Use these links to rapidly review the documentUNITED AUSTRALIA/PACIFIC, INC. TABLE OF CONTENTS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarter ended September 30, 2001

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission
File No.333-05017

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United Australia/Pacific, Inc.(Exact name of Registrant as specified in its charter)

State of Colorado(State or other jurisdiction of
incorporation or organization)

84-1341958(I.R.S. Employer
Identification No.)4643 South Ulster Street, #1300
Denver, Colorado

80237(Address of principal executive offices)

(Zip code)


Registrant's
telephone number, including area code:(303) 770-4001

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

The
Company has no publicly-traded shares of capital stock. As of November 5, 2001 the Company had 28,460,926 shares of common stock outstanding.

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UNITED AUSTRALIA/PACIFIC, INC.        TABLE OF CONTENTS



|                                                                                              
|----------------------------------------------------------------------------------------------
|PART IFINANCIAL INFORMATION                                                                  
|Item 1.  Financial Statements                                                                 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
|Item 3.  Quantitative and Qualitative Disclosures about Market Risk                           
|PART IIOTHER INFORMATION                                                                     
|Item 6.  Exhibits and Reports on Form 8-K                                                     





UNITED AUSTRALIA/PACIFIC, INC.        CONDENSED CONSOLIDATED BALANCE SHEETS        (In thousands, except par value and number of shares)        (Unaudited)

|                                                                                                           |                                                                                                                                    | September 30,
2001 |                                             | December 31,
2000 |  
|---------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------------------------------------------- | ----------------- | -
|
|Current assets                                                                                             |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           | Cash and cash equivalents                                                                                                          |                    | $                                           | 7,947             |  
|                                                                                                           | Short-term liquid investments                                                                                                      |                    |                                             | 55,596            |  
|                                                                                                           | Subscriber receivables, net of allowance for doubtful accounts of $2,201 and $1,039, respectively                                  |                    |                                             | 9,673             |  
|                                                                                                           | Related party receivables                                                                                                          |                    |                                             | 2,742             |  
|                                                                                                           | Other receivables                                                                                                                  |                    |                                             | 1,032             |  
|                                                                                                           | Inventory                                                                                                                          |                    |                                             | 3,538             |  
|                                                                                                           | Prepaid expenses and other current assets                                                                                          |                    |                                             | 4,866             |  
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           |                                                                                                                                    |                    | Total current assets                        |                   |  
|Investments in affiliates, accounted for under the equity method, net                                      |                                                                                                                                    |                    | 60,403                                      |                   |  
|Property, plant and equipment, net of accumulated depreciation of $322,172 and $294,935, respectively      |                                                                                                                                    |                    | 84,087                                      |                   |  
|Goodwill and other intangible assets, net of accumulated amortization of $27,179 and $19,789, respectively |                                                                                                                                    |                    | 157,966                                     |                   |  
|Deferred financing costs, net of accumulated amortization of $8,676 and $6,826, respectively               |                                                                                                                                    |                    | 8,134                                       |                   |  
|Other assets                                                                                               |                                                                                                                                    |                    | 4,477                                       |                   |  
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           |                                                                                                                                    |                    | Total assets                                |                   | $
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                      |                                                                                                                                   
|Current liabilities                                                                                        |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           | Accounts payable                                                                                                                   |                    | $                                           | 1,480             |  
|                                                                                                           | Accrued interest                                                                                                                   |                    |                                             | 27,672            |  
|                                                                                                           | Other accrued liabilities                                                                                                          |                    |                                             | 33,122            |  
|                                                                                                           | Current portion of due to parent                                                                                                   |                    |                                             | 10,947            |  
|                                                                                                           | Current portion of other long-term debt                                                                                            |                    |                                             | 1,278             |  
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           |                                                                                                                                    |                    | Total current liabilities                   |                   |  
|Due to parent                                                                                              |                                                                                                                                    |                    | 7,096                                       |                   |  
|Senior discount notes                                                                                      |                                                                                                                                    |                    | 490,753                                     |                   |  
|Other long-term debt                                                                                       |                                                                                                                                    |                    | 199,612                                     |                   |  
|Other long-term liabilities                                                                                |                                                                                                                                    |                    | 482                                         |                   |  
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           |                                                                                                                                    |                    | Total liabilities                           |                   |  
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|Minority interests in subsidiaries                                                                         |                                                                                                                                    |                    | 70,504                                      |                   |  
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|Stockholders' deficit                                                                                      |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           | Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding                                         |                    |                                             |                  |  
|                                                                                                           | Common stock, $0.01 par value, 30,000,000 shares authorized, 28,460,926 and 22,961,728 shares issued and outstanding, respectively |                    |                                             | 285               |  
|                                                                                                           | Additional paid-in capital                                                                                                         |                    |                                             | 345,979           |  
|                                                                                                           | Deferred compensation                                                                                                              |                    |                                             | (3,559            | )
|                                                                                                           | Accumulated deficit                                                                                                                |                    |                                             | (714,648          | )
|                                                                                                           | Other cumulative comprehensive income (loss)                                                                                       |                    |                                             | (70,542           | )
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           |                                                                                                                                    |                    | Total stockholders' deficit                 |                   |  
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  
|                                                                                                           |                                                                                                                                    |                    | Total liabilities and stockholders' deficit |                   | $
|                                                                                                           |                                                                                                                                    |                    |                                             |                   |  

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





UNITED AUSTRALIA/PACIFIC, INC.        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND  COMPREHENSIVE INCOME (LOSS)        (In thousands, except per share amounts and number of shares)        (Unaudited)

|                                                                                                                                       |                            | Three Months Ended
September 30,         |         | Nine Months Ended
September 30, |        
|-------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------------------------------------- | ------- | ------------------------------- | -------
|
|Revenue                                                                                                                                |                            | $                                        | 44,325  |                                 | $      
|Operating expense                                                                                                                      |                            |                                          | (41,940 | )                               |        
|Selling, general and administrative expense, including management fees to related party of $873, $857, $2,605 and $2,562, respectively |                            |                                          | (13,940 | )                               |        
|Depreciation and amortization                                                                                                          |                            |                                          | (26,547 | )                               |        
|                                                                                                                                       |                            |                                          |         |                                 |        
|                                                                                                                                       |                            | Operating loss                           |         |                                 | (38,102
|Interest income                                                                                                                        |                            |                                          | 1,316   |                                 |        
|Interest expense                                                                                                                       |                            |                                          | (24,088 | )                               |        
|Foreign currency exchange gain (loss), net                                                                                             |                            |                                          | 185     |                                 |        
|Gain on issuance of common equity securities by subsidiary                                                                             |                            |                                          |        |                                 |        
|(Loss) gain on sale of investment in affiliate                                                                                         |                            |                                          |        |                                 |        
|Other income (expense), net                                                                                                            |                            |                                          | 183     |                                 |        
|                                                                                                                                       |                            |                                          |         |                                 |        
|                                                                                                                                       |                            | Loss before income taxes and other items |         |                                 | (60,506
|Income tax (expense) benefit, net                                                                                                      |                            |                                          |        |                                 |        
|Minority interests in subsidiaries                                                                                                     |                            |                                          | 26,122  |                                 |        
|Share in results of affiliates, net                                                                                                    |                            |                                          | (10,805 | )                               |        
|                                                                                                                                       |                            |                                          |         |                                 |        
|                                                                                                                                       |                            | Net loss                                 |         | $                               | (45,189
|                                                                                                                                       |                            |                                          |         |                                 |        
|Foreign currency translation adjustments                                                                                               |                            | $                                        | (2,258  | )                               | $      
|Cumulative effect of change in accounting principle                                                                                    |                            |                                          |        |                                 |        
|Amortization of cumulative effect of change in accounting principle                                                                    |                            |                                          | (39     | )                               |        
|                                                                                                                                       |                            |                                          |         |                                 |        
|                                                                                                                                       |                            | Comprehensive income (loss)              |         | $                               | (47,486
|                                                                                                                                       |                            |                                          |         |                                 |        
|Net loss per common share:                                                                                                             |                            |                                          |         |                                 |        
|                                                                                                                                       | Basic and diluted net loss |                                          | $       | (1.59                           | )      
|                                                                                                                                       |                            |                                          |         |                                 |        
|Weighted-average number of common shares outstanding:                                                                                  |                            |                                          |         |                                 |        
|                                                                                                                                       | Basic and diluted          |                                          |         | 28,460,926                      |        
|                                                                                                                                       |                            |                                          |         |                                 |        

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



UNITED AUSTRALIA/PACIFIC, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

(In thousands, except number of shares)

(Unaudited)

|                                                                                    |  | Common Stock |  |   |     |  |   |         |   | Other
Cumulative
Comprehensive
Income
(Loss)(1) |        |   |  
|----------------------------------------------------------------------------------- |  | ------------ |  | - | --- |  | - | ------- | - | ----------------------------------------------- | ------ | - | -
|
|
|Balances, December 31, 2000                                                         |  | 22,961,728   |  | $ | 230 |  | $ | 317,813 |   | $                                               | (8,904 | ) | $
|Issuance of capital stock to parent for capital contributions made in prior periods |  | 5,499,198    |  |   | 55  |  |   | (55     | ) |                                                 |       |   |  
|Cash contributions from parent                                                      |  |             |  |   |    |  |   | 473     |   |                                                 |       |   |  
|Equity transactions of subsidiaries                                                 |  |             |  |   |    |  |   | 29,538  |   |                                                 | 194    |   |  
|Amortization of deferred compensation                                               |  |             |  |   |    |  |   | (1,790  | ) |                                                 | 5,151  |   |  
|Net loss                                                                            |  |             |  |   |    |  |   |        |   |                                                 |       |   |  
|Cumulative effect of change in accounting principle                                 |  |             |  |   |    |  |   |        |   |                                                 |       |   |  
|Amortization of cumulative effect of change in accounting principle                 |  |             |  |   |    |  |   |        |   |                                                 |       |   |  
|Change in cumulative translation adjustments                                        |  |             |  |   |    |  |   |        |   |                                                 |       |   |  
|                                                                                    |  |              |  |   |     |  |   |         |   |                                                 |        |   |  
|Balances, September 30, 2001                                                        |  | 28,460,926   |  | $ | 285 |  | $ | 345,979 |   | $                                               | (3,559 | ) | $
|                                                                                    |  |              |  |   |     |  |   |         |   |                                                 |        |   |  

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





UNITED AUSTRALIA/PACIFIC, INC.        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)        (Unaudited)

|                                                                                        |                                                                                    | Nine Months Ended
September 30,          |         
|--------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ---------------------------------------- | --------
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                                    |                                                                                    |                                          |         
|Net loss                                                                                |                                                                                    | $                                        | (152,598
|Adjustments to reconcile net loss to net cash flows from operating activities:          |                                                                                    |                                          |         
|                                                                                        | Depreciation and amortization                                                      |                                          |         
|                                                                                        | Accretion of interest on senior notes and amortization of deferred financing costs |                                          |         
|                                                                                        | Minority interests in subsidiaries                                                 |                                          |         
|                                                                                        | Share in results of affiliates, net                                                |                                          |         
|                                                                                        | Gain on issuance of common equity securities by subsidiary                         |                                          |         
|                                                                                        | Stock-based compensation expense                                                   |                                          |         
|                                                                                        | (Gain) loss on sale of investment in affiliate                                     |                                          |         
|                                                                                        | Increase in receivables, net                                                       |                                          |         
|                                                                                        | Decrease (increase) in other assets                                                |                                          |         
|                                                                                        | Increase in accounts payable, accrued liabilities and other                        |                                          |         
|                                                                                        |                                                                                    |                                          |         
|                                                                                        |                                                                                    | Net cash flows from operating activities |         
|                                                                                        |                                                                                    |                                          |         
|CASH FLOWS FROM INVESTING ACTIVITIES                                                    |                                                                                    |                                          |         
|Purchase of short-term liquid investments                                               |                                                                                    |                                          | (392,704
|Proceeds from sale of short-term liquid investments                                     |                                                                                    |                                          | 428,218 
|Investments in affiliates and other investments                                         |                                                                                    |                                          | (33,538 
|Spectrum license fees and other acquisitions                                            |                                                                                    |                                          | (17,154 
|Distribution received from affiliated company                                           |                                                                                    |                                          | 6,248   
|Capital expenditures                                                                    |                                                                                    |                                          | (37,388 
|Other                                                                                   |                                                                                    |                                          | 2,813   
|                                                                                        |                                                                                    |                                          |         
|                                                                                        |                                                                                    | Net cash flows from investing activities |         
|                                                                                        |                                                                                    |                                          |         
|CASH FLOWS FROM FINANCING ACTIVITIES                                                    |                                                                                    |                                          |         
|Cash contributed from parent                                                            |                                                                                    |                                          | 473     
|Proceeds from issuance of common equity securities by subsidiary, net of offering costs |                                                                                    |                                          | 105,664 
|Proceeds from borrowings on the Austar Bank Facility                                    |                                                                                    |                                          |        
|Deferred financing costs and other                                                      |                                                                                    |                                          | (1,738  
|                                                                                        |                                                                                    |                                          |         
|                                                                                        |                                                                                    | Net cash flows from financing activities |         
|                                                                                        |                                                                                    |                                          |         
|EFFECT OF EXCHANGE RATES ON CASH                                                        |                                                                                    |                                          | (2,273  
|                                                                                        |                                                                                    |                                          |         
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        |                                                                                    |                                          | 2,330   
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                          |                                                                                    |                                          | 5,617   
|                                                                                        |                                                                                    |                                          |         
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                |                                                                                    | $                                        | 7,947   
|                                                                                        |                                                                                    |                                          |         
|SUPPLEMENTAL CASH FLOW DISCLOSURES                                                      |                                                                                    |                                          |         
|                                                                                        | Cash paid for interest                                                             |                                          | $       
|                                                                                        |                                                                                    |                                          |         
|                                                                                        | Cash received for interest                                                         |                                          | $       
|                                                                                        |                                                                                    |                                          |         

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





UNITED AUSTRALIA/PACIFIC, INC.        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        AS OF SEPTEMBER 30, 2001        (Unaudited)

1. Organization and Nature of Operations

United Australia/Pacific, Inc. (the "Company" or "UAP") is a majority-owned subsidiary of United Asia/Pacific Communications, Inc.
("Asia/Pacific"), which is in turn an indirect wholly-owned subsidiary of UnitedGlobalCom, Inc. ("United"). UAP provides video, telephone and Internet services, which the Company refers to as
"Distribution", in Australia and New Zealand and related programming services, which the Company refers to as "Content", and other media services in Australia. The following chart presents a summary
of the Company's ownership structure and its significant investments in telecommunications as of September 30, 2001.

LOGO

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these statements do
not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Operating
results for the three and nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further
information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2000.
Certain prior year amounts have been reclassified to conform with the current year presentation.

Use of Estimates

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

Principles of Consolidation

The accompanying interim condensed consolidated financial statements include the accounts of the Company and all subsidiaries where it exercises a controlling
financial interest through the ownership of a majority voting interest. The Company discontinued consolidating the results of its New Zealand subsidiary, Saturn, effective April 1, 2000, due to
the formation of TelstraSaturn, a 50/50 joint venture, which is accounted for under the equity method.

Risks, Uncertainties and Liquidity

UAP.The Company's senior discount notes (the "UAP Notes") began to accrue interest on a cash-pay basis
May 15, 2001, with the first payment of $34.5 million due November 15, 2001. The Company does not have enough cash to make this interest payment. If UAP does not make the interest
payment on November 15, 2001, the holders of the UAP Notes will have various remedies. If the failure to pay continues for a period of 30 days or more, the trustee under the Indenture
governing the UAP Notes, on its own initiative or at the request of the holders of the UAP Notes, can declare the entire unpaid principal and accrued interest of the UAP Notes to be due and payable.
The trustee, either independently or at the request of the UAP Note holders, could initiate bankruptcy proceedings against the Company, sue to recover the amount of the UAP Notes or take any other
action available to creditors. Based upon current market prices, the value of the Company's assets is significantly less than the amount of the outstanding principal and accrued interest on the UAP
Notes. While the Company has sought financing from United, at this point the Company believes it is unlikely United will make such contribution.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and projects continuing
negative cash flows from operations. These matters and the potential default in payment of interest on the Company's senior discount notes raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a going concern.

Austar United.Austar United is in the process of restructuring its A$400.0 ($196.6) million facility (the "Austar Bank
Facility"), and expects that such restructuring can be completed by the end of 2001. If Austar United is unable to refinance this facility, it is likely that certain of the financial covenants
required by the facility will not be met as of December 31, 2001. Austar United may need to negotiate a waiver of the financial covenants, sell assets or obtain funding from external sources to
repay this amount if it becomes due and payable in the first quarter of 2002, and continue to pay its other liabilities when due. The Company cannot be assured that Austar United will be successful in
obtaining a waiver of financial covenants or be successful in renegotiating or otherwise refinancing this facility. If the Austar Bank Facility indebtedness is accelerated, the acceleration may
constitute an event of default under the UAP Notes, and the holders of the UAP Notes would have certain remedies as discussed above.

Management
believes Austar United's working capital and projected operating cash flow as of September 30, 2001 are sufficient to fund Austar United's operations and meet Austar
United's
budgeted capital expenditure requirements through the remainder of 2001. Management expects Austar United to continue to incur operating losses in the near future, especially from its newer services
such as Content, telephone and Internet. Given its liquidity needs, Austar United may need to consider slowing the growth of its Internet or other businesses to conserve cash. The Company cannot be
assured that Austar United will be able to achieve operating profitability and/or positive operating cash flows from its video, telephone and Internet businesses.

TelstraSaturn.Because of delays in rolling out TelstraSaturn's network in Auckland, TelstraSaturn did not meet a
covenant required by its debt facility with respect to the ratio of its debt to the amount of network constructed as of September 30, 2001. TelstraSaturn has received a waiver through
November 15, 2001 of its noncompliance with this covenant as of September 30, 2001 and believes that it will continue to obtain waivers in relation to this covenant. TelstraSaturn is in
the process of seeking an amendment to the debt facility to reflect its revised network rollout plans. TelstraSaturn believes this amendment is reasonable and should be obtained. However, the Company
cannot be assured such amendment will be obtained. If TelstraSaturn does not obtain this amendment, TelstraSaturn's noncompliance with this covenant could have a material adverse effect on its
financial condition, and consequently the carrying value of Austar United's investment in TelstraSaturn ($39.2 million as of September 30, 2001) would also be adversely affected. There
is no recourse to the shareholders of TelstraSaturn for repayment of monies drawn under the TelstraSaturn Bank Facility.

New Accounting Principles

In June 2001, the Financial Accounting Standards Board authorized the issuance of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets("SFAS 142"). Under SFAS 142, goodwill and intangible assets with indefinite lives will no longer be
amortized, but will be tested for impairment on an annual basis and whenever indicators of impairment arise. The goodwill impairment test, which is based on fair value, is to be performed on a
reporting unit level. Goodwill will no longer be tested for impairment under Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of("SFAS 121"). Additionally, goodwill on equity method investments will no longer be
amortized; however, it will continue to be tested for impairment in accordance with Accounting Principles Board Opinion No. 18,The Equity Method of Accounting for
Investments in Common Stock. Under SFAS 142, intangible assets with indefinite lives will not be amortized. Instead they will be carried at the lower of cost or market
value and tested for impairment at least annually. All other recognized intangible assets will continue to be amortized over their estimated useful lives. SFAS 142 is effective for fiscal years
beginning after December 15, 2001, although goodwill on business combinations consummated after July 1, 2001 will not be amortized. On adoption, the Company expects to record a
cumulative effect adjustment to reflect the impairment of previously recognized goodwill and other intangible assets. While the Company has not yet determined what the impact will be on its financial
position and results of operations, it is possible that a substantial cumulative effect adjustment may be required.

In
August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144,Accounting for the
Impairment or Disposal of Long-Lived Assets("SFAS 144"), which is effective for fiscal periods beginning after December 15, 2001, and interim periods
within those fiscal years. SFAS 144 supercedes SFAS 121, and establishes an accounting model for impairment or disposal of long-lived assets to be disposed of by sale. Under
SFAS 144 there is no longer a requirement to allocate goodwill to long-lived assets to be tested for impairment. It also establishes a probability weighted cash flow estimation
approach to deal with situations in which there are a range of cash flows that may be generated by the asset being tested for impairment. SFAS 144 also establishes criteria for determining when
an asset should be treated as held for sale. The Company is currently evaluating the potential impact, if any, the adoption of SFAS 144 will have on its financial position and results of
operations.

3. Investments in Affiliates

|                  |       | September 30, 2001
|----------------- | ----- | ------------------
|
|
|TelstraSaturn     |       | $                 
|XYZ Entertainment |       |                   
|Other             |       |                   
|                  |       |                   
|                  | Total |                   
|                  |       |                   

|                  |       | December 31, 2001
|----------------- | ----- | -----------------
|
|
|TelstraSaturn     |       | $                
|XYZ Entertainment |       |                  
|Other             |       |                  
|                  |       |                  
|                  | Total |                  
|                  |       |                  

4. Property, Plant and Equipment

September 30, 2001

December 31, 2000(In thousands)Subscriber premises equipment and converters

$
303,450

$
309,200Microwave multi-point distribution system ("MMDS") distribution facilities


51,834


58,035Cable distribution networks


2,370


2,629Office equipment, furniture and fixtures


22,986


18,748Buildings and leasehold improvements


3,441


5,670Other


22,178


25,132406,259


419,414Accumulated depreciation


(322,172
)

(294,935
)Net property, plant and equipment

$
84,087

$
124,479


5. Goodwill and Other Intangible Assets

September 30, 2001

December 31, 2000(In thousands)Goodwill

$
90,217

$
105,936License fees and other intangible assets


94,928


114,555185,145


220,491Accumulated amortization


(27,179
)

(19,789
)Net goodwill and other intangible assets

$
157,966

$
200,702




6. Senior Discount Notes

September 30, 2001

December 31, 2000(In thousands)May 1996 Notes

$
443,805

$
421,372September 1997 Notes


46,948


44,869Total UAP Notes (see Note 2)

$
490,753

$
466,241


7. Other Long-Term Debt

September 30, 2001

December 31, 2000(In thousands)Austar Bank Facility

$
196,580

$
223,501Capitalized leases and other


4,310


4,759200,890


228,260Less current portion


(1,278
)

(1,366
)Total other long-term debt (see Note 2)

$
199,612

$
226,894


8. Stockholders' Deficit

Equity Transactions of Subsidiaries

The issuance of common equity, variable plan accounting for stock options and the recognition of deferred compensation expense by the Company's subsidiaries
affects the equity accounts of the Company. The following represents the effect on additional paid-in-capital and deferred compensation as a result of these equity
transactions:

Nine Months Ended September 30, 2001(In thousands)Issuance of shares by United Austar, Inc. to Asia/Pacific

$
29,732Variable plan accounting for stock options


(194
)Deferred compensation expense


194Amortization of deferred compensation


5,151Amortization of deferred compensation (minority interest)


(1,790
)Total

$
33,093


9. Related Party Transactions

The Company and Asia/Pacific are parties to a 20-year management services agreement (the "Management Agreement"), pursuant to which Asia/Pacific
performs certain administrative, accounting, financial reporting and other services for the Company in exchange for a fee of approximately $1.0 million per year. In addition, the Company
reimburses Asia/Pacific or United for any out-of-pocket expenses, including travel, lodging and entertainment expenses incurred on behalf of the Company. For the three months
ended September 30, 2001 and 2000, the Company recorded $0.3 and $0.2 million, respectively, under the Management Agreement. For the nine months ended September 30, 2001 and 2000,
the Company recorded $0.8 and $0.7 million, respectively, under the Management Agreement.

Effective June 24, 1999, United and Austar United executed a management services agreement pursuant to which United performs certain technical and consulting services in return
for a monthly management fee of $0.2 million. This amount may be adjusted before January 1 of each year by the board of directors of United but may not increase by more than 15.0% in any
one year. This agreement also requires that Austar United reimburse United for all direct and other expenses reasonably incurred by United on behalf of Austar United. The agreement will continue
through December 31, 2010.

Prior
to June 1999, Austar Entertainment was a party to a technical assistance agreement with Asia/Pacific whereby Austar Entertainment paid Asia/Pacific a fee based on its
gross revenue. Austar Entertainment also reimbursed United for certain direct costs incurred by United, including salaries and benefits relating to senior management positions, pursuant to the terms
of the technical assistance agreement. Effective June 24, 1999, the rights under this agreement were assigned to Austar United as part of the restructuring associated with the Austar United
initial public offering.

In
September 2001, United received $10.5 million from Austar United as payment of its accrued management fees and technical assistance obligations.

Included
in the amount due to parent is the following:

September 30, 2001

December 31, 2000(In thousands)Management fee payable to Asia/Pacific

$
3,772

$
2,972Austar United technical assistance agreement obligations to United


1,978


5,950Austar United management fees payable to United


600


3,600Austar Entertainment deferred management fees payable to Asia/Pacific


7,096


8,068Austar Entertainment technical assistance agreement obligations and other payables to Asia/Pacific and United


4,597


6,06118,043


26,651Less current portion


(10,947
)

(18,583
)Total due to parent

$
7,096

$
8,068


10. Segment Information

The Company provides video, voice and Internet services in Australia and New Zealand, and related Content and other media services in Australia.

The
Company evaluates performance and allocates resources based on the results of these divisions. The key operating performance criteria used in this evaluation include revenue
growth and "Adjusted EBITDA". Adjusted EBITDA represents net operating loss before depreciation, amortization and stock-based compensation charges. Stock-based compensation charges result from
variable plan accounting for the Austar United stock option plan and are generally non-cash charges. Industry analysts generally consider Adjusted EBITDA to be a helpful way to measure the
performance of cable television operations and communications companies. Adjusted EBITDA should not, however, be considered a replacement for net income, cash flows or for any other measure of
performance or liquidity under generally accepted accounting principles, or as an indicator of a company's operating performance. The presentation of Adjusted EBITDA may not be comparable to
statistics with a similar name reported by other companies. Not all companies and analysts calculate Adjusted EBITDA in the same manner.

A summary of segment information by geographic area is as follows:

September 30, 2001

December 31, 2000(In thousands)Total Assets:Australia

$
342,793

$
483,574New Zealand


39,246


37,119Corporate and other


18,422


24,873Total

$
400,461

$
545,566


|                 |                     | Three Months Ended September 30, 2001 |  
|---------------- | ------------------- | ------------------------------------- | -
|
|
|Revenue:         |                     |                                       |  
|                 | Australia           |                                       | $
|                 | Corporate and other |                                       |  
|                 |                     |                                       |  
|                 |                     | Total                                 |  
|                 |                     |                                       |  
|Adjusted EBITDA: |                     |                                       |  
|                 | Australia           |                                       | $
|                 | Corporate and other |                                       |  
|                 |                     |                                       |  
|                 |                     | Total                                 |  
|                 |                     |                                       |  



|                 |                     | Three Months Ended September 30, 2000 |  
|---------------- | ------------------- | ------------------------------------- | -
|
|
|Revenue:         |                     |                                       |  
|                 | Australia           |                                       | $
|                 | Corporate and other |                                       |  
|                 |                     |                                       |  
|                 |                     | Total                                 |  
|                 |                     |                                       |  
|Adjusted EBITDA: |                     |                                       |  
|                 | Australia           |                                       | $
|                 | Corporate and other |                                       |  
|                 |                     |                                       |  
|                 |                     | Total                                 |  
|                 |                     |                                       |  

|                 |                     | Nine Months Ended September 30, 2001 |  
|---------------- | ------------------- | ------------------------------------ | -
|
|
|Revenue:         |                     |                                      |  
|                 | Australia           |                                      | $
|                 | Corporate and other |                                      |  
|                 |                     |                                      |  
|                 |                     | Total                                |  
|                 |                     |                                      |  
|Adjusted EBITDA: |                     |                                      |  
|                 | Australia           |                                      | $
|                 | Corporate and other |                                      |  
|                 |                     |                                      |  
|                 |                     | Total                                |  
|                 |                     |                                      |  

|                 |                     | Nine Months Ended September 30, 2000 |  
|---------------- | ------------------- | ------------------------------------ | -
|
|
|Revenue:         |                     |                                      |  
|                 | Australia           |                                      | $
|                 | New Zealand         |                                      |  
|                 | Corporate and other |                                      |  
|                 |                     |                                      |  
|                 |                     | Total                                |  
|                 |                     |                                      |  
|Adjusted EBITDA: |                     |                                      |  
|                 | Australia           |                                      | $
|                 | New Zealand         |                                      |  
|                 | Corporate and other |                                      |  
|                 |                     |                                      |  
|                 |                     | Total                                |  
|                 |                     |                                      |  



The
Company's consolidated Adjusted EBITDA reconciles to the condensed consolidated statements of operations and comprehensive income (loss) as follows:

|                                 |                              | Three Months Ended September 30, |         | Nine Months Ended September 30, |  
|-------------------------------- | ---------------------------- | -------------------------------- | ------- | ------------------------------- | -
|
|
|Operating loss                   |                              | $                                | (38,102 | )                               | $
|Depreciation and amortization    |                              |                                  | 26,547  |                                 |  
|Stock-based compensation expense |                              |                                  | 816     |                                 |  
|                                 |                              |                                  |         |                                 |  
|                                 | Consolidated Adjusted EBITDA |                                  | $       | (10,739                         | )
|                                 |                              |                                  |         |                                 |  





Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These
forward-looking statements may include, among other things, statements concerning our plans, objectives and future economic prospects, expectations, beliefs, future plans and strategies, anticipated
events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may
cause our actual results, performance or achievements, or industry results, to be materially different from what we say or imply with such forward-looking statements. These factors include, among
other things, actions that may arise from the potential failure to make interest payments on our Notes, changes in television viewing preferences and habits by our subscribers and potential
subscribers and their acceptance of our new digital video, telephone and Internet access services we may offer. They also include our ability to secure adequate capital to pay interest on, or
refinance, our Notes and fund other system growth and development and any acquisitions, risks inherent in investment and operations in foreign countries, changes in government regulation and changes
in the nature of key strategic relationships with joint venturers. We also will be subject to new accounting rules that may require future write-downs due to impairment of goodwill and other
intangible assets. These adjustments and potential impairment write-downs will be based on underlying values of assets, which are subject to change. We have also included forward-looking statements
concerning our potential plans to refinance our operating companies' bank facilities. Many factors outside of our control will affect our ability to refinance this indebtedness, including general
financial market conditions. These forward-looking statements apply only as of the time of this report, and we have no obligation or plans to provide updates or revisions to these forward-looking
statements or any other changes in events, conditions or circumstances on which these statements are based. The following discussion and analysis of financial condition and results of operations cover
the three and nine months ended September 30, 2001 and 2000 and should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere
herein. These unaudited condensed consolidated financial statements provide additional information regarding our financial activities and condition.

Summary Operating Data

The following comparative operating data reflects video subscribers, voice subscribers and lines, Content and Internet subscribers for systems in which we had
an ownership interest as of September 30, 2001.

|       |                      | September 30, 2001 |     
|------ | -------------------- | ------------------ | ----
|
|Video: |                      |                    |     
|       | Austar Entertainment |                    | 51.0
|       | TelstraSaturn        |                    | 25.5
|       |                      |                    |     
|       |                      | Total              |     
|       |                      |                    |     



|       |                         |       |      |   |       | Subscribers |        | Lines 
|------ | ----------------------- | ----- | ---- | - | ----- | ----------- | ------ | ------
|
|
|Voice: |                         |       |      |   |       |             |        |       
|       | TelstraSaturn           |       | 25.5 | % | 50.0  | %           | 39,900 |       
|       | Austar United Broadband |       | 51.0 | % | 100.0 | %           | 11,000 |       
|       |                         |       |      |   |       |             |        |       
|       |                         | Total |      |   |       |             |        | 50,900
|       |                         |       |      |   |       |             |        |       

|          |                         | UAP
Ownership |      | System
Ownership |       | Subscribers |        |  |  |  |  | 
|--------- | ----------------------- | ------------- | ---- | ---------------- | ----- | ----------- | ------ |  |  |  |  | 
|Internet: |                         |               |      |                  |       |             |        |  |  |  |  | 
|          | Austar United Broadband |               | 51.0 | %                | 100.0 | %           | 78,100 |  |  |  |  | 
|          | TelstraSaturn           |               | 25.5 | %                | 50.0  | %           | 65,300 |  |  |  |  | 
|          |                         |               |      |                  |       |             |        |  |  |  |  | 
|Total     |                         |               |      |                  |       | 143,400     |        |  |  |  |  | 
|          |                         |               |      |                  |       |             |        |  |  |  |  | 

|         |                   | UAP
Ownership |      | System
Ownership |      | Subscribers |           |  |  |  |  | 
|-------- | ----------------- | ------------- | ---- | ---------------- | ---- | ----------- | --------- |  |  |  |  | 
|Content: |                   |               |      |                  |      |             |           |  |  |  |  | 
|         | XYZ Entertainment |               | 25.5 | %                | 50.0 | %           | 7,077,800 |  |  |  |  | 
|         |                   |               |      |                  |      |             |           |  |  |  |  | 

|       |                      | September 30, 2000 |     
|------ | -------------------- | ------------------ | ----
|
|Video: |                      |                    |     
|       | Austar Entertainment |                    | 72.3
|       | TelstraSaturn        |                    | 36.2
|       |                      |                    |     
|       |                      | Total              |     
|       |                      |                    |     

|       |                         |  |      |   |       | Subscribers |        | Lines
|------ | ----------------------- |  | ---- | - | ----- | ----------- | ------ | -----
|
|
|Voice: |                         |  |      |   |       |             |        |      
|       | TelstraSaturn           |  | 36.2 | % | 50.0  | %           | 30,300 |      
|       | Austar United Broadband |  | 72.3 | % | 100.0 | %           |       |      
|       |                         |  |      |   |       |             |        |      
|       | Total                   |  |      |   |       |             | 30,300 |      
|       |                         |  |      |   |       |             |        |      

|          |                         | UAP
Ownership |      | System
Ownership |       | Subscribers |        |        |  |  |  | 
|--------- | ----------------------- | ------------- | ---- | ---------------- | ----- | ----------- | ------ | ------ |  |  |  | 
|Internet: |                         |               |      |                  |       |             |        |        |  |  |  | 
|          | TelstraSaturn           |               | 36.2 | %                | 50.0  | %           | 40,900 |        |  |  |  | 
|          | Austar United Broadband |               | 72.3 | %                | 100.0 | %           | 24,900 |        |  |  |  | 
|          |                         |               |      |                  |       |             |        |        |  |  |  | 
|          |                         | Total         |      |                  |       |             |        | 65,800 |  |  |  | 
|          |                         |               |      |                  |       |             |        |        |  |  |  | 



|         |                   | UAP
Ownership |      | System
Ownership |      | Subscribers |           |  |  |  |  | 
|-------- | ----------------- | ------------- | ---- | ---------------- | ---- | ----------- | --------- |  |  |  |  | 
|Content: |                   |               |      |                  |      |             |           |  |  |  |  | 
|         | XYZ Entertainment |               | 36.2 | %                | 50.0 | %           | 6,339,000 |  |  |  |  | 
|         |                   |               |      |                  |      |             |           |  |  |  |  | 

Results of Operations

Revenue

Revenue by line of business is as follows:

|         |                            | Three Months Ended
September 30, |            | Nine Months Ended
September 30,
|-------- | -------------------------- | -------------------------------- | ---------- | -------------------------------
|
|
|Video    |                            | $  38,041                        |            | $  41,859                      
|Voice    |                            | 827                              |            |                               
|Internet |                            | 2,435                            |            | 1,225                          
|Content  |                            | 2,984                            |            |                               
|Other    |                            | 38                               |            | 969                            
|         |                            |                                  |            |                                
|         | Consolidated revenue       |                                  | $  44,325  |                                
|         |                            |                                  |            |                                
|         | Consolidated revenue in A$ |                                  | A$  86,466 |                                
|         |                            |                                  |            |                                

Revenue
for Austar United in Australian dollars increased A$9.7 million, or 12.6%, from A$76.8 ($44.1) million for the three months ended September 30, 2000 to A$86.5
($44.3) million for the three months ended September 30, 2001, due primarily to the launch of its mobile telephony business in the fourth quarter 2000 and revenue from TVSN, a national shopping
channel in Australia and New Zealand, acquired in October 2000. Revenue for Austar United increased A$34.0 million, or 15.3%, from A$222.6 ($133.2) million for the nine months ended
September 30, 2000 to A$256.6 ($132.9) million for the nine
months ended September 30, 2001. Video revenue accounted for A$10.5 million of this increase, due to organic subscriber growth (average of 428,691 subscribers for the nine months ended
September 30, 2001 compared to an average of 401,216 subscribers for the nine months ended September 30, 2000), offset by a reduction in the average monthly revenue per video subscriber
from A$55.78 ($33.04) for the nine months ended September 30, 2000 to A$54.74 ($28.36) for the nine months ended September 30, 2001, due to lower premium revenues in the current period.
The remaining increase was due to the launch of wireless data services in late first quarter 2000, the launch of its mobile telephony business in the fourth quarter 2000 and revenue from TVSN. The
total increase in revenue for the nine months ended September 30, 2001 compared to the same period in the prior year was offset by a A$7.9 ($4.9) million reduction in revenue as a result of the
de-consolidation of TelstraSaturn effective April 1, 2000.

Adjusted EBITDA

Adjusted EBITDA by line of business is as follows:

|                                    |                                                     | Three Months Ended
September 30, |             | Nine Months Ended
September 30, |            
|----------------------------------- | --------------------------------------------------- | -------------------------------- | ----------- | ------------------------------- | -----------
|
|
|Video                               |                                                     | $  (1,766                        | )           | $  (9,358                       | )          
|Voice                               |                                                     | (270                             | )           | (777                            | )          
|Internet                            |                                                     | (5,720                           | )           | (4,801                          | )          
|Content                             |                                                     | (2,010                           | )           |                                |            
|Corporate and other (Austar United) |                                                     | (621                             | )           | 751                             |            
|Corporate and other (UAP)           |                                                     | (352                             | )           | (278                            | )          
|                                    |                                                     |                                  |             |                                 |            
|                                    | Consolidated Adjusted EBITDA(1)                     |                                  | $  (10,739  | )                               | $  (14,463 
|                                    |                                                     |                                  |             |                                 |            
|                                    | Consolidated Austar United Adjusted EBITDA in A$(1) |                                  | A$  (20,263 | )                               | A$  (22,900
|                                    |                                                     |                                  |             |                                 |            

---

Adjusted
EBITDA for Austar United improved A$2.6 million, from negative A$22.9 ($14.2) million for the three months ended September 30, 2000 to negative A$20.3 ($10.4)
million for the three months ended September 30, 2001, due primarily to improved video Adjusted EBITDA from the reduction of programming cost per subscriber effective July 1, 2001, as a
result of negotiations with XYZ Entertainment. Adjusted EBITDA for Austar United decreased A$23.9 million, from negative A$45.9 ($28.1) million for the nine months ended September 30,
2000 to negative A$69.8 ($36.1) million for the nine months ended September 30, 2001, primarily due to an incremental increase in video programming costs, as the Australian dollar continued to
weaken from period to period and development and start-up costs associated with TVSN, offset by the de-consolidation of TelstraSaturn and the resulting removal of approximately
A$2.5 ($1.7) million of negative Adjusted EBITDA.

Interest Expense

|              |                        | Three Months Ended
September 30, |         | Nine Months Ended
September 30, |  
|------------- | ---------------------- | -------------------------------- | ------- | ------------------------------- | -
|
|
|UAP           |                        | $                                | (17,615 | )                               | $
|Austar United |                        |                                  | (6,473  | )                               |  
|              |                        |                                  |         |                                 |  
|              | Total interest expense |                                  | $       | (24,088                         | )
|              |                        |                                  |         |                                 |  

Interest
expense increased $3.4 million for the three months ended September 30, 2001 compared to the three months ended September 30, 2000 and increased
$8.7 million for the nine months ended September 30, 2001 compared to the nine months ended September 30, 2000, the detail of which is as follows:

|          |                                          | Three Months Ended
September 30, |         | Nine Months Ended
September 30, |        
|--------- | ---------------------------------------- | -------------------------------- | ------- | ------------------------------- | -------
|
|
|Cash Pay: |                                          |                                  |         |                                 |        
|          | UAP Notes                                |                                  | $       | (17,251                         | )      
|          | Austar Bank Facility                     |                                  |         | (5,917                          | )      
|          |                                          |                                  |         |                                 |        
|          |                                          |                                  | (23,168 | )                               |        
|          |                                          |                                  |         |                                 |        
|Non Cash: |                                          |                                  |         |                                 |        
|          | UAP Notes accretion                      |                                  |         | (110                            | )      
|          | Amortization of deferred financing costs |                                  |         | (810                            | )      
|          |                                          |                                  |         |                                 |        
|          |                                          |                                  | (920    | )                               |        
|          |                                          |                                  |         |                                 |        
|          |                                          | Total interest expense           |         | $                               | (24,088
|          |                                          |                                  |         |                                 |        

Minority Interests in Subsidiaries

The minority interests' share of losses increased $8.8 million from $17.3 million for the three months ended September 30, 2000 to
$26.1 million for the three months ended September 30, 2001. The minority interests' share of losses increased $19.1 million from $43.5 million for the nine months ended
September 30, 2000 to $62.6 million for the nine months ended September 30, 2001. Austar United's rights offering in May 2001 reduced our indirect ownership interest in
Austar United from 72.8% as of March 31, 2001 to 51.0% as of September 30, 2001. For accounting purposes, we continue to consolidate 100% of the results of operations of Austar United,
then deduct the minority interests' share of losses.

Share in Results of Affiliates

|                                     |  | Three Months Ended
September 30, |         | Nine Months Ended
September 30, |  
|------------------------------------ |  | -------------------------------- | ------- | ------------------------------- | -
|
|
|TelstraSaturn(1)                     |  | $                                | (10,361 | )                               | $
|XYZ Entertainment                    |  |                                  | (228    | )                               |  
|Other                                |  |                                  | (216    | )                               |  
|                                     |  |                                  |         |                                 |  
|Total share in results of affiliates |  | $                                | (10,805 | )                               | $
|                                     |  |                                  |         |                                 |  

---

Liquidity and Capital Resources

UAP

Our senior discount notes began to accrue interest on a cash-pay basis May 15, 2001, with the first payment of $34.5 million due
November 15, 2001. We do not have enough cash to make this interest payment. If we do not make the interest payment on November 15, 2001, the holders of the UAP Notes will have various
remedies. If the failure to pay continues for a period of 30 days or more, the trustee under the Indenture governing the UAP Notes, on its own initiative or at the request of the holders of the
UAP Notes, can declare the entire unpaid principal and accrued interest of the UAP Notes to be due and payable. The trustee, either independently or at the request of the UAP Note holders, could
initiate bankruptcy proceedings against us, sue to recover the amount of the UAP Notes or take any other action available to creditors. Based upon current market prices, the value of our assets is
significantly less than the amount of the outstanding principal and accrued interest on the UAP Notes. While we have sought financing from United, at this point we believe it is unlikely United will
make such contribution.

The
accompanying financial statements have been prepared assuming that we will continue as a going concern. We have suffered recurring losses and project continuing negative cash
flows from operations. These matters and the potential default in payment of interest on our senior discount notes raise substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should
we be unable to continue as a going concern.

Austar United

Austar United is in the process of restructuring its A$400.0 ($196.6) million Austar Bank Facility, and expects that such restructuring can be completed by the
end of 2001. If Austar United is unable to refinance this facility, it is likely that certain of the financial covenants required by the facility will not be met as of December 31, 2001. Austar
United may need to negotiate a waiver of the financial covenants, sell assets or obtain funding from external sources to repay this amount if it becomes due and payable in the first quarter of 2002,
and continue to pay its other liabilities when due. We cannot be assured that Austar United will be successful in obtaining a waiver of financial covenants or be successful in renegotiating or
otherwise refinancing this facility. If the Austar Bank Facility indebtedness is accelerated, the acceleration may constitute an event of default under the UAP Notes, and the holders of the UAP Notes
would have certain remedies discussed above.

We believe Austar United's working capital and projected operating cash flow as of September 30, 2001 are sufficient to fund Austar United's operations and meet Austar United's
budgeted capital expenditure requirements through the remainder of 2001. We expect Austar United to continue to
incur operating losses in the near future, especially from its newer services such as Content, telephone and Internet. Given its liquidity needs, Austar United may need to consider slowing the growth
of its Internet or other businesses to conserve cash. We cannot be assured that Austar United will be able to achieve operating profitability and/or positive operating cash flows from its video,
telephone and Internet businesses.

TelstraSaturn

Because of delays in rolling out TelstraSaturn's network in Auckland, TelstraSaturn did not meet a covenant required by its debt facility with respect to the
ratio of its debt to the amount of network constructed as of September 30, 2001. TelstraSaturn has received a waiver through November 15, 2001 of its noncompliance with this covenant as
of September 30, 2001 and believes that it will continue to obtain waivers in relation to these covenants. TelstraSaturn is in the process of seeking an amendment to the debt facility to
reflect its revised network rollout plans. TelstraSaturn believes this amendment is reasonable and should be obtained. However, we cannot be assured such amendment will be obtained. If TelstraSaturn
does not obtain this amendment, TelstraSaturn's noncompliance with this covenant could have a material adverse effect on its financial condition, and consequently the carrying value of Austar United's
investment in TelstraSaturn ($39.2 million as of September 30, 2001) would also be adversely affected. There is no recourse to the shareholders of TelstraSaturn for repayment of monies
drawn under the TelstraSaturn Bank Facility.

In
October 2001, Austar United announced it reached agreement with Telstra Corporation of Australia ("Telstra") on a restructuring of the shareholders agreement for
TelstraSaturn. Under the agreement, Austar United will have the right to sell its shares in TelstraSaturn to Telstra after the 2004 financial year-end and Telstra will have the right to
purchase Austar United's shares based upon a pre-determined formula. In addition, as part of the agreement Telstra has agreed to fund all remaining capital needs of TelstraSaturn.

Statements of Cash Flows

Nine Months Ended September 30, 2001.Cash and cash equivalents increased $2.3 million from
$5.6 million as of December 31, 2000 to $7.9 million as of September 30, 2001. Principal sources of cash during the nine months ended September 30, 2001 included
proceeds from Austar United's rights offering totaling $105.7 million, the net sale of short-term investments of $35.5 million, a distribution from XYZ Entertainment of
$6.2 million and other sources totaling $3.3 million. During the nine months ended September 30, 2001, cash was used principally for capital expenditures of $37.4 million,
the funding of operating activities of $56.3 million, investments in TelstraSaturn totaling $33.5 million, and other uses totaling $21.2 million.

Nine Months Ended September 30, 2000.Cash and cash equivalents decreased $3.0 million from
$6.0 million as of December 31, 1999 to $3.0 million as of September 30, 2000. Principal sources of cash during the nine months ended September 30, 2000 included
proceeds from the issuance of common equity securities by Austar United of $102.4 million, borrowings on the Austar Bank Facility of $57.6 million and other sources totaling
$4.6 million. During the nine months ended September 30, 2000, cash was used principally for capital expenditures of $77.3 million, the funding of operating activities of
$44.7 million, spectrum license fees and other acquisitions of $34.5 million, investments in affiliated companies totaling $5.2 million and other uses totaling
$5.9 million.





Item 3. Quantitative and Qualitative Disclosures about Market Risk

Investment Portfolio

We do not use derivative financial instruments in our non-trading investment portfolio. We place our cash and cash equivalent investments in highly
liquid instruments that meet high credit quality standards with original maturities at the date of purchase of less than three months. We also place our short-term investments in liquid
instruments that meet high credit quality standards with original maturities at the date of purchase of between three and twelve months. We also limit the amount of credit exposure to any one issue,
issuer or type of instrument. These investments are subject to interest rate risk and will fall in value if market interest rates increase. We do not expect, however, any material loss with respect to
our investment portfolio.

Impact of Foreign Currency Rate Changes

The functional currency of Austar United is the Australian dollar. We are exposed to foreign exchange rate fluctuations related to Austar United's monetary
assets and liabilities and the financial results of Austar United when its financial statements are translated into U.S. dollars during consolidation. Foreign currency rate changes also affect our
share in results of our unconsolidated affiliates. Our exposure to foreign exchange rate fluctuations also arises from items such as the cost of equipment, management fees, programming costs and
certain other charges that are denominated in U.S. dollars but recorded in the functional currency of Austar United. We generally do not execute hedge transactions to reduce our exposure to foreign
currency exchange rate risk. Accordingly, we may experience economic loss and a negative impact on earnings and equity with respect to our holdings solely as a result of foreign currency exchange rate
fluctuations. The relationship between the Australian dollar and the U.S. dollar, which is our reporting currency, is shown below per one U.S. dollar.

|                   |  | Spot Rate |   | Three Month
Average Rate |   | Nine Month
Average Rate |  
|------------------ |  | --------- | - | ------------------------ | - | ----------------------- | -
|December 31, 2000  |  | 1.7897    |   |                         |   |                        |  
|September 30, 2001 |  | 2.0348    |   | 1.9507                   |   | 1.9305                  |  
|September 30, 2000 |  |          |   | 1.7408                   |   | 1.6882                  |  
|% Devaluation      |  | 13.7      | % | 12.1                     | % | 14.4                    | %

The
table below presents the impact of foreign currency fluctuations on revenue and Adjusted EBITDA.

|               |                                                    | Three Months
Ended
September 30, |   | Nine Months
Ended
September 30, |  
|-------------- | -------------------------------------------------- | -------------------------------- | - | ------------------------------- | -
|
|
|Austar United: |                                                    |                                  |   |                                 |  
|               | Revenue                                            |                                  | $ | 44,325                          |  
|               |                                                    |                                  |   |                                 |  
|               | Adjusted EBITDA                                    |                                  | $ | (10,387                         | )
|               |                                                    |                                  |   |                                 |  
|               | Revenue based on prior year exchange rates         |                                  | $ | 49,670                          |  
|               |                                                    |                                  |   |                                 |  
|               | Adjusted EBITDA based on prior year exchange rates |                                  | $ | (11,640                         | )
|               |                                                    |                                  |   |                                 |  
|               | Revenue impact                                     |                                  | $ | (5,345                          | )
|               |                                                    |                                  |   |                                 |  
|               | Adjusted EBITDA impact                             |                                  | $ | 1,253                           |  
|               |                                                    |                                  |   |                                 |  



The
table below presents the foreign currency translation adjustments arising from translating Austar United's assets and liabilities into U.S. dollars for the three quarters ended
September 30, 2001 and 2000.

|                                         |  | For the Three Months Ended |        
|---------------------------------------- |  | -------------------------- | -------
|
|
|
|Foreign Currency Translation Adjustments |  | $                          | (15,257
|                                         |  |                            |        

The
table below presents the foreign currency exposure related to Austar United's U.S. dollar-denominated liabilities.

|                                                                                                              |       | September 30,
2001 |       | December 31,
2000
|------------------------------------------------------------------------------------------------------------- | ----- | ------------------ | ----- | -----------------
|
|Austar United technical assistance agreement obligations to United                                            |       | $                  | 1,978 |                  
|Austar United management fees payable to United                                                               |       |                    | 600   |                  
|Austar Entertainment deferred management fees payable to Asia/Pacific                                         |       |                    | 7,096 |                  
|Austar Entertainment technical assistance agreement obligations and other payables to Asia/Pacific and United |       |                    | 4,597 |                  
|                                                                                                              |       |                    |       |                  
|                                                                                                              | Total |                    | $     | 14,271           
|                                                                                                              |       |                    |       |                  

Interest Rate Sensitivity

The table below provides information about our primary debt obligations. The information is presented in U.S. dollar equivalents, which is our reporting
currency.

|                |                                                     | September 31, 2001    |  
|--------------- | --------------------------------------------------- | --------------------- | -
|
|
|Long-term debt: |                                                     |                       |  
|                | UAP fixed rate USD Notes                            |                       | $
|                |                                                     | Average interest rate |  
|                | Austar United variable rate A$ Austar Bank Facility |                       | $
|                |                                                     | Average interest rate |  

The
table below presents principal cash flows by expected maturity dates for our debt obligations (see Note 2 of the condensed consolidated financial statements). The
information is presented in U.S. dollar equivalents, which is our reporting currency.

|                |                                                     | As of December 31,
|--------------- | --------------------------------------------------- | ------------------
|
|
|Long-term debt: |                                                     |                   
|                | UAP fixed rate USD Notes                            |                   
|                | Austar United variable rate A$
Austar Bank Facility |                   

We use interest rate swap agreements from time to time, to manage interest rate risk on our floating-rate debt facilities. Interest rate swaps are entered into depending
on our assessment of the market, and generally are used to convert floating-rate debt to fixed-rate debt. Interest differentials paid or received under these swap agreements
are recognized over the life of the contracts as adjustments to the effective yield of the underlying debt, and related amounts payable to, or receivable from, the counterparties are included in the
consolidated balance sheet. Currently, we have four interest rate swaps to manage interest rate exposure on the Austar Bank Facility. Two of these swap agreements expire in 2002 and effectively
convert an aggregate principal amount of A$50.0 ($24.6) million of variable-rate, long-term debt into fixed-rate borrowings. The other two swap agreements expire in
2004 and effectively convert an aggregate principal amount of A$100.0 ($49.1) million of variable-rate, long-term debt into fixed-rate borrowings. For the nine
months ended September 30, 2001, the weighted-average fixed rate under these agreements was 5.7% compared to the weighted-average variable rate of 4.8%. Fair values of the interest rate swap
agreements are based on the estimated amounts that we would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. The total fair value of the interest
rate swaps was $(1.6) and $0.7 million as of September 30, 2001 and December 31, 2000, respectively. We have chosen not to designate such swaps as hedges, therefore, fair value
mark-to-market adjustments are recognized each period in the statement of operations.





Part IIOther Information

Item 6. Exhibits and Reports on Form 8-K

None.

None.



SIGNATURE

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

|United Australia/Pacific, Inc. |  |                                                                                                             
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------
|Date:                          |  | November 14, 2001                                                                                           
|By:                            |  | /s/ Valerie L. CoverValerie L. Cover
Controller
(A Duly Authorized Officer and Principal Accounting Officer)