<PAGE>
 
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D. C. 20549

                                   FORM 10-K

[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934
       For the fiscal year ended December 31, 1998

                                       OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
       For the transition period from _____ to _____


Commission File No. 0-16784


                      AMERICAN CABLE TV INVESTORS 5, LTD.
                      -----------------------------------
            (Exact name of Registrant as specified in its charter)


<TABLE>
<S>                                                                        <C>
            State of Colorado                                                          84-1048934
------------------------------------------                                    --------------------------
       (State or other jurisdiction                                                 (I.R.S. Employer
      of incorporation or organization)                                          Identification Number)

               5619 DTC Parkway
              Englewood, Colorado                                                       80111
-----------------------------------------------                               -------------------------
   (Address of principal executive offices)                                           (Zip Code)
</TABLE>


 Registrant's telephone number, including area code:  (303) 267-5500

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

 Securities registered pursuant to Section 12(g) of the Act:
     200,005 Limited Partnership Units Sold to Investors at $500 per Unit

 Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 of the Securities Exchange Act of 1934
during the preceding 12 months; and (2) has been subject to such filing
requirements for the past 90 days.  [X] Yes   [ ] No

 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]

 State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. N/A

<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        1998 ANNUAL REPORT ON FORM 10-K

                               Table of Contents

                                                               Page
                                                               ----
                                     PART I
 
Item 1.    Business...........................................  I-1
 
Item 2.    Properties.........................................  I-15
 
Item 3.    Legal Proceedings..................................  I-15
 
Item 4.    Submission of Matters to a Vote of Security Holders  I-15
 
                                    PART II
 
Item 5.    Market for Registrant's Common Equity and Related 
           Stockholder Matters................................  II-1
 
Item 6.    Selected Financial Data............................  II-2
 
Item 7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations................  II-3
 
Item 8.    Financial Statements and Supplementary Data........  II-14
 
Item 9.    Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure................  II-14
 
                                    PART III
 
Item 10.   Directors and Executive Officers of the Registrant.  III-1
 
Item 11.   Executive Compensation.............................  III-2
 
Item 12.   Security Ownership of Certain Beneficial Owners
           and Management.....................................  III-3
 
Item 13.   Certain Relationships and Related Transactions.....  III-3
 
                                    PART IV

Item 14.   Exhibits, Financial Statements and Financial 
           Statement Schedules, and Reports on Form 8-K.......  IV-1

<PAGE>
 
                                    PART I.

Item 1.       Business.
------        -------- 

          (a) General Development of Business
              -------------------------------

          American Cable TV Investors 5, Ltd. ("ACT 5" or the "Partnership") is
a Colorado limited partnership that was formed in December of 1986 for the
purpose of acquiring, developing and operating cable television systems.  The
Partnership's general partner is IR-TCI Partners V, L.P. ("IR-TCI" or the
"General Partner"), a Colorado limited partnership.  At December 31, 1998, the
general partner of IR-TCI was TCI Ventures Five, Inc. ("TCIV 5"), a subsidiary
of TCI Cablevision Associates, Inc. ("Cablevision").  The limited partner of IR-
TCI is Cablevision Equities VI, a limited partnership whose partners are certain
former officers and key employees of the predecessor of Cablevision. Cablevision
is an indirect subsidiary of Tele-Communications, Inc. ("TCI") and is the
managing agent of the Partnership.  Prior to its January 17, 1996 withdrawal,
Integrated Cable Corp. V ("ICC"), an indirect subsidiary of Presidio Capital
Corp. ("Presidio") also served as a general partner of IR-TCI.  In accordance
with the terms of the IR-TCI limited partnership agreement, TCIV 5 elected to
continue the business of IR-TCI.  The withdrawal of ICC has not had and is not
expected to have a material effect on the Partnership's results of operations or
financial condition.

          TCI and AT&T have agreed to a merger (the "Merger") in which TCI will
become a wholly-owned subsidiary of AT&T.  In anticipation of the Merger, TCI
announced that it will restructure certain of its subsidiaries, including the
merger of its subsidiary, TCI Communications, Inc. ("TCIC") into TCI.  The
Merger is not expected to have a material effect on the Partnership's results of
operations or financial condition.

          In its public offering that was conducted from May of 1987 to February
of 1989, the Partnership sold 200,005 limited partnership units at a price of
$500 per unit ("Unit").

          The Partnership had a 40% ownership interest in Newport News
Cablevision Associates, L.P., and its subsidiary Newport News Cablevision, Ltd.
(collectively, "Newport News").  Newport News owned and operated the cable
system located in and around Newport News, Virginia (the "Newport News System").
American Cable TV Investors 4, Ltd., an affiliate, owned the 60% majority
interest in Newport News. The Newport News System was sold to an unaffiliated
third party for cash proceeds of $121,886,000 on January 1, 1996 (the "Newport
News Sale"). The Partnership's share of the cash proceeds from the sale of the
Newport News System was used to fund a distribution to ACT 5's limited partners
("Limited Partners") of $165 per Unit in 1996.

          During 1997, ACT 5 sold three of its cable television systems in three
separate transactions.  The cable television systems were located in and around
(i) Shelbyville and Manchester, Tennessee (the "Southern Tennessee System"),
(ii) St. Mary's County, Maryland (the "St. Mary's System") and (iii) Lower
Delaware (the "Lower Delaware System") (collectively, the "1997 Sales
Transactions").  The 1997 Sales Transactions were approved by the Limited
Partners at a special meeting that occurred on March 26, 1997.  The
Partnership's share of the cash proceeds from the 1997 Sales Transactions was
used to fund a distribution to the Limited Partners of $370 per Unit in 1997.

                                      I-1
<PAGE>
 
     Pursuant to the asset purchase agreement for the sale of the Southern
Tennessee System (the "Southern Tennessee Sale"), $494,000 of such sales price
was placed in escrow (the "Southern Tennessee Escrow") and was subject to
indemnifiable claims made by the purchaser of the Southern Tennessee System,
Rifkin Acquisition Partners, L.L.L.P. ("Rifkin"), through March 31, 1998.  Prior
to March 31, 1998, Rifkin filed a claim against the Southern Tennessee Escrow
relating to a class action lawsuit filed by a customer challenging late fee
charges with respect to the Southern Tennessee System.  Such claim has had and
will continue to have the effect of delaying the release of the Southern
Tennessee Escrow.  In addition, any judgment against the Southern Tennessee
System may have the effect of reducing the amount of the Southern Tennessee
Escrow ultimately released to ACT 5.  Such claim could prevent the release of
some or all of the Southern Tennessee Escrow to ACT 5.

     On August 12, 1998, the Partnership entered into an agreement that provides
for the sale of its cable television system located in and around Riverside,
California ("Riverside" or the "Riverside System") to Century Communications
Corp. ("Century"), an unaffiliated third party, for a cash sales price of
$33,000,000, subject to certain adjustments (the "Riverside Sale").  On January
1, 1999, Century assigned its interest in the Riverside Sale to Century Valley
Cable Corp. ("Century Sub"), a wholly-owned subsidiary of Century.  Pursuant to
the asset purchase agreement for the Riverside Sale, $1,500,000 of such sales
price will be subject to indemnifiable claims for 180 days following
consummation of the Riverside Sale.

     The Riverside Sale was approved by the Limited Partners at a special
meeting that occurred on December 11, 1998.  Subject to the receipt of
regulatory approvals and satisfaction or waiver of customary conditions to
closing, consummation of the Riverside Sale is expected to occur during the
second quarter of 1999.

     In the event that the Riverside Sale is consummated, of which there can be
no assurance, the Partnership will have sold all of its assets (other than cash
and funds held in escrow) and, pursuant to the Partnership's limited partnership
agreement, will ultimately be dissolved and terminated.  Assuming the Riverside
Sale and the dissolution and liquidation of the Partnership had occurred on
December 31, 1998, the Partnership estimates that the pro forma distribution to
Limited Partners would have been $228 per $500 Unit.  The Partnership
anticipates that an initial distribution will be made to its partners as soon as
practicable after the date of the closing of the Riverside Sale.  It is expected
that a final liquidating distribution will be made as soon as practicable after
all funds held in escrow have been released to the Partnership, subject to the
receipt of any indemnifiable claims.  No assurance can be given as to the timing
or amount of such distributions.

     In the event that the Riverside Sale is not consummated, it is currently
the General Partner's intention to seek a substitute buyer for the Riverside
System.  There is no assurance that the General Partner could arrange for a
substitute sale transaction for the Riverside System at an appropriate price or
on terms acceptable to the Partnership.  If the General Partner's efforts in
arranging a substitute sale transaction prove to be unsuccessful, the General
Partner would continue to operate the Riverside System.

                                      I-2
<PAGE>
 
     In August 1998, TCIC and Century signed a definitive agreement to establish
a joint venture that will combine multiple cable television systems in Southern
California (the "Joint Venture").  Among those systems to be contributed to the
Joint Venture by TCIC is the cable television system serving customers in
Redlands, California (the "Redlands System").  The Riverside System currently
utilizes office facilities, personnel and certain cable distribution assets
(including the headend) of the Redlands System.  In the event the Riverside Sale
is consummated, the Riverside System is among those systems to be contributed to
the Joint Venture by Century.  TCIC will have a 25% interest in the Joint
Venture, which will be managed by Century.  In the event that the Joint Venture
is consummated prior to the Riverside Sale, or the Joint Venture is consummated
and the Riverside Sale is not consummated, Cablevision will continue to manage
the Riverside System.  The Partnership has agreed that in the event the Joint
Venture is consummated prior to the Riverside Sale, Cablevision may engage the
Joint Venture to perform all or some portion of the day-to-day management of the
Riverside System.

     Certain statements in this Annual Report on Form 10-K constitute forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995.  In particular, some of the statements contained under the
caption Business and Management's Discussion and Analysis of Financial Condition
                     -----------------------------------------------------------
and Results of Operations are forward-looking.  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 Partnership
or industry results, to differ materially from future results, performance or
achievements expressed or implied by such forward-looking statements.  Such
risks, uncertainties and other factors include, among others:  general economic
and business conditions and industry trends; the regulatory and competitive
environment of the industries in which the Partnership operates; uncertainties
inherent in new business strategies; uncertainties inherent in the changeover to
the year 2000, including the Partnership's projected state of readiness, the
projected cost of remediation, the expected date of completion of each program
or phase, the projected worst case scenarios, and the expected contingency plans
associated with such worst case scenarios; new product launches and development
plans; rapid technological changes, the acquisition, development and/or
financing of telecommunications networks and services; the development and
provision of programming for new television and telecommunications technologies;
future financial performance, including  availability, terms and deployment of
capital; the ability of vendors to deliver required equipment, software and
services; availability of qualified personnel; changes in, or failure or
inability to comply with, government regulations, including, without limitation,
regulations of the Federal Communications Commission ("FCC"), and adverse
outcomes from regulatory proceedings; changes in the nature of key strategic
relationships with partners and joint venturers; competitor responses to the
Partnership's products and services and the overall market acceptance of such
products and services; and other factors.  These forward-looking statements (and
such risks, uncertainties and other factors) speak only as of the date of this
Report, and the Partnership expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statement contained
herein, to reflect any change in the Partnership's expectations with regard
thereto, or any other change in events, conditions or circumstances on which any
such statement is based.  Any statement contained within Management's Discussion
and Analysis of Financial Condition and Results of Operations on this Form 10-K
related to year 2000 are hereby denominated as "Year 2000 Statements" within the
meaning of the Year 2000 Information and Readiness Disclosure Act.

     (b) Financial Information about Industry Segments
         ---------------------------------------------

     The Partnership operates in the cable television industry.
 
                                      I-3
<PAGE>
 
  (c) Narrative Description of Business
      ---------------------------------

  CABLE TELEVISION INDUSTRY
  -------------------------

  General.  Cable television systems receive video, audio and data signals
transmitted by nearby television and radio broadcast stations, terrestrial
microwave relay services and communications satellites.  Such signals are then
amplified and distributed by coaxial cable and optical fiber to the premises of
customers who pay a fee for the service.  In many cases, cable television
systems also originate and distribute local programming.

  Compressed digital video technology converts on average as many as twelve
analog signals (now used to transmit video and voice) into a digital format and
compresses such signals (which is accomplished primarily by eliminating the
redundancies in television imagery) into the space normally occupied by one
analog signal. The digitally compressed signal is uplinked to a satellite, which
retransmits the signal to a customer's satellite dish or to a cable system's
headend to be distributed, via optical fiber and coaxial cable, to the
customer's home. At the home, a set-top video terminal converts the digital
signal back into analog channels that can be viewed on a normal television set.
In this regard, Riverside introduced digital video services in 1997. The primary
capital cost of digital video services is the purchase and installation of
digital set-top devices. Accordingly, the capital costs incurred will be
dependent upon the number of digital set top devices required. The Riverside
System had approximately 1,500 subscribers to digital video services at December
31, 1998. The Riverside System incurred approximately $419,000 in capital costs
during 1998 related to the introduction of digital video services.

  Service Charges.  The Riverside System offers a limited "basic service"
("Basic-TV")(comprised of 24 channels featuring local broadcast signals and
public, educational and governmental access channels) and an "expanded" tier
(comprised of 30 channels featuring specialized programming services, in such
areas as health, family entertainment, religion, news, weather, public affairs,
education, shopping, sports and music).  The monthly service fee for basic
service generally ranges from $10.00 to $11.00 and the monthly service fee for
the expanded tier ranges from $16.00 to $17.00.  Customers may also elect to
subscribe to digital video services comprised of 36 channels featuring
additional specialized programming and premium services for an additional $10.00
monthly fee.  The Riverside System also offers "premium services" (referred to
in the cable television industry as "Pay-TV" and "pay-per-view") to its
customers.  Such services consist principally of feature films as well as live
and taped sports events, concerts and other programming.  The Riverside System
offers Pay-TV services for a monthly fee generally ranging from $9.00 to $10.00
per service, except for certain movie or sports services (such as various
regional sports networks and certain pay-TV channels) offered at $1.00 to $2.00
per month, pay-per-view movies offered separately at $3.00 per movie and certain
pay-per-view events offered separately at $10.00 to $50.00 per event.  Charges
are usually discounted when multiple Pay-TV services are ordered.

  As further enhancements to their cable services, customers may generally rent
converters and/or remote control devices for a monthly charge ranging from $0.10
to $5.00 each, as well as purchase a channel guide for a monthly charge ranging
from $1.50 to $2.00.  Also, a nonrecurring installation charge (which is limited
by the FCC's rules which regulate hourly service charges for each individual
cable system) of up to $39.00 is usually charged.

                                      I-4
<PAGE>
 
  Monthly fees for Basic-TV and Pay-TV services to commercial customers vary
depending on the nature and type of service.  Except under the terms of certain
contracts to provide service to commercial accounts, customers are free to
discontinue service at any time without penalty.

  The Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act") and the Telecommunications Act of 1996 (the "1996 Telecom Act"
and together with the 1992 Cable Act, the "Cable Acts") established rules under
which the Riverside System's basic service and expanded tier service rates and
equipment and installation charges are regulated if a complaint is filed or if
the appropriate franchise authority is certified.  For additional information
see Regulation and Legislation below.

  Programming.  The Riverside System purchases substantially all of its basic
and premium programming for its cable systems from Satellite Services, Inc.
("SSI"), a subsidiary of TCI.  Pursuant to license agreements entered into by
SSI with certain program suppliers, the Riverside System and other affiliates of
TCI are permitted to obtain programming directly from SSI at what may be more
favorable rates than those available directly to the Riverside System.  The
Riverside System will continue to purchase substantially all of its programming
from SSI, so long as the Riverside System continues to qualify under SSI's
affiliation agreements.

  Local Franchises.  Cable television systems generally are constructed and
operated under the authority of nonexclusive permits or "franchises" granted by
local and/or state governmental authorities.  Federal law, including the Cable
Communications Policy Act of 1984 (the "1984 Cable Act") and the 1992 Cable Act,
limits the power of the franchising authorities to impose certain conditions
upon cable television operators as a condition of the granting or renewal of a
franchise.

  The Riverside System's franchises contain varying provisions relating to
construction and operation of cable television systems, such as time limitations
on commencement and/or completion of construction; quality of service, including
(in certain circumstances) requirements as to the number of channels and broad
categories of programming offered to customers; rate regulation; provision of
service to certain institutions; provision of channels for public access and
commercial leased-use; and maintenance of insurance and/or indemnity bonds.  The
Riverside System's franchises also typically provide for periodic payments of
fees, generally 5% of revenue, to the governmental authority granting the
franchise.  Additionally, many franchises require payments to the franchising
authority for the funding of public, educational and governmental ("PEG") access
channels.  Franchises usually require the consent of the franchising authority
prior to a transfer of the franchise or a transfer or change in ownership or
operating control of the franchisee.

  Subject to applicable law, a franchise may be terminated prior to its
expiration date if the cable television operator fails to comply with the
material terms and conditions thereof.  Under the 1984 Cable Act, if a franchise
is lawfully terminated, and if the franchising authority acquires ownership of
the cable television system or effects a transfer of ownership to a third party,
such acquisition or transfer must be at an equitable price, or in the case of a
franchise existing on the effective date of the 1984 Cable Act, at a price
determined in accordance with the terms of the franchise, if any.

                                      I-5
<PAGE>
 
  In connection with a renewal of a franchise, the franchising authority may
require the cable operator to comply with different and more stringent
conditions than those originally imposed, subject to the provisions of the 1984
Cable Act and other applicable federal, state and local law.  The 1984 Cable
Act, as supplemented by the renewal provisions of the 1992 Cable Act,
establishes an orderly process for franchise renewal which protects cable
operators against unfair denials of renewals when the operator's past
performance and proposal for future performance meet the standards established
by the 1984 Cable Act.  The Partnership believes that the Riverside System
generally has operated in a manner which satisfies such standards and allows for
the renewal of such franchises; however, there can be no assurance that the
franchises for the Riverside System will be successfully renewed as they expire.

  The Riverside System's franchises have expiration dates which range from 2001
to 2006. Approximately 84% of the Riverside System's customers are served
pursuant to franchise agreements that have expiration dates that fall within the
next five years.

  Competition.  Cable television competes for customers in local markets with
other providers of entertainment, news and information.  The competitors in
these markets include broadcast television and radio, newspapers, magazines and
other printed material, motion picture theaters, video cassettes and other
sources of information and entertainment including directly competitive cable
television operations and internet service providers.  The Cable Acts are
designed to increase competition in the cable television  industry.  See
Regulation and Legislation below.

  There are alternative methods of distributing the same or similar video
programming offered by cable television systems.  Further, these technologies
have been encouraged by the United States Congress ("Congress") and the FCC to
offer services in direct competition with existing cable systems.

  DBS.  Direct broadcast satellite ("DBS") has emerged as the most significant
competition to cable television systems. Earlier "direct-to-home" satellite
services required the subscriber to purchase a large and expensive "dish"
antenna, but newer medium and high powered alternatives currently allow the
subscriber to receive digital services directly via satellite using a relatively
small dish. Moreover, video compression technology allows DBS providers to offer
more than 100 digital channels, thereby surpassing the typical cable system. DBS
providers offer most of the same programming as cable television, but also offer
certain sports packages not currently available through cable television
systems. DBS currently faces technical and legal obstacles to providing popular
local broadcast signals, although at least one DBS provider is now attempting to
provide this programming in certain major markets, and Congress and the FCC are
considering proposals that would remove existing legal obstacles. The DBS
industry has grown rapidly over the last several years and now serves
approximately 9 million subscribers nationwide. Recently announced mergers could
strengthen the surviving DBS companies.

  Although the effect of competition from these DBS services cannot be
specifically predicted, it is clear there has been significant growth in DBS
customers, and the Partnership assumes that such DBS competition will be
substantial in the near future as developments in technology continue to
increase satellite transmitter power and decrease the cost and size of equipment
needed to receive these transmissions and enable DBS to overcome the
aforementioned disadvantages.  Furthermore, the extensive national advertising
of DBS programming packages, including certain sports packages not currently
available on cable television systems, will likely continue the growth in DBS
customers.  DBS services are available within the franchise areas served by the
Riverside System.  See Management's Discussion and Analysis of Financial
                       -------------------------------------------------
Condition and Results of Operations - General - Competition.
---------------------------------------------               

                                      I-6
<PAGE>
 
  Telephone Company Entry.  The 1996 Telecom Act eliminated the statutory and
  ------------------------                                                   
regulatory restrictions that prevented local telephone companies from competing
with cable operators for the provision of video services by any means. See
Regulation and Legislation below. The 1996 Telecom Act allows local telephone
companies, including the regional bell operating companies ("RBOCs"), to compete
with cable television operators both inside and outside their telephone service
areas. The Partnership expects that the Riverside System could face competition
from telephone companies for the provision of video services, whether it is
through wireless cable, or through upgraded telephone networks. The Partnership
assumes that all major telephone companies have already entered or may enter the
business of providing video services. The 1992 Cable Act ensures that telephone
company providers of video services will have access to acquiring all of the
significant cable television programming services. The specific manner in which
telephone company provision of video services will be regulated is described
under Regulation and Legislation below.

  Utility Company Entry.  The 1996 Telecom Act eliminates certain federal
  ---------------------                                                  
restrictions on utility holding companies and thus frees all utility companies
to provide cable television services. Riverside could face competition from
utility companies in the delivery of video services.

  MMDS/LMDS.  Another alternative method of distribution is multi-channel multi-
  ----------                                                                   
point distribution systems ("MMDS"), which deliver programming services over
microwave channels received by customers with special antennas.  MMDS systems
are less capital intensive, are not required to obtain local franchises or pay
franchise fees, and are subject to fewer regulatory requirements than cable
television systems.  The 1992 Cable Act also ensures that MMDS operators have
the opportunity to acquire all significant cable television programming
services.  Although there are relatively few MMDS systems in the United States
currently in operation, virtually all markets have been licensed or tentatively
licensed. Developments in digital compression technology will significantly
increase the number of channels that can be made available from MMDS.  Since
1992, most of Riverside's service areas have been subject to competition from a
MMDS operator.  See Management's Discussion and Analysis of Financial Condition
and Results of Operations General - Competition.
                          -------               

  Finally, an emerging technology, local multipoint distribution services
("LMDS"), could also pose a significant threat to the cable television industry,
if and when it becomes established.  LMDS, sometimes referred to as cellular
television, could have the capability of delivering more than 100 channels of
video programming to a customer's home.  The potential impact of LMDS is
difficult to assess due to the recent development of the technology and the
absence of any current fully-operational LMDS systems.

  Cable System Overbuilds.  Cable operators may compete with other cable
  ------------------------                                              
operators or new entities seeking franchises for competing cable television
systems at any time during the terms of existing franchises.  The 1992 Cable Act
promotes the granting of competitive franchises and the Riverside System
operates under non-exclusive franchises.  Recently, there has been a significant
increase in the number of cities that have constructed their own cable
television systems in a manner similar to city-provided utility services.  These
systems typically will compete directly with the existing cable operator without
the burdens of franchise fees or other local regulation.  Although the total
number of municipal overbuild cable systems remains relatively small, recent
developments would indicate an increasing trend in cities authorizing such
direct municipal competition with cable operators.

                                      I-7
<PAGE>
 
  Private Cable.  Cable operators also compete with Satellite Master Antenna
  --------------                                                            
Television ("SMATV") systems, which provide multichannel program services
directly to hotel, motel, apartment, condominium and similar multi-unit
complexes within a cable television system's franchise area, generally free of
any regulation by state and local governmental authorities.  Further, the FCC in
1997, adopted new rules that restrict the ability of cable operators to maintain
ownership of cable wiring inside multi-unit buildings, thereby making it less
expensive for SMATV competitors to reach those customers.  See Regulations and
Legislation below.  Further, the FCC in 1998 ruled that private cable operators
can lease video distribution capacity from local telephone companies and,
thereby, distribute cable programming services over the public rights-of-way
without obtaining a franchise.  This could provide a significant regulatory
advantage for private cable operators in the future.

  In addition to competition for customers, the cable television industry
competes with broadcast television, radio, the print media and other sources of
information and entertainment for advertising revenue.  As the cable television
industry has developed additional programming, its advertising revenue has
increased.  Cable operators sell advertising spots primarily to local and
regional advertisers.

  With the exception of the DBS operators and a MMDS operator that compete with
the Riverside System, the Partnership has no basis upon which to estimate the
number of cable television companies and other entities with which the Riverside
System competes or may potentially compete.  The full extent to which other
media or home delivery services will compete with cable television systems may
not be known for some time and there can be no assurance that existing,
proposed, or as yet undeveloped technologies will not become dominant in the
future.

  Regulation and Legislation.  The operation of cable television systems is
extensively regulated by the FCC, some state governments and most local
governments.  On February 8, 1996, the President signed into law the 1996
Telecom Act. This new law alters the regulatory structure governing the nation's
telecommunications providers, including the Partnership.  It removes barriers to
competition in both the cable television market and the local telephone market.
Among other things, it reduces the scope of cable rate regulation.

  The 1996 Telecom Act requires the FCC to implement numerous rulemakings, the
final outcome of which cannot yet be determined due to court challenges.
Moreover, Congress and the FCC have frequently revisited the subject of cable
television regulation and may do so again.  Future legislative and regulatory
changes could adversely affect the Riverside System's operations.  This section
briefly summarizes key laws and regulations currently affecting the growth and
operation of the Riverside System.

  Cable Rate Regulation.  The 1992 Cable Act imposed extensive rate
  ---------------------                                           
regulation on the cable television industry.  All cable systems are subject to
rate regulation of their basic and upper tier programming services, as well as
their provision of customer equipment used to receive basic tier services,
unless they face "effective competition" in their local franchise area.  Under
the 1992 Cable Act, the incumbent cable operator can demonstrate effective
competition by showing either low penetration (less than 30% of the occupied
households in the franchise area subscribe to basic service), or the presence
(measured collectively as 50% availability, 15% customer penetration) of other
multichannel video programming distributors ("MVPDs").  The 1996 Telecom Act
expands the existing definition of effective competition to create a special
test for a competing MVPD (other than a DBS distributor) affiliated with a local
exchange carrier ("LEC").  There is no penetration minimum for a LEC affiliate
to qualify as an effective competitor, but it must offer comparable programming
services in the franchise area.

                                      I-8
<PAGE>
 
     Although the FCC establishes all cable rate rules, local government units
(commonly referred to as local franchising authorities or "LFAs") are primarily
responsible for administering the regulation of the lowest level of cable -- the
basic service tier ("BST"), which typically contains local broadcast stations
and PEG channels.  Before an LFA begins BST rate regulation, it must certify to
the FCC that it will follow applicable federal rules, and many LFAs have
voluntarily declined to exercise this authority.  LFAs also have primary
responsibility for regulating cable equipment rates.  Under federal law, charges
for various types of cable equipment must be unbundled from each other and from
monthly charges for programming services, and priced no higher than the
operator's actual cost, plus an 11.25% rate of return.

     The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming.   Under the 1996 Telecom Act, the FCC can regulate CPST rates only
if an LFA first receives at least two complaints from local customers within 90
days of a CPST rate increase and then files a formal complaint with the FCC.
When new CPST rate complaints are filed, the FCC now considers only whether the
incremental increase is justified and will not reduce the previously established
CPST rate.  At December 31, 1998, none of the Riverside System's franchise areas
were subject to such rate regulation.  However, future events could occur that
could cause one or more of the Riverside System's franchise areas to be subject
to rate regulation.

     Under the FCC's rate regulations, rate increases are governed by a
complicated price structure that allows for the recovery of inflation and
certain increased costs, as well as providing some incentive for expanding
channel carriage.  The FCC has modified its rate adjustment regulations to allow
for annual rate increases and to minimize previous problems associated with
delays in implementing rate increases.  Operators also have the opportunity of
bypassing this "benchmark" structure in favor of traditional cost-of-service
regulation in cases where the latter methodology appears favorable.  However,
the FCC significantly limited the inclusion in the rate base of acquisition
costs in excess of the historical cost of tangible assets.  Premium cable
services offered on a per channel or per program basis remain unregulated, as do
affirmatively marketed packages consisting entirely of new programming product.

     The 1996 Telecom Act sunsets FCC regulation of CPST rates for all systems
(regardless of size) on March 31, 1999.  However, certain members of Congress
and FCC officials have called for the delay of this regulatory sunset and
further have urged more rigorous rate regulation (including limits on
programming cost pass-throughs to cable customers) until a greater degree of
competition to incumbent cable operators has developed.  The 1996 Telecom Act
also relaxes existing uniform rate requirements by specifying that uniform rate
requirements do not apply where the operator faces effective competition, and by
exempting bulk discounts to multiple dwelling units ("MDUs"), although
complaints about predatory pricing in MDUs still may be made to the FCC.

                                      I-9
<PAGE>
 
     Cable Entry Into Telecommunications.  The 1996 Telecom Act provides that no
     -----------------------------------                                        
state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service.  States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection.  State and local
governments also retain their authority to manage the public rights-of-way.
Although the 1996 Telecom Act clarifies that traditional cable franchise fees
may be based only on revenues related to the provision of cable television
services, it also provides that LFAs may require reasonable, competitively
neutral compensation for management of the public rights-of-way when cable
operators provide telecommunications service.  The 1996 Telecom Act prohibits
LFAs from requiring cable operators to provide telecommunications service or
facilities as a condition of a franchise grant, renewal, or transfer, except
that LFAs argue they can seek "institutional networks" as part of such franchise
negotiations.  The favorable pole attachment rates afforded cable operators
under federal law can be increased by utility companies owning the poles during
a five year phase-in period beginning in 2001, if the cable operator provides
telecommunications service, as well as cable service, over its plant.

     Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act intended to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. This requires, for
example, that the incumbant local telephone company must allow new competing
telecommunications providers to connect to the local telephone distribution
system. In a January 1999 decision, the Supreme Court upheld the FCC's
fundamental interconnection requirements. However, the court ordered the FCC to
reconsider to what extent the local telephone company must make available for
resale separate components of its local telephone system.

     Telephone Company Entry Into Cable Television.  The 1996 Telecom Act allows
     ---------------------------------------------                              
telephone companies to compete directly with cable operators by repealing the
historic telephone company/cable company cross-ownership ban and the FCC's video
dialtone regulations.  This will allow LECs, including the RBOCs, to compete
with cable operators both inside and outside their telephone service areas.
Because of their resources, LECs could be formidable competitors to traditional
cable operators, and certain LECs have begun offering cable service.

     Under the 1996 Telecom Act, a LEC or other entity providing video
programming to customers will be regulated as a traditional cable operator
(subject to local franchising and federal regulatory requirements), unless it
elects to provide its programming via an "open video system" ("OVS").  It was
anticipated that the primary benefit of using an OVS regulatory model was to
avoid the need to obtain a local franchise prior to providing services.
However, a January 1999 federal court of appeals decision held that OVS
providers can be required to obtain such a franchise.  To be eligible for OVS
status, the LEC itself cannot occupy more than one-third of the system's
activated channels when demand for channels exceeds supply.  Nor can it
discriminate among programmers or establish unreasonable rates, terms or
conditions for service.

     Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibitions remain on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures among cable
operators and LECs in the same market.  The 1996 Telecom Act provides a few
limited exceptions to this buyout prohibition.

                                     I-10
<PAGE>
 
     Electric Utility Entry Into Telecommunications/Cable Television.  The 1996
     ---------------------------------------------------------------           
Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services, information services, and other
services or products subject to the jurisdiction of the FCC notwithstanding the
Public Utilities Holding Company Act.  Electric utilities must establish
separate subsidiaries, known as "exempt telecommunications companies," and must
apply to the FCC for operating authority.  Again, because of their resources,
electric utilities could be formidable competitors to traditional cable systems.
At December 31, 1998, no electric utilities were in competition with the
Riverside System.

     Additional Ownership Restrictions.  Pursuant to the 1992 Cable Act, the FCC
     ---------------------------------                                          
adopted regulations establishing a 30% limit on the number of homes nationwide
that a cable operator may reach through cable systems in which it holds an
attributable interest with an increase to 35% if the additional cable systems
are minority controlled.  The FCC stayed the effectiveness of its ownership
limits pending the appeal of a September 16, 1993 decision by the United States
District Court for the District of Columbia which, among other things, found
unconstitutional the provision of the 1992 Cable Act requiring the FCC to
establish such ownership limits.

     The FCC also adopted regulations limiting carriage by a cable operator of
national programming services in which that operator holds an attributable
interest (using the same attribution standards as were adopted for its limits on
the number of homes nationwide that a cable operator may reach through its cable
systems) to 40% of the activated channels on each of the cable operator's
systems.  The rules provide for the use of two additional channels or a 45%
limit, whichever is greater, provided that the additional channels carry
minority controlled programming services.  The regulations also grandfather
existing carriage arrangements which exceed the channel limits, but require new
channel capacity to be devoted to unaffiliated programming services until the
system achieves compliance with the regulations.  These channel occupancy limits
apply only up to 75 activated channels on the cable system, and the rules do not
apply to local or regional programming services.

     The 1996 Telecom Act eliminates statutory restrictions on broadcast/cable
cross-ownership (including broadcast network/cable restrictions), but leaves in
place existing FCC regulations prohibiting local cross-ownership between
television stations and cable systems.  The 1996 Telecom Act leaves in place
existing restrictions on cable cross-ownership with SMATV and MMDS facilities,
but lifts those restrictions where the cable operator is subject to effective
competition.  In January 1995, however, the FCC adopted regulations which permit
cable operators to own and operate SMATV systems within their franchise area,
provided that such operation is consistent with local cable franchise
requirements.

     Must Carry/Retransmission Consent.  The 1992 Cable Act contains broadcast
     ---------------------------------                                        
signal carriage requirements that allow local commercial television broadcast
stations to elect once every three years between requiring a cable system to
carry the station ("must carry") or negotiating for payments for granting
permission to the cable operator to carry the station ("retransmission
consent").  Less popular stations typically elect must carry, and more popular
stations typically elect retransmission consent.  Must carry requests can dilute
the appeal of a cable system's programming offerings, and retransmission consent
demands may require substantial payments or other concessions (e.g. a
requirement that the cable system also carry the local broadcaster's affiliated
cable programming service).  Either option has a potentially adverse effect on
the Riverside System's business. The burden associated with must-carry
obligations could dramatically increase if television broadcast stations proceed
with planned conversions to digital transmissions and if the FCC determines in a
pending rulemaking that cable systems must carry all analog and digital signals
transmitted by the television stations.

                                     I-11
<PAGE>
 
     Access Channels.  LFAs can include franchise provisions requiring cable
     ---------------                                                        
operators to set aside certain channels for PEG access programming.  Federal law
also requires a cable system with 36 or more channels to designate a portion of
its activated channel capacity (either 10% or 15%) for commercial leased access
by unaffiliated third parties.  The FCC has adopted rules regulating the terms,
conditions and maximum rates a cable operator may charge for use of this
designated channel capacity, but use of commercial leased access channels has
been relatively limited.  In February of 1997, the FCC released revised rules
which mandate a modest rate reduction that has made commercial leased access a
more attractive option for third party programmers, particularly for part-time
leased access carriage.

     "Anti-Buy Through" Provisions.  Federal law requires each cable system to
     -----------------------------                                            
permit customers to purchase premium or pay-per-view video programming offered
by the operator on a per-channel or a per-program basis without the necessity of
subscribing to any tier of service (other than the basic service tier) unless
the system's lack of addressable converter boxes or other technological
limitations does not permit it to do so.  The statutory exemption for cable
systems that do not have the technological capability to comply expires in
October 2002, but the FCC may extend that period if deemed necessary.

     Access to Programming.  To spur the development of independent cable
     ---------------------                                               
programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers.  Of special significance from a competitive business posture, the
1992 Cable Act precludes satellite video programmers affiliated with cable
operators from favoring cable operators over competing multichannel video
programming distributors (such as DBS and MMDS distributors).  This provision
limits the ability of vertically integrated satellite cable programmers to offer
exclusive programming arrangements to the Partnership.  Recently, both Congress
and the FCC have considered proposals that would expand the program access
rights of cable's competitors, including the possibility of subjecting both
terrestrially delivered video programming and video programmers who are not
affiliated with cable operators to all program access requirements.

     Inside Wiring.  In a 1997 Order, the FCC established rules that require an
     -------------                                                             
incumbent cable operator upon expiration or termination of a MDU service
contract to sell, abandon, or remove "home run" wiring that was installed by the
cable operator in a MDU.  These inside wiring rules will assist building owners
in their attempts to replace existing cable operators with new video programming
providers who are willing to pay the building owner a higher fee.  Additionally,
the FCC has proposed abrogating all exclusive MDU contracts held by cable
operators, but at the same time allowing competitors to cable to enter into
exclusive MDU service contracts.

                                     I-12
<PAGE>
 
     Other FCC Regulations.  In addition to the FCC regulations noted above,
     ---------------------                                                  
there are other FCC regulations covering such areas as equal employment
opportunity, customer privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local
sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards, and consumer electronics equipment compatibility.  The FCC has the
authority to enforce its regulations through the imposition of substantial
fines, the issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate certain transmission facilities used in connection with cable
operations.

     The FCC recently completed a rulemaking designed to encourage and
facilitate third-party sale of cable converters to cable customers.
Specifically, the FCC requires cable operators to segregate security functions
of set top boxes from all other functions by July 1, 2000.  Additionally, as of
January 1, 2005, cable operators can no longer lease or sell converter set top
boxes that have integrated security and navigation functions.  The result of
this rulemaking is that cable subscribers will not necessarily obtain their set
top boxes from the cable operator, but, instead, may purchase such set top boxes
from third-party vendors.  Such third-party sales of previously unmodified cable
set top boxes could make it more difficult for cable operators to combat theft
of service.

     Copyright.  Cable television systems are subject to federal copyright
     ---------                                                            
licensing covering carriage of television and radio broadcast signals.  In
exchange for filing certain reports and contributing a percentage of their
revenue to a federal copyright royalty pool (such percentage varies depending on
the size of the system and the number of distant broadcast television signals
carried), cable operators can obtain blanket permission to retransmit
copyrighted material on broadcast signals.  The possible modification or
elimination of this compulsory copyright license is subject to continuing review
and could adversely affect the Riverside System's ability to obtain desired
broadcast programming.  In addition, the cable industry pays music licensing
fees to Broadcast Music, Inc. and is negotiating a similar arrangement with the
American Society of Composers, Authors and Publishers.  Copyright clearances for
nonbroadcast programming services are arranged through private negotiations.

     State and Local Regulation.  Cable television systems generally are
     --------------------------                                         
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity. The 1996 Telecom Act clarified that the need
for an entity providing cable services to obtain a local franchise depends
solely on whether the entity crosses public rights of way.   Federal law now
prohibits franchise authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises covering an existing cable
system's service area.  Cable franchises generally are granted for fixed terms
and in many cases are terminable if the franchisee fails to comply with material
provisions.  Non-compliance by the cable operator with franchise provisions may
also result in monetary penalties.

                                     I-13
<PAGE>
 
     The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction.  Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections.  A number of states subject
cable television systems to the jurisdiction of centralized state governmental
agencies, some of which impose regulation of a character similar to that of a
public utility.  Although LFAs have considerable discretion in establishing
franchise terms, there are certain federal limitations.  For example, LFAs
cannot insist on franchise fees exceeding 5% of the system's gross revenue,
cannot dictate the particular technology used by the system, and cannot specify
video programming other than identifying broad categories of programming.

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

     Proposed Changes in Regulation. The regulation of cable television systems
at the federal, state and local levels is subject to the political process and
has been in constant flux over the past decade. Material changes in the law and
regulatory requirements must be anticipated and there can be no assurance that
the Partnership's business will not be affected adversely by future legislation,
new regulation or deregulation.

     General
     -------

     Legislative, administrative and/or judicial action may alter portions of
the foregoing statements relating to competition and regulation.

     The Partnership has not expended material amounts during the last three
years on research and development activities. Construction and maintenance
materials are available and acquired from a number of suppliers and are not
deemed to be in short supply.

     There is no customer or affiliated group of customers to whom sales are
made in an amount which exceeds 10% of the Partnership's revenue.

     Compliance with federal, state, and local provisions which have been
enacted or adopted regulating the discharge of material into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.

     At December 31, 1998, 53 individuals were employed at the Riverside System.
The Riverside System shares office personnel with the Redlands System.

(d)  Financial Information about Foreign and Domestic Operations and Export
     ----------------------------------------------------------------------
     Sales
     -----

     The Partnership has neither foreign operations nor export sales.

                                     I-14
<PAGE>
 
Item 2.     Properties.
------      ---------- 

     At December 31, 1998, the Riverside System's physical cable television
properties, which are located in California, consist of cable system components,
motor vehicles, miscellaneous hardware, spare parts, and other components.
Riverside uses office facilities and certain cable distribution assets
(including the headend) of the Redlands System.  See Business - General
                                                     --------   -------
Development of Business and note 5 to the accompanying financial statements.
-----------------------                                                     

     Riverside's cable television facilities are, in the opinion of management,
suitable and adequate by industry standards.  However, for information
concerning the economic feasibility of implementing technological improvements,
see Management's Discussion and Analysis of Financial Condition and Results of
    --------------------------------------------------------------------------
Operations - General - Competition. See also Business - Narrative Description of
--------------------                         -----------------------------------
Business - General and - Competition.
--------                             

     During 1998, $1.1 million in capital expenditures were made to improve and
expand the Riverside System, of which $419,000 relates to digital video
services.  See Management's Discussion and Analysis of Financial Condition and
               ---------------------------------------------------------------
Results of Operations - Liquidity and Capital Resources.
------------------------------------------------------- 

Item 3.     Legal Proceedings.
------      ----------------- 

     Late Fee Litigation. On February 17, 1999, in the Circuit Court for the
     -------------------
fourteenth judicial district at Manchester, Coffee County, Tennessee, the
Partnership was named in a certified class action entitled Johnny Clouse v.
                                                           ----------------
American Cable TV Investors 5 Ltd., et al concerning late fee charges and
-----------------------------------------
practices. The Partnership's Southern Tennessee System charged late fees to
customers who did not pay their cable bills on time. This late fee case
challenges the amount of the late fees and the practices under which they were
imposed. The Plaintiff raises claims under state consumer protection statutes,
other state statutes, and the common law. The plaintiff generally alleges that
the late fees charged by the cable system were not reasonably related to the
costs incurred by the cable systems as a result of the late payment. The
plaintiff seeks to require the cable system (which the Partnership sold on April
1, 1997) to reduce its late fees on a prospective basis and to provide
compensation for alleged excessive late fee charges for past periods. Based upon
the facts available, management believes that, although no assurances can be
given as to the outcome of this action, the ultimate disposition of this matter
will not have a material adverse effect upon the financial condition of the
Partnership.

Item 4.     Submission of Matters to a Vote of Security Holders.
-------     --------------------------------------------------- 

     At a special meeting of the Limited Partners held on December 11, 1998, the
following matters were voted upon and approved by the Limited Partners:

       Resolution 1. Consent to the sale of the Riverside System to Century or
       one of Century's affiliates by 97% of the votes cast at such meeting
       (133,862 for; 895 against; 2,742 abstained).

       Resolution 2. Consent to the sale of the Riverside System in any
       substitute sales transaction (in the event that the foregoing sale does
       not close) by 94% of the votes cast at such meeting (129,780 for; 3,363
       against; 4,356 abstained).

                                     I-15
<PAGE>
 
                                   PART II.


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.
------   --------------------------------------------------------------------- 

     In its public offering that was conducted from May 1987 to February 1989,
the Partnership sold 200,005 Units to the public at a price of $500 per Unit.
At December 31, 1998, there were approximately 11,900 Unit holders.

     Although the Units are freely transferable, no public trading market for
the Units exists.  To the extent that an informal or secondary market exists,
the Limited Partners may only be able to sell Units at a substantial discount
from the Units' proportionate share of the estimated market value of the
underlying net assets of the Partnership.

     As of February 27, 1998, ACT 5 had processed requests in 1998 for the
transfer of Units representing 5% of the total Units.  In order to maintain ACT
5's partnership status for federal income tax purposes, no more than 5% of the
Units can be transferred in any one tax year.  Accordingly, ACT 5 did not
process any additional requests for the transfer of Units during 1998.  ACT 5
began accepting transfers for the 1999 tax year effective January 1, 1999.

     The Partnership used most of its share of the net proceeds from the Newport
News Sale to make distributions in 1996 to Presidio, TCIV 5 and the Limited
Partners of $67,000, $266,000 and $33,001,000 ($165 per Unit for Limited
Partners of record as of January 1, 1996), respectively.  The Partnership used
most of the net proceeds from the sale of the Southern Tennessee, St. Mary's and
Lower Delaware Systems to make distributions in 1997 to Presidio, TCIV 5 and the
Limited Partners of $149,000, $598,000 and $74,002,000 ($370 per Unit for
Limited Partners of record as of July 1, 1997), respectively.

                                     II-1
<PAGE>
 
Item 6.     Selected Financial Data.
------      ----------------------- 

     Selected financial data related to the Partnership's financial condition
and results of operations for the five years ended December 31, 1998 are
summarized as follows (such information should be read in conjunction with the
Partnership's financial statements included elsewhere herein):

SUMMARY BALANCE SHEET DATA:
-------------------------- 

<TABLE>
<CAPTION>
                                                                          December 31,
                                         -------------------------------------------------------------------------------
                                              1998           1997 (1)          1996           1995            1994
                                         ---------------  ---------------  -------------  -------------  ---------------
                                                                      amounts in thousands
<S>                                      <C>              <C>              <C>            <C>            <C> 
 Cash and cash equivalents                       $16,134          16,400           4,729          2,132              599
 Property and equipment, net                     $ 7,814           8,261          38,732         39,794           39,588
 Franchise costs and other
  intangibles, net                               $ 5,597           7,963          28,877         37,050           45,398
 Total assets                                    $30,501          35,578          73,209         79,936           86,563
 Debt                                            $    --              --           7,500          8,700           13,800
 Partners' equity                                $28,447          28,941          60,137         57,840           64,004
 Units outstanding                                   200             200             200            200              200
</TABLE>


SUMMARY STATEMENT OF OPERATIONS DATA:
------------------------------------ 

<TABLE>
<CAPTION>
                                                                     Years ended December 31,
                                         ---------------------------------------------------------------------------------
                                               1998            1997 (1)          1996            1995            1994
                                         -----------------  --------------  --------------  --------------  --------------
                                                          amounts in thousands, except per Unit amounts
<S>                                      <C>                <C>             <C>             <C>             <C> 
 Revenue                                          $ 9,542          16,255          28,108          26,196          24,393
 Operating loss                                   $(1,044)         (2,352)         (4,556)         (4,867)         (5,213)
 Interest expense                                 $    --            (135)           (302)           (925)           (989)
 Interest income                                  $   752           1,947             494              81              --
 Share of earnings (losses) of
  Newport News                                    $    --              --          39,995            (652)           (194)
 Net earnings (loss)                              $  (494)         43,553          35,631          (6,164)         (6,396)
 Net earnings (loss) per Unit                     $ (2.45)         215.58          176.37          (30.51)         (31.66)
 Distributions per Unit                                --             370             165              --              --
</TABLE>
-------------------------

(1)  The December 31, 1997 summary balance sheet data and summary statement of
     operations data reflect the effects of the 1997 Sales Transactions.  As a
     result of the 1997 Sales Transactions, the Partnership's statement of
     operations for the year ended December 31, 1997 includes (i) three months
     of operating results for the Southern Tennessee and St. Mary's Systems,
     (ii) six months of operating results for the Lower Delaware System and
     (iii) twelve months of operating results for the Riverside System.  See
     Management's Discussion and Analysis of Financial Condition and Results of
     --------------------------------------------------------------------------
     Operations - General.
     -------------------- 

                                     II-2
<PAGE>
 
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
------   -----------------------------------------------------------------------
of Operations.
------------- 

     General
     -------

     AT&T Merger. TCI and AT&T have agreed to a merger, in which TCI will become
a wholly-owned subsidiary of AT&T.  In anticipation of the Merger, TCI announced
that it will restructure certain of its subsidiaries, including the merger of
TCIC into TCI.  The Merger is not expected to have a material effect on the
Partnership's results of operations or financial condition.

     Asset Sales.  On January 1, 1996, Newport News sold the Newport News System
to Cox Communications Rhode Island, Inc., an unaffiliated third party, for cash
proceeds of $121,886,000. The Partnership had a 40% ownership interest in
Newport News.  Accordingly, during 1996 the Partnership received $35,789,000 of
the net cash proceeds (after satisfaction of Newport News' transaction costs and
liabilities) from the Newport News Sale.  The Partnership used most of its share
of the net proceeds from the Newport News Sale to make distributions in 1996 to
Presidio, TCIV 5 and the Limited Partners of $67,000, $266,000 and $33,001,000
($165 per Unit for Limited Partners of record as of January 1, 1996),
respectively.

     On April 1, 1997, the Partnership sold the Southern Tennessee System to
Rifkin for an adjusted sales price of $19,647,000.  Pursuant to the asset
purchase agreement for the Southern Tennessee Sale, $494,000 of such sales price
was placed in escrow and was subject to indemnifiable claims made by Rifkin
through March 31, 1998.  Prior to March 31, 1998, Rifkin filed a claim against
the Southern Tennessee Escrow relating to a class action lawsuit filed by a
customer challenging late fee charges with respect to the Southern Tennessee
System.  Such claim has had and will continue to have the effect of delaying the
release of the Southern Tennessee Escrow.  In addition, any judgment against the
Southern Tennessee System may have the effect of reducing the amount of the
Southern Tennessee Escrow ultimately released to ACT 5.  Such claim could
prevent the release of some or all of the Southern Tennessee Escrow to ACT 5.

     On April 16, 1997, the Partnership sold the St. Mary's System to Gans
Multimedia Partnership ("Gans"), an unaffiliated third party, for an adjusted
sales price of $30,547,000 (the "St. Mary's Sale").  Pursuant to the asset
purchase agreement for the St. Mary's Sale, $766,000 of such sales price was
placed in escrow (the "St. Mary's Escrow") and was subject to indemnifiable
claims made by Gans through April 15, 1998.  The St. Mary's Escrow was released
to ACT 5 during the second quarter of 1998.  ACT 5 received interest of $39,000
in conjunction with the release of the St. Mary's Escrow.

     On June 24, 1997, the Partnership sold the Lower Delaware System to
Mediacom Delaware LLC ("Mediacom"), an unaffiliated third party, for an adjusted
sales price of $42,191,000 (the "Lower Delaware Sale").  Pursuant to the asset
purchase agreement for the Lower Delaware Sale, $1,077,000 of such sales price
was placed in escrow (the "Lower Delaware Escrow") and was subject to
indemnifiable claims made by Mediacom through June 23, 1998.  The Lower Delaware
Escrow was released to ACT 5 during the third quarter of 1998.  ACT 5 received
interest of $57,000 in conjunction with the release of the Lower Delaware
Escrow.

                                     II-3
<PAGE>
 
     The 1997 Sales Transactions were approved by the Limited Partners at a
special meeting that occurred on March 26, 1997.  The Partnership used proceeds
from the 1997 Sales Transactions to pay disposition fees of $2,778,000 to
Cablevision, repay debt and related accrued interest of $8,652,000, and make
distributions to its General and Limited Partners of $747,000 and $74,002,000
($370 per Unit for Limited Partners of record as of July 1, 1997), respectively.

     On August 12, 1998, the Partnership entered into an agreement that provides
for the sale of the Riverside System to Century, an unaffiliated third party,
for a cash sales price of $33,000,000, subject to certain adjustments.  On
January 1, 1999, Century assigned its interest in the Riverside Sale to Century
Sub.  Pursuant to the asset purchase agreement for the Riverside Sale,
$1,500,000 of such sales price will be subject to indemnifiable claims for 180
days following consummation of the Riverside Sale.

     The Riverside Sale was approved by the Limited Partners at a special
meeting that occurred on December 11, 1998.  Subject to the receipt of
regulatory approvals and satisfaction or waiver of customary conditions to
closing, consummation of the Riverside Sale is expected to occur during the
second quarter of 1999.

     In the event that the Riverside Sale is consummated, of which there can be
no assurance, the Partnership will have sold all of its assets (other than cash
and funds held in escrow) and, pursuant to the Partnership's limited partnership
agreement, will ultimately be dissolved and terminated.  Assuming the Riverside
Sale and the dissolution and liquidation of the Partnership had occurred on
December 31, 1998, the Partnership estimates that the pro forma distribution to
Limited Partners would have been $228 per $500 Unit.  The Partnership
anticipates that an initial distribution will be made to its partners as soon as
practicable after the date of the closing of the Riverside Sale.  It is expected
that a final liquidating distribution will be made as soon as practicable after
all funds held in escrow have been released to the Partnership, subject to the
receipt of any indemnifiable claims.  No assurance can be given as to the timing
or amount of such distributions.

     In the event that the Riverside Sale is not consummated, it is currently
the General Partner's intention to seek a substitute buyer for the Riverside
System.  There is no assurance that the General Partner could arrange for a
substitute sale transaction for the Riverside System at an appropriate price or
on terms acceptable to the Partnership.  If the General Partner's efforts in
arranging a substitute sale transaction prove to be unsuccessful, the General
Partner would continue to operate the Riverside System.

     In August 1998, TCIC and Century signed a definitive agreement to establish
a joint venture that will combine multiple cable television systems in Southern
California.  Among those systems to be contributed to the Joint Venture by TCIC
is the Redlands System.  The Riverside System currently utilizes office
facilities, personnel and certain cable distribution assets (including the
headend) of the Redlands System.  In the event the Riverside Sale is
consummated, the Riverside System is among those systems to be contributed to
the Joint Venture by Century.  TCIC will have a 25% interest in the Joint
Venture, which will be managed by Century.  In the event that the Joint Venture
is consummated prior to the Riverside Sale, or the Joint Venture is consummated
and the Riverside Sale is not consummated, Cablevision will continue to manage
the Riverside System.  The Partnership has agreed that in the event the Joint
Venture is consummated prior to the Riverside Sale, Cablevision may engage the
Joint Venture to perform all or some portion of the day-to-day management of the
Riverside System.

                                     II-4
<PAGE>
 
  Regulation.   The operation of the Riverside System is regulated at the
federal, state and local levels.  The 1992 Cable Act and the 1996 Telecom Act
established rules under which the Riverside System's regulated basic and tier
service rates and its equipment and installation charges (the "Regulated
Services") are regulated if a complaint is filed or if the appropriate franchise
authority is certified.  Under the 1996 Telecom Act, regulation of tier service
is scheduled to sunset on March 31, 1999.  At December 31, 1998, none of the
Riverside System's franchise areas were subject to such rate regulation.
However, future events could occur that could cause one or more of the Riverside
System's franchise areas to be subject to rate regulation.

  During the year ended December 31, 1998, approximately 69% of the Riverside
System's revenue was derived from Regulated Services.  As noted above, any
increases in rates charged for such services are subject to regulation by the
Cable Acts.  Moreover, competitive factors may limit Riverside's ability to
increase its service rates.

  Competition.  Since 1992, most of Riverside's service areas have been subject
to competition from a MMDS operator (the "California MMDS Operator").  Although
the California MMDS Operator has generated increased competition in Riverside's
service area, the Partnership is currently unable to predict the extent of the
competitive effect at this time on the Partnership's financial condition or
results of operations.  For additional information concerning the revenue and
subscriber bases of Riverside, see The Riverside System below.  See also
                                                                        
Business - Narrative Description of Business - Competition.
--------------------------------------------               

  In addition to MMDS, Riverside competes with other distributors of the same or
similar video programming as that offered by its cable system. DBS has emerged
as significant competition to cable television systems. As described under
Business - Narrative Description of Business - Competition, DBS service is
--------------------------------------------               
available within the franchise areas serviced by the Riverside System. However,
the Partnership is unable to predict what effect such competition will have on
Riverside's financial condition or results of operations.

  The 1996 Telecom Act eliminated the statutory and regulatory restrictions that
prevented telephone companies from competing with cable operators for the
provision of video services by any means.  See Business - Narrative Description
                                               --------------------------------
of Business - Regulation and Legislation.  The 1996 Telecom Act allows local
-----------                                                                 
telephone companies, including the RBOCs, to compete with cable television
operators both inside and outside their telephone service areas.  The
Partnership expects that the Riverside System will face substantial competition
from telephone companies for the provision of video services, whether it is
through wireless cable, or through upgraded telephone networks.  The Partnership
assumes that all major telephone companies have already entered or may enter the
business of providing video services.  Most major telephone companies have
greater financial resources than the Partnership, and the 1992 Cable Act ensures
that telephone company providers of video services will have access to acquiring
all of the significant cable television programming services. Additionally, the
1996 Telecom Act eliminates certain federal restrictions on utility holding
companies and thus frees all utility companies to provide cable television
services.  The Partnership expects this could result in another source of
significant competition in the delivery of video services. Based on the
foregoing, the Partnership continues to believe that the Riverside System could
experience competition from alternative providers of video programming services
in the future.  The Partnership presently cannot predict the effect that any
such competition might have on its financial condition or results of operations.

                                     II-5
<PAGE>
 
  As further described under Business - Narrative Description of Business, the
                             --------------------------------------------      
Riverside System is presently operating in an external environment that is
characterized by rapidly changing competitive, regulatory, technological and
economic factors.  Although the Partnership generally is unable to predict the
effect that such changing factors might have on Riverside's financial condition
and results of operations, the Partnership does believe that the continued
evolution of such factors could place Riverside at a competitive disadvantage if
it were not to implement certain technological improvements.  In this regard,
Riverside introduced digital video services during 1997.  The primary capital
cost of digital video services is the purchase and installation of digital set-
top devices.  Accordingly, the capital costs incurred will be dependent upon the
number of digital set-top devices required.  The Riverside System had
approximately 1,500 subscribers to digital video services at December 31, 1998.
The Riverside System incurred approximately $419,000 in capital costs in 1998
related to the introduction of digital video services.  The Riverside System
aplans to increase the number of subscribers to digital video services.

  The Partnership has no specific plans with respect to more extensive
advancements or improvements that would involve the replacement of coaxial trunk
cable with fiber optic cable.  The Partnership would not proceed with the
implementation of any significant technological advancements or improvements
without first conducting additional analysis of the economic feasibility of such
advancements and improvements.  See Liquidity and Capital Resources below.
                                    -------------------------------       

  The Riverside System.  The following table sets forth information for the
Riverside System for the periods indicated (amounts in thousands):

<TABLE>
<CAPTION>
                                                                     December 31,
                                                     ---------------------------------------------
                                                          1998            1997           1996
                                                     ---------------  -------------  -------------
 
<S>                                                  <C>              <C>            <C>
         Basic Customers /1/                                    19.6           18.9           19.1
                                                             =======         ======         ======
 
         Premium Subscriptions /1//2/                           20.5           19.9           22.0
                                                             =======         ======         ======
 
         Homes Passed                                           31.8           31.6           31.3
                                                             =======         ======         ======
 
         Total Assets                                        $13,873         16,841         19,490
                                                             =======         ======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                                       Year ended
                                                                      December 31,
                                                     ----------------------------------------------
                                                          1998            1997            1996
                                                     --------------  --------------  --------------
 
<S>                                                  <C>             <C>             <C>
         Revenue /3/                                         $9,542           8,632           8,388
                                                             ======           =====           =====
 
         Operating Cash Flow /4/                             $4,074           3,532           3,009
                                                             ======           =====           =====
</TABLE>
-------------------------

                                     II-6
<PAGE>
 
     /1/  From December 31, 1997 to December 31, 1998, Riverside experienced an
          increase of 700 basic subscribers and 600 premium subscriptions. The
          increase in premium subscriptions is comprised of a 400 subscription
          increase in STARZ! subscriptions and a 300 subscription increase in
          "ENCORE" subscriptions, partially offset by a 100 subscription
          decrease in traditional premium subscriptions. From December 31, 1996
          to December 31, 1997, Riverside experienced a decrease of 2,100
          premium subscriptions and 200 basic subscribers. The decrease in
          premium subscriptions is comprised of a 1,900 subscription decrease in
          traditional premium subscriptions and a 400 subscription decrease in
          "ENCORE" subscriptions, partially offset by a 200 subscription
          increase in STARZ! subscriptions. The monthly charge for "ENCORE" and
          STARZ!, which are indirectly owned by TCI, generally ranges from $1.00
          to $7.00, as compared to $9.00 to $10.00 for other premium services.
          As described under General - Competition above, Riverside is subject
                             -------                                          
          to competition from the California MMDS Operator and DBS providers.
          The Partnership currently is unable to predict the future effect of
          such competition on Riverside's financial condition and results of
          operations.

     /2/  A basic subscriber may subscribe to one or more premium services and
          the number of premium services reflected represents the total number
          of such subscriptions.  In addition to competition, fluctuations in
          premium subscriptions may also result from the timing of promotional
          campaigns that involve the packaging of premium services at a lower
          per-unit price than would otherwise be paid if such services were
          purchased separately.  As such packaged prices expire, Riverside
          typically experiences reductions in the number of its premium
          subscriptions.

     /3/  For additional information concerning Riverside's revenue, see
                                                                        
          Material Changes in Results of Operations below.
          -----------------------------------------       

     /4/  Operating income before depreciation, amortization and management fees
          ("Operating Cash Flow") is a measure of value and borrowing capacity
          within the cable television industry.  Changes in Operating Cash Flow
          result from the net effect of the revenue and expense variances
          discussed in Material Changes in Results of Operations below.  The
                       -----------------------------------------            
          amounts reflected in the table do not include allocations of certain
          indirect expenses of the Partnership and are not intended to be a
          substitute for a measure of performance prepared in accordance with
          generally accepted accounting principles and should not be relied upon
          as such.

     On August 12, 1998, the Partnership entered into an agreement that provides
for the sale of the Riverside System.  The Riverside Sale was approved by the
Limited Partners at a special meeting that occurred on December 11, 1998.
Subject to the receipt of regulatory approvals and satisfaction or waiver of
customary conditions to closing, consummation of the Riverside Sale is expected
to occur during the second quarter of 1999.  There is no assurance that that the
Riverside Sale will be consummated.  For additional information concerning the
Riverside Sale, see Asset Sales above.

                                     II-7
<PAGE>
 
     Year 2000. In addition to the property and equipment owned by the Riverside
System, certain office facilities, personnel, and cable distribution assets of
the Redlands System, and certain software and equipment of TCI are utilized by
the Riverside System (collectively, the "Riverside/Redlands Systems").
Accordingly, the assessment and remediation of ACT 5's year 2000 issues are
dependent upon the assessment and remediation by TCI of certain of its own year
2000 issues and the year 2000 issues of the Riverside/Redlands Systems.

     During 1998, TCI, in its capacity as the ultimate parent of the managing
agent of ACT 5, continued its comprehensive effort to assess and remediate the
Riverside/Redlands Systems' computer and other systems and related software and
equipment to ensure such systems, software and equipment recognize, process and
store information in the year 2000 and beyond.  TCI's year 2000 remediation
efforts include an assessment of the Riverside/Redlands Systems' most critical
systems, such as customer service and billing systems, headends and other cable
plant, business support operations, and other equipment and facilities.  TCI
also continued its efforts to verify the year 2000 readiness of ACT 5's
important suppliers and vendors.

     ACT 5's year 2000 remediation efforts are being managed by the year 2000
Program Management Office ("PMO") of TCI.  The PMO is responsible for
overseeing, coordinating and reporting on ACT 5's year 2000 remediation efforts.
At December 31, 1998, it was comprised of a 119-member, full-time staff,
accountable to executive management of TCI.  As described above, AT&T and TCI
have agreed to a merger.  Although no assurance can be given, management of TCI
does not anticipate that such merger will have a detrimental impact on the
Riverside/Redlands Systems year 2000 assessment and remediation efforts.

     The PMO has defined a four-phase approach to determining the year 2000
readiness of the Riverside/Redlands Systems' computer and other systems,
software and equipment. Such approach is intended to provide a detailed method
for tracking the evaluation, repair and testing of such critical systems,
software and equipment. Phase 1, Assessment, involves the inventory of all
critical systems, software and equipment and the identification of any year 2000
issues. Phase 1 also includes the preparation of the workplans needed for
remediation. Phase 2, Remediation, involves repairing, upgrading and/or
replacing any non-compliant critical equipment and systems. Phase 3, Testing,
involves testing such critical systems, software, and equipment for year 2000
readiness, or in certain cases, relying on test results provided to TCI. Phase
4, Implementation, involves placing compliant systems, software and equipment
into production or service.

     Management believes that the progress of remediation of the
Riverside/Redlands Systems closely follows that of TCIC as a whole, and that the
phase completion data set forth below for TCIC may be considered to be a useful
guide for estimating the Riverside/Redlands Systems' phase completion and
ultimately the progress of remediating potential year 2000 issues impacting ACT
5's operations.

                                     II-8
<PAGE>
 
     At December 31, 1998, TCIC's overall progress by phase was as follows:


<TABLE>
<CAPTION>
                                                              
                                             Percentage of                    
                                          Year 2000  Projects                 Expected Completion Date
Phase                                     Completed by Phase*                 - All Year 2000 Projects
------------------------------   ------------------------------------   -----------------------------------
 
<S>                              <C>                                    <C>
Phase 1 - Assessment                           64%                                   April 1999    
Phase 2 - Remediation                          20%                                   May 1999      
Phase 3 - Testing                              11%                                   July 1999     
Phase 4 - Implementation                        3%                                   September 1999 
</TABLE>
------------------------------

  * The percentages set forth above were calculated by dividing the number of
year 2000 projects that have completed a given phase by the total number of year
2000 projects.

  The completion dates set forth above are based on TCIC's current expectations.
However, due to the uncertainties inherent in year 2000 remediation, no
assurances can be given as to whether such projects will be completed on such
dates.

  TCI is completing an inventory of critical systems with embedded technologies
that impact ACT 5's operations and is currently determining the correct
remediation approach. The embedded technologies assessments are expected to be
complete by April of 1999.

  During 1998, TCI continued its survey of significant third-party vendors and
suppliers whose systems, services or products are important to ACT 5's
operations (e.g., the suppliers of set-top devices and the provider of ACT 5's
billing services). The year 2000 readiness of these providers is critical to
continued provision of cable services by ACT 5. TCI has received information
that critical systems, services or products supplied to ACT 5 by third parties
are either year 2000 ready or are expected to be year 2000 ready by mid-1999.

  In addition to the survey process described above, TCI has identified ACT 5's
most critical supplier/vendor relationships and has instituted a verification
process to determine such vendors' year 2000 readiness.  Such verification may
include reviewing the vendors' test and other data and engaging in regular
conferences with the vendors' year 2000 team.  TCI is also requiring testing to
validate the year 2000 compliance of certain critical products and services.

  Year 2000 expenses and capital expenditures incurred during the year ended
December 31, 1998 were not material.  Although no assurance can be given,
management of ACT 5 currently expects total estimated costs associated with year
2000 remediation efforts to be approximately $200,000.  Such amount is exclusive
of replacement costs associated with noncompliant information technology ("IT")
systems incurred by TCI on behalf of ACT 5.  Additionally, ACT 5 is not
deferring any planned IT projects due to year 2000 remediation costs.

                                     II-9
<PAGE>
 
  The failure to correct a material year 2000 problem in the Redlands System
could result in an interruption of ACT 5's provision of cable service through
the Riverside System.  Management believes that TCI's year 2000 efforts in the
Riverside/Redlands Systems will significantly reduce ACT 5's risks associated
with the changeover to the year 2000.  TCI has implemented certain enterprise-
wide contingency plans to minimize the effect of potential year 2000 related
disruptions.  The risks and the uncertainties discussed below and the associated
contingency plans relate to systems, software, equipment, and services that TCI
has deemed critical in regard to customer service, business operations,
financial impact or safety.

  The failure of addressable controllers contained in the Riverside/Redlands
Systems' headend could disrupt the delivery of premium services to customers and
could necessitate crediting customers for failure to receive such premium
services.  In this unlikely event, management expects that it will identify and
transmit the lowest cost programming tier.  Unless other contingency plans are
developed with the programmers, premium and adult content channels would not
likely be transmitted until the addressable controller had been repaired.

  Customer service networks and/or automated voice response systems failure
could prevent access to customer account information, hamper installation
scheduling and disable the processing of pay-per-view requests.  ACT 5 plans to
have its customer service representatives answer telephone calls from customers
in the event of outages and expects to retrieve needed customer information
manually from the billing service provider.

  A failure of the services provided by billing systems service providers could
result in a loss of customer records which could result in a disruption in the
ability to bill customers for a protracted period.  ACT 5 plans to have
electronic backup records of its customer billing information prepared prior to
the year 2000 to allow for data recovery.  In addition, ACT 5 continues to
monitor the year 2000 readiness of its key customer billing suppliers.

  Advertising revenue could be adversely affected by the failure of certain
equipment which could impede or prevent the insertion of advertising spots in
ACT 5's programming.  ACT 5 anticipates that it can minimize the effect of this
situation by having the dates manually reset each day until the equipment has
been repaired.

  Security and fire protection systems failure could leave facilities vulnerable
to intrusion and fire.  ACT 5 expects to have such systems returned to normal
functioning by turning the power off and then on again ("power off/on").  ACT 5
also plans to have additional security staff on site and plans to implement a
backup plan for communicating with local fire and police departments.  Also,
certain personal computers interface with and control elevators, escalators,
wireless systems, public access systems and certain telephony systems.   In the
event such computers cease operating, conducting a power off/on is expected to
resume normal functioning.  If a power off/on does not resume normal
functioning, management expects to resolve the problem by resetting the computer
to a pre-designated date which precedes the year 2000.

  In the event that the local public utility cannot supply power, TCI expects to
supply power for a limited time to the Riverside/Redlands Systems' cable headend
and office sites through backup generators.

                                     II-10
<PAGE>
 
  The financial impact of any or all of the above worst-case scenarios on ACT 5
has not been and cannot be estimated by ACT 5 due to the numerous uncertainties
and variables associated with such scenarios.

  ACT 5 does not presently anticipate that there will be material losses from
any claims of breach of contract due to year 2000 issues.


  Results of Operations
  ---------------------

  Material Changes in Results of Operations
  -----------------------------------------

  The decreases in the Partnership's revenue and operating costs and expenses
for the year ended December 31, 1998, as compared to the corresponding prior
year period, resulted primarily from the impact of the 1997 Sales Transactions.
See General above.
    -------       

  Revenue decreased $6,713,000 or 41% and $11,853,000 or 42% during the years
ended December 31, 1998 and 1997, respectively, as compared to the corresponding
prior year periods.  Such  decreases are primarily attributable to the timing of
the 1997 Sales Transactions.  Revenue for Riverside increased $910,000 or 11%
for the year ended December 31, 1998, as compared to the corresponding prior
year period.  Revenue from Riverside's customers accounted for $557,000 of such
increase, due to the net effect of a $659,000 increase in basic revenue, a
$98,000 increase in revenue from digital products and a $200,000 decrease in
traditional premium revenue.  Riverside experienced a 7% increase in its average
basic rate, a 2% increase in the average number of basic customers, a 5%
decrease in its average rate for traditional premium services, and a 2% decrease
in the average number of traditional premium subscriptions during the year ended
December 31, 1998, as compared to the corresponding prior year period.
Advertising sales increased $270,000 and other revenue accounted for the
remaining increase in revenue. Revenue for Riverside increased $244,000 or 3%
during the year ended December 31, 1997, as compared to the corresponding prior
year period. Such increase is attributable to a 3% increase in the weighted
average rate received for Regulated Services during 1997. Basic customers for
Riverside remained relatively consistent from 1996 to 1997. Premium revenue for
Riverside was consistent from 1996 to 1997 as the 10% decrease in premium
customers was offset by an increase in the weighted average rate received for
premium services. For additional information, see General - The Riverside System
                                                  -------
and General - Regulation above.
    -------                            

  Programming expense decreased $1,445,000 or 39% and $2,148,000 or 37% for the
years ended December 31, 1998 and 1997, respectively, as compared to the
corresponding prior year periods.  Such decreases are primarily attributable to
the timing of the 1997 Sales Transactions.  Programming expense for Riverside
increased $116,000 or 6% and $196,000 or 10% during the years ended December 31,
1998 and 1997, respectively, as compared to the corresponding prior year
periods.  Such increases are primarily attributable to higher programming rates.
The Partnership anticipates that Riverside's programming costs will increase in
future periods.

                                     II-11
<PAGE>
 
  Operating expenses decreased $654,000 or 39% and $1,274,000 or 43% for the
years ended December 31, 1998 and 1997, respectively, as compared to the
corresponding prior year periods.  Such decreases are primarily attributable to
the timing of the 1997 Sales Transactions.  Operating expenses for Riverside
increased $294,000 or 40% and decreased $51,000 or 6% for the years ended
December 31, 1998 and 1997, respectively, as compared to the corresponding prior
year periods.  The 1998 increase is primarily due to increased labor costs
related to the hiring of additional operating personnel in conjunction with
Riverside's efforts to increase the number of customers who subscribe to digital
video services.  The 1997 decrease is attributable to reductions in payroll
expenses and other cost-cutting measures implemented at the end of 1996.

  Selling, general and administrative ("SG&A") expenses decreased $2,741,000 or
44% and $2,702,000 or 30% during the years ended December 31, 1998 and 1997,
respectively, as compared to the corresponding prior year periods.  Such
decreases are primarily attributable to the timing of the 1997 Sales
Transactions. Exclusive of the effects of the 1997 Sales Transactions, SG&A
expenses for the Partnership increased $323,000 or 10% and decreased $399,000 or
11% for the years ended December 31, 1998 and 1997, respectively, as compared to
the corresponding prior year periods. The 1998 increase is due to increased
costs relating to costs associated with the Riverside Sale and the launch of
digital products. The 1997 decrease is primarily attributable to reductions in
payroll expenses and other cost-cutting measures implemented at the end of 1996.

  Depreciation and amortization decreased $3,181,000 or 45% and $7,933,000 or
53% during the years ended December 31, 1998 and 1997, respectively, as compared
to the corresponding prior year periods.  Depreciation and amortization for
Riverside increased $126,000 or 4% and decreased $237,000 or 6% for the years
ended December 31, 1998 and 1997, respectively, as compared to the corresponding
prior year periods.  The 1998 increase is primarily attributable to capital
expenditures.  The 1997 decrease is primarily attributable to certain of
Riverside's assets becoming fully depreciated during the last half of 1996.

  Other Income (Expense)
  ----------------------

  The Partnership's interest expense decreased $135,000 or 100% and $167,000 or
55% during the years ended December 31, 1998 and 1997, respectively, as compared
to the corresponding prior year periods.  Such decreases are due to the
Partnership's use of cash proceeds from the Southern Tennessee Sale to repay all
amounts outstanding under the bank credit facility and to terminate such
facility during 1997.

  Interest income decreased $1,195,000 or 61% and increased $1,453,000 or 294%
during the years ended December 31, 1998 and 1997, respectively, as compared to
the corresponding prior year periods.  The decrease in 1998 is due to a decrease
in the average balance of the Partnership's cash and cash equivalents, primarily
due to the distribution of cash proceeds related to the 1997 Sales Transactions
during the third quarter of 1997.  The 1997 increase is due to increases in the
balances of the Partnership's interest-bearing assets resulting primarily from
the receipt of cash proceeds related to the 1997 Sales Transactions.

  During the first quarter of 1998, the Partnership expensed $202,000 of
deferred loan costs that were related to debt that was repaid in 1997.

  The Partnership recorded a gain from the 1997 Sales Transactions of
$44,093,000 during the year ended December 31, 1997.

                                     II-12
<PAGE>
 
  The Partnership's share of Newport News' earnings aggregated $39,995,000 for
the year ended December 31, 1996.  As described in notes 2 and 4 to the
accompanying financial statements of the Partnership, Newport News was
liquidated in 1996.

  Inflation did not have a significant impact on the Partnership's financial
condition or results of operations during the three-year period ended December
31, 1998.

  Liquidity and Capital Resources
  -------------------------------

  As previously described under General - Asset Sales, the Partnership entered
                                -------                                       
into an agreement that provides for the sale of the Riverside System.  In the
event that the Riverside Sale is consummated, the Partnership anticipates that
it would use all or a portion of the available net cash proceeds to satisfy its
liabilities, including any amounts due to related parties, and make
distributions to the Partnership's partners.

  In the event that the Riverside Sale is consummated, of which there can be
no assurance, the Partnership will have sold all of its assets (other than cash
and funds held in escrow) and, pursuant to the Partnership's limited partnership
agreement, will ultimately be dissolved and terminated.  Assuming the Riverside
Sale and the dissolution and liquidation of the Partnership had occurred on
December 31, 1998, the Partnership estimates that the pro forma distribution to
Limited Partners would have been $228 per $500 Unit.  The Partnership
anticipates that an initial distribution will be made to its partners as soon as
practicable after the date of the closing of the Riverside Sale.  It is expected
that a final liquidating distribution will be made as soon as practicable after
all funds held in escrow have been released to the Partnership, subject to the
receipt of any indemnifiable claims.  No assurance can be given as to the timing
or amount of such distributions.

  As previously described under General - Asset Sales, pursuant to the 1997
                                -------                                    
Sales Transactions, $2,337,000 of the combined sales price of the 1997 Sales
Transactions was placed in escrow and was subject to indemnifiable claims for up
to one year following consummation of the applicable 1997 Sales Transactions.
The St. Mary's Escrow was released to ACT 5 during the second quarter of 1998
and the Lower Delaware Escrow was released to ACT 5 during the third quarter of
1998.  Prior to its release, Rifkin filed a claim against the Southern Tennessee
Escrow relating to a class action lawsuit filed by a customer challenging late
fee charges with respect to the Southern Tennessee System.  Such claim has had
and will continue to have the effect of delaying the release of the Southern
Tennessee Escrow.  In addition, any judgment against the Southern Tennessee
System may have the effect of reducing the amount of the Southern Tennessee
Escrow ultimately released to ACT 5.

  The Partnership's other liabilities represent unclaimed distribution checks to
certain Limited Partners which were written on a bank account which was
subsequently closed.  Such checks will either be reissued to such Limited
Partners or released to the respective state of such Limited Partners' last
known residence upon dissolution of the Partnership.

  During the year ended December 31, 1998, the Partnership used cash on hand and
cash provided by investing activities of $266,000 and $838,000, respectively, to
fund operating activities of $1,104,000. See the Partnership's statements of
cash flows included in the accompanying financial statements.

                                     II-13
<PAGE>
 
  The Partnership estimates that during 1999 it will spend approximately $1.4
million for capital expenditures related to Riverside, of which $928,000 relates
to digital video services.  The estimated digital video services capital
expenditures are based upon the achievement of a target level of new customers
to such services, and therefore the estimate of capital expenditures will
fluctuate based on the actual number of new customers which subscribe to digital
video services.  Additionally, such estimated amounts assume a full year of
capital expenditures for Riverside and that no significant technological
improvements will be implemented to the Riverside System.  See related
discussion under General - Competition and General - Asset Sales.  During the
                 -------                   -------                           
year ended December 31, 1998, the Partnership expended $1.1 million for capital
expenditures of which $419,000 related to digital video services.

  The Partnership anticipates that cash on hand, cash provided by Riverside's
operating activities and any cash released from the Southern Tennessee Escrow
will be sufficient to fund estimated capital expenditures (exclusive of any
significant technological improvements, as described under General -
                                                           -------  
Competition), and meet its other liquidity requirements.

Item 8.  Financial Statements and Supplementary Data.
------   ------------------------------------------- 

  The financial statements of the Partnership are filed under this item
beginning on Page II-15.  All financial statement schedules are omitted as they
are not required or are not applicable.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
------   ---------------------------------------------------------------
         Financial Disclosure.
         -------------------- 

     None.

                                     II-14
<PAGE>
 
                          Independent Auditors' Report
                          ----------------------------



The Partners
American Cable TV Investors 5, Ltd.:


We have audited the accompanying balance sheets of American Cable TV Investors
5, Ltd. (a Colorado limited partnership) as of December 31, 1998 and 1997, and
the related statements of operations, partners' equity, and cash flows for each
of the years in the three-year period ended December 31, 1998.  These financial
statements are the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Cable TV Investors 5,
Ltd. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1998, in conformity with generally accepted accounting principles.



                                                 KPMG LLP


Denver Colorado
February 24, 1999

                                     II-15
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                                 Balance Sheets

                           December 31, 1998 and 1997

                                  (See note 2)

<TABLE>
<CAPTION>
                                                                           1998             1997
                                                                      ---------------  ---------------
Assets                                                                      amounts in thousands
------
 
<S>                                                                   <C>              <C>
Cash and cash equivalents                                                     $16,134           16,400
 
Trade and other receivables                                                       389              432
 Less allowance for doubtful accounts                                               8               23
                                                                              -------           ------
                                                                                  381              409
                                                                              -------           ------
 
Property and equipment:
 Cable distribution systems                                                    18,610           17,693
 Support equipment and buildings                                                1,473            1,436
                                                                              -------           ------
                                                                               20,083           19,129
 Less accumulated depreciation                                                 12,269           10,868
                                                                              -------           ------
                                                                                7,814            8,261
                                                                              -------           ------
 
Franchise costs and other intangibles                                          24,649           24,649
 Less accumulated amortization                                                 19,052           16,686
                                                                              -------           ------
                                                                                5,597            7,963
                                                                              -------           ------
 
Funds held in escrow (note 2)                                                     494            2,337
 
Other assets, net of accumulated amortization                                      81              208
                                                                              -------           ------
 
                                                                              $30,501           35,578
                                                                              =======           ======
</TABLE>


                                                                     (continued)

                                     II-16
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                           Balance Sheets, continued

                                  (See note 2)


<TABLE>
<CAPTION>
                                                                            1998              1997
                                                                      ----------------  ----------------
Liabilities and Partners' Equity                                             amounts in thousands
--------------------------------
 
<S>                                                                   <C>               <C>
Accounts payable                                                                $  53                14
 
Accrued expenses:
 Unclaimed limited partner distribution checks                                    639             1,138
 Franchise fees                                                                   133               152
 State income taxes withheld from distributions                                    --               150
 Other                                                                             43               157
                                                                              -------            ------
                                                                                  815             1,597
                                                                              -------            ------
 
Subscriber advance payments and converter deposits                                 46               107
 
Amounts due to related parties (note 5)                                         1,140             4,919
                                                                              -------            ------
 
    Total liabilities                                                           2,054             6,637
                                                                              -------            ------
 
Partners' equity (deficit):
 General partner                                                               (3,017)           (3,012)
 Limited partners                                                              31,464            31,953
                                                                              -------            ------
 
    Total partners' equity                                                     28,447            28,941
                                                                              -------            ------
 
Commitments and contingencies (notes 2, 5, 6 and 7)
                                                                              $30,501            35,578
                                                                              =======            ======
</TABLE>

See accompanying notes to financial statements.

                                     II-17
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                            Statements of Operations

                  Years ended December 31, 1998, 1997 and 1996

                                  (See note 2)


<TABLE>
<CAPTION>
                                                            1998              1997             1996
                                                      ----------------  ----------------  ---------------
                                                                     amounts in thousands,
                                                                    except per unit amounts
 
<S>                                                   <C>               <C>               <C>
Revenue                                                       $ 9,542            16,255           28,108
 
Operating costs and expenses:
 Programming (primarily from related parties - note
  5)                                                            2,219             3,664            5,812
 Operating (including allocations
  from related parties - note 5)                                1,027             1,681            2,955
 Selling, general and administrative (including
  charges and allocations from related parties -
  note 5)                                                       3,522             6,263            8,965
 Depreciation                                                   1,559             2,690            6,672
 Amortization                                                   2,259             4,309            8,260
                                                              -------            ------           ------
 
    Total operating expenses                                   10,586            18,607           32,664
                                                              -------            ------           ------
 
    Operating loss                                             (1,044)           (2,352)          (4,556)
 
Other income (expense):
 Interest expense                                                  --              (135)            (302)
 Interest income                                                  752             1,947              494
 Write-off of deferred loan costs                                (202)               --               --
 Gain on sale of cable television systems (note 2)                 --            44,093               --
 Share of earnings of Newport News Cablevision
  Associates, L.P. ("Newport News") (note 4)                       --                --           39,995
                                                              -------            ------           ------ 
                                                                  550            45,905           40,187
                                                              -------            ------           ------
 
    Net earnings (loss)                                       $  (494)           43,553           35,631
                                                              =======            ======           ======
 
Net earnings (loss) per limited partnership unit
 ("Unit")                                                      $(2.45)           215.58           176.37
                                                              =======            ======           ======
                                                                                        
</TABLE>


See accompanying notes to financial statements.

                                     II-18
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Statements of Partners' Equity

                  Years ended December 31, 1998, 1997 and 1996

                                  (See note 2)

<TABLE>
<CAPTION>
                                                          General           Limited
                                                          partner           partners           Total
                                                      ---------------   ---------------   ---------------
<S>                                                   <C>               <C>               <C>
                                                                     amounts in thousands
 
Balance at January 1, 1996                                    $(2,724)           60,564            57,840
 
 Distribution (note 2)                                           (333)          (33,001)          (33,334)
 
 Net earnings                                                     356            35,275            35,631
                                                      ---------------   ---------------   ---------------
 
Balance at December 31, 1996                                   (2,701)           62,838            60,137
 
 Distribution (note 2)                                           (747)          (74,002)          (74,749)
 
 Net earnings                                                     436            43,117            43,553
                                                      ---------------   ---------------   ---------------
 
Balance at December 31, 1997                                   (3,012)           31,953            28,941
 
 Net loss                                                          (5)             (489)             (494)
                                                      ---------------   ----------------  ---------------
 
Balance at December 31, 1998                                  $(3,017)           31,464            28,447
                                                      ===============   ================  ===============
</TABLE>


See accompanying notes to financial statements.

                                     II-19
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                            Statements of Cash Flows

                  Years ended December 31, 1998, 1997 and 1996

                                  (See note 2)

<TABLE>
<CAPTION>
                                                            1998               1997              1996
                                                      -----------------  ----------------  ----------------
                                                                      amounts in thousands
                                                                          (see note 1)
Cash flows from operating activities:
<S>                                                   <C>                <C>               <C>
 Net earnings (loss)                                           $  (494)           43,553            35,631
 Adjustments to reconcile net earnings (loss) to
  net cash provided by (used in) operating
  activities:
    Depreciation and amortization                                3,818             6,999            14,932
    Write-off of deferred loan costs                               202                --                --
    Gain on sale of cable television systems                        --           (44,093)               --
    Share of earnings of Newport News                               --                --           (39,995)
    Changes in operating assets and liabilities,
     net of effects from sale of cable television
     systems:
         Net change in receivables,
          prepaid expenses and other
          assets                                                   (47)              164                 2
         Net change in accounts
          payable, accrued expenses,
          subscriber advance payments
          and converter deposits, and
          amounts due  to related parties                       (4,583)            2,907            (4,534)
                                                               -------           -------           -------  
 
              Net cash provided by (used in)
               operating activities                             (1,104)            9,530             6,036
                                                               -------           -------           ------- 
                                                               
Cash flows from investing activities:
 Capital expended for property and equipment                    (1,073)           (1,188)           (5,673) 
 Proceeds from sale of cable television systems,
  net of disposition fees and funds held in escrow               1,843            87,270                -- 
 Distribution from Newport News                                     --                --            35,789
 Other investing activities                                         68                18                63
                                                               -------           -------           -------
 
              Net cash provided by investing
               activities                                      $   838            86,100            30,179
                                                               -------           -------           -------
</TABLE>

                                                                     (continued)

                                     II-20
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                      Statements of Cash Flows, continued

                  Years ended December 31, 1998, 1997 and 1996

                                  (See note 2)

<TABLE>
<CAPTION>
                                                            1998              1997              1996
                                                      ----------------  ----------------  ----------------
                                                                      amounts in thousands
                                                                          (see note 1)
<S>                                                   <C>               <C>               <C>
Cash flows from financing activities:
 Borrowings of debt                                           $    --             1,000             6,500
 Repayments of debt                                                --            (8,500)           (7,700)
 Distributions to partners                                         --           (74,749)          (33,334)
 Change in cash overdraft                                          --            (1,710)              916
                                                              -------           -------           -------
 
             Net cash provided by (used in)
              financing activities                                 --           (83,959)          (33,618)
                                                              -------           -------           -------  
                                  
 
             Net change in cash and  cash
              equivalents                                        (266)           11,671             2,597
 
             Cash and cash
              equivalents:
 
              Beginning of year                                16,400             4,729             2,132
                                                              -------           -------           -------
 
              End of year                                     $16,134            16,400             4,729
                                                              =======           =======           =======
</TABLE>


See accompanying notes to financial statements.

                                     II-21
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Notes to Financial Statements

                        December 31, 1998, 1997 and 1996

(1)  Summary of Significant Accounting Policies
     ------------------------------------------

     Organization
     ------------

     American Cable TV Investors 5, Ltd. ("ACT 5" or the "Partnership") is a
     Colorado limited partnership that was formed in December of 1986 for the
     purpose of acquiring, developing, and operating cable television systems.
     The Partnership had a 40% ownership interest in Newport News, which also
     was formed in 1986 for the purpose of acquiring, developing and operating a
     cable television system located in and around Newport News, Virginia (the
     "Newport News System").  American Cable TV Investors 4, Ltd. ("ACT 4"), an
     affiliate, owned the 60% majority interest in Newport News.  As a result of
     the sale of the Newport News System on January 1, 1996, Newport News was
     liquidated in 1996.  See note 2.

     The Partnership's general partner is IR-TCI Partners V, L.P. ("IR-TCI" or
     the "General Partner"), a Colorado limited partnership. At December 31,
     1998, the general partner of IR-TCI was TCI Ventures Five, Inc. ("TCIV 5"),
     a subsidiary of TCI Cablevision Associates, Inc. ("Cablevision"). The
     limited partner of IR-TCI is Cablevision Equities VI, a limited partnership
     whose partners are certain former officers and key employees of the
     predecessor of Cablevision. Cablevision is an indirect subsidiary of Tele-
     Communications, Inc. ("TCI") and is the managing agent of the Partnership.
     Prior to its January 17, 1996 withdrawal, Integrated Cable Corp. V ("ICC"),
     an indirect subsidiary of Presidio Capital Corp. ("Presidio"), also served
     as a general partner of IR-TCI. In accordance with the terms of the IR-TCI
     limited partnership agreement, TCIV 5 elected to continue the business of
     IR-TCI. The withdrawal of ICC has not had and is not expected to have a
     material effect on the Partnership's results of operations or financial
     condition.

     In its public offering that was conducted from May of 1987 to February of
     1989, the Partnership sold 200,005 limited partnership units to the public
     resulting in gross proceeds of $100,002,500.

     TCI and AT&T have agreed to a merger (the "Merger"), in which TCI will
     become a wholly-owned subsidiary of AT&T. In anticipation of the Merger,
     TCI announced that it will restructure certain of its subsidiaries,
     including the merger of its subsidiary, TCI Communications, Inc. ("TCIC")
     into TCI. The Merger is not expected to have a material effect on the
     Partnership's results of operations or financial condition.

                                                                     (continued)

                                     II-22
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Notes to Financial Statements

     Allocation of Net Earnings and Net Losses
     -----------------------------------------
 
     Net earnings and net losses shall be allocated 99% to ACT 5's limited
     partners ("Limited Partners") and 1% to the General Partner and
     distributions of Cash from Operations, Sales or Refinancings (all as
     defined in the Partnership's limited partnership agreement) shall be
     distributed 99% to the Limited Partners and 1% to the General Partner until
     cumulative distributions to the Limited Partners equal the Limited
     Partners' aggregate contributions ("Payback"), plus 6% per annum. After the
     Limited Partners have received distributions equal to Payback plus 6% per
     annum, the allocations of net earnings, net losses and credits, and
     distributions of Cash from Operations, Sales or Refinancings shall be 25%
     to the General Partner and 75% to the Limited Partners. Although ACT 5's
     September 1997 distributions of proceeds from the sales of certain of its
     cable television systems allowed Limited Partners to achieve Payback,
     Limited Partners have not yet received a 6% return on their aggregate
     contributions. Accordingly, amounts will continue to be allocated 99% to
     the Limited Partners and 1% to the General Partner until such 6% return has
     been achieved. See note 2.

     Cash and Cash Equivalents
     -------------------------

     Cash and cash equivalents consist of investments which are readily
     convertible into cash and have maturities of three months or less at the
     time of acquisition.

     At December 31, 1998 and 1997, $15,761,000 and $10,353,000 of the
     Partnership's cash and cash equivalents were invested in money market
     funds, respectively. The Partnership is exposed to credit loss in the event
     of non-performance by the other parties to such financial instruments.
     However, the Partnership does not anticipate non-performance by the other
     parties.

     Cash paid by the Partnership for interest was none, $152,000 and $332,000
     during the years ended December 31, 1998, 1997 and 1996, respectively.

     Property and Equipment
     ----------------------

     Property and equipment is stated at cost, which includes an allocation of
     the acquisition costs of cable television systems.  Depreciation is
     computed using the straight-line method over the estimated useful lives of
     the assets, which range from 3 to 20 years.

     Repairs and maintenance are charged to operations, and renewals and
     additions, including labor and overhead related to installations and
     interest costs related to construction, are capitalized.  Capitalized
     interest costs were not significant in any of the periods presented in the
     accompanying financial statements.

                                                                     (continued)

                                     II-23
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Notes to Financial Statements

     At the time of ordinary retirements, sales, or other dispositions of part
     of a cable television system, the depreciated cost and cost of removal of
     such property are charged to accumulated depreciation, and salvage value,
     if any, is credited thereto.  The net book value of assets retired or
     disposed of as a result of major rebuilds and lost converters is charged to
     depreciation expense in the period of disposition.  Gains or losses are
     only recognized in connection with the disposition of properties in their
     entirety.


     Franchise Costs and Other Intangibles
     -------------------------------------

     Franchise costs represent the difference between the acquisition cost of a
     cable television system and amounts allocated to the tangible assets.
     Franchise costs are amortized using the straight-line method over the
     remaining terms of the franchise agreements at the time of acquisition,
     which ranged from 3 to 15 years.  Other intangibles, which were fully
     amortized in 1998, were amortized using the straight-line method over the
     estimated lives of the assets, which ranged from 4 to 8 years.

     Impairment of Long-Lived Assets
     -------------------------------

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

     Other Assets
     ------------
 
     Other assets are amortized using the straight-line method over the
     estimated lives of the assets.

     Revenue Recognition
     -------------------
 
     Revenue for customer fees, equipment rental, advertising, pay-per-view
     programming and revenue sharing agreements is recognized in the period that
     services are delivered.  Installation revenue is recognized in the period
     the installation services are provided to the extent of direct selling
     costs.  Any remaining amount is deferred and recognized over the estimated
     average period that subscribers are expected to remain connected to the
     system.

     Net Earnings (Loss) Per Unit
     ----------------------------
 
     Net earnings (loss) per Unit is calculated by dividing net earnings (loss)
     attributable to the Limited Partners by the number of Units outstanding
     during the period.  The number of Units outstanding for each of the years
     in the three-year period ended December 31, 1998 was 200,005.

                                                                     (continued)

                                     II-24
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Notes to Financial Statements

     Income Taxes
     ------------
 
     No provision has been made for income tax expense or benefit in the
     accompanying financial statements as the earnings or losses of the
     Partnership are reported in the respective income tax returns of the
     partners.

     The Partnership had taxable earnings of $1.0 million, $40.2 million and
     $42.0 million for the years ended December 31, 1998, 1997 and 1996,
     respectively.

     As of February 27, 1998, ACT 5 had processed requests in 1998 for the
     transfer of Units representing 5% of the total Units.  In order to maintain
     ACT 5's partnership status for federal income tax purposes, no more than 5%
     of the Units can be transferred in any one tax year.  Accordingly, ACT 5
     did not process any additional requests for the transfer of Units during
     1998.  ACT 5 began accepting transfers for the 1999 tax year effective
     January 1, 1999.

     Estimates
     ---------

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

     Reclassifications
     -----------------

     Certain amounts have been reclassified for comparability with the 1998
     presentation.

(2)  Asset Sales
     -----------

     On January 1, 1996, Newport News sold the Newport News System to Cox
     Communications Rhode Island, Inc., an unaffiliated third party, for cash
     proceeds of $121,886,000 (the "Newport News Sale").  The Partnership had a
     40% ownership interest in Newport News.  Accordingly, during 1996 the
     Partnership received $35,789,000 of the net cash proceeds (after
     satisfaction of Newport News' transaction costs and liabilities) from the
     Newport News Sale.  The Partnership used most of its share of the net
     proceeds from the Newport News Sale to make distributions in 1996 to
     Presidio, TCIV 5 and Limited Partners of $67,000, $266,000 and $33,001,000
     ($165 per Unit for Limited Partners of record as of January 1, 1996),
     respectively.

                                                                     (continued)

                                     II-25
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Notes to Financial Statements

     On April 1, 1997, the Partnership sold the cable television system in and
     around Shelbyville and Manchester, Tennessee (the "Southern Tennessee
     System" or "Southern Tennessee") to Rifkin Acquisition Partners, L.L.L.P.
     ("Rifkin"), an unaffiliated third party, for an adjusted sales price of
     $19,647,000 (the "Southern Tennessee Sale").  Pursuant to the asset
     purchase agreement for the Southern Tennessee Sale, $494,000 of such sales
     price was placed in escrow (the "Southern Tennessee Escrow") and was
     subject to indemnifiable claims by Rifkin through March 31, 1998.  Prior to
     March 31, 1998, Rifkin filed a claim against the Southern Tennessee Escrow
     relating to a class action lawsuit filed by a customer challenging late fee
     charges with respect to the Southern Tennessee System.  Such claim has had
     and will continue to have the effect of delaying the release of the
     Southern Tennessee Escrow.  In addition, any judgment against the Southern
     Tennessee System may have the effect of reducing the amount of the Southern
     Tennessee Escrow ultimately released to ACT 5.  Such claim could prevent
     the release of some or all of the Southern Tennessee Escrow to ACT 5.

     On April 16, 1997, the Partnership sold the cable television system located
     in and around St. Mary's County, Maryland ("St. Mary's") to Gans Multimedia
     Partnership ("Gans"), an unaffiliated third party, for an adjusted sales
     price of $30,547,000 (the "St. Mary's Sale").  Pursuant to the asset
     purchase agreement for the St. Mary's Sale, $766,000 of such sales price
     was placed in escrow (the "St. Mary's Escrow") and was subject to
     indemnifiable claims by Gans through April 15, 1998.  The St. Mary's Escrow
     was released to ACT 5 during the second quarter of 1998.  ACT 5 received
     interest of $39,000 in conjunction with the release of the St. Mary's
     Escrow.

     On June 24, 1997, the Partnership sold the cable television system located
     in and around Lower Delaware ("Lower Delaware") to Mediacom Delaware LLC
     ("Mediacom"), an unaffiliated third party, for an adjusted sales price of
     $42,191,000 (the "Lower Delaware Sale"). Pursuant to the asset purchase
     agreement for the Lower Delaware Sale, $1,077,000 of such sales price was
     placed in escrow (the "Lower Delaware Escrow") and was subject to
     indemnifiable claims by Mediacom through June 23, 1998.  The Lower Delaware
     Escrow was released to ACT 5 during the third quarter of 1998.  ACT 5
     received interest of $57,000 in conjunction with the release of the Lower
     Delaware Escrow.

     The Southern Tennessee Sale, St. Mary's Sale and the Lower Delaware Sale
     are collectively referred to herein as the "1997 Sales Transactions."  The
     1997 Sales Transactions were approved by the Limited Partners at a special
     meeting that occurred on March 26, 1997.

     The Partnership used proceeds from the 1997 Sales Transactions to pay
     disposition fees of $2,778,000 to Cablevision, repay debt and related
     accrued interest of $8,652,000, and make distributions to its General and
     Limited Partners during the third quarter of 1997 of $747,000 and
     $74,002,000 ($370 per Unit for Limited Partners of record as of July 1,
     1997), respectively.  See note 5.

                                                                     (continued)

                                     II-26
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Notes to Financial Statements

     On August 12, 1998, the Partnership entered into an agreement that provides
     for the sale of its cable television system located in and around
     Riverside, California ("Riverside" or the "Riverside System") to Century
     Communications Corp. ("Century"), an unaffiliated third party, for a cash
     sales price of $33,000,000, subject to certain adjustments (the "Riverside
     Sale"). On January 1, 1999, Century assigned its interest in the Riverside
     Sale to Century Valley Cable Corp., a wholly-owned subsidiary of Century.
     Pursuant to the asset purchase agreement, $1,500,000 of such sales price
     will be subject to indemnifiable claims for 180 days following consummation
     of the Riverside Sale.

     The Riverside Sale was approved by the Limited Partners at a special
     meeting that occurred on December 11, 1998.  Subject to the receipt of
     regulatory approvals and satisfaction or waiver of customary conditions to
     closing, consummation of the Riverside Sale is expected to occur during the
     second quarter of 1999.

     In the event that the Riverside Sale is consummated, of which there can be
     no assurance, the Partnership will have sold all of its assets (other than
     cash and funds held in escrow) and, pursuant to the Partnership's limited
     partnership agreement, will ultimately be dissolved and terminated.
     Assuming the Riverside Sale and the dissolution and liquidation of the
     Partnership had occurred on December 31, 1998, the Partnership estimates
     that the pro forma distribution to Limited Partners would have been $228
     per $500 Unit.  The Partnership anticipates that an initial distribution
     will be made to its partners as soon as practicable after the date of the
     closing of the Riverside Sale.  It is expected that a final liquidating
     distribution will be made as soon as practicable after all funds held in
     escrow have been released to the Partnership, subject to the receipt of any
     indemnifiable claims.  No assurance can be given as to the timing or amount
     of such distributions.

     In the event that the Riverside Sale is not consummated, it is currently
     the General Partner's intention to seek a substitute buyer for the
     Riverside System.  There is no assurance that the General Partner could
     arrange for a substitute sale transaction for the Riverside System at an
     appropriate price or on terms acceptable to the Partnership.  If the
     General Partner's efforts in arranging a substitute sale transaction prove
     to be unsuccessful, the General Partner would continue to operate the
     Riverside System.

                                                                     (continued)

                                     II-27
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Notes to Financial Statements

     In August 1998, TCIC and Century signed a definitive agreement to establish
     a joint venture that will combine multiple cable television systems in
     Southern California (the "Joint Venture").  Among those systems to be
     contributed to the Joint Venture by TCIC is the cable television system
     serving customers in Redlands, California (the "Redlands System").  The
     Riverside System currently utilizes office facilities, personnel and
     certain cable distribution assets (including the headend) of the Redlands
     System.  In the event the Riverside Sale is consummated, the Riverside
     System is among those systems to be contributed to the Joint Venture by
     Century.  TCIC will have a 25% interest in the Joint Venture, which will be
     managed by Century.  In the event that the Joint Venture is consummated
     prior to the Riverside Sale, or the Joint Venture is consummated and the
     Riverside Sale is not consummated, Cablevision will continue to manage the
     Riverside System.  The Partnership has agreed that in the event the Joint
     Venture is consummated prior to the Riverside Sale, Cablevision may engage
     the Joint Venture to perform all or some portion of the day-to-day
     management of the Riverside System.  See note 1.

     Riverside's total assets were $13,873,000 and $16,841,000 as of December
     31, 1998 and 1997, respectively.  The following table sets forth the
     revenue for each of the Partnership's cable television systems (amounts in
     thousands):

<TABLE>
<CAPTION>
 
                                                                   Years ended December 31,
                                                    ------------------------------------------------------
Revenue                                                    1998               1997              1996
-------                                             ------------------  -----------------  ---------------
 
<S>                                                 <C>                 <C>                <C>
Riverside                                                       $9,542              8,632            8,388
Southern Tennessee                                                  --                995            3,868
St. Mary's                                                          --              2,166            6,855
Lower Delaware                                                      --              4,462            8,997
                                                                ------             ------           ------
                                                                $9,542             16,255           28,108
                                                                ======             ======           ======
</TABLE>

(3)  Debt
     ----

     During the year ended December 31, 1997, the Partnership used cash proceeds
     from the Southern Tennessee Sale to repay all amounts outstanding under the
     bank credit facility.  In connection with such repayment, the Partnership
     also terminated the bank credit facility.

(4)  Investment in Newport News
     --------------------------

     Net earnings and net losses of Newport News were allocated and
     distributions were made to the Partnership and ACT 4 in the ratio of their
     respective ownership interests. Newport News was sold on January 1, 1996
     for cash proceeds of $121,886,000. As a result of the Newport News Sale,
     Newport News was liquidated in 1996. See note 2.

                                                                     (continued)

                                     II-28
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                       (A Colorado Limited Partnership)

                         Notes to Financial Statements


                   Newport News Cablevision Associates, L.P.
                   -----------------------------------------
                                        
                Condensed Consolidated Statement of Operations

<TABLE>
<CAPTION>
                                                             Year ended December 31,
                                                                       1996
                                                        ----------------------------------
                                                               amounts in thousands
 
                  Revenue                                          $     --
 
<S>               <C>                                              <C>
                  Programming, operating, selling,
                    general and administrative expenses                 (53)
                  Depreciation and amortization                          --
                                                                   --------
 
                        Operating loss                                  (53)
 
                  Gain on sale of assets, net of
                    $510,000 of costs and expenses in
                    1996 related to 1995 operations                  99,700
                  Interest income                                       350
                  Interest expense and other, net                       (10)
                                                                   --------
 
                        Net earnings                               $ 99,987
                                                                   ========
</TABLE>

(5)  Transactions with Related Parties
     ---------------------------------

     The Partnership purchases programming services from affiliates of TCI. The
     charges, which generally approximate such TCI affiliates' cost and are
     based upon the number of customers served by the Partnership, aggregated
     $2,201,000, $3,647,000 and $5,576,000 in 1998, 1997 and 1996, respectively.

     The Partnership has a management agreement with Cablevision whereby
     Cablevision is responsible for performing all services necessary for the
     management of the Partnership's cable television systems. As compensation
     for these services, the Partnership pays a management fee equal to 6% of
     gross revenue, as defined in the management agreement (through January 17,
     1996, 5-1/2% to Cablevision and 1/2% to Presidio Cable IV Corp., a
     subsidiary of Presidio). Such fees amounted to $573,000, $975,000 and
     $1,672,000 during the years ended December 31, 1998, 1997 and 1996,
     respectively. As a result of ICC's withdrawal as a general partner on
     January 17, 1996, Cablevision has received the entire 6% management fee
     since January 17, 1996. See note 1.

     The Partnership also reimburses Cablevision for direct out-of-pocket and
     indirect expenses allocable to the Partnership and for certain personnel
     employed on a full- or part-time basis to perform accounting, marketing,
     technical, or other services. Such reimbursements amounted to $207,000,
     $297,000 and $487,000 in 1998, 1997 and 1996, respectively.

                                                                   (continued)

                                     II-29
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                       (A Colorado Limited Partnership)

                         Notes to Financial Statements

     Riverside shares office facilities, personnel and certain distribution
     assets with the Redlands System. As a result, the majority of Riverside's
     operating and administrative salaries and expenses are charged to Riverside
     based upon Riverside's estimated utilization of such office facilities and
     personnel. During the years ended December 31, 1998, 1997 and 1996,
     Riverside's operating and administrative salaries and expenses aggregated
     $2,402,000, $2,216,000 and $2,350,000, respectively.

     ACT 5 is obligated to pay a disposition fee to Cablevision equal to 3% of
     the gross proceeds from the sale of any cable television system owned by
     ACT 5. This fee is due and payable at the time the cable television system
     is sold if the consideration received is greater than its adjusted cost, as
     defined in ACT 5's limited partnership agreement. In connection with the
     1997 Sales Transactions, disposition fees of $2,778,000 were paid to
     Cablevision.

     Amounts due to related parties, which represent non-interest-bearing
     payables to TCI and its affiliates, consist of the net effect of cash
     advances and certain intercompany expense allocations.

     Amounts due from related parties bear interest at variable rates (5.0% at
     December 31, 1998). Interest earned on amounts due from TCI and its
     affiliates was $120,000 during the year ended December 31, 1998, and was
     not significant for the years ended December 31, 1997 and 1996.

(6)  Commitments and Contingencies
     -----------------------------

     ACT 5 has contingent liabilities related to legal proceedings and other
     matters arising in the ordinary course of business. Although it is
     reasonably possible that ACT 5 may be required to make payments upon
     conclusion of such matters, an estimate of any loss or range of loss cannot
     be made. In the opinion of management, it is expected that amounts, if any,
     which may be required to satisfy such contingencies will not have a
     material effect upon the Partnership's financial condition.

     The Partnership leases certain property and equipment under operating
     leases. The Partnership's lease expense aggregated $146,000, $344,000 and
     $539,000 in 1998, 1997 and 1996, respectively, including $4,000, $82,000
     and $199,000 paid under pole rental agreements which are terminable on
     short notice by either party. Riverside's lease expense aggregated
     $146,000, $214,000 and $187,000 in 1998, 1997 and 1996, respectively,
     including $4,000, $19,000 and $25,000 paid under pole rental agreements in
     1998, 1997 and 1996, respectively. Management expects that in the normal
     course of business, Riverside's leases that expire will be renewed or
     replaced by other leases.

                                                                     (continued)

                                     II-30
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                       (A Colorado Limited Partnership)

                         Notes to Financial Statements

(7)  Year 2000 Costs
---  ---------------

     In addition to the property and equipment owned by the Riverside System,
     certain office facilities, personnel, and cable distribution assets of the
     Redlands System, and certain software and equipment of TCI are utilized by
     the Riverside System (collectively, the "Riverside/Redlands Systems").
     Accordingly, the assessment and remediation of ACT 5's year 2000 issues are
     dependent upon the assessment and remediation by TCI of certain of its own
     year 2000 issues and the year 2000 issues of the Riverside/Redlands
     Systems.

     During 1998, TCI, in its capacity as the ultimate parent of the managing
     agent of ACT 5, continued its comprehensive effort to assess and remediate
     the Riverside/Redlands Systems' computer and other systems and related
     software and equipment to ensure such systems, software and equipment
     recognize, process and store information in the year 2000 and beyond.
     TCI's year 2000 remediation efforts include an assessment of the
     Riverside/Redlands Systems' most critical systems, such as customer service
     and billing systems, headends and other cable plant, business support
     operations, and other equipment and facilities.  TCI also continued its
     efforts to verify the year 2000 readiness of ACT 5's important suppliers
     and vendors.

     ACT 5's year 2000 remediation efforts are being managed by the year 2000
     Program Management Office ("PMO") of TCI. The PMO is responsible for
     overseeing, coordinating and reporting on ACT 5's year 2000 remediation
     efforts. As described in note 1, AT&T and TCI have agreed to a merger.
     Although no assurance can be given, management of TCI does not anticipate
     that such merger will have a detrimental impact on the Riverside/Redlands
     Systems' year 2000 assessment and remediation efforts.

                                                                     (continued)

                                     II-31
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                       (A Colorado Limited Partnership)

                         Notes to Financial Statements


     During 1998, TCI continued its survey of significant third-party vendors
     and suppliers whose systems, services or products are important to ACT 5's
     operations (e.g., the suppliers of set-top devices and the provider of ACT
     5's billing services).  The year 2000 readiness of these providers is
     critical to continued provision of cable services by ACT 5.  

     In addition to the survey process described above, TCI has identified ACT
     5's  most critical supplier/vendor relationships and has instituted a
     verification process to determine such vendors' year 2000 readiness.  Such
     verification may include reviewing the vendors' test and other data and
     engaging in regular conferences with the vendors' year 2000 team.  TCI is
     also requiring testing to validate the year 2000 compliance of certain
     critical products and services.


                                                                     (continued)

     
                                     II-32
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.
                        (A Colorado Limited Partnership)

                         Notes to Financial Statements

Year 2000 expenses and capital expenditures incurred during the year ended
December 31, 1998 were not material.  Although no assurance can be given,
management of ACT 5 currently expects total estimated costs associated with year
2000 remediation efforts to be approximately $200,000.  Such amount is exclusive
of replacement costs associated with noncompliant information technology ("IT")
systems incurred by TCI on behalf of ACT 5.  Additionally, ACT 5 is not
deferring any planned IT projects due to year 2000 remediation costs.

The failure to correct a material year 2000 problem in the Redlands System could
result in an interruption of ACT 5's provision of cable service through the
Riverside System.  There can be no assurance that ACT 5's systems, the
Riverside/Redlands Systems, or the systems of other companies on which ACT 5
relies will be converted in time or that any such failure to convert by ACT 5 or
other companies will not have a material adverse effect on its financial
position, results of operations, or cash flows.

                                     II-33
<PAGE>
 
                                   PART III.

Item 10.  Directors and Executive Officers of the Registrant.
--------  -------------------------------------------------- 

     As the Partnership has no directors or officers of its own, all of the
Partnership's major decisions are made by IR-TCI whose general partner is TCIV
5.  Until its withdrawal by letter dated January 17, 1996, ICC was also a
general partner of the General Partner.

     The Partnership has entered into a management agreement with Cablevision,
pursuant to which Cablevision is responsible for managing the day-to-day
operations of the Partnership's cable television systems.

     As of February 1, 1999, the following executive officers and directors of
TCIV 5 operate IR-TCI:
<TABLE>
<CAPTION>
 
               Name                                              Position
               ----                                              --------
 
<S>                                  <C>
William R. Fitzgerald (1)            President and Director of TCIV 5 since November 1998.  Chief
-----------------------------------  Operating Officer of TCIC since November 1998, Executive Vice
Born May 20, 1957                    President of TCIC since December 1997 and Senior Vice President
                                     of TCIC from March 1996 to December 1997.  Serves as a Vice
                                     President of various TCI subsidiaries; and was Senior Vice
                                     President and Partner in Daniels & Associates, a brokerage and
                                     investment banking company from 1988 to 1996.
 
 
Stephen M. Brett (1)                 Director of TCIV 5 since August 1995. Vice President and
-----------------------------------  Secretary of Cablevision and TCIV 5 since March 1992. Executive
Born September 20, 1940              Vice President, General Counsel and Secretary of TCI since
                                     January 1994.  Executive Vice President of TCIC since October
                                     1997.  Secretary of TCIC since February 1994, and General
                                     Counsel of TCIC since 1991; Senior Vice President of TCIC from
                                     December 1991 until October 1997; Assistant Secretary of TCIC
                                     from June 1992 to February 1994; and Vice President and
                                     Secretary of most of TCI's subsidiaries.
 
 
Bernard W. Schotters                 Vice President and Treasurer of Cablevision and TCIV 5 since
-----------------------------------  December 1991.  Senior Vice President and Treasurer of TCI
Born November 24, 1944               since October 1997.  Executive Vice President of TCIC since
                                     December 1997, Treasurer of TCIC since December 1991. Senior
                                     Vice President of TCIC from December 1991 to December 1997; and
                                     Vice President and Treasurer of most of TCI's subsidiaries.
 
 
Ann M. Koets                         Vice President and Principal Accounting Officer of TCIV 5 since
-----------------------------------  June 1998. Executive Vice President of TCIC since December
Born January 21, 1958                1997, Senior Vice President of TCIC from May 1997 to December
                                     1997; and served in various other capacities with TCIC and its
                                     subsidiaries prior to 1997.
 
</TABLE>

                                     III-1
<PAGE>
 
<TABLE>
<S>                                  <C>
Marvin Jones                         Vice President of TCIV 5 since November 1998.  Director and
-----------------------------------  President of TCIV 5 from March 1996 to November 1998.
Born September 11, 1937              Executive Vice President and Chief Operating Officer of TCIC
                                     from March 1997 to November 1998.  President of one of TCIC's
                                     cable groups from November 1996 to March 1997.  Mr. Jones has
                                     performed consulting services in the cable television industry
                                     since December 1991.
 
 
Arthur C. Belanger (1)               Director of TCIV 5 since June 1996.  Prior  to his retirement
-----------------------------------  in January 1992, Mr. Belanger was Executive Vice President and
Born November 23, 1925               Chief Operating Officer of United Artists Communications, Inc.
 
 
Paul F. Schonewolf (1)               Director of TCIV 5 since June 1996. Mr. Schonewolf is the
-----------------------------------  President of Hamilton County/Gore Mt. Cable TV, Inc., a cable
Born February 9, 1937                company serving six upstate New York communities.  From 1987 to
                                     1993 he was President of Schomann Entertainment Corp., which
                                     owned and operated cable television companies in New York,
                                     Vermont, New Hampshire and Pennsylvania.  From 1986 to 1994 he
                                     was President of PFS Communications, a consulting company
                                     serving the cable television industry.
 
</TABLE>

     (1)  Directors of TCIV 5 serve until their successors are appointed and
          qualified.

     There are no family relations, of first cousin or closer, among the
individuals named above, by blood, marriage or adoption.

     During the past five years, none of the persons named above has had any
involvement in such legal proceedings as would be material to an evaluation of
that person's ability or integrity, except as noted above.

     Pursuant to section 16(a) of the Securities Exchange Act of 1934, as
amended, the officers and directors of the General Partner are required to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission").  Officers and directors are required by
regulation of the Commission to furnish the Partnership with copies of all
Section 16(a) forms filed.

     Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Partnership believes that, during the fiscal
year ended December 31, 1998, all applicable filing requirements were complied
with.

Item 11.  Executive Compensation.
--------  ---------------------- 

     The Partnership pays no direct compensation to the individuals named above,
but instead pays for their services through management and other fees paid to
Cablevision.  See Certain Relationships and Related Transactions below.
                  ----------------------------------------------       

                                     III-2
<PAGE>
 
Item 12.  Security Ownership of Certain Beneficial Owners and Management.
--------  -------------------------------------------------------------- 

     No General or Limited Partner of the Partnership owns more than 5% of the
Units.

     None of the individuals referred to in Item 10 above owns (i) any Units of
the Partnership or (ii) more than 1% of the outstanding shares of TCI, the
ultimate parent and owner, directly or indirectly, of all of the voting stock of
TCIV 5.

Item 13.  Certain Relationships and Related Transactions.
--------  ---------------------------------------------- 

     The Partnership purchases programming services from affiliates of TCI.  In
1998, the charges, which generally approximate such TCI affiliates' cost and are
based upon the number of subscribers served by the Partnership, aggregated
$2,201,000.

     Under a management agreement with Cablevision, the Partnership is charged a
management fee of 6% of gross revenue, as defined in the management agreement.
Such fees aggregated $573,000 in 1998.  Cablevision is also reimbursed for
direct out-of-pocket and indirect expenses allocable to the Partnership, and for
certain personnel employed on a full- or part-time basis to perform accounting,
marketing, technical, or other services. Such reimbursements aggregated $207,000
in 1998.

     Riverside shares office facilities, personnel and certain distribution
assets with the Redlands System.  As a result, the majority of Riverside's
operating and administrative salaries and expenses are allocated based upon
Riverside's estimated utilization of such office facilities and personnel.
During the year ended December 31, 1998, Riverside's operating and
administrative salaries and expenses aggregated $2,402,000.

     At December 31, 1998, the Partnership owed $1,140,000 to TCI and its
affiliates. Such amounts are non-interest-bearing and consist of the net effect
of cash advances and certain intercompany expense allocations.

     Amounts due from related parties bear interest at variable rates (5.0% at
December 31, 1998).  Interest earned on amounts due from TCI and its affiliates
was $120,000 during the year ended December 31, 1998.

                                     III-3
<PAGE>
 
                                   PART IV.
 
Item 14.    Exhibits, Financial Statements and Financial Statement Schedules
--------    ----------------------------------------------------------------
            and Reports on Form 8-K.
            ------------------------

<TABLE>
<CAPTION>
(a) (1) Financial Statements                                                                    Page
                                                                                                ----
<S>                                                                                  <C>
 
Included in Part II of this Report:
 
        Independent Auditors' Report                                                            II-15
 
        Balance Sheets, December 31, 1998 and 1997                                              II-16
 
        Statements of Operations,
           Years ended December 31, 1998, 1997 and 1996                                         II-18
 
        Statements of Partners' Equity,
           Years ended December 31, 1998, 1997 and 1996                                         II-19
 
        Statements of Cash Flows,
           Years ended December 31, 1998, 1997 and 1996                                         II-20
 
        Notes to Financial Statements,
           December 31, 1998, 1997 and 1996                                                     II-22
 
(a) (2) Financial Statement Schedules
 
        All schedules are omitted as they are not required or are not applicable.
</TABLE>

                                     IV-1
<PAGE>
 
(a)  (3)  Exhibits
          --------

     The following exhibits are filed herewith or incorporated by reference
herein (according to the number assigned to them in Item 601 of Regulation S-K),
as noted:

3 - Articles of Incorporation and Bylaws:

     Limited Partnership Agreement, incorporated by reference to Exhibit A to
      Prospectus filed pursuant to Rule 424(b) as part of Registration Statement
      33-12064.

     Limited Partnership Agreement of General Partner, incorporated by reference
      to the Partnership's Annual Report on Form 10-K for the year ended
      December 31, 1987 (Commission File Number 0-16784).

10 - Material Contracts:

     Management Agreement between Cablevision and the Partnership, incorporated
      by reference to the Partnership's Annual Report on Form 10-K for the year
      ended December 31, 1987 (Commission File Number 0-16784).

     Acquisition and Disposition Services Agreement between Cablevision and the
      Partnership, incorporated by reference to the Partnership's Annual Report
      on Form 10-K for the year ended December 31, 1987 (Commission File Number
      0-16784).

     Consulting Agreement, re:  the Partnership between Cablevision and
      Presidio, incorporated by reference to the Partnership's Annual Report on
      Form 10-K for the year ended December 31, 1987 (Commission File Number 0-
      16784).

     Asset Purchase Agreement by and between American Cable TV Investors 5, Ltd.
      and Gans Multimedia Partnership dated as of November 27, 1996,
      incorporated by reference to the Partnership's Current Report on Form 8-K
      filed February 11, 1997.

     Asset Purchase Agreement by and between American Cable TV Investors 5, Ltd.
      and Rifkin Acquisition Partners, L.L.L.P. dated as of November 29, 1996,
      incorporated by reference to the Partnership's Current Report on Form 8-K
      filed February 11, 1997.

     Asset Purchase Agreement by and between American Cable TV Investors 5, Ltd.
      and Mediacom LLC dated as of December 24, 1996, incorporated by reference
      to the Partnership's Current Report on Form 8-K filed February 11, 1997.

     Asset Purchase Agreement by and between American Cable TV Investors 5, Ltd.
      and Century Communications Corp. dated as of August 12, 1998,
      incorporated by reference to the Partnership's Current Report on Form 8-K
      filed August 27, 1998.

     First Amendment, dated as of November 11, 1998, to Asset Purchase Agreement
      dated as of August 12, 1998, by and among American Cable TV Investors 5,
      Ltd. And Century Communications Corp.

                                     IV-2
<PAGE>
 
27 - Financial Data Schedule.

(b)  Reports on Form 8-K filed during the quarter ended December 31, 1998:

     None.

                                     IV-3
<PAGE>
 
                                   SIGNATURES

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

AMERICAN CABLE TV INVESTORS 5, LTD., A Colorado Limited Partnership
By:  IR-TCI PARTNERS V, L.P., Its General Partner

     By:  TCI VENTURES FIVE, INC., Its General Partner

         By:  /s/William R. Fitzgerald       March 5, 1999
              ------------------------    
              William R. Fitzgerald
              President and Director - TCI Ventures Five, Inc.
              (Principal Executive Officer)


Pursuant to the Securities Exchange Act of 1934, this report has been signed by
the following persons on behalf of the Partnership and in the capacities and on
the dates indicated:

<TABLE>
<CAPTION>
                                   Signature                                      Date
                                   ---------                                      ----
 
<S>                                                                      <C> 
 
        /s/ William R. Fitzgerald                                           March 5, 1999
        ---------------------------------------------------------------
        William R. Fitzgerald
        President and Director - TCI Ventures Five, Inc.
        (Principal Executive Officer)
 
 
 
        /s/ Stephen M. Brett                                                March 5, 1999
        ---------------------------------------------------------------
        Stephen M. Brett
        Vice President,  Secretary and Director - TCI Ventures Five, Inc.
 
 
 
        /s/ Bernard W. Schotters                                            March 5, 1999
        ---------------------------------------------------------------
        Bernard W. Schotters
        Vice President and Treasurer - TCI Ventures Five, Inc.
        (Chief Financial Officer)
 


        /s/ Ann M. Koets                                                    March 5, 1999
        ---------------------------------------------------------------
        Ann M. Koets
        Vice President - TCI Ventures Five, Inc.
        (Principal Accounting Officer)
</TABLE>

                                     IV-4
<PAGE>
 
<TABLE>
<CAPTION>
 
<S>                                                                      <C> 
 
         /s/ Arthur C. Belanger                                             March 5, 1999
        ---------------------------------------------------------------
        Director - TCI Ventures Five, Inc.
 
 
 
        /s/ Paul F. Schonewolf                                              March 5, 1999
        ---------------------------------------------------------------
        Director - TCI Ventures Five, Inc.
 
</TABLE>

                                     IV-5
<PAGE>
 
                      AMERICAN CABLE TV INVESTORS 5, LTD.


                                 EXHIBIT INDEX
                                 -------------
                                        
The following exhibits are filed herewith or incorporated by reference
(according to the number assigned to them in Item 601 of Regulation S-K), as
noted:

3 - Articles of Incorporation and Bylaws:

      Limited Partnership Agreement, incorporated by reference to Exhibit A to
       Prospectus filed pursuant to Rule 424(b) as part of Registration
       Statement 33-12064.

      Limited Partnership Agreement of General Partner, incorporated by
       reference to the Partnership's Annual Report on Form 10-K for the year
       ended December 31, 1987 (Commission File Number 0-16784).

10 - Material Contracts:

      Management Agreement between Cablevision and the Partnership, incorporated
       by reference to the Partnership's Annual Report on Form 10-K for the year
       ended December 31, 1987 (Commission File Number 0-16784).

      Acquisition and Disposition Services Agreement between Cablevision and the
       Partnership, incorporated by reference to the Partnership's Annual Report
       on Form 10-K for the year ended December 31, 1987 (Commission File Number
       0-16784).

      Consulting Agreement, re:  the Partnership between Cablevision and
       Presidio, incorporated by reference to the Partnership's Annual Report on
       Form 10-K for the year ended December 31, 1987 (Commission File Number 0-
       16784).

      Asset Purchase Agreement by and between American Cable TV Investors 5 Ltd.
       and Gans Multimedia Partnership dated as of November 27, 1996,
       incorporated by reference to the Partnership's Current Report on Form 8-K
       filed February 11, 1997.

      Asset Purchase Agreement by and between American Cable TV Investors 5 Ltd.
       and Rifkin Acquisition Partners, L.L.L.P. dated as of November 29, 1996,
       incorporated by reference to the Partnership's Current Report on Form 8-K
       filed February 11, 1997.

      Asset Purchase Agreement by and between American Cable TV Investors 5,
       Ltd. and Mediacom LLC dated as of December 24, 1996, incorporated by
       reference to the Partnership's Current Report on Form 8-K filed February
       11, 1997.

      Asset Purchase Agreement by and between American Cable TV Investors 5,
       Ltd. and Century Communications Corp. dated as of August 12, 1998,
       incorporated by reference to the Partnership's Current Report on Form 8-K
       filed August 27, 1998.

      First Amendment, dated as of November 11, 1998, to Asset Purchase 
       Agreement dated as of August 12, 1998, by and among American Cable TV
       Investors 5, Ltd. And Century Communications Corp.

27 - Financial Data Schedule.