixth year and then remains fixed
through the tenth year of the lease. See Note 11 for further detail. Minimum
future lease commitments for the aforementioned leases relate to 1999 only, as
all leases are cancelable in accordance with the aforementioned terms. The
future minimum lease commitments related to these conduit leases approximates
$423,000 for the first six months of 1999. The Company expects to renew these
leases on or before the expiration dates.
 
    Total rental expense associated with the aforementioned operating leases for
the years ended December 31, 1998, 1997 and 1996 was $1,828,000, $1,094,000 and
$864,000, respectively.
 
    PROGRAMMING COMMITMENTS
 
    The Company's parent, PCI, has entered into programming agreements with
certain third party content providers. The programming agreements have terms
which range from one to five years and require that the license fees be paid
either at a fixed amount or based upon the number of subscribers connected to
the system each month. All programming agreements are signed between PCI and the
third-party programming suppliers, therefore, at December 31, 1998, no future
minimum commitment lies with the Company. For the years ended December 31, 1998,
1997 and 1996, the Company incurred programming fees of approximately
$2,579,000, $1,546,000 and $1,685,000, respectively, pursuant to these
agreements, which are allocated to the Company based on the number of
subscribers connected to the system each month.
 
    REGULATORY APPROVALS
 
    The Company is in the process of obtaining permits from the Polish State
Agency for Radiocommunications ("PAR") for several of its cable television
systems. If these permits are not obtained, PAR could impose penalties such as
fines or in severe cases, revocation of all permits held by an operator or the
forfeiture of the operator's cable networks. Management of the Company does not
believe that these pending approvals result in a significant risk to the
Company.
 
    One of the PTK Companies was not able to register several capital increases
that were filed in 1995, for an aggregate amount of PLN 2,000,000 (approximately
$569,000 at the December 31, 1998 conversion rate). The capital increases were
rejected by the relevant Registration Court, and the court's decision was lost
on appeal. Since the PTK Company received an in-kind contribution of equipment
in respect of the proposed capital increases, the non-recognition of the capital
increases by the Polish courts means that the contribution could be treated as
income in the hands of the PTK Company. As a result, part or all of the
contribution could be subject to corporate income tax of 40%. The PTK Company
had enough tax net operating loss in 1995 to offset any additional taxable
income resulting from an unfavorable treatment. PCBV has not recorded any
amounts related to this in the accompanying consolidated financial statements
due to the tax net operating loss and management's belief that this issue will
be resolved with no material effect on the consolidated financial position or
results of operations of the Company.
 
                                       76
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
    LITIGATION AND CLAIMS
 
    One of the Company's cable television subsidiaries and four other unrelated
Polish cable operators and HBO Polska Sp. z o.o., have been made defendants in a
lawsuit instituted by Polska Korporacja Telewizyjna Sp. z o.o., a subsidiary of
Canal+. The primary defendant in the proceedings is HBO Polska Sp. z o.o. which
is accused of broadcasting the HBO television program in Poland without a
license from the Council as required by the Radio and Television Act of 1992, as
amended, and thereby undertaking an activity constituting an act of unfair
competition. The Company does not believe that the final disposition of the
lawsuit will have a material adverse effect on its consolidated financial
position or results of operations.
 
    From time to time, the Company is subject to various claims and suits
arising out of the ordinary course of business. While the ultimate result of all
such matters is not presently determinable, based upon current knowledge and
facts, management does not expect that their resolution will have a material
adverse effect on the Company's consolidated financial position or results of
operations.
 
11. CONCENTRATIONS OF BUSINESS AND CREDIT RISK
 
    USE OF TPSA CONDUITS
 
    The Company's ability to build out its existing cable television networks
and to integrate acquired systems into its cable television networks depends on,
among other things, the Company's continued ability to design and obtain access
to network routes, and to secure other construction resources, all at reasonable
costs and on satisfactory terms and conditions. Many of such factors are beyond
the control of the Company. A substantial portion of the Company's contracts
with TPSA for the use of such conduits permits termination by TPSA without
penalty at any time either immediately upon the occurrence of certain conditions
or upon provision of three to six months' notice without cause.
 
    LIMITED INSURANCE COVERAGE
 
    While the Company carries general liability insurance on its properties,
like many other operators of cable television systems it does not insure the
underground portion of its cable televisions networks. Accordingly, any
catastrophe affecting a significant portion of the Company's cable television
networks could result in substantial uninsured losses and could have a material
adverse effect on the Company.
 
    YEAR 2000
 
    The Company is dependent upon computer systems and other technological
devices with imbedded microprocessor chips that are intended to utilize dates
and process data beyond December 31, 1999. In January 1997, the Company
developed a plan to address the impact that potential year 2000 problems may
have on Company operations and to implement necessary changes to address such
problems (the "Y2K Plan"). During the course of the development of its Y2K Plan,
the Company has identified certain critical operations, which need to be year
2000 compliant for the Company to operate effectively. These critical operations
include accounting and billing systems, customer service and service delivery
systems, and field and headend devices.
 
    Largely as a result of its high rate of growth over the past few years, the
Company has entered into an agreement to purchase a new system to replace its
current accounting system and an agreement to
 
                                       77
<PAGE>
                     POLAND CABLEVISION (NETHERLANDS) B.V.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                        DECEMBER 31, 1998, 1997 AND 1996
 
11. CONCENTRATIONS OF BUSINESS AND CREDIT RISK (CONTINUED)
purchase specialized billing software for the Company's new customer service and
billing center. The vendors of the new accounting system and of the billing
software have confirmed to the Company that these products are year 2000
compliant. The Company has completed the testing phase of the new accounting
system, and the implementation phase was substantially completed at the end of
1998. The Company expects implementation of the billing software to be completed
for the majority of its cable subscribers by the end of 1999.
 
    The Company believes that its most significant year 2000 risk is its
dependency upon third party programming, software, services and equipment,
because the Company does not have the ability to control third parties in their
assessment and remediation procedures for potential year 2000 problems. Should
these parties not be prepared for year 2000 conversion, their products or
services may fail and may cause interruptions in, or limitations upon, the
Company's provision of the full range of its cable service to its customers. In
an effort to prevent any such interruptions or limitations, the Company is in
the process of communicating with each of its material third party suppliers of
programming, software, services and equipment to determine the status of their
year 2000 compliance programs. The Company expects to complete this process by
September 30, 1999, and it anticipates that all phases of its Y2K Plan will be
completed by December 31, 1999.
 
    The Company has not yet developed a contingency plan to address the
situation that may result if the Company or its third party suppliers are unable
to achieve year 2000 compliance with regard to any products or services utilized
in the Company's operations. The Company does not intend to decide on the
development of such a contingency until it has gathered all of the relevant Year
2000 compliance data from its third party suppliers.
 
    The Company has not yet determined the full cost of its Y2K Plan and its
related impact on the financial condition of the Company. The Company has to
date not incurred any replacement or remediation costs for equipment or systems
as a result of year 2000 non-compliance. Rather, due to the rapid growth and
development of its cable system the Company had made substantial capital
investments in equipment and systems for reasons other than year 2000 concerns.
The total cost of the Company's new accounting system and billing software
package is estimated to be approximately $2,400,000.
 
    The Company believes that any year 2000 compliance issues it may face can be
remedied without a material financial impact on the Company, but no assurance
can be made in this regard until all of the data has been gathered from the
Company's third party suppliers. At this date the Company cannot predict the
financial impact on its operations if year 2000 problems are caused by products
or services supplied to the Company by such third parties.
 
    CREDITWORTHINESS
 
    All of the Company's customers are located in Poland. As is typical in this
industry, no single customer accounted for more than five percent of the
Company's sales in 1997 or 1996. The Company estimates an allowance for doubtful
accounts based on the credit worthiness of its customers as well as general
economic conditions. Consequently, an adverse change in those factors could
effect the Company's estimate of its bad debts.
 
                                       78
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE
 
    None.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
 
    The current directors and executive officers of the Company are:
 
<TABLE>
<CAPTION>
NAME                                                       AGE                            POSITION
-----------------------------------------------------      ---      -----------------------------------------------------
<S>                                                    <C>          <C>
Robert E. Fowler, III                                          40   Chairman of the Board of Directors
David T. Chase                                                 69   Director
Arnold L. Chase                                                47   Director
Scott A. Lanphere                                              33   Director
Jerzy Z. Swirski                                               41   Director
Przemyslaw A. Szmyt                                            36   Director
David Keefe                                                    49   Chief Executive Officer, Director
Dorothy E. Hansberry                                           46   Vice President and General Counsel
Warren L. Mobley, Jr                                           50   Chief Operating Officer and Execuitve Vice President
                                                                    of Marketing and Sales
Piotr M. Majchrzak                                             31   Chief Financial Officer
</TABLE>
 
CERTAIN INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
 
    Information with respect to the business experience and affiliations for the
past five years of the current directors and executive officers of the Company
is set forth below.
 
    ROBERT E. FOWLER, III has served as Chairman of the Board of Directors of
PCI since December 1997, and he served as its Chief Executive Officer from
December 1996 to December 1997, its Vice President from August 1993 to December
1996 and its Treasurer from April 1991 to December 1996. Mr. Fowler has served
as Chief Executive Officer and as a director of @Entertainment since May 1997.
From December 1993 to February 1997, he served as Vice President of D.T. Chase
Enterprises, Inc. From March 1995 to late 1996, Mr. Fowler served as a director
of ACCEL. Since April 1, 1998, Mr. Fowler has served on the Supervisory Board of
Twoj Styl. Mr. Fowler devoted approximately 35% of his working time to PCI and
approximately 65% of his working time to companies that were affiliated with
PCI.
 
    DAVID T. CHASE has been a director of PCI since its inception in 1990, and
was the Chairman of the Board of Directors of PCI from March 1996 until December
1997. Mr. Chase has served as Chairman of the Board of Directors of
@Entertainment since May 1997. Since January 1990, Mr. Chase has been a director
and President of D. T. Chase Enterprises, Inc. and David T. Chase Enterprises,
Inc., a diversified conglomerate with extensive holdings in real estate and
previously in media. He is also a director of ACCEL International Corporation
("ACCEL"), an insurance holding company.
 
    ARNOLD L. CHASE has served as a director of PCI since December 1996. Mr.
Chase served as President of the Managing Board of PTK-Warsaw from October, 1993
to September, 1996. Mr. Chase has served as a director of @Entertainment since
May 1997. Mr. Chase has also served as director and Executive Vice President and
as Treasurer of D.T. Chase Enterprises, Inc. since December 1990 and October
1992, respectively. Mr. Chase served PCI as Co-Chairman of the Board of
Directors from April 1991 to March 1996 and as its President from October 1992
to March 1996. Mr. Chase has been a director of International Bancorp, Inc. (the
parent company of First National Bank of New England) since 1985, and has been a
director of First National Bank of New England since 1972.
 
    SCOTT A. LANPHERE has served as a director of PCI since March 1996. He
served as a Managing Director of PCBV from May 1996 to October 1997. Mr.
Lanphere has served as a director of @Entertainment since May 1997. Mr. Lanphere
has served as a Director at Morgan Grenfell Private Equity Ltd. since
 
                                       79
<PAGE>
October 1998. Mr. Lanphere served as a Director of Investments for Advent
International plc from December 1994 to October 1998, and from May 1991 to
December 1994 served as an Investment Manager of Advent International plc.
 
    JERZY Z. SWIRSKI has served as a director of PCI since October 1996. Mr.
Swirski has served as a director of @Entertainment since May 1997. Mr. Swirski
has served as an Investment Director for Advent International plc since July
1995. From January 1995 to July 1995, Mr. Swirski was a consultant to Enterprise
Investors, a Polish equity firm. From 1991 to 1994, he was an officer of E.
Wedel S.A., a Polish subsidiary of PepsiCo Foods, International ("Wedel"), and
General Manager of Frito-Lay, Poland.
 
    PRZEMYSLAW A. SZMYT served as a director of PCI since December 1997 and
served as a Vice President and General Counsel of PCI from February 1997 until
December 1997. Mr. Szmyt has served as Senior Vice President of Business
Development since January 1999 and as Vice President, General Counsel and
Secretary of @Entertainment since May 1997. Mr Szmyt has served as a Managing
Director of PCBV since November 1997 and as a member of the Supervisory Board of
Twoj Styl since April 1998. Since January 1998, Mr. Szmyt has served as a member
of the Management Board of DTC Productions Sp. z o.o. Since December 1997, he
has served as a member of the Management Board of Wizja TV Sp. z o.o. From
September 1995 to February 1997, Mr. Szmyt was a director for Poland of
MeesPierson EurAmerica, an investment banking firm and affiliate of MeesPierson
N.V., a Dutch merchant bank. From early 1992 to August 1995, Mr. Szmyt was a
senior associate at Soltysinski, Kawecki & Szlezak, a law firm in Warsaw. From
October 1994 to late 1996, Mr. Szmyt served on the Management Board of
Telewizyjna Korporacja Partycypacyjna S.A., a holding company of Canal + Polska.
Mr. Szmyt is also a Board Member of United Way Poland and of Litewska Childrens'
Hospital Fundation.
 
    DAVID KEEFE has served as Chief Executive Officer and director of PCI since
January 1998. From December 1995 to December 1997, Mr. Keefe was Chief Executive
Officer of Kabelkom Hungary, a Hungarian cable company. From January 1994 to
December 1995, Mr. Keefe served as Cable Operations Director and a member of the
Board of Directors of Wharf Cable, a cable company in Hong Kong.
 
    DOROTHY E. HANSBERRY has served as Vice President and General Counsel of PCI
since January 1998. Since May 1996, Ms. Hansberry has served as the President of
Hansberry Consultants, Inc. From July 1997 to January 1998, she worked as an
attorney at Dewey Ballantine Sp. z o.o., a Warsaw law firm. From May 1996 to
July 1997, Ms. Hansberry was an attorney at Beata Gessel and Partners, a Warsaw
law firm, and was of-counsel to Bondurant, Mixson & Elmore, an Atlanta, Georgia
law firm. From December 1991 to October 1996, she served as legal advisor to
Eastern European anti-monopoly offices. From March 1994 to August 1995, Ms.
Hansberry acted as resident legal advisor to the Polish Anti-Monopoly Office.
From October 1980 to May 1996, she worked as a senior trial attorney in the
Antitrust Division of the U.S. Department of Justice.
 
    WARREN L. MOBLEY, JR.  has served as Chief Operating Officer of PCI since
December 1998, and has served as Executive Vice President of Marketing and Sales
since May 1998. From March 1997 to May 1998 Mr. Mobley served as President of
World Channel Ltd. From March 1993 to February 1997, Mr. Mobley served as Vice
President of Development of United International Holdings Asia.
 
    PIOTR M. MAJCHRZAK has served as Chief Financial Officer of PCI since July
1998. From April 1997 to June 1998, Mr. Majchrzak was Director of Finance and
Corporate Controller of the Company. From September 1992 to March 1997, Mr.
Majchrzak worked for Philip Morris Poland and ZPTK S.A., Polish subsidiaries of
Philip Morris International, most recently as Manager Financial Systems and
Accounting of ZPTK S.A.
 
BOARD OF DIRECTORS
 
    The Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), provides that seven individuals shall comprise the Board of
Directors.
 
                                       80
<PAGE>
    The By-Laws of the Company (the "By-Laws") provide that, in the absence of
their earlier resignation or removal, all Directors will serve until the next
annual meeting of shareholders (held the second Wednesday of August of each
year) following their election. The By-Laws provide that directors may resign or
may be removed (with or without cause) by the vote of stockholders representing
at least 61% of the total outstanding voting power. The By-Laws further provide
that, except as otherwise required by the laws of the State of New York or the
Certificate of Incorporation, vacancies in the Board of Directors shall be
filled by the vote of stockholders representing at least 61% of the total
outstanding voting power.
 
    The By-Laws provide that a majority of the entire board, determined without
respect to vacancies, constitutes a quorum of the Board of Directors. The
By-Laws further provide that the act of a majority of all of the Directors
present at a meeting for which there is a quorum shall be the act of the Board
of Directors, except as otherwise provided in the By-Laws, in the Certificate of
Incorporation or by the New York Business Corporation Law. Without limiting the
generality of the foregoing sentence, the By-Laws provide that the affirmative
action of four Directors shall be required to approve certain transactions
including the Company's annual budget, related party transactions and certain
extraordinary transactions. There are no standing committees of the Board of
Directors.
 
    The By-Laws provide for an annual meeting of the Board of Directors
immediately following the annual meeting of the shareholders of the Company.
Special meetings of the Board of Directors may be called by the Chief Executive
Officer, a Vice President or any two directors then in office.
 
ITEMS REQUIRING SUPERMAJORITY VOTE UNDER THE CERTIFICATE OF INCORPORATION
 
    The following actions require (i) the affirmative vote of at least six
directors, followed by the affirmative vote of the percentage of issued and
outstanding capital stock entitled to vote thereon at a meeting of the
shareholders as required under the New York Business Corporation Law ("NYBCL"),
if such action is required to be submitted to the shareholders under the NYBCL,
or (ii) if any such action is not approved by at least six directors, then any
such action will require the affirmative vote of at least 65% of the total
voting power of the capital stock issued and outstanding and entitled to vote
thereon, provided however that if board approval of such action is required
under the NYBCL, the action will also require the approval of the Board of
Directors at a special meeting of the Board of Directors (and for no purposes
other than the approval of actions taken pursuant to this subsection (ii)) for
which two-fifths of the total number of directors constitutes a quorum.
 
A. fundamental change in the business of the Company or any subsidiary;
 
B.  The adoption of, and approval of any modification to, the annual budget of
    the Company for each fiscal year;
 
C.  An expenditure, not accounted for in the budget during any fiscal year, in
    excess of $5 million;
 
D. A merger or other business combination or the sale, lease, transfer or other
    disposition of all or any material portion of the assets;
 
E.  Certain encumbrances;
 
F.  Related-party transactions;
 
G. The issuance by the Company of third-party debt which causes the aggregate of
    all third party debt to exceed $25 million;
 
H. Certain issuances of capital stock;
 
I.  The declaration of dividends or other distributions;
 
J.  The repurchase or optional redemption of any capital;
 
K.  The dissolution or liquidation or voluntary winding-up of the Company;
 
L.  Amending the Company's Certificate of Incorporation or By-Laws;
 
M. The giving of certain guarantees or indemnities;
 
                                       81
<PAGE>
N. The election or removal of the Chief Executive Officer or the Chairman of the
    Board;
 
O. Entering into or modifying a material employment contract;
 
P.  A change in the auditors or fiscal year-end of the Company;
 
Q. Settling or resolving tax claims in excess of $250,000;
 
R. Commencement, prosecution or compromise of material litigation or arbitration
    proceedings; and
 
S.  Taking steps to wind-up, dissolve or voluntarily seek the protection of
    bankruptcy laws.
 
REMUNERATION OF DIRECTORS
 
    Directors receive no compensation for attending meetings of the Board of
Directors or for serving as a director. Pursuant to the By-Laws, however,
Directors are entitled to receive reasonable reimbursement of expenses
incidental to attendance at such meetings.
 
ITEM 11. EXECUTIVE COMPENSATION
 
    The following table sets forth certain information regarding all
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and each of the other three most highly compensated executive officers
of the Company who earned over, and a former executive officer who would have
been one of the most highly compensated executive officers at the end of the
fiscal year 1998 (collectively, the "Named Executive Officers") for services
rendered in all capacities to the Company for the last three fiscal years, to
the extent that those officers were in the employ of the Company. Columns
relating to long-term compensation have been omitted from the table as the
Company did not have capital stock-related award plans and there has been no
compensation arising from long-term incentive plans during the years reflected
in the table.
 
<TABLE>
<CAPTION>
                                                                                                             SECURITIES
                                                                                           OTHER ANNUAL      UNDERLYING
NAME AND PRINCIPAL POSITION                           YEAR     SALARY ($)    BONUS ($)   COMPENSATION ($)   OPTIONS/SAR
--------------------------------------------------  ---------  -----------  -----------  -----------------  ------------
<S>                                                 <C>        <C>          <C>          <C>                <C>
David Keefe.......................................       1998     220,000      200,000          68,175(1)       250,000
Chief Executive Officer                                  1997      --           --              --               --
                                                         1996      --           --              --               --
 
George Z. Makowski (2)............................       1998     169,770       60,000          34,300(3)       385,000
                                                         1997     156,000      175,000(4)        68,400(5)       --
                                                         1996      --           --              --
 
Warren L. Mobley, Jr..............................       1998     112,084       --              18,000(6)        --
Chief Operating Officer and Executive Vice               1997      --           --              --               --
  President of Marketing and Sales                       1996      --           --              --               --
 
Dorothy E. Hansberry..............................       1998     150,000       10,000          --               --
Vice President and General Counsel                       1997      --           --              --               --
                                                         1996      --           --              --               --
 
Piotr M. Majchrzak................................       1998      75,000       10,000          --               --
Chief Financial Officer                                  1997      42,500       10,500          --               --
                                                         1996      --           --              --               --
</TABLE>
 
(1) Includes amounts paid pursuant to housing allowance
 
(2) Mr. Makowski was the Chief Operating Officer of PCI. Mr. Makowski's
    employment with PCI was terminated effective as of May 1998.
 
(3) Represents amounts paid pursuant to housing allowance
 
(4) Represents one-time bonus paid upon completion of @Entertainment's initial
    public equity offering
 
(5) Represents amounts paid pursuant to housing and tuition allowances
 
(6) Represents amounts paid pursuant to housing allowance
 
                                       82
<PAGE>
                               COMPENSATION PLANS
 
EMPLOYMENT AGREEMENTS
 
    The Company has employment agreements with each of Mr. Keefe, Ms. Hansberry,
Mr. Mobley and Mr. Majchrzak.
 
    Mr. Keefe entered into a two-year employment agreement with PCI effective at
January 1, 1998. Pursuant to such agreement, Mr. Keefe serves as the Chief
Executive Officer of PCI. Mr. Keefe receives a base annual salary of
approximately $220,000, a monthly allowance for additional housing and cost of
living expenses of $5,000, an allowance for relocation expenses of up to
$20,000, and reimbursement of educational and tax planning expenses of up to an
aggregate amount of $23,000 per year. Mr. Keefe also receives a guaranteed bonus
of $100,000 in the first year of his employment and unspecified incentive
bonuses thereafter. He received an additional bonus of $200,000 upon the signing
of the employment agreement. Mr. Keefe may terminate the employment agreement at
any time upon three months' written notice, and PCI may terminate the agreement
at any time upon one month's written notice (with an obligation to pay Mr. Keefe
an additional five months' salary). In addition, PCI may terminate the agreement
immediately without further obligation to Mr. Keefe for cause (as defined in the
employment agreement).
 
    Ms. Hansberry entered into a two-year employment agreement with PCI
effective at January 1, 1998. Pursuant to such agreement, Ms. Hansberry serves
as Vice President and General Counsel of PCI and receives an annual remuneration
totaling $150,000. She is eligible to receive annual performance-based bonuses
of up to $40,000 per year. Ms. Hansberry's initial year bonus of $40,000 is
guaranteed. Ms. Hansberry or PCI may terminate the agreement at any time upon
six months' written notice. In addition, PCI may terminate the agreement without
further obligation to Ms. Hansberry for cause (as defined in the agreement).
 
    Mr. Majchrzak entered into agreement with PCI effective at April 14, 1997,
which was amended effective January 1, 1998. Pursuant to such agreement, Mr.
Majchrzak serves as Chief Financial Officer of PCI. Pursuant to an employment
agreement with PTK Warszawa S.A. and services agreement with PCI, Mr. Majchrzak
receives annual remuneration totaling $75,000. He is eligible to receive an
annual performance-based bonus of up to $26,000 per year. Mr. Majchrzak may
terminate his contract with PCI at any time upon three months' written notice
and PCI may terminate the contract with Mr. Majchrzak at any time upon three
months' written notice. In addition, PCI may terminate the contract without
further obligation to Mr. Majchrzak for cause (as defined in the agreement). Mr.
Majchrzak's employment agreement with PTK Warszawa S.A. may be terminated by
either party upon one month's written notice.
 
                                       83
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    Poland Communications, Inc. is a wholly owned subsidiary of @ Entertainment,
Inc.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
CERTAIN RELATIONSHIPS
 
    David T. Chase, a director of the Company, is the father of Arnold L. Chase,
a director of the Company. No other family relationship exists between any of
the directors and executive officers of the Company.
 
PCBV STOCKHOLDERS' AGREEMENT
 
    PCI holds 92.3% of the issued and outstanding capital stock of PCBV which
owns 100% of the issued and outstanding capital stock of each of PTK-Krakow,
PTK-Warsaw, and 46.8% of the issued and outstanding capital stock of PTK
Operator, as well as approximately 98% of the issued and outstanding capital
stock of PTK, S.A.
 
    The following is a summary of the stockholders' agreement (the "PCBV
Stockholders' Agreement") entered into by and among Frank N. Cooper, Reece
Communications, Inc., Rutter-Dunn Communications, Inc., and Poland Cablevision
U.S.A., Inc. (collectively, the "Minority Stockholders"), PCI, and PCBV on March
8, 1990, as amended. The Minority Stockholders own the 7.7% of outstanding PCBV
capital stock that is not owned by PCI. The following summary does not purport
to be complete, and it is qualified in its entirety by reference to the PCBV
Stockholders' Agreement. The parties to the PCBV Stockholders' Agreement other
than PCBV are hereinafter referred to as the "PCBV Stockholders." Shares of the
capital stock of PCBV are hereinafter referred to as "PCBV shares."
 
    The PCBV Stockholders' Agreement protects shareholdings of each Minority
Stockholder from dilution, by requiring that the PCBV shares of each Minority
Stockholder must continue to represent a constant percentage of the total equity
in PCBV and of the total votes to be cast by the PCBV Stockholders on any
subject, regardless of changes to the capital structure of PCBV and regardless
of any additional equity funds that may be contributed to PCBV by PCI.
 
    The PCBV Stockholders' Agreement contains restrictions on the PCBV
Stockholders' ability to sell, pledge, hypothecate or otherwise transfer or
encumber their PCBV shares. In addition, PCBV Stockholders have the right of
first refusal to purchase PCBV shares upon the death of an individual PCBV
Stockholder, and upon the liquidation, dissolution or other termination of a
corporate PCBV Stockholder.
 
    Furthermore, PCI has the right of first refusal to purchase PCBV shares from
Minority Stockholders, and the Minority Stockholders have the right of first
refusal to purchase PCBV shares from PCI, before such shares can be sold to a
third party.
 
    The PCBV Stockholders' Agreement includes certain limitations on payments
that can be paid by PCBV to the PCBV Stockholders. If the managing board of PCBV
solicits and receives loans from any of the PCBV Stockholders, the loans cannot
bear interest at a rate exceeding 10% per annum.
 
    Under the PCBV Stockholders' Agreement, PCI has the option to purchase the
PCBV shares owned by the Minority Stockholders upon the satisfaction of certain
conditions. These conditions involve the number of subscribers obtained by PTK,
S.A. in nine specified cities in Poland. On each occasion when the subscriber
count in one of these specified cities reaches the number prescribed in the PCBV
Stockholders' Agreement, one-ninth of the Minority Stockholders' PCBV shares
become available for purchase by PCI for a period of approximately 60 to 90
days. The option periods have expired with respect to a number of the specified
cities.
 
    The PCBV Stockholders' Agreement also includes covenants against competition
that limit the ability of each PCBV Stockholder to engage directly or indirectly
in any aspect of the cable television business in Poland for a period ending ten
years after such PCBV Stockholder ceases to be a PCBV Stockholder. PCI has
direct or indirect ownership interests in a number of entities that engage in
certain aspects of the cable
 
                                       84
<PAGE>
television business in Poland. Under the PCBV Stockholders' Agreement, the
Minority Stockholders have a claim against 7.7% of the profits and equity of
such entities and, under a supplemental agreement, PCI has agreed to share the
profits of these entities with the Minority Stockholders on a pro rata basis. In
addition, PCI is negotiating to buy, and has made an offer to buy, the
outstanding PCBV shares held by the Minority Stockholders, though there can be
no assurance that an agreement can be reached with any of the Minority
Stockholders on satisfactory terms.
 
SERVICE AGREEMENTS
 
    PCI has entered into service agreements with PCBV and other of its direct
and indirect subsidiaries (the "Service Agreements"), including Poltelkab Sp. z
o.o. ("Poltelkab"), Telkat Sp. z o.o. ("Telkat"), PTK-Szczecin Sp. z o.o.
("PTK-Szczecin"), PTK-Lublin S.A. ("PTK-Lublin"), ETV Sp. z o.o. ("ETV"), PTK,
S.A., PTK-Operator, PTK-Warsaw, and PTK-Krakow, pursuant to which PCI provides
various services, including administrative, technical, managerial, financial,
operational and marketing services to each of the subsidiaries and PCBV serves
as PCI's agent. PCI also entered into a service agreement, dated August 31,
1995, with PCBV and ETV, whereby PCBV is the principal service provider and PCI
acts as agent to PCBV (the "ETV Service Agreement"). The services provided under
these agreements are intended to enable the subsidiaries to construct, develop,
operate and manage cable television systems throughout Poland. Except for the
ETV Service Agreement, which requires ETV to pay $18,740 per calendar quarter to
PCBV, the Service Agreements provide that the subsidiaries will each pay to PCI
or PCBV, as the case may be, a fee of $10,000 per calendar quarter for
performing general administrative services, and a commercially reasonable rate
for legal, financial and other specific professional services. With the
exception of the ETV Service Agreement, if a subsidiary is obligated to pay fees
to PCI pursuant to a management agreement (described below), any fee payable
under the Service Agreements is waived. The Service Agreements also typically
require the subsidiaries to reimburse PCBV for any reasonable out-of-pocket
expenses incurred by PCBV or PCI, acting as agent for PCBV, including salaries
and benefits, housing allowances, travel expenses, and equipment supply or other
goods costs. The agreements were due to expire on December 31, 1997, but were
automatically extended for successive one-year periods as no party gave notice
on or before January 31, 1999.
 
MANAGEMENT AGREEMENTS
 
    PCI entered into management agreements with certain of its direct or
indirect subsidiaries, namely Poltelkab, Telkat, PTK-Szczecin, PTK-Lublin, ETV,
PTK, S.A., PTK-Operator, PTK-Warsaw, and PTK-Krakow. The agreements typically
provide that the subsidiary will pay to PCI an annual consulting fee of $320,000
when and to the extent that the subsidiary's net income exceeds zero and in
exchange for organizational and consulting services rendered by PCI. Telkat pays
to PCI an annual consulting fee of $160,000. The management agreements also
provide for an initial term ending as of the end of the calendar year during
which they became effective, and provide for successive renewals for one-year
periods unless the agreement is terminated in writing with at least thirty days
notice by either party.
 
CORPORATE OVERHEAD ALLOCATION AGREEMENT
 
    PCI entered into a Corporate Overhead Allocation Agreement, dated January 1,
1996 (the "Allocation Agreement"), with certain of its direct or indirect
subsidiaries, namely PTK S.A., PTK-Warsaw, PTK-Operator, PTK-Krakow,
PTK-Szczecin, PTK-Lublin, ETV, Telkat, TV Kabel, TK Gosat and Poltelkab
(collectively the "PTK Companies"), and PCBV. The Allocation Agreement provides
that costs incurred by PCI or PCBV, acting as PCI's agent, with regard to the
Service Agreements and as otherwise requested by the PTK Companies shall be
allocated and charged to particular PTK Companies in the event they are directly
attributable to such subsidiaries, and shall otherwise be allocated equally
among each of the PTK Companies. With regard to services rendered and costs
incurred by subsidiaries for the benefit of some or all of the PTK Companies,
which include costs associated with maintaining a central office in Warsaw,
legal
 
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<PAGE>
expenses, expenses relating to governmental relationships and approvals,
programming services, accounting, management information systems services, and
salaries associated with personnel whose duties clearly benefit other PTK
Companies, the Allocation Agreement provides that such expenses shall be
allocated between the PTK Companies. The Allocation Agreement was due to
terminate on December 31, 1997, but was automatically renewed for successive
one-year periods as no written notice of termination was provided by PCI or PCBV
or any subsidiary, with respect to itself.
 
LICENSE AGREEMENT
 
    PTK S.A., a subsidiary of PCI entered into a License Agreement, dated
January 7, 1999 (the "License Agreement") with an affiliate of the Company,
Sereke Holding B.V. ("Sereke"). The License Agreement provides that Sereke
grants PTK the non-exclusive right to distribute channels from the Wizja TV
programming package to the Company's subscribers for a fee as described on the
Company's rate card. The subscriber fee per month was $3.50 until September 30,
1998 and since October 1, 1998 the fee has been $2.50. The total cost for the
Company under this License Agreement was approximately $12,473,000 in 1998. This
Agreement will expire on the fifth anniversary of the effective date, which was
June 5, 1998. Management believes that the terms of the License Agreement are no
less favorable than those that could have been obtained from an unaffiliated
third party.
 
SALE OF ASSETS AND LIABILITIES OF A SUBSIDIARY
 
    During February 1998, @Entertainment, Inc., the Company's parent, purchased
substantially all of the assets and liabilities of Mozaic Entertainment, Inc.,
one of the Company's subsidiaries, including a note payable to the Company for
$6,527,000, for consideration of $100. This transfer was made in order to
consolidate the D-DTH and programming businesses of @Entertainment. The transfer
was accounted for at historical cost in a manner similar to a pooling of
interests. The difference between the amount of cash disbursed and the fair
value of the liabilities assumed and the historical cost of the net assets
acquired, of approximately $3,031,000 was accounted for as a reduction of the
accumulated deficit.
 
PURCHASE OF PRINT MEDIA SERVICES
 
    During 1998 PCI purchased print media services from an affiliate of the
Company, Wydawnictwo Prasawe Twoj Styl Sp. z o.o. ("WPTS"). The total cost for
the Company for these services was approximately $4,355,000 in 1998. Management
believes that the terms of the agreement relating to print media services are no
less favorable than those that could have been obtained from an unaffiliated
third party.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
(A) FINANCIAL STATEMENTS AND SCHEDULES.
 
    The financial statements as set forth under Item 8 of this report on Form
10-K are incorporated herein by reference. Financial statement schedules have
been omitted since they are either not required, not applicable, or the
information is otherwise included.
 
(b) Reports on Form 8-K
 
No reports on Form 8-K were filed during the last quarter of the year ended
  December 31, 1998.
 
(c) Exhibit Listing
 
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<PAGE>
 
<TABLE>
<CAPTION>
  NUMBER
-----------
<C>          <S>
       3.1   Restated Certificate of Incorporation of Poland Communications, Inc. as amended through August 1998.
 
       3.2   By-Laws of PCI as amended through March 1998.
 
       4.1   Indenture dated as at October 31, 1996 between PCI and State Street Bank and Trust Company relating to
             PCI's 9 7/8% Senior Notes due 2003 and its 9 7/8% Series B Senior Notes due 2003 (Incorporated by
             reference to Exhibit 4.11 of PCI's Registration Statement on Form S-4, Registration No. 333-20307).
 
      10.1   Employment Agreement dated as of January 1, 1998, between PCI and Dorothy Hansberry. (Incorporated by
             reference to Exhibit 10.19 of @Entertainment's Registration Statement on Form S-4, Registration No.
             333-60659)
 
      10.2   Employment Agreement, dated January 1, 1998 between PCI and David Keefe. (Incorporated by reference to
             Exhibit 10.17 of @Entertainment's Registration Statement on Form S-4, Registration No. 333-20307)
 
      10.3   Stock Option Agreement, dated as of January 1, 1998, beteen @Entertainment and David Keefe.
             (Incorporated by reference to Exhibit 10.18 of @Entertainment's Registration Statement on Form S-4,
             Registration No. 333-20307)
 
      10.4   Form of Indemnification Agreement between @Entertainment and its executive officers and directors.
 
      10.5   Purchase Agreement dated October 24, 1996 between PCI and Merrill Lynch & Co., Merrill Lynch, Pierce,
             Fenner & Smith Incorporated relating to $130,000,000 aggregate principal amount of PCI's 9 7/8% Senior
             Notes due 2003 (Incorporated by reference to Exhibit 1.1 of PCI's Registation Statement on Form S-4,
             Registration No. 333-20307).
 
        21   Subsidiaries of PCI
 
        27   Financial Data Schedule
</TABLE>
 
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<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                POLAND COMMUNICATIONS, INC.
 
                                BY:        /S/ DAVID KEEFE
                                     ---------------------------
                                             David Keefe
                                     CHIEF EXECUTIVE OFFICER AND
                                               DIRECTOR
 
    In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates stated.
 
<TABLE>
<CAPTION>
                  SIGNATURE                                         TITLE                             DATE
----------------------------------------------  ----------------------------------------------  -----------------
 
<S>                                             <C>                                             <C>
/s/ DAVID KEEFE                                 Chief Executive Officer and Director               March 30, 1999
------------------------------------
David Keefe
 
/s/ PIOTR M. MAJCHRZAK                          Chief Financial Officer                            March 30, 1999
------------------------------------            (Principal Financial and Principal Accounting
Piotr M. Majchrzak                              Officer)
 
/s/ ROBERT E. FOWLER III                        Chairman of the Board of Director                  March 30, 1999
------------------------------------
Robert E. Fowler III
 
/s/ ARNOLD L. CHASE                             Director                                           March 30, 1999
------------------------------------
Arnold L. Chase
 
/s/ DAVID T. CHASE                              Director                                           March 30, 1999
------------------------------------
David T. Chase
 
                                                Director
------------------------------------
Scott A. Lanphere
 
/s/ JERZY Z. SWIRSKI                            Director                                           March 30, 1999
------------------------------------
Jerzy Z. Swirski
 
/s/ PRZEMYSLAW A. SZMYT                         Director                                           March 30, 1999
------------------------------------
Przemyslaw A. Szmyt
</TABLE>
 
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