<PAGE>

--------------------------------------------------------------------------------
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 10-K
                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

<Table>
<Caption>
(Mark One)
<C>        <S>
   [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

           FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                  OR


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

           FOR THE TRANSITION PERIOD FROM           TO
</Table>

               COMMISSION FILE NUMBERS 333-35183 AND 333-35183-01
                             ---------------------

                           JAMES CABLE PARTNERS, L.P.
                           JAMES CABLE FINANCE CORP.
           (Exact name of Registrants as specified in their charters)

<Table>
<S>                                                 <C>
                     DELAWARE                                           38-2778219
                     MICHIGAN                                           38-3182724
 (State or Other Jurisdiction of Incorporation or          (I.R.S. Employer Identification No.)
                   Organization)

         38710 WOODWARD AVENUE, SUITE 180                                  48304
            BLOOMFIELD HILLS, MICHIGAN                                  (Zip Code)
     (Address of Principal Executive Offices)
</Table>

       REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 647-1080

       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE.

       SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE.

     Indicate by check mark whether each of the registrants (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]     No [ ]

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

     The aggregate market value of the voting and non-voting common equity of
James Cable Partners, L.P. held by non-affiliates of James Cable Partners, L.P.
is estimated to be $0.

     The aggregate market value of the voting and non-voting common equity of
James Cable Finance Corp. held by non-affiliates of James Cable Finance Corp. is
estimated to be $0.

     The number of shares of James Cable Finance Corp. outstanding as of March
15, 2002 was 1,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                     None.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* James Cable Finance Corp. meets the conditions set forth in General
  Instruction I.(1)(a) and (b) to Form 10-K and is therefore filing with the
  reduced disclosure format.
<PAGE>

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                        PAGE NO.
                                                                        --------
<S>       <C>                                                           <C>
                                     PART I
Forward Looking Statements............................................      2
Item 1.   Business....................................................      3
          General.....................................................      3
          Business Strategy...........................................      3
          Industry Overview...........................................      5
          The Systems.................................................      6
          Programming and Subscriber Rates............................     10
          Internet Services...........................................     11
          Customer Service and Marketing..............................     12
          Technical Overview..........................................     12
          Franchises..................................................     13
          Competition.................................................     14
          Legislation and Regulation..................................     17
          Insurance...................................................     22
          Employees...................................................     22
Item 2.   Properties..................................................     22
Item 3.   Legal Proceedings...........................................     23
Item 4.   Submission of Matters to a Vote of Security Holders.........     24

                                    PART II
Item 5.   Market for Registrant's Common Equity and Related
          Shareholder Matters.........................................     24
Item 6.   Selected Financial Data.....................................     25
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................     27
          Overview....................................................     27
          Results of Operations.......................................     28
          Financial Condition, Liquidity and Capital Resources........     30
          Impact of Inflation and Changing Prices.....................     33
          Critical Accounting Policies................................     33
          Effects of New Accounting Pronouncements....................     33
          Sales of Cable Systems......................................     34
          Risk Factors................................................     34
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk........................................................     37
Item 8.   Financial Statements and Supplementary Data.................     37
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure....................................     38

                                    PART III
Item 10.  Directors and Executive Officers............................     38
Item 11.  Executive Compensation......................................     38
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................     39
Item 13.  Certain Relationships and Related Transactions..............     39

                                    PART IV
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
          8-K.........................................................     40
</Table>

                                        1
<PAGE>

FORWARD LOOKING STATEMENTS

     This annual report on Form 10-K includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act), which can be identified by the use of forward-
looking terminology such as: "attempt," "goal," "foreseeable," "may," "might,"
"could," "would," "believe," "expect," "intend," "plan," "seek," "anticipate,"
"estimate," "project" or "continue" or the negative thereof or other variations
thereon or comparable terminology. All statements other than statements of
historical fact included in this annual report on Form 10-K, including without
limitation the statements under "Part I -- Item 1. Business" and "Part
II -- Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" and located elsewhere herein regarding our operations,
results of operations, financial position, liquidity and capital resources are
forward-looking statements. These forward-looking statements also include, but
are not limited to:

     - estimates and expectations regarding our current and future operations
       and markets;

     - forecasts and expectations of growth regarding our industry, operations,
       services and subscriber base;

     - statements regarding our current plans and goals for our cable systems;
       and

     - statements and projections regarding our anticipated revenues, expense
       levels, operating results, financial condition, liquidity and capital
       resources.

     Although we believe the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance such expectations will prove
to have been correct. Important factors with respect to any such forward-looking
statements, including certain risks and uncertainties that could cause actual
results to differ materially from our expectations (Cautionary Statements), are
disclosed in this annual report on Form 10-K, including, without limitation, in
conjunction with the forward-looking statements included in this annual report
on Form 10-K. See, e.g., "Part II -- Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Risk Factors."
Important factors that could cause actual results to differ materially from
those in the forward-looking statements included herein include, but are not
limited to:

     - changes or advances in technology;

     - competition in the industry and markets in which we operate;

     - potential fluctuations in our subscriber base and costs that impact our
       results of operations, financial condition and liquidity;

     - our ability to attract and retain skilled personnel;

     - changes in government regulation and our cable franchises; and

     - general economic and business conditions.

     THESE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE
OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR
PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE
CAUTIONARY STATEMENTS.

                                        2
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

  GENERAL:

     James Cable Partners, L.P. ("James," and together with its wholly owned
subsidiary James Cable Finance Corp., the "Company") owns, operates and develops
cable television systems (the "Systems") serving rural communities in seven
geographically and economically diverse clusters. The Company's Systems are
operated under the name "CommuniComm Services" and are located in Oklahoma,
Texas, Georgia, Louisiana, Colorado, Wyoming, Tennessee, Alabama and Florida. As
of December 31, 2001, the Systems passed an estimated 130,000 homes and served
68,492 basic subscribers, representing a basic penetration of 52.7%. The
Company's goal is to be the preferred provider of video services, and to become
the single hardwire broadband provider of enhanced video services and advanced
telecommunication services, in the markets that it serves. James' principal
executive offices are located at 38710 Woodward Avenue, Suite 180, Bloomfield
Hills, Michigan 48304, and its telephone number is (248) 647-1080.

     James is a Delaware limited partnership that was formed in January 1988 for
the purpose of realizing capital appreciation through the ownership, control and
operation of assets comprising cable television systems. Unless its term is
extended as provided in its limited partnership agreement, James will be
dissolved upon the earliest to occur of (i) December 31, 2005, (ii) a
determination, by the General Partner, of James that James should be dissolved,
with the approval of 51% of its Class A Limited Partner interests, (iii) the
sale or disposition by James of substantially all of its assets, (iv) the
consent of holders of 51% of its Class A Limited Partner interests of James, (v)
the removal of the General Partner pursuant to the terms of the Partnership
Agreement, or (vi) the bankruptcy, insolvency, dissolution or withdrawal of the
General Partner.

     Since its inception, James' business and affairs have been managed and
controlled by its general partner, James Communications Partners, a Michigan
co-partnership (the "General Partner"). The General Partner is managed and
controlled by its two general partners, Jamesco, Inc. and DKS Holdings, Inc. See
"Part III -- Item 10. Directors and Executive Officers." The General Partner's
principal executive office is located at 38710 Woodward Avenue, Suite 180,
Bloomfield Hills, Michigan 48304, and its telephone number is (248) 647-1080.

     James Cable Finance Corp. ("Finance Corp.") is a wholly-owned subsidiary of
James that was incorporated under the laws of the State of Michigan on June 19,
1997 for the purpose of serving as a co-issuer with James of the $100 million
principal amount 10 3/4% Series B Senior Notes due 2004 that the Company issued
during the second-half of 1997 (the "Notes"). Finance Corp.'s only asset
consists of $1,000 cash and there are substantial contractual restrictions on
its activities. Finance Corp.'s principal executive office is located at 38710
Woodward Avenue, Suite 180, Bloomfield Hills, Michigan 48304, and its telephone
number is (248) 647-1080.

 BUSINESS STRATEGY:

     The Company believes that there are competitive and economic advantages to
owning and operating cable television systems in rural markets. Due to lower
population densities and higher per household plant installation costs, rural
markets are more likely than larger urban and suburban markets to have a single
hardwire broadband video and telecommunications service provider. In addition,
cable television systems in rural markets are typically characterized by lower
churn rates than larger urban and suburban markets. In rural markets, cable
service is often required for adequate reception of a full range of over-the-air
television stations. Moreover, the Company believes there are fewer
entertainment alternatives available, and that cable television provides a major
source of entertainment.

     The Company's business strategy has been to (i) selectively upgrade the
Systems, (ii) provide enhanced digital video, (iii) deliver advanced
telecommunications services, including Internet access, and (iv) pursue
strategic acquisitions. It has also attempted to maintain and improve system
operating results by implementing management, operational and technical changes
that are intended to improve operating efficiencies, enhance

                                        3
<PAGE>

operating cash flow and reduce overhead through economies of scale. To this end,
the Company has "clustered" its Systems in concentrated geographic areas, which
allows fixed costs to be spread over an extended subscriber base. In an effort
to further enhance its operational and financial performance, the Company may
from time to time consider opportunities to acquire or exchange its assets for
cable television systems located near its existing markets.

     - Selectively Upgrade Systems.  The Company has upgraded certain of its
       cable television systems to further strengthen its position as the
       preferred provider of video services in the communities it serves. These
       upgrades, which employ fiber optic technology, increase the bandwidth of
       the Company's cable plant generally to 750 megahertz ("MHz"), thereby
       increasing channel capacity, enhancing signal quality and improving
       technical reliability. The Company believes the upgrades will enable it
       to offer comparable or superior video service and quality at attractive
       pricing levels relative to its competitors, such as direct broadcast
       satellite ("DBS"). The Company also believes that the upgrades will
       provide the technical platform necessary for the development and delivery
       of advanced telecommunications services.

       As of December 31, 2001, the Company had completed the 750 MHz upgrades
       to cable plant serving approximately 34% of its basic subscribers and has
       also supplemented a portion of its 450 MHz cable plant with fiber to
       approximately 11% of its subscribers. The Company is nearing the
       completion of the upgrade to the cable plant for its entire Tennessee
       System which serves approximately 6,100 subscribers. After the upgrade is
       completed, which is expected to occur during the second quarter of 2002,
       approximately 90% of the System's subscribers will be on 750 MHz plant
       with the remaining subscribers on two-way 450 MHz plant, both of which
       will allow for the use of advanced telecommunications services, including
       high-speed Internet. At December 31, 2001, more than 70% of the Tennessee
       System subscribers had been converted to the 750 MHz or two-way 450 MHz
       cable plant. In addition, at December 31, 2001 the Company was nearing
       the completion of the 750 MHz upgrade to its cable plant in Lusk, Wyoming
       which serves approximately 400 subscribers. The Lusk, Wyoming upgrade was
       completed during the first quarter of 2002 and has allowed for the
       introduction of high-speed Internet to the basic subscribers. Once the
       Tennessee and Lusk, Wyoming upgrades are completed, the Company will have
       two-way capabilities for approximately 50% of its subscriber base.

       The Company is continually in the process of identifying other areas
       within its Systems which can be upgraded to allow for the introduction of
       advanced telecommunications services. However, the Company will only
       proceed with upgrades which it believes are economically feasible after
       carefully weighing the anticipated revenues against the costs of
       completing the upgrade.

     - Provide Enhanced Digital Video.  The Company, in order to provide
       enhanced digital video, has launched Headend In The Sky(R) ("HITS"), a
       digital compression service developed by National Digital Television
       Center, Inc., a subsidiary of AT&T. HITS is currently available to
       approximately 56% of the Company's subscriber base. Alternatively, in
       Systems that do not offer HITS, the Company has launched its digital
       video solution utilizing either Hits2Home ("H2H") or HITS Quick Take
       ("HQT"). H2H and HQT were developed by the same group, and allow for many
       of the same digital services as HITS, but were specifically developed for
       smaller headends where the large upfront cost of HITS could not be
       justified. With HITS the Company receives the digital signals at its
       headend sites, which requires a significant amount of upfront cost in
       equipment, and then distributes the signal to its subscribers over its
       cable plant. In addition, HITS allows for full two-way communication over
       the cable plant so that no telephone lines are required at the
       subscriber's home. With H2H there is a dish installed at the subscriber's
       premise and they receive the digital signals directly, thus, there is no
       upfront cost for headend equipment. With HQT the Company receives the
       digital signals at its headend, although with much less upfront equipment
       cost than HITS, and then distributes the signal to the subscribers over
       its cable plant. However, both H2H and HQT require the installation of a
       phone line in the subscribers home so that the digital converter can
       communicate back to the host. All three of these services allow the
       Company to deliver video services such as pay-per-view programming and
       tiered niche satellite programming as well as digital audio services. The
       Company believes that these enhanced digital video services will allow it
       to provide services comparable to DBS. At December 31,
                                        4
<PAGE>

       2001 at least one of the above digital services was available to
       substantially all of the Company's basic subscribers.

     - Deliver Advanced Telecommunications Services, Including Internet
       Access.  The Company believes that upgraded advanced telecommunications
       services will provide additional revenue opportunities. The Company
       further believes that the cable infrastructure will provide the fastest,
       most cost-effective delivery mechanism for Internet access and inter- and
       intra-network data services in many of its markets.

       As of December 31, 2001, the Company offered either its two-way or
       one-way high-speed Internet services in portions of each Cluster and had
       more than 6,400 high-speed Internet customers. The Company intends to
       increase the number of high-speed Internet customers by (i) continued
       emphasis on marketing and customer based education regarding the benefits
       of high-speed Internet services and (ii) offering its high-speed services
       to additional subscribers as future rebuild and upgrade projects are
       completed. In addition to its high-speed Internet services, the Company
       is also offering traditional dial-up Internet services in many of its
       Systems. At December 31, 2001, the Company had more than 4,000 dial-up
       Internet customers.

     - Pursue Strategic Acquisitions.  The Company intends to consider
       opportunities to acquire cable television systems. Because it is more
       cost effective to provide advanced telecommunications services over an
       expanded subscriber base within a concentrated geographic area, the
       Company will generally seek to acquire cable television systems, or
       groups of systems, in close proximity to its existing Systems and
       markets. However, the Company may consider acquisitions in other
       geographic areas which are consistent with its business strategy.
       Furthermore, the Company may divest itself, through asset exchanges or
       outright sales, of cable television systems that do not readily lend
       themselves to the Company's business strategy. Factors likely to be
       considered by the Company in evaluating the desirability of a potential
       acquisition or asset exchange opportunity include price and terms,
       subscriber densities, growth potential (in terms of both market and cash
       flow) and whether the target system can be readily integrated into the
       Company's operations.

  INDUSTRY OVERVIEW:

     A cable television system receives television, radio and data signals at
its "headend" site by means of off-air antennas, microwave relay systems and
satellite earth stations. These signals are then modulated, amplified and
distributed, primarily through coaxial and fiber optic distribution systems, to
deliver a wide variety of channels of television programming, primarily
entertainment and informational video programming, to the homes of subscribers
who pay fees for this service, generally on a monthly basis. A cable television
system may also originate its own television programming and other information
services for distribution through the system. Cable television systems generally
are constructed and operated pursuant to non-exclusive franchises or similar
licenses granted by local governmental authorities for a specified period of
time.

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

     Cable television systems offer customers various levels (or "tiers") of
cable services consisting of broadcast television signals of local network
affiliates, independent and educational television stations, a limited number of
television signals from so-called "super stations" originating from distant
cities (such as

                                        5
<PAGE>

WGN), various satellite-delivered, non-broadcast channels (such as Cable News
Network ("CNN"), MTV: Music Television ("MTV"), the USA Network ("USA"), ESPN
and Turner Network Television ("TNT")), programming originated locally by the
cable television system (such as public, governmental and educational access
programs) and informational displays featuring news, weather and public service
announcements. For an extra monthly charge, cable television systems also offer
"premium" television services to customers on a per-channel basis. These
services (such as Home Box Office ("HBO") and Showtime) are satellite channels
that consist principally of feature films, live sporting events, concerts and
other special entertainment features, usually presented without commercial
interruption.

     A subscriber generally pays an initial installation charge and fixed
monthly fees for basic and premium television services and for other services
(such as the rental of converters and remote control devices). Such monthly
service fees constitute the primary source of revenues for cable television
systems. In addition to subscriber revenues, cable television systems also
frequently offer to their subscribers home shopping services, which pay such
systems a share of revenues from products sold in the systems' service areas.
Some cable television systems also receive revenue from the sale of available
spots on advertiser-supported programming.

     In addition to the above traditional cable television offerings, many cable
television systems have begun the process of upgrading or rebuilding their cable
plant to allow for the introduction of advanced telecommunications services such
as high-speed internet, digital compression services and telephony. This allows
the cable television systems to offer their subscriber base more services over
their already existing infrastructure and, of course, collect additional
revenues for installations and monthly fees for these new services.

  THE SYSTEMS:

     The following table sets forth certain operating statistics for the Systems
for the periods indicated:

<Table>
<Caption>
                                                 1997     1998(1)    1999(1)     2000      2001
                                                -------   --------   --------   -------   -------
                                                (DOLLARS IN THOUSANDS EXCEPT PER SUBSCRIBER DATA)
<S>                                             <C>       <C>        <C>        <C>       <C>
Homes passed(2)...............................  129,291   138,040    129,600    129,600   130,000
Basic subscribers(3)..........................   78,197    84,755     71,864     69,875    68,492
Basic penetration(4)..........................     60.5%     61.4%      55.5%      53.9%     52.7%
Basic revenues(5).............................  $29,978   $31,521    $30,737    $29,990   $29,817
Average monthly basic revenues per
  subscriber(6)...............................  $ 31.92   $ 33.35    $ 34.18    $ 35.61   $ 35.95
Premium subscriptions(7)......................   24,076    26,413     23,001     22,713    27,243
Premium penetration(8)........................     30.8%     31.2%      32.0%      32.5%     39.8%
Average monthly total revenues per
  subscriber(6)...............................  $ 38.10   $ 39.95    $ 41.56    $ 44.99   $ 48.00
Average annual system operating cash flow per
  subscriber(9)...............................  $   235   $   233    $   226    $   226   $   213
Average annual EBITDA per subscriber(10)......  $   202   $   195    $   188    $   196   $   183
Miles of plant................................    3,483     3,883      3,254      3,282     3,421
</Table>

---------------

 (1) The figures shown for 1998 reflect the Company's purchase of its cable
     system serving Tazewell, Tennessee. The figures shown for 1999 reflect the
     Company's March 1999 sales of its cable systems serving Wartburg, Tennessee
     and Forsyth and Monroe County, Georgia (See "Part II -- Item 7.
     Management's Discussion and Analysis of Financial Condition and Results of
     Operations -- Sales of Cable Systems.").

 (2) Homes passed refers to estimates by the Company of the number of dwelling
     units in a particular community that can be connected to the distribution
     system without any further extension of principal transmission lines. Such
     estimates are based upon a variety of sources, including billing records,
     house counts, city directories and other local sources.

 (3) For purposes of all information presented herein, and unless otherwise
     indicated, the number of basic subscribers for the Systems has been
     computed by adding the actual number of subscribers for all non-bulk
     accounts and the equivalent subscribers for all bulk accounts. The number
     of such equivalent subscribers has been calculated by dividing aggregate
     basic service revenues for bulk accounts by the full
                                        6
<PAGE>

basic service rate for the community in which the account is located. In
addition, the basic subscriber number includes subscribers who are receiving the
Company's services at a promotional rate.

 (4) Basic subscribers as a percentage of homes passed.

 (5) Basic revenues consist of monthly subscription fees for all services (other
     than premium programming, Internet services and digital services) and
     monthly charges for customer equipment rental.

 (6) The average of the monthly revenues divided by the number of basic
     subscribers at the end of such month during the twelve-month periods ended
     December 31 for each year presented.

 (7) A customer may purchase more than one premium service, each of which is
     counted as a separate premium subscription.

 (8) Premium subscriptions as a percentage of basic subscribers.

 (9) System operating cash flow divided by the average number of basic
     subscribers for the period.

(10) EBITDA divided by the average number of basic subscribers for the period
     (See "Part II -- Item 6. Selected Financial Data (Footnote 6)" for a
     definition of EBITDA).

     The Company's Systems are divided into seven geographic groups
("Clusters"). The following table summarizes certain operating data at and for
the year ended December 31, 2001 for the individual clusters:

<Table>
<Caption>
                                                                                                              AVERAGE
                                                 PERCENT OF                                                   MONTHLY
                       ESTIMATED                 ALL SYSTEMS                                                   TOTAL
                         HOMES        BASIC         BASIC         BASIC         PREMIUM        PREMIUM        REVENUES
       CLUSTER          PASSED     SUBSCRIBERS   SUBSCRIBERS   PENETRATION   SUBSCRIPTIONS   PENETRATION   PER SUBSCRIBER
       -------         ---------   -----------   -----------   -----------   -------------   -----------   --------------
<S>                    <C>         <C>           <C>           <C>           <C>             <C>           <C>
Oklahoma/Texas.......    33,000      15,314          22.3%        46.4%          5,898          38.5%          $49.76
Louisiana............    26,000      12,354          18.0         47.5           5,141          41.6            48.17
Georgia..............    20,000      11,769          17.2         58.8           5,616          47.7            51.69
Colorado/Wyoming.....    15,000       8,597          12.6         57.3           3,193          37.1            49.72
Alabama..............    14,000       8,214          12.0         58.7           2,919          35.5            44.34
Tennessee............    12,000       6,141           9.0         51.2           2,090          34.0            40.47
Florida..............    10,000       6,103           8.9         61.0           2,386          39.1            46.25
                        -------      ------         -----                       ------
  Totals.............   130,000      68,492         100.0%        52.7%         27,243          39.8%          $48.00
                        =======      ======         =====                       ======
</Table>

     The Oklahoma/Texas Cluster.  The Oklahoma/Texas Cluster is comprised of
Systems that were acquired in 1988 and 1989, and serves rural communities in
southeastern Oklahoma north of Dallas, Texas and in northern Texas northwest of
Fort Worth. Since 1988, the Company has made $15.6 million in capital
expenditures improving the plant and operations in this Cluster. These
improvements include upgrading many of the Systems to 450 MHz 60-channel
capacity plant, installing three microwave complexes (eliminating the need for
eight separate headends), upgrading the Durant System to a 750 MHz hybrid fiber
optic-backbone/coaxial ("HFC") cable system, and supplementing its 450 MHz cable
plant in Decatur, Texas with fiber.

     The Company is currently offering its two-way high-speed Internet service
to approximately 5,500 subscribers and its one-way high-speed Internet service
to approximately 3,200 subscribers in its Oklahoma/Texas Cluster. In addition to
the high-speed Internet services, the Company is offering traditional dial-up
Internet service to certain portions of the Oklahoma/Texas Cluster. At December
31, 2001, the Oklahoma/Texas Cluster had approximately 1,470 high-speed Internet
customers and approximately 1,320 dial-up Internet customers.

     The Company is currently offering its digital services, through HITS, H2H
or HQT, to substantially all of its basic subscribers in the Oklahoma/Texas
Cluster. At December 31, 2001, the Oklahoma/Texas Cluster had digital services
in approximately 1,420 of its basic subscriber's homes.

     The administrative, technical, marketing and customer service operations
for this cluster are consolidated into one main office located in Durant,
Oklahoma. The primary employer in the Oklahoma/Texas Cluster's

                                        7
<PAGE>

area is the oil and gas industry. Small manufacturing companies also provide
employment, as does farming and ranching. At December 31, 2001, the number of
homes passed in the Oklahoma/Texas Cluster was estimated to be 33,000 and the
number of basic subscribers and premium subscriptions were 15,314 and 5,898,
respectively.

     The Louisiana Cluster.  The Louisiana Cluster is comprised of Systems that
were acquired in three transactions in 1988 and serves rural communities in
Louisiana and Texas located near Lake Charles, Louisiana. Since its acquisition
of the Systems in this Cluster, the Company has made $14.7 million in capital
expenditures, upgrading virtually all of these Systems to 450 MHz 60-channel
plants, installing a microwave complex, eliminating the need for eight headends
and supplementing its 450 MHz plant in and around Westlake, Vinton and Dequincy
with fiber which has improved picture quality and technical reliability. At
December 31, 2001, the estimated number of homes passed for this Cluster was
26,000 and the number of basic subscribers and premium subscriptions were 12,354
and 5,141, respectively.

     The Company is currently offering its two-way high-speed Internet service
to approximately 6,300 subscribers and is in the process of replacing a
microwave path with fiber which will add approximately 850 more subscribers to
its high-speed Internet base. In addition, the Company offers traditional
dial-up service to certain portions of the Louisiana Cluster. At December 31,
2001, the Louisiana Cluster had approximately 930 high-speed Internet customers
and approximately 220 dial-up Internet customers.

     The Company is currently offering its digital services, through HITS, H2H
or HQT, to substantially all of its basic subscribers in the Louisiana Cluster.
At December 31, 2001, the Louisiana Cluster had digital services in
approximately 1,970 of its basic subscriber's homes.

     Since acquiring the Louisiana Cluster, the Company has consolidated all
administrative, technical, marketing and customer service operations into one
central office located in Westlake, Louisiana.

     The economy in southwestern Louisiana ranges from the farming and cattle
industry to the petro-chemical industry and gaming. Major employers in the area
include CITGO Petroleum Corporation, PPG Industries, Inc. and Conoco, Inc. The
introduction of riverboat casinos on Lake Charles has become very popular due to
its proximity to Houston, and companies like Casino America, Inc. and Players
International, Inc. have become major employers in the area.

     The Georgia Cluster.  The Georgia Cluster is comprised of Systems that were
acquired in three transactions in 1988 and serves rural communities in central
Georgia located east of Atlanta and south of Macon. Since 1988, the Company has
made $14.2 million in capital improvements to the Georgia Cluster which has
included the installation of microwave complexes, which eliminated the need for
several headends, as well as improving the plant throughout the majority of the
Cluster. In addition, the Company has completed its 750 MHz upgrades to the
cable plant in Hawkinsville, Cochran, Eatonton, Madison and Gray.

     The Company is now offering its two-way high-speed Internet service to
approximately 6,800 subscribers and, in addition, is offering its one-way
high-speed Internet service to approximately 2,100 subscribers. In addition to
the high-speed Internet services, the Company is offering traditional dial-up
Internet service to certain portions of the Georgia Cluster. At December 31,
2001, the Georgia Cluster had approximately 940 high-speed Internet customers
and approximately 1,000 dial-up Internet customers.

     The Company is currently offering its digital services, through HITS, H2H
or HQT, to substantially all of its basic subscribers in the Georgia Cluster. At
December 31, 2001, the Georgia Cluster had digital services in approximately 950
of its basic subscriber's homes.

     At December 31, 2001, the Georgia Cluster passed an estimated 20,000 homes
and had 11,769 basic subscribers and 5,616 premium subscriptions. The Systems in
this Cluster operate primarily out of one office located in Eatonton, Georgia,
where all administrative, technical, marketing and customer service operations
are centralized.

     The Company believes that the economy in the Georgia Cluster's area is very
diversified. There are several large employers in the area, including the
corporate headquarters of Applebee's International, Inc., a regional restaurant
chain, and Warner Robbins Air Force Base.
                                        8
<PAGE>

     The Colorado/Wyoming Cluster.  The Colorado/Wyoming Cluster is comprised of
Systems that were acquired in 1988 and serves rural communities located east of
Denver, Colorado and north and west of Cheyenne, Wyoming. This geographically
diverse group of Systems is operated from a central office in Douglas, Wyoming.
Since these Systems were acquired, the Company has made $9.4 million in capital
expenditures to improve plant reliability, reception and service, including the
750 MHz HFC upgrade of the Systems serving Douglas, Torrington, Wheatland,
Lingle and Lusk, Wyoming.

     The Company is now offering its two-way high-speed Internet service, as
well as traditional dial-up Internet service, to approximately 6,000 subscribers
in the Colorado/Wyoming Cluster. At December 31, 2001, the Colorado/Wyoming
Cluster had approximately 1,540 high-speed Internet customers and approximately
850 dial-up Internet customers.

     The Company is currently offering its digital services, through HITS, H2H
or HQT, to substantially all of its basic subscribers in the Colorado/Wyoming
Cluster. At December 31, 2001, the Colorado/Wyoming Cluster had digital services
in approximately 1,020 of its basic subscriber's homes.

     The economy in the Colorado/Wyoming Cluster's area is largely dependent on
ranching and farming, the oil and gas industry, and mining. At December 31,
2001, the estimated number of homes passed in this Cluster was 15,000 and the
number of basic subscribers and premium subscriptions were 8,597 and 3,193,
respectively.

     The Alabama Cluster.  The Company acquired the Systems comprising the
Alabama Cluster primarily in four transactions in 1988 and 1989. These Systems
are divided into two groups, with one group serving the rural communities
located on the western edge of the state west of Birmingham, Alabama, and the
other group serving communities located south and east of Birmingham, between
Birmingham and Atlanta, Georgia. Since its acquisition of the Systems in this
Cluster, the Company has made $7.2 million in capital expenditures, improving
the channel capacity in many of these Systems and improving reliability and
channel offerings, including the 750 MHz upgrade to the cable plant in Roanoke
and Wadley, Alabama.

     The Company is now offering its two-way high-speed Internet to
approximately 2,300 of its basic subscribers, as well as traditional dial-up
Internet service in certain portions of its Alabama Cluster. At December 31,
2001, the Alabama Cluster had approximately 450 high-speed Internet customers
and approximately 130 dial-up Internet customers.

     The Company is currently offering its digital services, through HITS, H2H
or HQT, to substantially all of its basic subscribers in the Alabama Cluster. At
December 31, 2001, the Alabama Cluster had digital services in approximately 810
of its basic subscriber's homes.

     The operations of the Alabama Cluster are managed from one main office
located in Roanoke, Alabama. All administrative, technical, marketing and
customer service operations have been centralized into the main office. The
Alabama Cluster, as of December 31, 2001, passed an estimated 14,000 homes and
had 8,214 basic subscribers and 2,919 premium subscriptions.

     The communities served by the Alabama Cluster benefit from a number of
small and large manufacturing companies in the area, including 3M and Wrangler.
In addition, Mercedes-Benz has a large manufacturing plant in Tuscaloosa,
Alabama, just south of the Company's Systems serving western Alabama.

     The Tennessee Cluster.  The Company acquired the System comprising the
Tennessee Cluster in one transaction in 1998. This System serves rural
communities located Northeast of Knoxville, Tennessee. All administrative,
technical, marketing and customer service operations are coordinated out of one
central office located in Tazewell, Tennessee.

     Since acquiring this Cluster, the Company has spent $9.3 million on capital
expenditures, the majority of which have been for the combined 750 MHz HFC and
two-way 450 MHz upgrades that are currently nearing completion. As of December
31, 2001, the Company had converted more than 70% of the Tennessee Cluster's
basic subscribers to its upgraded cable plant which has allowed for the
introduction of advanced telecommunication services, including its high-speed
Internet. In addition, the Company is offering its dial-up Internet service to
all of the basic subscribers in the Tennessee Cluster. At December 31, 2001, the
Tennessee Cluster
                                        9
<PAGE>

had approximately 1,030 high-speed Internet customers, approximately 410 dial-up
Internet customers and had its digital services, primarily through the HITS
platform, in approximately 1,210 of its basic subscriber's homes.

     The economies of the communities served by the Tennessee Cluster benefit
from many furniture manufacturers as well as medical supply manufacturers and
the agriculture industry. As of December 31, 2001, the Tennessee Cluster passed
an estimated 12,000 homes and had 6,141 basic subscribers and 2,090 premium
subscriptions.

     The Florida Cluster.  The Florida Cluster is comprised of Systems that were
acquired in 1988 and serves several rural communities located near Gainesville,
Florida. Since May 1988, the Company has made $7.5 million in capital
expenditures in this Cluster. The Company has installed a microwave complex,
which eliminated the need for three headends, and has upgraded the majority of
its cable television plant in this Cluster to 450 MHz with 60 channels of
capacity. The majority of the Systems in this Cluster have been consolidated
onto one microwave complex, which reduces maintenance and equipment costs.

     The Company is currently offering its one-way high-speed Internet service
to approximately 2,600 of its basic subscribers, as well as traditional dial-up
Internet service to certain portions of the Florida Cluster. At December 31,
2001, the Florida Cluster had approximately 80 high-speed Internet customers and
approximately 110 dial-up Internet customers.

     The Company is currently offering its digital services, through HITS, H2H
or HQT, to substantially all of its basic subscribers in the Florida Cluster. At
December 31, 2001, the Florida Cluster had digital services in approximately 690
of its basic subscriber's homes.

     The Company's Florida Cluster operates from a centralized office in High
Springs, Florida. All administrative, technical, marketing and customer service
operations are coordinated from this location. The Florida Cluster, as of
December 31, 2001, passed an estimated 10,000 homes and had 6,103 basic
subscribers and 2,386 premium subscriptions.

     The University of Florida, located in Gainesville, has contributed to the
economic stability of the communities served by the Florida Cluster. Other
industries providing employment in the area include agriculture, ranching and
tourism.

  PROGRAMMING AND SUBSCRIBER RATES:

     The Company has various contracts to obtain basic, satellite, premium and
digital programming for the Systems from program suppliers, including, in
limited circumstances, some broadcast stations, with compensation generally
based on a fixed fee per customer or a percentage of the gross receipts for the
particular service. Some program suppliers provide volume discount pricing
structures and/or offer marketing support. In addition, the Company is a member
of a programming consortium consisting of small to medium sized multiple system
operators and individual cable systems serving, in the aggregate, over eight
million cable subscribers. The consortium helps create efficiencies in the areas
of securing and administering programming contracts, as well as to establish
more favorable programming rates and contract terms for small and medium sized
cable operators. The Company does not have long-term programming contracts for
the supply of a portion of its programming, due in part to ongoing negotiations
with a number of its programming suppliers, but also due to the Company's belief
that it is in its best interests to enter into long-term programming contracts
only if additional benefits are derived from the contractual arrangements. In
cases where the Company does have such contracts, they are generally for fixed
periods of time ranging from three to seven years and are subject to negotiated
renewal. While the loss of contracts with certain of the Company's programming
suppliers could have an adverse effect on its results of operations, management
does not believe the risk of such a loss is particularly great due to the
substantial motivation of programming suppliers to obtain the widest possible
audience for their products.

     Cable programming costs are expected to continue to increase primarily due
to additional programming being provided to subscribers, increased costs to
purchase cable programming and inflationary increases. In 1999, 2000 and 2001,
programming costs (not including digital) as a percentage of revenues were
20.1%,
                                        10
<PAGE>

21.2% and 22.1%, respectively. No assurance can be given that the Company's
programming costs will not increase substantially in the near future or that
other materially adverse terms will not be added to its programming contracts.

     The Systems offer their subscribers programming that includes the local
network, independent and educational television stations, a limited number of
television signals from distant cities, numerous satellite-delivered,
non-broadcast channels (such as CNN, MTV, USA, ESPN and TNT) and in some systems
local information and public access channels. The programming offered by the
Company varies among the Systems depending upon each System's channel capacity
and viewer interests. In general, the Company offers two tiers of basic cable
television programming: a broadcast basic programming tier (consisting generally
of network and public television signals available over-the-air) and a satellite
programming tier (consisting generally of satellite-delivered programming such
as CNN, USA, ESPN and TNT). However, in some of its Systems the Company offers
only a single level of basic service containing both the broadcast and satellite
delivered programming. The Company also offers premium programming services,
both on a per-channel basis and, in many Systems, as part of premium service
packages as well as multiple tiers of digital satellite service, and
pay-per-view, through HITS, H2H and HQT.

     Monthly subscriber rates for services vary from market to market, primarily
according to the amount of programming provided. At December 31, 2001, the
Company's monthly full basic service rates for residential subscribers ranged
from $14.95 to $42.99 and per-channel premium service rates (not including
special promotions) ranged from $9.95 to $12.95 per service. At December 31,
2001, the weighted average price for the Company's monthly full basic service
was approximately $38.74.

     A one-time installation fee, which the Company may wholly or partially
waive during a promotional period, is usually charged to new subscribers. The
Company also charges monthly fees for converters and remote control tuning
devices and administrative fees for delinquent payments for service. Subscribers
are free to discontinue service at any time without additional charge but may be
charged a reconnection fee to resume service. Commercial customers, such as
hotels, motels and hospitals, are charged a negotiated, non-recurring fee for
installation of service and monthly fees. Multiple dwelling unit accounts may be
offered a bulk rate in exchange for single-point billing and basic service to
all units.

     In addition to subscriber fees, the Company derives a small amount of
revenue from the sale of local spot advertising time on locally originated and
satellite-delivered programming. The Company also derives modest amounts of
revenues from affiliations with home shopping services (which offer merchandise
for sale to subscribers and compensate system operators with a percentage of
their sales receipts).

     Other potential sources of revenue for cable television systems include the
lease of tower space to cellular telephone, personal communications services
("PCS"), and paging companies and other transmission businesses and the sale of
programming featuring movies and special events to customers on a pay-per-view
basis, which the Company can now offer through its HITS, H2H and HQT digital
services. Generally, the Company offers two levels of digital service, including
an Entertainment tier (which offers niche satellite programming) and a Cinema
tier (which offers additional premium channel offerings such as Encore and
Bravo), as well as a variety of digital music channels. At December 31, 2001,
the Company's rates for its digital services varied from $4.95, for one tier of
HITS service, to $14.95 for both tiers of any digital service for a basic-only
cable subscriber.

     While the Company also offers advanced telecommunications services
(including Internet services as discussed below), it anticipates that monthly
subscriber fees from cable television will continue to constitute the majority
of its total revenues for the foreseeable future.

  INTERNET SERVICES:

     As of December 31, 2001 the Company had the capabilities of providing its
high-speed Internet service, via either one-way or two-way, to approximately 58%
of its basic cable subscribers. In addition, the Company,

                                        11
<PAGE>

as of December 31, 2001, was offering its traditional dial-up Internet services
to over 57% of its cable subscribers.

     The two-way high-speed Internet service, which utilizes a cable modem,
provides Internet access at speeds of up to 1.5 Megabits per second. The two-way
high-speed Internet service does not require a phone line for access since all
transmissions are through the customers' cable television equipment. The one-way
high-speed Internet service is a hybrid between the two-way high-speed and
traditional dial-up services. With the one-way high-speed Internet service, the
customer dials in to the server over a traditional phone line but receives
information over the cable television equipment. Thus, while the upstream
connection is at a maximum speed of 56 Kilobits per second, the downstream
access can achieve speeds of up to 1.5 Megabits per second. The traditional
dial-up Internet service offered by the Company is similar to dial-up services
offered by companies such as America Online or The Microsoft Network. With
dial-up Internet service, the customer sends and receives information over a
traditional phone line with speeds of up to 56 Kilobits per second.

     Monthly rates charged to Internet customers vary based on the type of
service they receive. In some of the Systems a discount is given to those
Internet customers who also receive the Company's cable television service. At
December 31, 2001, the Company's monthly Internet rate (not including special
promotions) varied from $17.95, for a dial-up customer who also receives cable
television, to $59.95 for high-speed commercial customers.

  CUSTOMER SERVICE AND MARKETING:

     The Company emphasizes customer service, which it believes is increasingly
important to the successful operation of its business. To meet its objective of
providing high levels of customer service, the Company offers its customers a
full line-up of programming, timely and reliable service and good picture
quality. The Company's employees receive ongoing training in customer service,
sales and subscriber retention, and technical support. Customer service
representatives, customer care specialists and technicians are also trained to
market upgrades at the point of sale or service. In addition, the Company has
attempted to establish and to maintain a local presence and visibility within
the communities it serves.

     As part of its efforts to maximize cash flow, and in response to increasing
competition, the Company has attempted to add and retain subscribers and
increase cash flow per subscriber by aggressively marketing its basic and
premium service offerings as well as its Internet, HITS, H2H and HQT services.
To this end, the Company utilizes a number of coordinated marketing techniques,
including (i) direct door to door sales, (ii) local newspaper and radio
advertising and cable system promotional advertising insertion in certain
satellite programs, (iii) direct mail, (iv) telemarketing and (v) monthly
billing statement inserts. There can be no assurance that the Company's efforts
in this area will be successful. See "-- Competition" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Risk
Factors."

  TECHNICAL OVERVIEW:

     The following table sets forth certain information, as of December 31,
2001, regarding the analog channel capacities and miles of plant of the Systems:

<Table>
<Caption>
                                      300 MHZ    330 MHZ    400 MHZ    450 MHZ     750 MHZ
                                      UP TO 36   UP TO 42   UP TO 54   UP TO 62   UP TO 100
                                      CHANNELS   CHANNELS   CHANNELS   CHANNELS   CHANNELS    TOTAL
                                      --------   --------   --------   --------   ---------   ------
<S>                                   <C>        <C>        <C>        <C>        <C>         <C>
Number of headends(1)...............      10         17         1           12          8         48
Number of subscribers as of December
  31, 2001(1).......................   7,964      9,774       400       26,860     23,494     68,492
% of subscribers....................    11.6%      14.3%      0.6%        39.2%      34.3%     100.0%
Miles of Plant......................     466        642         6        1,412        895      3,421
% of miles of plant.................    13.6%      18.8%      0.2%        41.3%      26.1%     100.0%
</Table>

---------------

(1) Some of the Company's headends have subscribers on multiple bandwidth
    levels. In these instances the headend has been included in the highest
    bandwidth category offered but the subscribers have been allocated to their
    actual bandwidth category.

                                        12
<PAGE>

     The Company is nearing the completion of the upgrade to the cable plant for
its entire Tennessee System which serves approximately 6,100 subscribers. After
the upgrade is completed, which is expected to occur during the second quarter
of 2002, approximately 90% of the System's subscribers will be on 750 MHz plant
with the remaining subscribers on two-way 450 MHz plant, both of which will
allow for the use of advanced telecommunications services, including high-speed
Internet. At December 31, 2001, more than 70% of the Tennessee System
subscribers had been converted to the 750 MHz or two-way 450 MHz cable plant. In
addition, at December 31, 2001 the Company was nearing the completion of the 750
MHz upgrade to its cable plant in Lusk, Wyoming which serves approximately 400
subscribers. The Lusk, Wyoming upgrade was completed during the first quarter of
2002 and has allowed for the introduction of high-speed Internet to the basic
subscribers. Once the Tennessee and Lusk, Wyoming upgrades are completed, the
Company will have two-way capabilities for approximately 50% of its subscriber
base.

     The Company is continually in the process of identifying other areas within
its Systems which can be upgraded to allow for the introduction of advanced
telecommunications services. However, the Company will only proceed with
upgrades which it believes are economically feasible after carefully weighing
the anticipated revenues against the costs of completing the upgrade.

     The Company utilizes a "trap" scheme whereby a technician installs filters,
or traps, at each cabled home enabling the technician to configure the
programming received by each subscriber. Also, the Company will enable digital
addressable technology to as many of its subscribers as possible to take
advantage of the HITS, H2H or HQT services. These services transmit digitally
compressed signals of niche satellite programming, multiplexed premium services,
pay-per-view movies and music.

     While some of the Company's Systems are wired exclusively with coaxial
cable, the remaining Systems utilize fiber optic cable in conjunction with
coaxial cable. Fiber optic strands are capable of carrying hundreds of video,
data and voice channels over extended distances without the extensive signal
amplification typically required for coaxial cable. The Company plans to use an
HFC design across those portions of its cable plant that serve its highest
subscriber densities to most efficiently upgrade the Systems. Additionally, the
Company plans to use fiber optic technology to interconnect certain headends and
install fiber backbones to reduce amplifier cascades, thereby gaining
operational efficiencies and improving picture quality and system reliability.

  FRANCHISES:

     Cable television systems are generally constructed and operated under
non-exclusive franchises granted by local governmental authorities. These
franchises typically contain many conditions, including; (i) time limitations on
commencement and completion of construction, (ii) conditions of service,
including number of channels, types of programming and the provision of free
service to schools and certain other public institutions and (iii) the
maintenance of insurance and indemnity bonds. Certain provisions of local
franchises are subject to federal regulation under the Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), and the
Telecommunications Act of 1996 (the "1996 Telecom Act").

     At December 31, 2001, the Company held 118 franchises. These franchises,
most of which are non-exclusive, generally provide for the payment of fees to
the issuing authority. Annual franchise fees range up to 5% of the gross
revenues generated by a System. For the past three years, franchise fee payments
made by the Company have averaged approximately 2.6% of total gross System
revenues. Franchise fees are generally passed directly through to the customers
on their monthly bills. General business or utility taxes may also be imposed in
various jurisdictions. The 1984 Cable Act prohibits franchising authorities from
imposing franchise fees in excess of 5% of gross revenues and also permits the
cable operator to seek renegotiation and modification of franchise requirements
if warranted by significantly changed circumstances. Most of the Company's
franchises can be terminated prior to their stated expirations for uncured
breaches of material provisions.

                                        13
<PAGE>

     The following table sets forth the number of franchises by year of
franchise expiration and the number and percentage of basic subscribers at
December 31, 2001:

<Table>
<Caption>
                                                       PERCENTAGE     NUMBER        PERCENTAGE
YEAR OF                                   NUMBER OF     OF TOTAL     OF BASIC     OF TOTAL BASIC
FRANCHISE EXPIRATION                      FRANCHISES   FRANCHISES   SUBSCRIBERS    SUBSCRIBERS
--------------------                      ----------   ----------   -----------   --------------
<S>                                       <C>          <C>          <C>           <C>
Prior to 2004...........................      15          11.4%        5,476            8.0%
2004 - 2008.............................      37          28.0        27,044           39.5
2009 - 2012.............................      27          20.5        10,919           15.9
2013 and after..........................      35          26.5        19,404           28.3
No expiration date......................       4           3.0         1,545            2.3
                                             ---         -----        ------          -----
  Subtotal..............................     118          89.4        64,388           94.0
No franchise required...................      14          10.6         4,104            6.0
                                             ---         -----        ------          -----
  Total.................................     132         100.0%       68,492          100.0%
                                             ===         =====        ======          =====
</Table>

     The Company believes that it has good relationships with its franchising
authorities. To date, the Company has never had a franchise revoked for any of
its Systems, and no request by the Company for a franchise renewal or extension
has been denied, although such renewals and extensions have frequently entailed
mutually acceptable franchise modifications. The Company is currently in the
process of seeking the renewal of its expiring franchises, however, there can be
no assurance that it will be successful in renewing all of its franchises in the
future.

     The 1984 Cable Act provides for, among other things, an orderly franchise
renewal process in which renewal of franchise licenses issued by governmental
authorities will not be unreasonably withheld, or, if renewal is withheld and
the franchise authority chooses to acquire the system or transfer ownership to
another person, such franchise authority or other person must pay the operator
either (i) the "fair market value" (without value assigned to the franchise) for
the system covered by such franchise if the franchise did not exist before the
effective date of the 1984 Cable Act (December 1984) or the franchise was
pre-existing but the franchise agreement did not provide for a buyout or (ii) in
the case of pre-existing franchises with buyout provisions, the price set forth
in such franchise agreements. In addition, the 1984 Cable Act established
comprehensive renewal procedures which require that an incumbent franchisee's
renewal application be assessed on its own merits and not as part of a
comparative process with competing applications.

     The 1984 Cable Act also established buyout rates for franchises which
post-date the existence of the 1984 Cable Act or pre-date the 1984 Cable Act but
the franchise agreement does not contain buyout provisions; in the event the
franchise is terminated "for cause" and the franchise authority desires to
acquire the system, the franchise authority must pay the operator an "equitable"
price. To date, none of the Company's franchises has been terminated.

     The 1992 Cable Act prohibits the award of exclusive franchises, prohibits
franchising authorities from unreasonably refusing to award additional
franchises and permits them to operate cable systems themselves without
franchises. The 1996 Telecom Act provides that no state or local laws or
regulations may prohibit or have the effect of prohibiting any entity from
providing any interstate or intrastate telecommunications service. State and
local authorities retain authority to manage the public rights of way and
"competitively neutral" requirements concerning right of way fees, universal
service, public safety and welfare, service quality, and consumer protection are
permitted with respect to telecommunications services.

  COMPETITION:

     Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast programming,
DBS services, wireless cable services, newspapers, movie theaters, live sporting
events, online computer services and home video products, including DVD and
videotape players. The extent to which a cable communications system is
competitive depends, in part, upon the cable system's ability to

                                        14
<PAGE>

provide, at a reasonable price to customers, a greater variety of programming
and other communications services than those which are available off-air or
through other alternative delivery sources and upon superior technical
performance and customer service.

     Cable television systems generally operate pursuant to franchises granted
on a nonexclusive basis. The 1992 Cable Act prohibits franchising authorities
from unreasonably denying requests for additional franchises and permits
franchising authorities to operate cable television systems without a franchise.
It is possible that a franchising authority might grant a second franchise to
another company containing terms and conditions more favorable than those
afforded the Company.

     Well-financed businesses from outside the cable industry (such as the
public utilities that own the poles to which cable is attached) may become
competitors for franchises or providers of competing services. Congress has
repealed the prohibition against national television networks owning cable
systems, and telephone companies may now enter the cable industry as described
below. In addition, beginning in 1997, there has been a significant increase in
the number of cities that have constructed their own cable television systems in
a manner similar to city-provided utility services. These systems typically will
compete directly with the existing cable operator without the burdens of
franchise fees or other local regulation. Although the total number of municipal
overbuild cable systems remains small, there appears to be an increasing trend
in cities authorizing such direct municipal competition with cable operators.

     In recent years, the Federal Communications Commission ("FCC") and Congress
have adopted policies providing a more favorable operating environment for new
and existing technologies that provide, or have the potential to provide,
substantial competition to cable television systems. These technologies include,
among others, DBS service, whereby signals are transmitted by satellite to
satellite dishes as small as eighteen inches located on the customers' premises.
Programming is currently available to the owners of DBS dishes through
conventional, medium and high-powered satellites. DBS systems have increased
channel capacity to over 100, enabling them to provide movies, broadcast
stations, high-speed Internet access, and other programming services comparable
to those of cable television systems. DBS is currently being heavily marketed on
a nationwide basis by two specific providers and is a significant competitor to
traditional hardline cable service providers, including the Company.

     The 1992 Cable Act contains provisions, which the FCC has implemented with
regulations, to enhance the ability of cable competitors to purchase and make
available to home satellite dish owners certain satellite delivered cable
programming at competitive costs. Digital satellite service ("DSS") offered by
DBS systems has certain advantages over cable systems with respect to
programming and digital quality, as well as disadvantages that include high
costs for additional outlets and a lack of local broadcast programming in
smaller markets, service and equipment distribution. With respect to local
broadcast television programming, recent legislation has removed legal obstacles
to the retransmission of such programming to DBS subscribers. DBS providers are
now making local broadcast programming available in certain larger markets.
Rural loan legislation was recently enacted to make local broadcast programming
available to DBS subscribers in smaller markets. In rural markets it may not be
cost effective for DBS providers to provide local programming unless it is
subsidized by the federal government. DBS companies now need to secure
retransmission consent from the popular broadcast stations they wish to carry,
and in January of 2002 began facing mandatory carriage obligations of less
popular broadcast stations. The DBS industry initiated a judicial challenge to
the 2002 requirement mandating carriage of less popular broadcast stations. This
lawsuit alleges that the requirement (similar to the one applicable to cable
systems) is unconstitutional. The federal district court and circuit court both
rejected the constitutional challenge, but the DBS industry is now seeking
review by the U.S. Supreme Court. The Company's strategy of providing
pay-per-view and satellite niche programming, via its HITS, H2H and HQT
applications, in certain of its Systems is designed to combat DSS competition.
"Bundling" of the Company's video service with Internet services and other
advanced telecommunications services in certain of the Company's Systems may
also be an effective tool for combating DSS competition.

     The principal DBS systems with which the Company's Systems compete are
DirecTV and Echostar, which now have approximately 18 million subscribers and
are growing rapidly. In October 2001 Echostar and DirecTV announced merger plans
subject to, among other things, regulatory approval. If the merger is

                                        15
<PAGE>

consummated, the combined entity would have transmission capacity to
approximately 18 million customers. It is unclear what impact the consolidation
of these two companies will have on the competition the Company faces from the
DBS industry. Echostar and DirecTV have announced, however, that the merger
would afford the surviving entity sufficient capacity to expand the carriage of
local broadcast programming to every U.S. television market.

     Cable television systems also compete with wireless program distribution
services such as multichannel multipoint distribution service ("MMDS") which
uses low power microwaves to transmit video programming and high-speed data
services, including Internet access, over the air to customers. Wireless
distribution services generally provide many of the programming services
provided by cable systems, and digital compression technology has increased
significantly the channel capacity of the systems. Because MMDS service requires
unobstructed "line of sight" transmission paths, the ability of such wireless
distribution systems to compete may be hampered in some areas by physical
terrain and foliage. Although prohibitive topography and limited "line of sight"
access have limited competition from wireless distribution systems in a majority
of the Company's franchise service areas, the Company has experienced such
competition in portions of its Systems in Oklahoma, Texas, Louisiana and
Florida.

     The 1996 Telecom Act eliminated the previous prohibition on the provision
of video programming by local exchange telephone companies ("LECs") in their
telephone service areas. Various LECs currently are seeking to provide video
programming services within their telephone service areas through a variety of
distribution methods, primarily through the deployment of broadband wire
facilities, but also through the use of wireless (MMDS) transmission. Cable
television systems could be placed at a competitive disadvantage if the delivery
of video programming services by LECs becomes widespread, since LECs may not be
required, under certain circumstances, to obtain local franchises to deliver
such video services or to comply with the variety of obligations imposed upon
cable television systems under such franchises. Issues of cross-subsidization by
LECs of video and telephony services also pose strategic disadvantages for cable
operators seeking to compete with LECs that provide video services. The Company
believes, however, that the small markets in which it provides, or expects to
provide, cable services are unlikely to support competition in the provision of
video and broadband telecommunications services given the lower population
densities and higher costs per subscriber of installing plant.

     Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition on LEC buyouts (i.e. any
ownership interest exceeding ten percent) of co-located cable systems, cable
operator buyouts of co-located LEC systems and joint ventures between cable
operators and LECs in the same market remains in place. The 1996 Telecom Act
provides a few limited exceptions to this buyout prohibition, including a "rural
exemption." The 1996 Telecom Act also provides the FCC with limited authority to
grant waivers of the buyout prohibition (subject to local franchising authority
approval). The Company believes that significant growth opportunities exist by
establishing cooperative, rather than competitive, relationships with LECs
within service areas, to the extent permitted by law.

     The entry of electric utility companies into the cable business, which was
authorized by the 1996 Telecom Act, could also have an adverse affect on the
Company's business. In addition, well capitalized businesses from outside of the
cable industry may become competitors for franchises or providers of competing
services.

     Other new technologies may become competitive with non-entertainment
services that cable television systems can offer. The FCC has authorized
television broadcast stations to transmit textual and graphic information useful
both to consumers and businesses. The FCC also permits commercial and
noncommercial FM stations to use their subcarrier frequencies to provide
non-broadcast services including data transmissions. The FCC has established an
over-the-air Interactive Video and Data Service that will permit two-way
interaction with commercial and educational programming along with informational
and data services. The expansion of fiber optic systems, as well as the increase
in DSL services, by LECs and other common carriers provide facilities for the
transmission and distribution to homes and businesses of video services and
high-speed Internet services. In addition, wireless Internet access is now
offered in some markets by cellular, PCS and other mobile service providers.
High-speed Internet access also facilitates the streaming of video into

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homes and businesses. As the quality and availability of video streaming over
the Internet improves, it may compete with traditional delivery by cable
systems. It is possible that programming suppliers will consider bypassing cable
operators and market their services directly to the consumer through the
Internet.

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

     As described above, cable television systems face competition from
alternative methods of receiving and distributing television signals, from other
sources of news, information and entertainment, and from other cable television
systems that have authority to build and operate cable television systems within
the same geographic territories as the Company (typically referred to as
"overbuilds"). In such overbuild situations the Company may be in competition
with municipalities or public or private entities that may be better
capitalized. Although the total number of such overbuilt areas with the
Company's operations remains small, overbuilds in Lafayette, Alabama and
Alachua, Florida have resulted in a loss of approximately 750 subscribers as
well as reduced subscription rates in these areas. The Company is responding to
this competition through the introduction of advanced telecommunication services
and aggressive marketing campaigns.

  LEGISLATION AND REGULATION:

     General.  The operation of cable television systems is extensively
regulated by the FCC, some state governments and most local governments. The
1996 Telecom Act alters the regulatory structure governing the nation's
telecommunications providers. It removes barriers to competition in both the
cable television market and the local telephone market. Among other things, it
also reduces the scope of cable rate regulation.

     The 1996 Telecom Act requires the FCC to undertake a host of implementing
rulemakings. Moreover, Congress and the FCC have frequently revisited the
subject of cable regulation. Future legislative and regulatory changes could
adversely affect the Company's operations. This section briefly summarizes key
laws and regulations affecting the operation of the Company's Systems and does
not purport to describe all present, proposed, or possible laws and regulations
affecting the Company or its Systems.

     Cable Rate Regulation.  The 1992 Cable Act imposed an extensive rate
regulation regime on the cable television industry. Under that regime, all cable
systems are subject to rate regulation, unless they face "effective competition"
in their local franchise area. Federal law now defines "effective competition"
on a community-specific basis as requiring either low penetration (less than
30%) by the incumbent cable operator, appreciable penetration (more than 15%) by
competing multichannel video providers ("MVPs"), or the presence of a competing
MVP affiliated with a local telephone company.

     Although the FCC rules control, local government units (commonly referred
to as local franchising authorities or "LFAs") are primarily responsible for
administering the regulation of the lowest level of cable -- the basic service
tier ("BST"), which typically contains local broadcast stations and public,
educational, and government ("PEG") access channels. Before an LFA begins BST
rate regulation, it must certify to the FCC that it will follow applicable
federal rules, and many LFAs have voluntarily declined to exercise this
authority. LFAs also have primary responsibility for regulating cable equipment
rates. Under federal law, charges for various types of cable equipment must be
unbundled from each other and from monthly charges for programming services.

     The FCC formerly administered rate regulation of cable programming service
tiers ("CPST"), which typically contain satellite-delivered programming.
However, the 1996 Telecom Act eliminated CPST regulation effective March 31,
1999. Accordingly, the FCC cannot act on CPST rate increases that occur after
that date.

     Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
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opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or
per-program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming products. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of operators to
require purchase of any CPST before purchasing premium services offered on a
per-channel or per-program basis.

     In an effort to ease the regulatory burden on small cable systems, the FCC
has created special rate rules applicable for systems with fewer than 15,000
subscribers owned by an operator with fewer than 400,000 subscribers. The
special rate rules allow for a vastly simplified cost-of-service showing. The
Company is eligible for these simplified cost-of-service rules, and has
calculated its rates generally in accordance with those rules.

     Although FCC regulation of CPST rates for all systems (regardless of size)
expired on March 31, 1999, critics of the cable television industry have called
for more rigorous rate regulation (including limits on programming cost
pass-throughs to cable subscribers) until a greater degree of competition to
incumbent cable operators has developed. The 1996 Telecom Act also relaxes
existing uniform rate requirements by specifying that uniform rate requirements
do not apply where the operator faces "effective competition," and by exempting
bulk discounts to multiple dwelling units, although complaints about predatory
pricing still may be made to the FCC.

     Cable Entry Into Telecommunications.  The 1996 Telecom Act provides that no
state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles if the operator
provides telecommunication services, as well as cable services, over its plant.
The FCC clarified that a cable operator's provision of Internet service through
its cable plant does not affect its favorable pole rates and the U.S. Supreme
Court upheld that position. Utilities have also challenged the favorable cable
television pole rates under the theory that they do not provide just
compensation. The Eleventh Circuit Court of Appeals is currently considering
this Challenge. If the challenge is successful this theory could result in
substantial pole attachment rate increases (See "Item 3 -- Legal Proceedings").

     Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunication carriers. A number of implementation
details are subject to ongoing regulatory and judicial review, but the basic
requirement is now well established.

     Telephone Company Entry into Cable Television.  The 1996 Telecom Act allows
telephone companies to compete directly with cable operators by repealing the
historic telephone company/cable cross-ownership ban. LECs, including the Bell
Operating Companies, can now compete with cable operators both inside and
outside their telephone service areas. Because of their resources, LECs could be
formidable competitors to traditional cable operators, and certain LECs have
begun offering cable service.

     Under the 1996 Telecom Act, a LEC, utility company, or other entity
providing video programming to subscribers through wired facilities will be
regulated as a traditional cable operator (subject to local franchising and
federal regulatory requirements), unless an election is made to provide the
video programming via an "open video system" ("OVS"). To qualify for OVS status,
two-thirds of the system's activated channels must be reserved for unaffiliated
entities. In addition, the FCC has revised its open video system policy to leave
franchising discretion to state and local authorities. It is unclear what effect
this ruling will have on the entities pursuing open video system operation.

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<PAGE>

     Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition on LEC buyouts (that is,
any ownership interest exceeding 10 percent) of co-located cable systems, cable
operator buyouts of co-located LEC systems, and joint ventures between cable
operators and LECs in the same market remains in place. The 1996 Telecom Act
provides a few limited exceptions to this buyout prohibition, including a "rural
exemption." The 1996 Telecom Act also provides the FCC with the limited
authority to grant waivers of the buyout prohibition (subject to LFA approval).

     Electric Utility Entry Into Telecommunications/Cable Television.  The 1996
Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services (including cable television)
notwithstanding the Public Utilities Holding Company Act. Electric utilities
must establish separate subsidiaries, known as "exempt telecommunications
companies" and must apply to the FCC for operating authority. Again, because of
their resources, electric utilities could be formidable competitors to
traditional cable companies.

     Additional Ownership Restrictions.  The 1996 Telecom Act eliminates
statutory restrictions on broadcast/ cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems. The District of Columbia Circuit Court of Appeals recently struck
down this remaining cross-ownership prohibition, concluding that the FCC had
failed to explain why its continuation was "necessary" for the public interest.
In the same decision, the Court struck down another FCC regulation precluding
any entity from operating broadcast television stations serving more than 35% of
the nation. If these rulings withstand further administrative and judicial
review, they may trigger additional consolidation among domestic media
companies. The 1996 Telecom Act leaves in place existing restrictions on cable
cross-ownership with satellite master antenna television ("SMATV") and MMDS
facilities, but lifts those restrictions where the cable operator is subject to
effective competition. FCC regulations permit cable operators to own and operate
separate SMATV systems within their franchise area, provided that such operation
is consistent with local cable franchise requirements.

     Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services. A companion rule established a
nationwide ownership cap on any cable operator equal to 30% of all nationwide
subscribers to multichannel video programming distributors, including cable and
DBS subscribers. The District of Columbia Court of Appeals recently struck down
both rules as unconstitutional. The FCC is now considering revising these rules.

     There are no federal restrictions on non-U.S. entities having an ownership
interest in cable television systems or the FCC licenses commonly employed by
such systems.

     Must Carry/Retransmission Consent.  The 1992 Cable Act conveyed to a
commercial broadcaster the right generally to elect every three years either to
require (i) the local cable operator to carry its signals ("must carry") or (ii)
that such operator obtain the broadcaster's retransmission consent before doing
so. In order to satisfy these requirements the Company has agreed, in limited
circumstances, to the direct payment of nominal fees for carriage and, again in
limited circumstances, to carry satellite-delivered cable programming which is
affiliated with the network carried by such stations. Currently, the Company has
agreements in place for the majority of its broadcast channels and is involved
in ongoing discussions with the balance of the broadcasters to obtain an
agreement. The Company believes that it will be able to reach an agreement with
the majority of the remaining broadcasters so that its compliance with the
"retransmission consent" and "must carry" provisions of the 1992 Cable Act will
not have a material effect on its operations, although this result may change in
the future depending on such factors as market conditions, channel capacity and
similar matters when such arrangements are renegotiated. In particular, the
burden associated with must carry obligations could dramatically increase if
television broadcast stations proceed with planned conversions to digital
transmissions and if the FCC determines that cable systems must simultaneously
carry all analog and digital signals transmitted by the television stations
during the multi-year transition in which a single broadcast licensee is
authorized to transmit both an analog and digital signal. The FCC tentatively
decided against imposition of dual digital and analog must carry in a January
2001 ruling. At the same time, however, it

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<PAGE>

initiated further fact-gathering which ultimately could lead to a
reconsideration of that tentative conclusion. A rulemaking is now pending at the
FCC regarding the imposition of dual digital and analog must carry provisions.

     Access Channels.  LFAs can include franchise provisions requiring cable
operators to set aside certain channels for public, educational and governmental
access programming. Federal law also requires cable systems to designate a
portion of their channel capacity (up to 15% in some cases) for commercial
leased access by unaffiliated third parties. The FCC has adopted rules
regulating the terms, conditions and maximum rates a cable operator may charge
for use of this designated channel capacity, but, to date, use of commercial
leased access channels has been relatively limited.

     Access to Programming.  To spur the development of independent cable
programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This provision
limits the ability of vertically integrated cable programmers to offer exclusive
programming arrangements to cable companies. This prohibition will expire in
October 2002 unless extended by the FCC in a pending proceeding. Both Congress
and the FCC have considered proposals that would expand the program access
rights of cable's competitors, including the possibility of subjecting both
terrestrially delivered video programming, and video and video programmers who
are not affiliated with cable operators, to all program access requirements.

     Inside Wiring.  The FCC has determined that an incumbent cable operator can
be required by the owner of a multiple dwelling unit ("MDU") complex to remove,
abandon or sell the "home run" wiring it initially provided. In addition, the
FCC is reviewing the enforceability of contracts to provide exclusive video
services within a MDU complex. The FCC has proposed abrogating all such
contracts held by incumbent cable operators, but allowing such contracts when
held by new entrants. These changes, and others now being considered by the FCC,
would, if implemented, make it easier for a MDU complex owner to terminate
service from an incumbent cable operator in favor of a new entrant and make the
already competitive MDU sector even more challenging for incumbent cable
operators. In a separate proceeding, the FCC has preempted restrictions on the
deployment of private antennas, including DBS receivers, on rental property
within the exclusive use of a tenant (such as balconies and patios).

     Other FCC Regulations.  In addition to the FCC regulations noted above,
there are other FCC regulations covering such areas as equal employment
opportunity (recently suspended by judicial ruling), subscriber privacy,
programming practices (including, among other things, syndicated program
exclusivity, network program nonduplication, local sports blackouts, indecent
programming, lottery programming, political programming, sponsorship
identification, children's programming advertisements, and closed captioning),
registration of cable systems and facilities licensing, maintenance of various
records and public inspection files, frequency usage, lockbox availability,
antenna structure notification, tower marking and lighting, consumer protection
and customer service standards, technical standards, consumer electronics
equipment compatibility, and Emergency Alert Systems ("EAS"). The FCC recently
stated that cable customers must be allowed to purchase cable converters from
third party vendors, and established a multi-year phase-in, which began on July
1, 2000, during which security functions (which would remain in the operator's
exclusive control) would be unbundled from basic converter functions (which
could then be satisfied by third party vendors). The FCC has the authority to
enforce its regulations through the imposition of substantial fines, the
issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate certain transmission facilities used in connection with cable
operations. The EAS obligations referred to above become effective for small
operators, such as the Company, in October 2002. The expense of installing
equipment capable of providing EAS service in the Company's Systems is
prohibitive and it intends to seek a waiver of the rules from the FCC. There is
no assurance that the FCC will grant such a waiver or, if a waiver is granted,
for what period such relief will be provided.

                                        20
<PAGE>

     The FCC is currently considering whether cable customers must be allowed to
purchase cable converters from third party vendors. If the FCC concludes that
such distribution is required, and does not make appropriate allowances for
signal piracy concerns, it may become more difficult for cable operators to
combat theft of service.

     Internet Service Regulation.  Following several inconsistent judicial
decisions regarding the proper regulatory treatment of cable delivered Internet
service, the FCC recently ruled that cable modem service is an interstate
information service, rather than a cable or telecommunications service. This
classification should, at least initially, leave cable modem service exempt from
the burdens associated with traditional cable and telecommunications
regulations. Indeed, the FCC suggested that, regardless of classification,
regulatory forbearance should now apply to cable modem service.

     The FCC simultaneously initiated a rulemaking to decide several key issues
relating to state and local regulation of cable modem service. In the
rulemaking, the FCC tentatively concluded that (i) revenues from cable modem
service are not to be included for purposes of calculating cable franchise fees
paid to franchisors and (ii) cable systems offering cable modem service require
no additional franchise authority to access the public rights-of-way. The
rulemaking inquires whether the FCC has jurisdiction and justification to
require forced access to cable facilities by unaffiliated entities to provide
competitive modem service. It also asks whether there are reasons different
regulatory regimes should apply to Internet service offered by a telephone
provider and Internet service offered by a cable operator. The FCC's
classification and proposed rules are likely to be strenuously opposed by state
and local governments, and it is premature to predict the outcome of these
proceedings.

     Copyright.  Cable television systems are subject to federal copyright
licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool (which varies depending on the size
of the system and the number of distant broadcast television signals carried),
cable operators can obtain blanket permission to retransmit copyrighted material
on broadcast signals. The possible modification or elimination of this
compulsory copyright license is the subject of continuing legislative review and
could adversely affect the Company's ability to obtain desired broadcast
programming. In addition, the cable industry pays music licensing fees to BMI
and ASCAP. Copyright clearances for nonbroadcast programming services are
arranged through private negotiations.

     State and Local Regulation.  Cable television systems generally are
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way. Federal
law now prohibits franchise authorities from granting exclusive franchises or
from unreasonably refusing to award additional franchises. Cable franchises
generally are granted for fixed terms and in many cases include monetary
penalties for non-compliance and may be terminable if the franchisee fails to
comply with material provisions.

     The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. Although LFAs have
considerable discretion in establishing franchise terms, there are certain
federal limitations. For example, LFAs cannot insist on franchise fees exceeding
5% of the system's gross revenues, cannot dictate the particular technology used
by the system, and cannot specify video programming other than identifying broad
categories of programming. The FCC has tentatively concluded that modem service
revenues should not be included in gross revenues when calculating cable
franchise fees. This is not yet a final ruling and franchisors are expected to
strenuously oppose the FCC's position.

     Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise
                                        21
<PAGE>

requirements in connection with a request for consent. Historically, franchises
have been renewed for cable operators that have provided satisfactory services
and have complied with the terms of their franchises. However, there can be no
assurance that renewal will be granted or that renewals will be made on similar
terms and conditions.

     Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the jurisdiction
of state governmental agencies. Tennessee and Florida, states where the Company
operates Systems, have enacted legislation with respect to the regulation of
cable television systems. In addition, a number of communities that the Company
serves have adopted local rate regulation and customer service ordinances.

  INSURANCE:

     The Company has insurance covering risks incurred in the ordinary course of
business, including general liability, property coverage and business
interruption insurance. As is typical in the cable television industry, the
Company does not maintain insurance covering its underground plant. Because of
the industry-wide casualty insurance reductions that resulted from insurers'
loss experience with several hurricanes in the southeastern portion of the
United States, the Company's casualty insurance in Florida and Louisiana was
ultimately reduced to $1 million per occurrence. All of the Company's casualty
insurance coverage is subject to deductibles ranging between $10,000 and
$100,000 per occurrence. The Company believes that its Systems in Florida and
Louisiana are located in areas that are not subject to a high degree of risk
from hurricanes, or from ice storms (which do pose a significant risk for its
Systems in other areas), and that losses in excess of its existing coverage
would be unlikely. If the Company is unable to maintain adequate casualty
insurance it will be subject to a potential reduction in cash flow in the event
of a loss in excess of its policy limits, and if a significant loss were to
occur, it could have a material adverse effect on the Company's financial
condition and results of operations. Notwithstanding the foregoing, the Company
believes that the amounts and types of its insurance coverage are commercially
reasonable given the nature and types of the Company's business and properties.

  EMPLOYEES:

     At December 31, 2001, the Company had approximately 197 full-time employees
and 10 part-time employees. None of the Company's employees are represented by a
labor union. The Company considers its relations with its employees to be good.

ITEM 2.  PROPERTIES

     A cable television system consists of four principal operating components.
The first component, known as the headend, receives television, radio and
information signals by means of special antennas and satellite earth stations.
The second component, the distribution network, which originates at the headend
and extends throughout the system's service area, consists of microwave relays,
coaxial or fiber optic cables placed on utility poles or buried underground and
associated electronic equipment. The third component of the system is a "drop
cable," which extends from the distribution network into each customer's home
and connects the distribution system to the customer's television set. The
fourth component, a converter, is the home terminal device that either expands
channel capacity to permit reception of more than twelve channels of programming
(for analog channels) or permits the subscriber to receive digital services such
as HITS, H2H or HQT.

     The Company's principal physical assets consist of cable television
systems, including signal-receiving, encoding and decoding apparatus, headends,
distribution systems and subscriber house drop equipment for each of its
Systems. The signal receiving apparatus typically includes a tower, antenna,
ancillary electronic equipment and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, are located near the
receiving devices. The Company's distribution systems consist primarily of
coaxial cable and related electronic equipment. As the upgrades are completed,
the Systems will incorporate fiber optic cable. Subscriber

                                        22
<PAGE>

equipment consists of taps, house drops and converters. The Company owns its
distribution systems, various office fixtures, test equipment and certain
service vehicles. The physical components of the Systems require maintenance and
periodic upgrading to keep pace with technological advances.

     The Company's cables generally are attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in underground ducts or trenches. The FCC regulates
most pole attachment rates under the federal Pole Attachment Act (See "Part I --
Item 3. Legal Proceedings" and "Part I -- Item 1. Business -- Legislation and
Regulation").

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

ITEM 3.  LEGAL PROCEEDINGS

     The Company is a party to ordinary and routine litigation proceedings that
are incidental to the Company's business. Management believes that the outcome
of all pending legal proceedings will not, in the aggregate, have a material
adverse effect on the financial condition or results of operations of the
Company.

     On August 18, 2000, the Company, through its membership in the Alabama
Cable Telecommunications Association, joined other Alabama cable operators in a
pole attachment Complaint against Alabama Power Company ("APC") which was filed
with the FCC's Cable Service Bureau (the "Bureau"). The complaint was initiated
as a result of APC's imposition of significant pole rental rate increases (more
than 500% for the Company), APC's refusal to engage in good faith negotiations
and the threat, by APC, to terminate existing pole attachment agreements. The
Bureau granted the Alabama cable operators, including the Company, all relief
requested in the Complaint. Specifically, the Bureau ruled that APC had failed
to make a persuasive argument on the merits that lawful just compensation was
greater than the current rate paid by the cable operators, including the
Company, under existing pole attachment agreements. Thus, the Bureau declared
APC's new pole attachment rental rates of $38.81 void and reinstated the $7.47
rate previously in effect, as well as other terms and conditions that APC had
sought to terminate. The Bureau also placed the parties under a bargaining order
requiring good faith negotiation of a new pole attachment agreement and a new
rental rate utilizing the FCC's established formulas.

     As expected, on September 11, 2000, APC appealed the Bureau's decision to
the FCC's five Commissioner panel (the "Panel"). On May 25, 2001 the Panel
issued a final decision affirming the earlier order issued by the Bureau.

     In addition, on September 11, 2000 and May 25, 2001, APC appealed the
decisions discussed above to the U.S. Court of Appeals for the Eleventh Circuit,
which consolidated the appeals and has agreed to hear the case. Both parties
submitted full briefs and, on October 31, 2001, presented their oral arguments
before the court. A final decision from the court is not expected until 2002.

     It is also important to note that APC is not the only utility company to
propose significant pole attachment rental rate increases. For instance, Georgia
Power Company, which also provides pole attachments to the Company, has proposed
an even greater increase than APC, as well as an onerous new pole agreement.
Both the rates and the agreement are currently being challenged at the FCC,
although the Company is not involved as it is with the APC proceedings.
Depending on the final outcome of these proceedings, as well as others that may
arise in the future involving other utility companies, the Company could
experience a significant increase in its pole attachment rental costs and the
results of its operations could be negatively impacted if enough of its pole
attachment rental rates increased at this pace.

     On October 31, 2001, Echostar Satellite Corporation ("ESC") filed a suit
against James Cable Partners, L.P. in U.S. District Court for the District of
Colorado alleging, among other things, unfair trade practices, and violations of
the Federal Communications Act of 1934 and The Digital Millennium Copyright Act.

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     In February 2002, the parties agreed to settle the case and entered into a
Confidential Settlement Agreement, which requires the Company to pay ESC
monetary consideration. The parties filed a Consent Motion for Entry of Final
Judgment and Permanent Injunction. On February 25, 2002, the court granted the
Consent Motion and entered the Final Judgment and Permanent Injunction as
submitted by the parties. The Final Judgment and Permanent Injunction included
only prospective injunctive relief and did not include any monetary judgment.
Under the Injunction, the Company will be enjoined in the future from taking
certain actions relating to Echostar's signals and satellites.

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

     There were no matters submitted to a vote of James' limited partners or
Finance Corp.'s sole shareholder during the fourth quarter of 2001.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

  EQUITY INTERESTS:

     Equity interests in James consist of a general partnership interest and
limited partnership interests. The general partnership interest represents 0.95%
of James' total partnership interest and the limited partnership interests
represent the balance of James' total partnership interest. James has been a
privately held entity since its formation in 1988 and no trading market exists
for either the general partnership interest or the limited partnership
interests. At December 31, 2001, there was one holder of the general partnership
interest and 17 holders of the limited partnership interests. See also "Part
III -- Item 10. Directors and Executive Officers" and "-- Item 12. Security
Ownership of Certain Beneficial Owners and Management." James has not made any
distributions of cash or property to any of its partners since the date of its
inception.

     Equity interests in Finance Corp. consist of shares of its common stock, no
par value per share. Finance Corp. has been a privately held entity since its
formation and no trading market exists for such common stock. At December 31,
2001, 1,000 shares of common stock were issued and outstanding, all of which
were owned of record and beneficially by James. Finance Corp. has never paid or
declared a dividend.

                                        24
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The following table sets forth certain historical financial data for the
Company for each of the years in the five-year period ended December 31, 2001.
The financial data for the years ended December 31, 1997 to 2001 were derived
from the financial statements of the Company which have been audited by Deloitte
& Touche LLP, independent auditors. The financial statements of the Company at
December 31, 2000 and 2001 and for each of the years in the three-year period
ended December 31, 2001, together with the report of Deloitte & Touche LLP
thereon, appear elsewhere in this Form 10-K.

                            SELECTED FINANCIAL DATA
                 (AMOUNTS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)

<Table>
<Caption>
                                                             YEAR ENDED DECEMBER 31,
                                               ----------------------------------------------------
                                                 1997     1998(14)   1999(14)     2000       2001
                                               --------   --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenues.....................................  $ 35,778   $ 37,758   $ 37,372   $ 37,893   $ 39,807
System operating expenses(1).................    17,400     19,410     20,445     22,011     25,064
Non-system operating expenses(2).............     2,585      2,960      2,831      2,134      2,091
Depreciation and amortization................     7,930      7,561      8,013      9,164     10,165
                                               --------   --------   --------   --------   --------
Operating income.............................     7,863      7,827      6,083      4,584      2,487
Interest expense, net........................     9,470     11,026     11,020     11,213     12,340
General partner incentive payment............        --         --        540         --         --
Other expenses, net..........................       233        112        109        109         17
                                               --------   --------   --------   --------   --------
Loss before gains on sales and extraordinary
  items......................................    (1,840)    (3,311)    (5,586)    (6,738)    (9,870)
Gains on sales of cable systems..............        --         --     15,886         --         --
Extraordinary loss due to debt refinancing...    (3,125)        --         --         --         --
Extraordinary gain due to extinguishment of
  debt.......................................        --         --         --         --      1,925
                                               --------   --------   --------   --------   --------
Net (loss) income............................  $ (4,965)  $ (3,311)  $ 10,300   $ (6,738)  $ (7,945)
                                               ========   ========   ========   ========   ========
OTHER DATA:
EBITDA(3)....................................  $ 15,793   $ 15,388   $ 14,096   $ 13,748   $ 12,652
System operating cash flow(4)................    18,378     18,348     16,927     15,882     14,743
Capital expenditures.........................     7,596      9,171     11,767      9,181     11,601
EBITDA margin(5).............................      44.1%      40.8%      37.7%      36.3%      31.8%
CASH FLOW DATA:
Cash provided by operating activities........  $  8,403   $  5,133   $  3,706   $  2,579   $    960
Cash (used in) provided by investing
  activities.................................    (7,596)   (16,971)     3,671     (9,323)   (11,601)
Cash provided by (used in) financing
  activities.................................     8,995      3,400     (3,500)     2,500     10,110
                                               --------   --------   --------   --------   --------
Net increase (decrease) in cash..............  $  9,802   $ (8,438)  $  3,877   $ (4,244)  $   (531)
                                               ========   ========   ========   ========   ========
SUMMARY SUBSCRIBER DATA:
Homes passed(6)..............................   129,291    138,040    129,600    129,600    130,000
Basic subscribers(7).........................    78,197     84,755     71,864     69,875     68,492
Basic penetration(8).........................      60.5%      61.4%      55.5%      53.9%      52.7%
Premium subscriptions(9).....................    24,076     26,413     23,001     22,713     27,243
Premium penetration(10)......................      30.8%      31.2%      32.0%      32.5%      39.8%
Average monthly total revenues per
  subscriber(11).............................  $  38.10   $  39.95   $  41.56   $  44.99   $  48.00
System operating cash flow per
  subscriber(12).............................  $    235   $    233   $    226   $    226   $    213
EBITDA per subscriber(13)....................  $    202   $    195   $    188   $    196   $    183
</Table>

<Table>
<Caption>
                                                                 AT DECEMBER 31,
                                               ----------------------------------------------------
                                                 1997       1998       1999       2000       2001
                                               --------   --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................  $  9,903   $  1,465   $  5,342   $  1,099   $    567
Total assets.................................    43,912     44,367     51,799     47,321     49,059
Total debt...................................   100,000    103,500    100,000    102,500    111,500
Partners' deficit............................   (65,711)   (69,022)   (58,183)   (64,914)   (72,859)
</Table>

                                        25
<PAGE>

                        NOTES TO SELECTED FINANCIAL DATA
---------------

 (1) System operating expenses exclude depreciation and amortization.

 (2) Non-system operating expenses consist primarily of management fees payable
     to the General Partner of the Company.

 (3) EBITDA represents operating income before depreciation and amortization.
     The Company has included EBITDA data (which are not a measure of financial
     performance under Generally Accepted Accounting Principles ("GAAP"))
     because it understands such data are used by certain investors to determine
     a company's historical ability to service its indebtedness. EBITDA should
     not be considered as an alternative to net income as an indicator of the
     Company's performance or as an alternative to cash flow as a measure of
     liquidity as determined in accordance with GAAP. In addition, the
     calculation of EBITDA for the Company may differ from EBITDA calculations
     of other companies.

 (4) System operating cash flow represents revenues less system operating
     expenses. System operating cash flow should not be considered as an
     alternative to net income as an indicator of the Company's performance or
     as an alternative to cash flow as a measure of liquidity as determined in
     accordance with GAAP.

 (5) EBITDA margin represents EBITDA divided by revenues.

 (6) Homes passed refers to estimates by the Company of the number of dwelling
     units in a particular community that can be connected to the distribution
     system without any further extension of principal transmission lines. Such
     estimates are based upon a variety of sources, including billing records,
     house counts, city directories and other local sources.

 (7) For purposes of all information presented herein, unless otherwise
     indicated, the number of basic subscribers for the Systems has been
     computed by adding the actual number of subscribers for all non-bulk
     accounts and the equivalent subscribers for all bulk accounts. The number
     of such equivalent subscribers has been calculated by dividing aggregate
     basic service revenues for bulk accounts by the full basic service rate for
     the community in which the account is located. In addition, the basic
     subscriber number includes subscribers who are receiving the Company's
     services at promotional rates.

 (8) Basic subscribers as a percentage of homes passed.

 (9) A customer may purchase more than one premium service, each of which is
     counted as a separate premium subscription.

(10) Premium subscriptions as a percentage of basic subscribers.

(11) The average of the monthly total revenues divided by the number of basic
     subscribers at the end of such month during the twelve-month periods ended
     December 31 for each year presented.

(12) System operating cash flow divided by the average number of basic
     subscribers for the period.

(13) EBITDA divided by the average number of basic subscribers for the period.

(14) The figures shown for 1998 reflect the Company's December 1998 purchase of
     its cable system serving Tazewell, Tennessee. The figures shown for 1999
     reflect the Company's March 1999 sales of its cable systems serving
     Wartburg, Tennessee and Forsyth and Monroe County, Georgia (See "-- Sales
     of Cable Systems").

                                        26
<PAGE>

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

     The following discussion provides information regarding the Company's
financial condition at December 31, 2000 and 2001, and its results of operations
for each of the years ended December 31, 1999, 2000 and 2001. This discussion
should be read in conjunction with the consolidated financial statements of the
Company, and the notes thereto, which appear elsewhere herein.

  OVERVIEW:

     Revenues.  The Company's revenues are primarily attributable to
subscription fees charged to subscribers to the Company's basic and premium
cable television programming services. Basic revenues consist of monthly
subscription fees for all services (other than premium programming, Internet
services and digital services) as well as monthly charges for customer equipment
rental. Premium revenues consist of monthly subscription fees for programming
provided on a per-channel basis. Internet revenues consist of monthly
subscription fees and cable modem installation charges. Digital services revenue
includes monthly subscription fees for tiers of digital programming and fees
charged for pay-per-view movies, concerts and sporting events. In addition,
other revenues are derived from installation and reconnection fees charged to
subscribers to commence service, late payment fees, franchise fees, advertising
revenues and commissions related to the sale of goods by home shopping services.
At December 31, 2001, the Company had 68,492 basic subscribers and 27,243
premium subscriptions, representing basic penetration of 52.8% and premium
penetration of 39.8%. The table below sets forth, for the periods indicated, the
percentage of the Company's total revenues attributable to the various sources:

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               1999     2000     2001
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Basic.......................................................   82.3%    79.1%    74.9%
Premium.....................................................    7.9      7.4      7.3
Internet....................................................    2.1      5.1      8.2
Digital.....................................................    0.1      0.9      2.6
Other.......................................................    7.6      7.5      7.0
                                                              -----    -----    -----
                                                              100.0%   100.0%   100.0%
                                                              =====    =====    =====
</Table>

     System Operating Expenses.  System operating expenses are comprised of
variable operating expenses and fixed selling, service and administrative
expenses directly attributable to the Systems. Variable operating expenses
consist of costs directly attributable to providing cable, digital and Internet
services to customers and therefore generally vary directly with revenues.
Variable operating expenses include programming fees paid to suppliers of
programming the Company includes in its basic, premium and digital cable
television services, as well as expenses related to copyright fees, franchise
operating fees and bad debt expenses. Satellite programming fees have
historically increased at rates in excess of inflation due in part to
improvements in the quality of programming. Selling, service and administrative
expenses directly attributable to the Systems include the salaries and wages of
the field and office personnel, plant operating expenses, office and
administrative expenses and sales costs.

     Non-System Operating Expenses.  Non-system operating expenses consist
primarily of general overhead expenses which are not directly attributable to
any one System. These expenses include legal, audit and tax fees, an incentive
bonus pool accrual for the General Managers of the Systems and amounts paid to
the General Partner for management expenses.

     Significant Leverage.  At December 31, 2001, the Company's debt was $111.5
million, its total assets were $49.1 million, and its partners' deficit was
$72.9 million. During the period from December 31, 2000 to March 2, 2001, the
Company was in default of a debt to EBITDA ratio covenant under its credit
facility. During the period from February 15, 2001 to March 2, 2001, the Company
was also in default of its obligation to pay interest on its 10 3/4% Series B
Senior Notes due 2004. On March 2, 2001, the Company amended and restated its
secured credit facility with new lenders which will permit it to borrow up to
$30 million. To date,

                                        27
<PAGE>

approximately $28 million of the available credit has been drawn down to pay
accrued interest on the Company's Series B Senior Notes and to purchase $12
million (face amount) of those Notes from affiliates of the lenders. The
remaining credit available may be used, among other things, to (i) provide for
working capital and general partnership purposes, (ii) make acquisitions of
cable television systems, (iii) pay future installments of interest on the
Company's Series B Senior Notes, and (iv) to finance capital improvements.

     Due to the Company's high degree of leverage: (a) a substantial portion of
its cash flow from operations will be committed to the payment of its interest
expense and will not be available for other purposes; (b) the Company's ability
to obtain additional financing in the future for working capital, capital
expenditures, acquisitions or other purposes may be limited; and (c) the Company
is more highly leveraged than many cable television companies and certain DBS
and telephone companies, which may limit the Company's flexibility in reacting
to changes in its business (See "-- Risk Factors").

  RESULTS OF OPERATIONS:

     The following table sets forth the percentage relationship that the various
items bear to revenues for the periods indicated:

<Table>
<Caption>
                                                              1999    2000    2001
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Revenues....................................................  100.0%  100.0%  100.0%
System operating expenses...................................   54.7    58.1    63.0
Non-system operating expenses...............................    7.6     5.6     5.3
Depreciation and amortization...............................   21.4    24.2    25.5
                                                              -----   -----   -----
Operating income............................................   16.3    12.1     6.2
Interest expense, net.......................................   29.5    29.6    31.0
General partner incentive payment...........................    1.4     0.0     0.0
Other expenses, net.........................................    0.3     0.3     0.0
                                                              -----   -----   -----
Loss before gains on sales of cable systems and
  extraordinary item........................................  (14.9)  (17.8)  (24.8)
Gains on sales of cable systems.............................   42.5      --      --
Extraordinary gain due to extinguishment of debt............     --      --     4.8
                                                              -----   -----   -----
Net income (loss)...........................................   27.6%  (17.8)% (20.0)%
                                                              =====   =====   =====
EBITDA margin...............................................   37.7%   36.3%   31.8%
</Table>

  RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 2001 VERSUS YEAR ENDED
  DECEMBER 31, 2000:

     Revenues.  Revenues increased by $1.9 million, or 5.1%, from $37.9 million
in 2000 to $39.8 million in 2001. This increase is primarily the result of an
increase in the Company's Internet and digital revenues of $2.0 million from
2000 to 2001 which was offset by a reduction in basic revenues for the same
periods. The decrease in the Company's basic revenues is a function of the
decrease in the Company's subscriber base discussed below as offset by rate
increases the Company has implemented over the past two years. These rate
increases have also increased the average basic revenues per subscriber per
month from $35.61 in 2000 to $35.95 in 2001.

     Subscribers.  At December 31, 2001 the Company had 68,492 subscribers which
represents a decrease of 1,383 from the 69,875 subscribers at December 31, 2000.
Of this total decrease in the Company's subscriber base, the Company estimates
that approximately 600 are attributable to overbuilds it has experienced in its
Lafayette, Alabama and Alachua, Florida systems by other franchised cable
operators. The Company believes that the remaining decrease of approximately 800
subscribers is a result of the increased availability and affordability of
competitive video services from satellite dishes and other alternatives to
traditional hardline cable service (See "Item 1. Business -- Competition" for a
discussion of both items). The Company continues to respond to this competition
with the introduction of advanced telecommunications services and aggressive
marketing campaigns.

                                        28
<PAGE>

     At December 31, 2001 the Company had approximately 6,400 high-speed
Internet customers and approximately 4,000 dial-up Internet customers, for a
total of approximately 10,400 Internet customers. This represents an increase of
approximately 3,200, or 44%, from the approximately 7,200 Internet customers at
December 31, 2000. In addition, the Company's digital services, either HITS, H2H
or HQT, were in approximately 8,100 of its basic subscribers' homes as of
December 31, 2001 as compared to a total of approximately 4,000 homes at
December 31, 2000.

     System Operating Expenses.  System operating expenses increased 13.9% from
$22.0 million in 2000 to $25.1 million in 2001. The primary reasons for this
increase are expenses associated with the Company's marketing campaigns,
expenses associated with the Company's launch of digital services in many of its
systems, Internet cost increases associated with an increase in Internet
customers, cost increases associated with higher programming rates and new
programming launched in conjunction with rate increases, and an increase in the
technical staff in order to provide better customer service. As a percentage of
revenues, system operating expenses increased by 4.9% from 58.1% in 2000 to
63.0% in 2001.

     Non-System Operating Expenses.  Non-system operating expenses remained
constant at $2.1 million in 2000 and 2001.

     EBITDA.  As a result of the foregoing, EBITDA in 2001 was $12.7 million, a
decrease of 8.0% from EBITDA in 2000 of $13.8 million.

     Depreciation and Amortization.  Depreciation and amortization increased
10.9% from $9.2 million in 2000 to $10.2 million in 2001, due primarily to the
capital expenditures made as a part of the Company's Tennessee System upgrade as
well as equipment costs associated with Internet and digital installations.

     Interest Expense, Net.  Interest expense, net was $12.4 million in 2001
which represents an increase of $1.0 million, or 9.1%, from 2000. This increase
was primarily the result of an increase of $1.9 million in the interest on
borrowings the Company had outstanding against its credit facility from 2000 to
2001. This increase was partially offset by a reduction in interest expense of
$1.1 million on the 10 3/4% Senior Notes due to the $12 million (face value) of
the Notes held by the Company since March 2, 2001. Both of these changes in
interest expense, net are a direct result of the credit facility amendment dated
March 2, 2001 as described in the "Financial Condition, Liquidity and Capital
Resources" section below.

     Loss before Extraordinary Item.  As a result of the foregoing factors, the
Company's loss before extraordinary item increased from $6.7 million in 2000 to
$9.9 million in 2001.

     Extraordinary Gain due to Debt Extinguishment.  On March 2, 2001 the
Company purchased $12 million (face value) of its 10 3/4% Series B Senior Notes
from affiliates of its credit facility lenders. These Notes were purchased at a
discounted price of .81 and, thus, the Company recognized an extraordinary gain
due to debt extinguishment in 2001 as follows:

<Table>
<S>                                                           <C>         <C>
Face value of Notes purchased...............................              $12,000,000
Purchase price of Notes.....................................  9,720,000
Unamortized value of costs associated with Notes............    354,688
                                                              ---------
     Subtotal...............................................               10,074,688
                                                                          -----------
Extraordinary gain on extinguishment of debt................              $ 1,925,312
                                                                          ===========
</Table>

     Net Loss.  As a result of the foregoing factors, the Company had a net loss
of $7.9 million in 2001 as compared to a net loss of $6.7 million in 2000.

  RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 2000 VERSUS YEAR ENDED
  DECEMBER 31, 1999:

     Revenues.  Revenues increased by $500,000, or 1.4%, from $37.4 million in
1999 to $37.9 million in 2000. This increase is primarily the result of an
increase in the Company's Internet and digital revenues of $1.4 million from
1999 to 2000 which was partially offset by a $900,000 decrease in its basic and
premium revenues for the same periods. The decrease in the Company's basic and
premium revenues are a direct result

                                        29
<PAGE>

of the decrease in the Company's subscriber base discussed below. Average basic
revenues per subscriber per month increased from $34.18 to $35.61, or 4.2%,
between 1999 and 2000 due to rate increases imposed by the Company during 1999
and 2000.

     Subscribers.  At December 31, 2000 the Company had 69,875 subscribers which
represents a decrease of 1,989 from the 71,864 subscribers at December 31, 1999.
The Company believes that this decrease is a result of the increased
availability and affordability of competitive video services from satellite
dishes and other alternatives to traditional hardline cable service (See "Item
1. Business -- Competition"). The Company continues to respond to this
competition with the introduction of advanced telecommunications services and
aggressive marketing campaigns.

     At December 31, 2000 the Company had approximately 3,400 high-speed
Internet customers and approximately 3,800 dial-up Internet customers, for a
total of approximately 7,200 Internet customers. This represents an increase of
approximately 3,400, or 90%, from the approximately 3,800 Internet customers at
December 31, 1999. In addition, the Company had installed its digital services,
either HITS or H2H, at approximately 4,000 of its basic subscriber homes as of
December 31, 2000.

     System Operating Expenses.  System operating expenses increased 7.7% from
$20.4 million in 1999 to $22.0 million in 2000. This increase resulted primarily
from additional costs related to the launching of Internet and digital services
in many of the Company's Systems during 2000, increases in programming costs
associated with new channel offerings and increased rates charged by programming
suppliers, and increased marketing costs associated with the Company's marketing
campaigns. As a percentage of revenues, system operating expenses increased by
3.4% from 54.7% in 1999 to 58.1% in 2000.

     Non-System Operating Expenses.  Non-system operating expenses decreased
24.6% from $2.8 million in 1999 to $2.1 million in 2000. This decrease is
primarily the result of a $350,000 decrease in legal and other professional fees
as well as a decrease of $300,000 in the management fees paid to the Company's
general partner.

     EBITDA.  As a result of the foregoing, EBITDA in 2000 was $13.8 million, a
decrease of 2.5% from EBITDA in 1999 of $14.1 million.

     Depreciation and Amortization.  Depreciation and amortization increased
14.4% from $8.0 million in 1999 to $9.2 million in 2000, due to the capital
expenditures associated with the Company's ongoing upgrades as well as equipment
associated with the launching of Internet and digital services in many of the
Company's Systems.

     Interest Expense, Net.  Interest expense, net increased by $200,000, or
1.8%, from $11.0 million in 1999 to $11.2 million in 2000. This increase is
primarily a result of interest paid on the Company's credit facility during
2000, as well as a decrease in the amount of interest capitalized from 1999 to
2000.

     Loss before Gains on Sales.  As a result of the foregoing factors, and
despite a general partner incentive payment of $500,000 paid in 1999, the
Company's loss before gains on sales increased $1.1 million from $5.6 million in
1999 to $6.7 million in 2000.

     Net Income/Loss.  As a result of the foregoing factors, and because of the
gains on the sales of the Tennessee (Wartburg) and Forsyth and Monroe County,
Georgia cable systems (See "-- Sales of Cable Systems") of $15.9 million in
1999, the Company experienced net income of $10.3 million in 1999 as compared to
a net loss of $6.7 million in 2000.

  FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES:

     General.  Liquidity describes the ability to generate sufficient cash flows
to meet the cash requirements of continuing operations and to pay obligations as
they mature. Liquidity, in the context of the Company's operations, is typically
determined by the cash flows from operating activities (e.g. initial
installation charges and monthly service fees paid by subscribers) and the cash
flows used in investing activities (e.g. spending associated with capital
projects). The Company continuously monitors available cash and cash equivalents
in relation to projected cash needs in an effort to maintain adequate balances
for current payments.
                                        30
<PAGE>

     Net cash from operating activities was $3.7 million, $2.6 million and $1.0
million for the years ended December 31, 1999, 2000 and 2001, respectively. Net
cash used in investing activities, the majority of which was used for capital
expenditures, was $11.6 million for the year ended December 31, 2001 as compared
to $9.3 million for the year ended December 31, 2000. This increase is primarily
the result of capital expenditures the Company made as a part of its Tennessee
System upgrade as well as equipment costs associated with Internet and digital
service installations. The net cash flow from operating activities was $3.7
million for the year ended December 31, 1999 which was attributable to $16.8
million in proceeds from the sales of the Company's Tennessee (Wartburg) and
Forsyth and Monroe County, Georgia cable systems (See "-- Sales of Cable
Systems") as offset by $11.8 million in capital expenditures and $1.3 million
the Company spent to acquire various small cable and Internet operations. Cash
flows from financing activities for the year ended December 31, 2001 were $10.1
million, which consisted of $23.5 million of borrowings the Company made against
its credit facility net of $2.5 million of principal payments made on the credit
facility, $1.2 million in costs associated with amending and restating the
credit facility and $9.7 million used to repurchase $12 million (face value) of
the Notes. Cash flows from financing activities for the year ended December 31,
2000 amounted to $2.5 million which consisted of $4.0 million of borrowings the
Company made against its credit facility net of $1.5 million of principal
payments on the credit facility, while the cash flows used in financing
activities for the year ended December 31, 1999 was $3.5 million, consisting
solely of payments the Company made on its credit facility.

     Total assets increased from $47.3 million at December 31, 2000 to $49.1
million at December 31, 2001 primarily as a result of an increase in net
property and equipment. Cash decreased by $500,000 primarily as a result of
interest payments made on the Notes and the credit facility as well as capital
spending associated with the Company's Tennessee system upgrade and costs
associated with Internet and digital service installations. This spending was
offset by borrowings the Company made against its credit facility. Net property
and equipment increased by $3.3 million as a result of the Company's capital
spending associated with the Tennessee System upgrade and costs associated with
Internet and digital service installations. Net intangible assets decreased $1.9
million primarily as a result of the 2001 amortization expense.

     Total debt increased from $102.5 million at December 31, 2000 to $111.5
million at December 31, 2001. During the period from December 31, 2000 to March
2, 2001, the Company was in default of a debt to EBITDA ratio covenant under its
credit facility. During the period from February 15, 2001 to March 2, 2001, the
Company was also in default of its obligation to pay interest on its 10 3/4%
Series B Senior Notes due 2004. As discussed below, on March 2, 2001, the
Company amended and restated its secured credit facility with new lenders which
will permit it to borrow up to $30 million. At December 31, 2001 approximately
$18 million of the available credit had been drawn down to pay accrued interest
on the Company's Notes and to purchase $12 million (face amount) of those Notes
from affiliates of the lenders. On February 13, 2002 the Company drew down
another $4.5 million to pay interest on the Notes, bringing its total current
borrowings to $28 million. The remaining credit available may be used, among
other things, to (i) provide for working capital and general partnership
purposes, (ii) make acquisitions of cable television systems, (iii) pay future
installments of interest on the Company's Series B Senior Notes, and (iv) to
finance capital improvements.

     The Company is nearing the completion of the upgrade to the cable plant for
its entire Tennessee System which serves approximately 6,100 subscribers. After
the upgrade is completed, which is expected to occur during the second quarter
of 2002, approximately 90% of the System's subscribers will be on 750 MHz plant
with the remaining subscribers on two-way 450 MHz plant, both of which will
allow for the use of advanced telecommunications services, including high-speed
Internet. At December 31, 2001, more than 70% of the Tennessee System
subscribers had been converted to the 750 MHz or two-way 450 MHz cable plant. In
addition, at December 31, 2001 the Company was nearing the completion of the 750
MHz upgrade to its cable plant in Lusk, Wyoming which serves approximately 400
subscribers. The Lusk, Wyoming upgrade was completed during the first quarter of
2002 and has allowed for the introduction of high-speed Internet to the basic
subscribers. Once the Tennessee and Lusk, Wyoming upgrades are completed, the
Company will have two-way capabilities for approximately 50% of its subscriber
base.

     The Company is continually in the process of identifying other areas within
its Systems which can be upgraded to allow for the introduction of advanced
telecommunications services. However, the Company will
                                        31
<PAGE>

only proceed with upgrades which it believes are economically feasible after
carefully weighing the anticipated revenues against the costs of completing the
upgrade.

     At December 31, 2001 the Company's total debt was $111.5 million, comprised
of $23.5 million borrowed under its secured credit facility and $88 million due
under the Notes (see discussion below for more detail on both the credit
facility and the Notes). As a result of this substantial debt, a significant
portion of the Company's cash flow from operations must be used to pay interest
expense. While the Company believes that it will be able to generate sufficient
cash flow to cover this interest expense in the foreseeable future, there can be
no assurances that this will be the case.

     In an effort to mitigate the possibility that it will be unable to make its
required interest payments, the Company plans to limit its capital spending on
rebuild/upgrade projects and other nonessential capital projects. The Company
believes that these limits, along with improved cash flow from operations, will
improve the likelihood that it can generate sufficient cash flow to cover the
interest expense.

     In addition, the Company intends to increase the rates it charges for
certain premium, digital and Internet services on April 1, 2002. While these
rate increases are not a direct result of the Company's current liquidity, they
should help to increase its cash flows in the near term and throughout the
maturity of the debt.

     The Notes.  The Company has outstanding an aggregate principal amount of
$88,000,000 of its 10 3/4% Series B Senior Notes due 2004. The Notes are general
senior unsecured obligations of the Company that mature on August 15, 2004 and
rank equally in right of payment with all other existing and future
unsubordinated indebtedness of the Company and senior in right of payment to any
subordinated obligations of the Company. The Notes are effectively subordinated
in right of payment to all secured indebtedness of the Company. Interest on the
Notes accrues at the rate of 10 3/4% per annum and is payable semi-annually in
arrears on February 15 and August 15, which commenced on February 15, 1998, to
holders of record on the immediately preceding February 1 and August 1. Interest
on the Notes accrues from the most recent date to which interest has been paid.
Interest is computed on the basis of a 360-day year comprised of twelve 30-day
months.

     There is no public market for the Notes. The Company has not and does not
intend to list the Notes on any securities exchange or to seek approval for
quotation through any automated quotation system.

     The Credit Facility.  The Company has a $30 million secured credit facility
with various independent lenders that matures on March 2, 2004. To date,
approximately $28 million of the available credit has been drawn down to pay
accrued interest on the Company's Series B Senior Notes and to purchase $12
million (face value) of the Notes from affiliates of the lenders. The remaining
credit available may be used, among other things, to (i) provide for working
capital and general partnership purposes, (ii) make acquisitions of cable
television systems, (iii) pay future installments of interest on the Company's
Notes, and (iv) to finance capital improvements.

     The Credit Facility, which is secured by a first priority lien on and
security interest in substantially all of the assets of the Company, accrues
interest at a fixed rate of 11.5% which is payable on a quarterly basis in
arrears. The Credit Facility contains certain covenants, and provides for
certain events of default, customarily contained in facilities of a similar
type. Among other things, the Credit Facility requires the Company to (i)
maintain the ratio of its total debt to annualized six-month EBITDA of no more
than 9.25 to 1 and (ii) maintain a senior debt ratio (that is, the ratio of debt
under the Credit Facility to annualized six-month EBITDA) of no more than 2.40
to 1. In addition, the Credit Facility imposes limitations on the amount of
capital expenditures that the Company can make for the remainder of the term.
Generally, capital expenditures are limited to $12 million per annum plus any
unused portion of the capital expenditure allowance from the previous year. At
December 31, 2001 the Company was in compliance with all of the above covenants.

     The Company believes that it will continue to generate cash sufficient to
meet its requirements for debt service, working capital and capital expenditures
contemplated in the near term. However, the ability of the Company to satisfy
its obligations will be primarily dependent on its future financial and
operating performance or upon its ability to renew or refinance borrowings or to
raise additional equity capital if
                                        32
<PAGE>

necessary. While the Company believes that it will be able to service its debt,
there can be no assurance that it will be able to renew or refinance borrowings,
or raise additional equity capital, if its future operating results fall short
of expectations (See "-- Risk Factors").

  IMPACT OF INFLATION AND CHANGING PRICES:

     The Company's costs and expenses are subject to inflation and price
fluctuations. However, because changes in costs are generally passed through to
subscribers, such changes historically have not had, and in the future are not
expected to have, a material effect on the Company's results of operations.

  CRITICAL ACCOUNTING POLICIES:

     The Company believes the following represent its critical accounting
policies:

     The Company reviews the recoverability of its long-lived and intangible
assets, when events or changes in circumstances occur that indicate that the
carrying value of the assets may not be recoverable. The measurement of possible
impairment is based on the Company's ability to recover the carrying value of
the asset from the expected future cash flows. If an impairment loss existed,
the amount of the loss would be recorded in the consolidated statements of
operations. It is possible that future events or circumstances could cause these
estimates to change.

  EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS:

     In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued. In
June 2000, the FASB issued SFAS No. 138, which amended certain provisions of
SFAS No. 133. SFAS No. 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The standard was effective
beginning in the first quarter of the Company's 2001 fiscal year . The adoption
of SFAS No. 133, as amended, did not have an impact on the Company's financial
position or results of operations.

     On July 20, 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 requires that goodwill and other intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually. Amortization of goodwill, including goodwill
recorded in past business combinations, will cease upon adoption of the
statement. SFAS No. 142 will be effective for fiscal years beginning after
December 15, 2001. The Company will adopt SFAS No. 142 beginning in the first
quarter of 2002 and is currently evaluating the impact that this standard will
have on its financial position and/or results of operations. The amount of
amortization in 2001 that would have been excluded under SFAS No. 142 was
approximately $186,000.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." The new standard requires one
model of accounting for long-lived assets to be disposed of, and broadens the
definition of discontinued operations to include a component of a segment. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001. The
Company does not expect the adoption of SFAS No. 144 to have a significant
impact on its financial position or results of operations.

     At the November 2001 meeting of the Emerging Issues Task Force, the FASB
staff announced their position regarding the classification of reimbursements
for out-of-pocket expenses. The FASB staff believes that these reimbursements
should be classified as revenue in the statements of operations. The staff
announcement, which is codified in EITF Topic No. D-103, is effective for fiscal
years beginning after December 15, 2001 and will require comparative financial
statements for prior periods to be reclassified. The Company does not expect the
adoption of this announcement to have a significant impact on its financial
position or results of operations.

                                        33
<PAGE>

  SALES OF CABLE SYSTEMS:

     Sale of the Tennessee (Wartburg) Cluster.  On March 5, 1999, pursuant to an
Asset Purchase Agreement dated as of July 31, 1998, the Company sold its cable
television systems in Pickett County, Scott County, Morgan County, Roane County,
Fentress County and Cumberland County, Tennessee, all of which made-up the
Tennessee (Wartburg) System, to Rapid Communications Partners, L.P. for $14.7
million in cash. As a result of the sale, the Company's remaining operations in
Tennessee consist only of its Tazewell, Tennessee System.

     Sale of the Forsyth System.  On March 31, 1999, pursuant to an Asset
Purchase Agreement dated as of February 2, 1999, the Company sold its cable
television system, serving approximately 1,700 subscribers, in Forsyth and
Monroe County, Georgia to the City of Forsyth for $2.3 million in cash.

     The net gains on the above sales are calculated as follows:

<Table>
<Caption>
                                                  TENNESSEE     FORSYTH       TOTALS
                                                 -----------   ----------   -----------
<S>                                              <C>           <C>          <C>
Net sale proceeds..............................  $14,453,000   $2,292,000   $16,745,000
Basis of assets sold...........................      570,876      288,439       859,315
                                                 -----------   ----------   -----------
Gain on sale...................................  $13,882,124   $2,003,561   $15,885,685
                                                 ===========   ==========   ===========
</Table>

  RISK FACTORS:

  We are highly leveraged and have significant debt service requirements

     As of December 31, 2001, our total debt outstanding was $111.5 million,
comprised of $23.5 million borrowed under our secured credit facility and $88
million due under our Notes.

     Because of our substantial debt:

     - we must dedicate a substantial portion of any cash flow from our
       operations to the payment of interest on, and principal of, our debt,
       which reduces the funds available for other purposes;

     - we may not be able to obtain additional financing for currently
       unanticipated capital requirements, capital expenditures, working capital
       requirements and other corporate purposes;

     - we were required to lien substantially all of our assets and pledge the
       equity ownership of our subsidiary to secure our secured credit facility;

     - we may be more vulnerable to general adverse economic and industry
       conditions;

     - our flexibility in planning for, or reacting to, changes in our business
       and the industry in which we operate is limited; and

     - we may be at a competitive disadvantage compared to our competitors that
       are better leveraged.

While we believe that we will continue to generate cash sufficient to meet our
debt service and working capital requirements in the near term, our ability to
satisfy those obligations will be primarily dependent on our future financial
and operating performance or upon our ability to renew or refinance our existing
indebtedness or to raise additional equity, if necessary. There can be no
assurance that we will be able to renew or refinance our existing indebtedness
or raise additional equity in the event that our future financial and operating
performance falls short of expectations.

  We could lose subscribers to new technologies

     Since 1996, we have experienced increased competition from new technologies
such as wireless cable services and DBS services. Due to regulatory changes, we
also face potential competition from telephone companies. Also, many of our
competitors have significantly greater financial resources than us. Thus, the
Company has experience significant subscriber loss during the past five years.
The Company believes that one of the primary reasons for this loss in its
subscriber base is the increased availability, affordability and

                                        34
<PAGE>

increased marketing efforts of competitive video services from satellite dishes
and other alternatives to traditional hardline cable service. Specifically, DBS
has emerged as a significant competitor with the Company due to several factors
including (i) a much heavier emphasis on marketing campaigns, (ii) a significant
reduction in the cost of the equipment necessary for a customer to receive the
DBS service and (iii) recent legislation that allows certain DBS customers to
receive local broadcast programming (See "Part 1. Business -- Competition").
While we believe our strategy of upgrading certain Systems to provide enhanced
video programming, Internet access and other advanced telecommunications
services will allow the Company to remain competitive in most of its markets,
there can be no assurance that this will be the case.

  Our new lines of business involve additional risk

     While we do not have extensive experience providing Internet access and
other advanced telecommunications services, at December 31, 2001 we had
successfully launched commercial Internet service in certain portions of every
Cluster.

     Some of the uncertainties associated with our offering Internet access
through cable are:

     - customer acceptance of cable as an alternative to traditional dial-up
       Internet access;

     - the competitive response of traditional ISPs, online services (such as
       The Microsoft Network, CompuServe and America Online) and long distance
       inter-exchange carriers (such as AT&T Corp., MCI Communications
       Corporation and Sprint Corporation), all of which currently offer
       Internet access on a large scale; and

     - the possibility that new technologies (including improved DBS offerings)
       may be developed which offer improved performance or other desirable
       features.

While we are optimistic about the prospects for these new lines of business,
there can be no assurance that we will be successful or that additional cash
flow will be generated.

  Our business is extensively regulated

     The cable television industry is subject to extensive governmental
regulation, principally by the FCC and local franchising authorities. Many
aspects of such regulation have recently been extensively revised and are
currently the subject of judicial proceedings and administrative rulemakings,
which are potentially significant to us. Moreover, the regulation of cable
television systems, including the rates charged for cable services, remains a
matter of interest to Congress, the FCC and local regulatory officials. These
regulations, which have removed some barriers to competition and added
materially to the regulatory burdens of cable operators, are related to:

     - cable system rates for both basic and certain nonbasic services;

     - programming access and exclusivity arrangements;

     - access to cable channels by unaffiliated programming services;

     - leased access terms and conditions;

     - horizontal and vertical ownership of cable systems;

     - customer service requirements;

     - franchise renewals;

     - television broadcast signal carriage and retransmission consent;

     - technical standards;

     - customer privacy;

     - consumer protection issues;

                                        35
<PAGE>

     - cable equipment compatibility;

     - obscene or indecent programming; and

     - rules against requiring subscribers to subscribe to tiers of service
       other than basic service as a condition of purchasing premium services.

Under the FCC's rate regulations, most cable systems were required to reduce
their basic service and CPST rates in 1993 and 1994, and have since had their
rate increases governed by a complicated price cap scheme. However, operators
also have the opportunity of bypassing this "benchmark" regulatory scheme in
favor of traditional "cost of service" in cases where the latter methodology
appears favorable.

     Because we qualify as a small cable company under FCC rules and have
elected to rely on the cost-of-service rules as and when our Systems are
required to justify their rates for regulated services, we have not implemented
the rate reductions that would otherwise have been required if we were subject
to the FCC's benchmarks. Instead, we were allowed to establish permitted rates
under a simple formula that considers total operating expenses (including
amortization expenses), net rate base, rate of return, channel count and
subscribers. So long as the per channel rate resulting from these inputs for one
of our Systems is no more than $1.24, that System's rates will be presumed
reasonable. If the formula-generated rate exceeds the $1.24, then we will be
required to prove the reasonableness of our calculations. Substantially all of
our rates are under the $1.24 per channel level. We believe that all of our
rates in excess of the $1.24 per channel level are reasonable using the formula
described above.

     FCC rules permit local franchise authorities to review basic service rates.
An adverse ruling in any such proceeding could require us to reduce our rates
and pay refunds. A reduction in our rates or the payment of refunds could have a
material adverse effect on us. Once the maximum permitted rate allowed by FCC
rules is being charged by us in regulated communities, future rate increases may
not exceed an inflation-indexed amount, plus increases in certain costs beyond
the cable operator's control, such as taxes, franchise fees and increased
programming costs. Although the regulation of the CPST expired for all cable
systems on March 31, 1999, critics of the cable television industry have called
for the reinstatement of this regulation and further have urged more rigorous
rate regulation (including limits on programming cost pass-throughs to cable
subscribers) until a greater degree of competition to incumbent cable operators
has developed.

 Our franchises are non-exclusive and are subject to renewal

     We operate our Systems under franchises granted by local authorities which
are generally non-exclusive and subject to renewal and renegotiation from time
to time. Each franchise is generally granted for a fixed term ranging from five
to 15 years but may be terminated if the franchisee fails to comply with the
material provisions thereof. Our franchises typically impose conditions relating
to the use and operation of the cable television system, including requirements
relating to the payment of fees, system bandwidth capacity, customer service
requirements, franchise renewal and termination. As of December 31, 2001, we had
15 franchises (representing 8.0% of our basic subscribers) expiring prior to
2004 and 37 franchises (representing 39.5% of our basic subscribers) expiring
between 2004 and 2008.

     Although we believe that we generally have good relationships with our
franchising authorities, no assurance can be given that we will be able to
retain or renew such franchises or that the terms of any such renewals will be
on terms as favorable to us as our existing franchises. The non-renewal or
termination of franchises relating to a significant portion of our subscribers
could have a material adverse effect on our results of operations.

 We must successfully integrate our future acquisitions

     An element of our business strategy is to achieve operational efficiencies
by providing advanced telecommunications services and video services over an
expanded subscriber base within a concentrated geographic area. Consequently, we
intend to consider potential opportunities to acquire or trade cable television
systems. Any acquisition or trade could have an adverse effect upon our results
of operations or cash flow, particularly acquisitions of new systems which must
be integrated with our existing operations. There can
                                        36
<PAGE>

be no assurance that we will be able to integrate successfully any acquired
systems with our existing operations or realize any efficiencies from any
acquisition or trade. There can also be no assurance that any acquisition or
trade, if consummated, will improve operating results or that we will be able to
obtain the financing that may be necessary to fund any acquisition or trade in
the future. In addition, any acquisition or trade will be subject to, among
other things, the satisfaction of customary closing conditions and the receipt
of certain third-party or governmental approvals, including the consent of
franchising authorities.

 Our insurance coverage has been reduced in Florida and Louisiana

     Because of industry-wide casualty insurance reductions that resulted from
insurers' loss experience with several hurricanes in the southeastern portion of
the United States, our casualty insurance in Florida and Louisiana has been
reduced to $1 million per occurrence. We believe that our Systems in Florida and
Louisiana are located in areas that are not subject to a high degree of risk
from hurricanes, or from ice storms (which do pose a significant risk for our
Systems in other areas), and that losses in excess of our existing coverage
would be unlikely. However, if such casualty insurance is inadequate, we could
experience a potential reduction in cash flow in the event of a loss in excess
of our policy limits. If a significant loss were to occur, it could have a
material adverse effect on our financial condition and results of operations.

 Our operations are dependent upon the services of management

     We rely significantly on the services of the General Partner and the
personnel employed by or on behalf of the General Partner, including William R.
James, who functions as our principal executive officer, Daniel K. Shoemaker,
who functions as our principal financial and accounting officer, and Scott A.
Madison, who functions as our director of engineering. We could be adversely
affected, however, if any of Messrs. James, Shoemaker and Madison were unwilling
or unable to continue to make their services available to us.

 There are potential conflicts of interest

     The General Partner, which is controlled by Mr. William R. James, is the
sole general partner of the Company. With certain limitations, the General
Partner has exclusive authority for the management and control of our business
and operations. It performs management services for us, for which it is paid an
annual fee.

     We are subject to possible conflicts of interest arising out of our
relationship with the General Partner and Mr. James. Because we were organized
and are operated by the General Partner, these conflicts will not necessarily be
resolved through arm's-length negotiations but rather may be resolved through
the exercise of the General Partner's judgment consistent with its fiduciary
responsibilities to us and our limited partners. Our Partnership Agreement
provides for a Partnership Advisory Board, one of the functions of which is to
review any potential conflicts of interest involving the General Partner, and
provides that the General Partner may be removed by the limited partners but (so
long as the General Partner is controlled by Mr. James) only if the General
Partner has been found by an independent party to have been engaged in
malfeasance, criminal conduct, wanton, willful neglect or a material breach of
the Partnership Agreement. There are no other procedures for resolving conflicts
between us and the General Partner. The Indenture contains certain restrictions
on transactions between James and Finance Corp. and their subsidiaries and
affiliates.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The Company did not hold, either during the years ended December 31, 2001
and 2000, or at December 31, 2001 or 2000, any market risk sensitive
instruments. The Company has outstanding $88 million of its 10 3/4% Series B
Senior Notes with a fixed interest rate of 10.75%. In addition, at December 31,
2001, the Company had borrowings outstanding against its credit facility of
$23.5 million with a fixed interest rate of 11.5%.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Pages FS-1 through FS-16 which are included in Item 14. Exhibits,
Financial Statement Schedules, and Reports on Form 8-K of this Annual Report on
Form 10-K for the fiscal year ended December 31, 2001.

                                        37
<PAGE>

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

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

     Since its inception in 1988, the Company's business and affairs have been
managed and controlled by the General Partner. The General Partner is managed
and controlled by its two partners, Jamesco Inc., a Michigan corporation (of
which William R. James is the sole shareholder, sole executive officer and sole
director) and DKS Holdings, Inc., a Michigan corporation (of which Daniel K.
Shoemaker is the sole shareholder, sole executive officer and sole director). By
virtue of these arrangements, Messrs. James and Shoemaker (each a "Director")
perform functions for the Company which are similar to those generally performed
for a corporation by its board of directors. The Directors also constitute all
of the directors of Finance Corp. Through the General Partner, the persons named
below (collectively, the "Executive Officers") perform for the Company functions
similar to those generally performed for a corporation by executive officers
having the titles set forth below:

<Table>
<Caption>
                    NAME                      AGE            FUNCTIONS PERFORMED
                    ----                      ---            -------------------
<S>                                           <C>   <C>
William R. James............................  68    President and Chief Executive Officer
Daniel K. Shoemaker.........................  39    Chief Financial Officer
Scott A. Madison............................  44    Director of Engineering
</Table>

     Messrs. James and Shoemaker also constitute all of the executive officers
and directors of Finance Corp.

     William R. James has been the sole shareholder and sole director of
Jamesco, and Jamesco has been a partner in the General Partner, since the
Company was formed in 1988. He has performed the functions of President and
Chief Executive Officer for the Company throughout the same period. He has been
the President of Finance Corp. since its formation in 1997.

     In January 1986, Mr. James founded James Communications, Inc. ("JCI"), a
cable television company. He served as President and Chief Executive Officer of
JCI from its inception until it was sold in December 1987. From 1979 to 1986,
Mr. James was employed by Capital Cities Communications (which became Capital
Cities/ABC Inc.), during which time he oversaw the development of its cable
division ("Capital Cities Cable"). At the time he left Capital Cities
Communications to found JCI, Mr. James was an Executive Vice President of
Capital Cities Communications and the President of Capital Cities Cable. Prior
to joining Capital Cities Communications, Mr. James was a partner at Touche Ross
& Co. in charge of national manufacturing consulting. Mr. James is a graduate of
Princeton University and graduated from the Harvard University Business School
with distinction.

     Daniel K. Shoemaker was a partner in the General Partner from 1989 until
July 1, 1997, when he contributed his partnership interest to his wholly-owned
corporation, DKS Holdings, Inc. He has performed the functions of Chief
Financial Officer for the Company since 1993, and from 1988 to 1993, he served
as its Director of Management Information Systems. He has also been the
Treasurer and Secretary of Finance Corp. since its formation in 1997. From 1985
to 1988, Mr. Shoemaker was a systems engineer in a management consulting group
of Electronic Data Systems Corporation.

     Scott A. Madison has served as the Company's Director of Engineering since
1991. From 1988 to 1991 he was Director of Engineering for C4 Media Companies
(cable television operators), and from 1986 to 1988 he was a Regional Engineer
for C4 Media Cable South, L.P.I.

ITEM 11.  EXECUTIVE COMPENSATION

     The Company does not pay any compensation to the Directors or Executive
Officers. The Partnership Agreement provides compensation to the General Partner
for management services. Under the terms of the

                                        38
<PAGE>

Partnership Agreement, the General Partner is entitled to an annual management
fee equal to 4% of the Company's annual revenues, plus $5 multiplied by the
average aggregate number of subscribers to the Systems owned by the Company
during such year. The amount of the management fee was approximately $1,868,000,
$1,567,000 and $1,638,000 in 1999, 2000 and 2001, respectively. No other amounts
were paid to the General Partner by the Company in those years.

     Effective December 29, 1999, with the consent of James' Partnership
Advisory Board and more than 96% of the limited partners of James, the limited
partnership agreement was amended and restated in its entirety. In connection
with the adoption of the Partnership Agreement, and with the approval of James'
Partnership Advisory Board and its limited partners, (i) the incentive
compensation payable by James to the general partner pursuant to the 1994
General Partner Incentive Compensation Agreement dated December 29, 1994 was
converted to a 2% Class A limited partnership interest, and (ii) the general
partner was issued an option to acquire a Class B limited partnership interest
of not more than 3.125% and not less than 2.5%.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     James is the record and beneficial owner of all of the issued and
outstanding shares of Finance Corp. The following table sets forth, at December
31, 2001, the partnership interests in James beneficially owned by: (a) each
person known to James to beneficially own 5% or more of James' total partnership
interests; and (b) each Director, each Executive Officer, and all Directors and
Executive Officers as a group:

<Table>
<Caption>
                  NAME AND ADDRESS OF
                   BENEFICIAL OWNER                      TYPE OF INTEREST(1)   % OF CLASS
                  -------------------                    -------------------   ----------
<S>                                                      <C>                   <C>
William R. James(2)....................................  General partnership         *
38710 Woodward Avenue, Suite 180                         Limited partnership       2.9%
Bloomfield Hills, Michigan 48304
Daniel K. Shoemaker(3).................................  General partnership         *
38710 Woodward Avenue, Suite 180                         Limited partnership         *
Bloomfield Hills, Michigan 48304
Scott A. Madison.......................................  None
38710 Woodward Avenue, Suite 180
Bloomfield Hills, Michigan 48304
SCP Acquisition LLC....................................  Limited partnership      88.1%
767 Fifth Avenue, 45th Floor
New York, New York 10153
All Directors and Executive Officers as a group........  General partnership         *
                                                         Limited partnership       3.2%
</Table>

---------------

 *  Less than 1.00%.

(1) The general partnership interest represents 0.95% of the Company's total
    partnership interest.

(2) Reflects ownership of all of the capital stock of Jamesco Inc., which holds
    a 99.0% interest in the General Partner. Mr. James performs the functions of
    a Director of the Company. He also performs the functions of Chief Executive
    Officer of the Company.

(3) Reflects ownership of all of the capital stock of DKS Holdings, Inc., which
    holds a 1.0% interest in the General Partner. Mr. Shoemaker performs the
    functions of a Director of the Company. He also performs the functions of
    Chief Financial Officer of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Except as otherwise described in the response to "Item 11. Executive
Compensation," none.

                                        39
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

  EXHIBITS:

<Table>
<Caption>
ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE NUMBER                       EXHIBIT DESCRIPTION
----------------                       -------------------
<S>                <C>
(3)(a)/(10)(a)     Second Amended and Restated Agreement of Limited Partnership
                   of James Cable Partners, L.P. dated as of December 29, 1999,
                   as amended by a First Amendment to Second Amended and
                   Restated Agreement of Limited Partnership dated as of March
                   1, 2001 (incorporated by reference to Exhibit (3)(a)/(10)(a)
                   of the registrant's Annual Report on Form 10-K for the year
                   ended December 31, 2000 as filed with the Securities and
                   Exchange Commission).
(3)(b)             Certificate of Limited Partnership of the Company
                   (incorporated by reference to Exhibit 3.2 of the
                   registrant's Registration Statement on Form S-4 as filed
                   with the Securities and Exchange Commission on September 8,
                   1997 (registration no. 333-35183)).
(3)(c)             Articles of Incorporation of Finance Corp. (incorporated by
                   reference to Exhibit 3.3 of the registrant's Registration
                   Statement on Form S-4 as filed with the Securities and
                   Exchange Commission on September 8, 1997 (registration no.
                   333-35183)).
(3)(d)             Bylaws of Finance Corp. (incorporated by reference to
                   Exhibit 3.4 of the registrant's Registration Statement on
                   Form S-4 as filed with the Securities and Exchange
                   Commission on September 8, 1997 (registration no.
                   333-35183)).
(4)(a)             Indenture dated as of August 15, 1997 among the Company,
                   Finance Corp., and United States Trust Company of New York,
                   as Trustee (including form of Notes) (incorporated by
                   reference to Exhibit 4.1 of the registrant's Registration
                   Statement on Form S-4 as filed with the Securities and
                   Exchange Commission on September 8, 1997 (registration no.
                   333-35183)).
(4)(b)             Credit Agreement dated as of March 2, 2001 between James
                   Cable Partners, L.P., as Borrower, and the Lenders listed
                   therein (incorporated by reference to Exhibit (4)(b) of the
                   registrant's Annual Report on Form 10-K for the year ended
                   December 31, 2000 as filed with the Securities and Exchange
                   Commission).
(4)(c)             Company Security Agreement dated as of March 2, 2001 between
                   James Cable Partners, L.P., as Grantor, and GoldenTree Asset
                   Management LLC, as agent for the Lenders (incorporated by
                   reference to Exhibit (4)(c) of the registrant's Annual
                   Report on Form 10-K for the year ended December 31, 2000 as
                   filed with the Securities and Exchange Commission).
(4)(d)             Guaranty Agreement dated as of March 2, 2001 by James Cable
                   Finance Corp., in favor of each of the Lenders (incorporated
                   by reference to Exhibit (4)(d) of the registrant's Annual
                   Report on Form 10-K for the year ended December 31, 2000 as
                   filed with the Securities and Exchange Commission).
(4)(e)             Guarantor Security Agreement dated as of March 2, 2001
                   between James Cable Finance Corp., as Grantor, and
                   GoldenTree Asset Management LLC, as agent for the Lenders
                   (incorporated by reference to Exhibit (4)(e) of the
                   registrant's Annual Report on Form 10-K for the year ended
                   December 31, 2000 as filed with the Securities and Exchange
                   Commission).
(4)(h)             Option Agreement/Option Certificate dated as of December 29,
                   1999 by and between James Cable Partners, L.P. and James
                   Communications Partners (incorporated by reference to
                   Exhibit (4)(h) of the registrant's Annual Report on Form
                   10-K for the year ended December 31, 1999 as filed with the
                   Securities and Exchange Commission).
12                 Statement re computation of ratios.*
</Table>

                                        40
<PAGE>

<Table>
<Caption>
ITEM 601
REGULATION S-K
EXHIBIT
REFERENCE NUMBER                       EXHIBIT DESCRIPTION
----------------                       -------------------
<S>                <C>
21                 List of subsidiaries of James: James Cable Finance Corp.
                   (James Cable Finance Corp. has no subsidiaries.)
24                 Powers of Attorney.*
</Table>

---------------

* Filed herewith.

     Management contracts and compensatory plans or arrangements:

     The management contracts and compensatory plans or arrangements required to
be filed as exhibits and included in such list of exhibits are as follows:

<Table>
<S>               <C>
(3)(a)/(10)(a)    Second Amended and Restated Agreement of Limited Partnership
                  of James Cable Partners, L.P. dated as of December 29, 1999,
                  as amended by a First Amendment to Second Amended and
                  Restated Agreement of Limited Partnership dated as of March
                  1, 2001 (incorporated by reference to Exhibit (3)(a)/(10)(a)
                  of the registrant's Annual Report on Form 10-K for the year
                  ended December 31, 2000 as filed with the Securities and
                  Exchange Commission).
(3)(b)            Certificate of Limited Partnership of the Company
                  (incorporated by reference to Exhibit 3.2 of the
                  registrant's Registration Statement on Form S-4 as filed
                  with the Securities and Exchange Commission on September 8,
                  1997 (registration no. 333-35183)).
(4)(h)            Option Agreement/Option Certificate dated as of December 29,
                  1999 by and between James Cable Partners, L.P. and James
                  Communications Partners (incorporated by reference to
                  Exhibit (4)(h) of the registrant's Annual Report on Form
                  10-K for the year ended December 31, 1999 as filed with the
                  Securities and Exchange Commission).
</Table>

  REPORTS ON FORM 8-K:

     None.

                                        41
<PAGE>

        INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:

<Table>
<Caption>
                                                                10-K
                                                               REPORT
                                                               PAGE(S)
                                                               -------
<S>                                                            <C>
James Cable Partners, L.P. and Subsidiary:
  Independent Auditors' Report..............................   FS-1
  Consolidated balance sheets as of December 31, 2000 and
     2001...................................................   FS-2
  Consolidated statements of operations for each of the
     years ended December 31, 1999, 2000 and 2001...........   FS-3
  Consolidated statements of partners' deficit for each of
     the years ended December 31, 1999, 2000 and 2001.......   FS-4
  Consolidated statements of cash flows for each of the
     years ended December 31, 1999, 2000 and 2001...........   FS-5
  Notes to consolidated financial statements................   FS-6
James Cable Finance Corp.:
  Independent Auditors' Report..............................   FS-14
  Balance sheets as of December 31, 2000 and 2001...........   FS-15
  Notes to balance sheets...................................   FS-16
Financial Statement Schedules:
  Any schedules for which provision is made in Regulation S-X either
  (i) are not required under the related instructions or are
  inapplicable and, therefore, have been omitted, or (ii) the
  information required is included in the consolidated financial
  statements or the notes thereto that are a part hereof.
</Table>

                                        42
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Partners of
James Cable Partners, L.P.
Bloomfield Hills, Michigan

     We have audited the accompanying consolidated balance sheets of James Cable
Partners, L.P. (the "Partnership") (a Delaware Limited Partnership) as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, partners' deficit and cash flows for each of the three years in the
period ended December 31, 2001. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of James Cable
Partners, L.P. at December 31, 2001 and 2000 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in the
United States of America.

                                          DELOITTE & TOUCHE LLP
                                          March 1, 2002
                                          Detroit, Michigan

                                       FS-1
<PAGE>

                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                     DECEMBER 31,
                                                              ---------------------------
                                                                  2000           2001
                                                              ------------   ------------
<S>                                                           <C>            <C>
                           ASSETS
Cash and cash equivalents...................................  $  1,098,890   $    567,404
Accounts receivable -- Subscribers (net of allowance for
  doubtful accounts of $15,878 in 2000 and $15,852 in
  2001).....................................................     3,629,802      4,024,248
Prepaid expenses and other assets (Note 5)..................       151,044        549,900
Property and equipment:
  Cable television distribution systems and equipment.......    94,848,859    104,257,833
  Land and land improvements................................       309,378        333,958
  Buildings and improvements................................     1,043,325      1,053,242
  Office furniture and fixtures.............................     3,475,706      4,549,932
  Vehicles..................................................     3,999,658      5,083,292
                                                              ------------   ------------
     Total..................................................   103,676,926    115,278,257
  Less accumulated depreciation.............................   (77,702,751)   (85,999,799)
                                                              ------------   ------------
     Total..................................................    25,974,175     29,278,458
Deferred financing costs (net of accumulated amortization of
  $2,105,278 in 2000 and $2,407,372 in 2001)................     2,105,884      2,094,469
Intangible assets, net (Note 2).............................    14,347,214     12,479,277
Deposits....................................................        13,942         65,260
                                                              ------------   ------------
     Total assets...........................................  $ 47,320,951   $ 49,059,016
                                                              ============   ============
             LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
  Debt (Note 3).............................................  $102,500,000   $111,500,000
  Accounts payable..........................................       116,293        701,812
  Accrued expenses (Note 5).................................     2,432,148      2,739,611
  Accrued interest on debt (Note 3).........................     4,031,249      3,547,499
  Unearned revenue..........................................     3,136,069      3,411,759
  Subscriber deposits.......................................        19,679         17,703
                                                              ------------   ------------
     Total..................................................   112,235,438    121,918,384
Commitments and contingencies (Notes 4 and 6)...............            --             --
Partners' deficit:
  Limited Partners ("L.P.").................................   (58,727,563)   (66,597,103)
  General Partner ("G.P.")..................................    (6,186,924)    (6,262,265)
                                                              ------------   ------------
     Total..................................................   (64,914,487)   (72,859,368)
                                                              ------------   ------------
     Total liabilities and partners' deficit................  $ 47,320,951   $ 49,059,016
                                                              ============   ============
</Table>

                See notes to consolidated financial statements.
                                       FS-2
<PAGE>

                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31,
                                                     ------------------------------------------
                                                         1999           2000           2001
                                                     ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
Revenues...........................................  $ 37,371,831   $ 37,893,244   $ 39,807,095
System operating expenses (excluding depreciation
  and amortization)................................    20,444,576     22,010,978     25,063,710
Non-system operating expenses:
  Management fee (Note 5)..........................     1,868,165      1,566,644      1,638,487
  Other............................................       963,114        568,059        452,641
                                                     ------------   ------------   ------------
     Total non-system operating expenses...........     2,831,279      2,134,703      2,091,128
Depreciation and amortization......................     8,013,278      9,163,834     10,164,982
                                                     ------------   ------------   ------------
     Operating income..............................     6,082,698      4,583,729      2,487,275
Interest and other:
  Interest expense.................................   (11,158,350)   (11,309,334)   (12,369,276)
  Interest income..................................       138,524         96,394         28,718
  General partner incentive payment (Note 8).......      (540,000)             0              0
  Other (Note 3)...................................      (109,063)      (108,681)       (16,910)
                                                     ------------   ------------   ------------
     Total interest and other......................   (11,668,889)   (11,321,621)   (12,357,468)
                                                     ------------   ------------   ------------
Loss before gains on sales of cable systems and
  extraordinary item...............................    (5,586,191)    (6,737,892)    (9,870,193)
Gains on sales of cable systems (Note 7)...........    15,885,685              0              0
Extraordinary gain due to extinguishment of debt
  (Note 3).........................................             0              0      1,925,312
                                                     ------------   ------------   ------------
     Net income (loss).............................  $ 10,299,494   $ (6,737,892)  $ (7,944,881)
                                                     ============   ============   ============
</Table>

                See notes to consolidated financial statements.
                                       FS-3
<PAGE>

                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT

<Table>
<Caption>
                                                        LIMITED        GENERAL
                                                        PARTNERS       PARTNER        TOTAL
                                                      ------------   -----------   ------------
<S>                                                   <C>            <C>           <C>
Balance, December 31, 1998..........................  $(62,650,960)  $(6,371,350)  $(69,022,310)
  Net income........................................     9,796,137       503,357     10,299,494
  Capital contribution..............................       540,000             0        540,000
                                                      ------------   -----------   ------------
Balance, December 31, 1999..........................   (52,314,823)   (5,867,993)   (58,182,816)
  Net loss..........................................    (6,418,961)     (318,931)    (6,737,892)
  Capital contribution..............................         6,221             0          6,221
                                                      ------------   -----------   ------------
Balance, December 31, 2000..........................   (58,727,563)   (6,186,924)   (64,914,487)
  Net loss..........................................    (7,869,540)      (75,341)    (7,944,881)
                                                      ------------   -----------   ------------
Balance, December 31, 2001..........................  $(66,597,103)  $(6,262,265)  $(72,859,368)
                                                      ============   ===========   ============
</Table>

                See notes to consolidated financial statements.
                                       FS-4
<PAGE>

                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                       -----------------------------------------
                                                           1999          2000           2001
                                                       ------------   -----------   ------------
<S>                                                    <C>            <C>           <C>
Cash Flows from Operating Activities:
  Net income (loss)..................................  $ 10,299,494   $(6,737,892)  $ (7,944,881)

  Adjustments to reconcile net income (loss) to net
     cash from operating activities:
     Depreciation....................................     5,534,440     7,016,364      8,297,048
     Amortization....................................     2,478,838     2,147,470      1,867,934
     Noncash interest expense........................       630,885       630,885        826,807
     Gains on sales of cable systems.................   (15,885,685)
     Noncash incentive payment.......................       540,000
     Capital contribution............................                       6,221
     Extraordinary gain on extinguishment of debt....                                 (1,925,312)
     (Increase) decrease in assets:
       Accounts receivable...........................        63,062      (273,358)      (394,446)
       Prepaid expenses..............................       (40,209)       29,591       (398,856)
       Deposits......................................        (7,610)        6,900        (51,318)
     Increase (decrease) in liabilities:
       Accounts payable..............................       (34,070)     (156,295)       585,519
       Accrued expenses..............................       168,200      (152,519)       307,463
       Accrued interest on debt......................             0             0       (483,750)
       Unearned revenue..............................       (39,434)       63,764        275,690
       Subscriber deposits...........................        (1,973)       (1,772)        (1,976)
                                                       ------------   -----------   ------------
          Total adjustments..........................    (6,593,556)    9,317,251      8,904,803
                                                       ------------   -----------   ------------
          Net cash flows from operating activities...     3,705,938     2,579,359        959,922
Cash Flows from (used in) Investing Activities:
  Purchase of Edge Cable T.V. .......................      (750,974)
  Purchase of Internet businesses....................      (555,720)      (41,600)
  Purchase of Lusk, Wyoming fiber....................                    (225,000)
  Net proceeds from sales of systems.................    16,745,000
  Additions to property and equipment................   (11,767,017)   (9,056,289)   (11,601,331)
                                                       ------------   -----------   ------------
          Net cash flows from (used in) investing
            activities...............................     3,671,289    (9,322,889)   (11,601,331)
Cash Flows (used in) from Financing Activities:
  Principal payments on debt.........................    (3,500,000)   (1,500,000)    (2,500,000)
  Proceeds from debt borrowings......................                   4,000,000     23,500,000
  Costs associated with credit facility amendment....                                 (1,170,077)
  Purchase of 10 3/4% Senior Notes...................                                 (9,720,000)
                                                       ------------   -----------   ------------
          Net cash flows (used in) from financing
            activities...............................    (3,500,000)    2,500,000     10,109,923
                                                       ------------   -----------   ------------
Net Increase (Decrease) in Cash and Cash
  Equivalents........................................     3,877,227    (4,243,530)      (531,486)
Cash and Cash Equivalents, Beginning of Year.........     1,465,193     5,342,420      1,098,890
                                                       ------------   -----------   ------------
Cash and Cash Equivalents, End of Year...............  $  5,342,420   $ 1,098,890   $    567,404
                                                       ============   ===========   ============

Supplemental Disclosure of Cash Flow
  Information -- Cash paid for interest during the
  period (Net of amounts capitalized and amounts paid
  on Company owned Senior Notes).....................  $ 10,544,612   $10,644,220   $ 12,086,188
                                                       ============   ===========   ============
</Table>

                See notes to consolidated financial statements.
                                       FS-5
<PAGE>

                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS -- James Cable Partners, L.P., a Delaware limited
partnership ("James"), was formed on January 12, 1988. James has system
locations in Alabama, Colorado, Wyoming, Oklahoma, Texas, Florida, Tennessee,
Louisiana and Georgia. James' principal investment objective is to realize
capital appreciation through the acquisition, ownership, control, and operations
of cable television systems.

     James Cable Finance Corp., a Michigan corporation ("Finance Corp."), was
organized on June 19, 1997 and became a wholly-owned subsidiary of James for the
sole purpose of acting as co-issuer with James of the Notes referred to below in
Note 3. References to the "Company" herein are to James and Finance Corp.
consolidated, or to James prior to the organization of Finance Corp., as
appropriate.

     PARTNERSHIP AGREEMENT -- The following represents certain provisions of the
James Cable Partners, L.P. Second Amended and Restated Agreement of Limited
Partnership dated as of December 29, 1999, as amended by a First Amendment to
Second Amended and Restated Agreement of Limited Partnership dated as of March
1, 2001 (the "Partnership Agreement"):

     TERM OF AGREEMENT -- Unless its term is extended as provided in the
Partnership Agreement, James will be dissolved upon the earliest to occur of (i)
December 31, 2005, (ii) a determination by the general partner that James should
be dissolved, with the approval of 51% of the Class A Limited Partner interests,
(iii) the sale or disposition by James of substantially all of its assets, (iv)
the consent of holders of 51% of the Class A Limited Partner interests, (v) the
removal of the general partner pursuant to the terms of the Partnership
Agreement, or (vi) the bankruptcy, insolvency, dissolution or withdrawal of the
general partner.

     VOTING RIGHTS -- Except as to matters for which consent or approval is
expressly required under the Partnership Agreement, the Limited Partners have no
right to vote on any partnership matters. Where a vote or consent is required,
each Partner is entitled to vote based on its percentage interest in James.

     CONTRIBUTIONS -- Under the Partnership Agreement, the partners have made
certain contributions to James. The general partner is not required to lend or
advance any funds to James or to make any additional capital contributions to
James. No limited partner is required to lend any funds to James or to make any
capital contributions to James. The Partnership Agreement provides that no
partner of James shall have the right to withdraw or demand the return of its
capital contribution during the term of James' existence. The general partner is
not personally liable for the return of the capital contributions made by
Limited Partners.

     DISTRIBUTIONS -- James has not made distributions to any of the partners,
cash or property, from the date of inception to the current date. While James
does not have plans to make any distributions in the near future, any
distributions made would be subject to the provisions of both the Partnership
Agreement and James' various debt agreements.

     PROPERTY, PLANT AND EQUIPMENT are recorded at cost. For the years ended
December 31, 2000 and 2001, the Company capitalized interest of $211,263 and
$181,245, respectively. Depreciation is computed using accelerated methods.
Estimated useful lives for major categories are as follows:

<Table>
<Caption>
                                                                 YEARS
                                                              -----------
<S>                                                           <C>
Buildings and improvements..................................  31.5 and 39
Cable television distribution systems.......................       7
Office furniture and fixtures...............................     5 - 7
Vehicles....................................................       5
</Table>

     INTANGIBLE ASSETS consist of subscriber lists, franchise operating rights
and covenants not to compete acquired in connection with acquisitions. Also
included is goodwill, which is the amount by which the cost of acquisitions
exceeded the fair values assigned to assets acquired. Intangible assets are
amortized using the straight-line method over periods up to 40 years.

                                       FS-6
<PAGE>
                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     IMPAIRMENT ACCOUNTING -- The Company reviews the recoverability of its
long-lived and intangible assets, when events or changes in circumstances occur
that indicate that the carrying value of the assets may not be recoverable. The
measurement of possible impairment is based on the Company's ability to recover
the carrying value of the asset from the expected future cash flows. If an
impairment loss existed, the amount of the loss would be recorded in the
consolidated statements of operations. It is possible that future events or
circumstances could cause these estimates to change.

     DEFERRED FINANCING COSTS in connection with the refinancing (Note 3) are
being amortized on the straight-line method over 3 years for the credit facility
and 7 years for the 10 3/4% Senior Notes due 2004.

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

     PROFITS AND LOSSES are generally allocated in accordance with James'
Partnership Agreement. Currently, profits and losses are allocated approximately
99.0% to the limited partners and 1.0% to the general partner.

     STATEMENT OF CASH FLOWS -- For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with maturities
of ninety days or less at date of purchase to be cash equivalents.

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

     INCOME TAXES -- The financial statements include only those assets,
liabilities and results of operations of the Company which relate to the
business of James Cable Partners, L.P. No recognition has been made of income
taxes since these taxes are the personal responsibility of the partners.

     IMPACT OF RECENTLY ADOPTED ACCOUNTING PRINCIPLES -- In June 1998, Statement
of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was issued. In June 2000, the FASB issued
SFAS No. 138, which amended certain provisions of SFAS No. 133. SFAS No. 133, as
amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The standard was effective beginning in the
first quarter of the Company's 2001 fiscal year. The adoption of SFAS No. 133,
as amended, did not have an impact on the Company's financial position or
results of operations.

     On July 20, 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 requires that goodwill and other intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually. Amortization of goodwill, including goodwill
recorded in past business combinations, will cease upon adoption of the
statement. SFAS No. 142 will be effective for fiscal years beginning after
December 15, 2001. The Company will adopt SFAS No. 142 beginning in the first
quarter of 2002 and is currently evaluating the impact that this standard will
have on its financial position and/or results of operations. The amount of
amortization in 2001 that would have been excluded under SFAS No. 142 was
approximately $186,000.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." The new standard requires one
model of accounting for long-lived assets to be disposed of, and broadens the
definition of discontinued operations to include a component of a segment. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001. The
Company does not expect the adoption of SFAS No. 144 to have a significant
impact on its financial position or results of operations.

                                       FS-7
<PAGE>
                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At the November 2001 meeting of the Emerging Issues Task Force, the FASB
staff announced their position regarding the classification of reimbursements
for out-of-pocket expenses. The FASB staff believes that these reimbursements
should be classified as revenue in the statements of operations. The staff
announcement, which is codified in EITF Topic No. D-103, is effective for fiscal
years beginning after December 15, 2001 and will require comparative financial
statements for prior periods to be reclassified. The Company does not expect the
adoption of this announcement to have a significant impact on its financial
position or results of operations.

     FAIR VALUES OF FINANCIAL INSTRUMENTS -- The carrying values of cash and
cash equivalents, accounts receivable, accounts payable and the Credit Facility
(Note 3) approximate fair market value due to the short-term of maturities of
these instruments.

     The estimated fair value of the Company's Notes (Note 3) have been
determined using available market information. However, considerable judgement
is required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein may not be indicative of the amounts
that the Company could realize in a current market exchange. The use of
different assumptions or valuation methodologies may have a material effect on
the estimated fair value amounts. The fair value of the Notes was estimated
using quoted market prices (in millions).

<Table>
<Caption>
                                                      DECEMBER 31, 2000    DECEMBER 31, 2001
                                                      ------------------   ------------------
                                                      CARRYING     FAIR    CARRYING     FAIR
                                                       AMOUNT     VALUE     AMOUNT     VALUE
                                                      ---------   ------   ---------   ------
<S>                                                   <C>         <C>      <C>         <C>
The Notes...........................................   $100.0     $63.0      $88.0     $62.0
</Table>

2.  INTANGIBLE ASSETS

     Intangible assets consist of the following:

<Table>
<Caption>
                                                               2000           2001
                                                           ------------   ------------
<S>                                                        <C>            <C>
Franchise operating rights...............................  $ 52,995,548   $ 52,995,548
Subscriber lists.........................................    12,122,320     12,122,320
Covenants not to compete.................................    13,104,200     13,104,200
Goodwill.................................................    16,585,782     16,585,782
Organization costs.......................................     1,248,020      1,248,020
                                                           ------------   ------------
  Total..................................................    96,055,870     96,055,870
Less accumulated amortization............................   (81,708,656)   (83,576,593)
                                                           ------------   ------------
     Total...............................................  $ 14,347,214   $ 12,479,277
                                                           ============   ============
</Table>

3.  DEBT

     At December 31, 2001 the Company's total debt was $111.5 million, comprised
of $23.5 million borrowed under its secured credit facility and $88 million due
under the Notes (see discussion below for more details on both the credit
facility and the Notes). As a result of this substantial debt, a significant
portion of the Company's cash flow from operations must be used to pay interest
expense. While the Company believes that it will be able to generate sufficient
cash flow to cover this interest expense in the foreseeable future, there can be
no assurances that this will be the case.

     In an effort to mitigate the possibility that it will be unable to make its
required interest payments, the Company plans to limit its capital spending on
rebuild/upgrade projects and other nonessential capital projects. The Company
believes that these limits, along with improved cash flow from operations, will
improve the likelihood that it can generate sufficient cash flow to cover the
interest expense.

                                       FS-8
<PAGE>
                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In addition, the Company intends to increase the rates it charges for
certain premium, digital and Internet services on April 1, 2002. While these
rate increases are not a direct result of the Company's current liquidity, they
should help to increase its cash flows in the near term and throughout the
maturity of the debt.

     Debt consists of the following:

<Table>
<Caption>
                                                               2000           2001
                                                           ------------   ------------
<S>                                                        <C>            <C>
10 3/4% Series B Senior Notes due 2004...................  $100,000,000   $ 88,000,000
Bank Credit Facility.....................................     2,500,000     23,500,000
                                                           ------------   ------------
Total....................................................  $102,500,000   $111,500,000
                                                           ============   ============
</Table>

     THE NOTES -- The Company has outstanding an aggregate principal amount of
$88,000,000 of its 10 3/4% Series B Senior Notes due 2004 (the "Notes"). The
Notes are general senior unsecured obligations of the Company that mature on
August 15, 2004 and rank equally in right of payment with all other existing and
future unsubordinated indebtedness of the Company and senior in right of payment
to any subordinated obligations of the Company. The Notes are effectively
subordinated in right of payment to all secured indebtedness of the Company.
Interest on the Notes accrues at the rate of 10 3/4% per annum and is payable
semi-annually in cash in arrears on February 15 and August 15, which commenced
on February 15, 1998, to holders of record on the immediately preceding February
1 and August 1. Interest on the Notes accrues from the most recent date to which
interest has been paid. Interest is computed on the basis of a 360-day year
comprised of twelve 30-day months. During the period from February 15, 2001 to
March 2, 2001, the Company was in default of its obligation to pay interest on
the Notes. However, this default was cured through a credit facility refinancing
discussed below.

     There is no public market for the Notes. The Company has not and does not
intend to list the Notes on any securities exchange or to seek approval for
quotation through any automated quotation system.

     THE CREDIT FACILITY -- During the period from December 31, 2000 to March 2,
2001, the Company was in default of a debt to EBITDA ratio covenant under its
credit facility. On March 2, 2001, the Company amended and restated its secured
credit facility with new lenders which will permit it to borrow up to $30
million. As of February 13, 2002 approximately $28 million of the available
credit has been drawn down to pay interest on the Company's Series B Senior
Notes and to repurchase $12 million (face value) of the Notes from affiliates of
the lenders. The remaining credit available may be used, among other things, to
(i) provide for working capital and general partnership purposes, (ii) make
acquisitions of cable television systems, (iii) pay future installments of
interest on the Company's Series B Senior Notes, and (iv) to finance capital
improvements.

     The Credit Facility, which is secured by a first priority lien on and
security interest in substantially all of the assets of the Company, accrues
interest at a fixed rate of 11.5% which is payable on a quarterly basis. The
Credit Facility contains certain covenants, and provides for certain events of
default, customarily contained in facilities of a similar type. Among other
things, the Credit Facility requires the Company to (i) maintain the ratio of
its total debt to annualized six-month EBITDA of no more than 9.25 to 1 and (ii)
maintain a senior debt ratio (that is, the ratio of debt under the Credit
Facility to annualized six-month EBITDA) of no more than 2.40 to 1. In addition,
the Credit Facility imposes limitations on the amount of capital expenditures
that the Company can make for the remainder of the term. Generally, capital
expenditures are limited to $12 million per annum plus any unused portion of the
capital expenditure allowance from the previous year. At December 31, 2001 the
Company was in compliance with all of the above covenants.

                                       FS-9
<PAGE>
                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As discussed above, the Company purchased $12 million (face amount) of its
10 3/4% Senior Notes from affiliates of its credit facility lenders. These Notes
were purchased at a discounted price of .81 and, thus, the Company recognized an
extraordinary gain on the extinguishment of debt as follows:

<Table>
<S>                                                           <C>         <C>
Face value of Notes purchased...............................              $12,000,000
Purchase price of Notes.....................................  9,720,000
Unamortized value of costs associated with the Notes........    354,688
                                                              ---------
     Subtotal...............................................               10,074,688
                                                                          -----------
Extraordinary gain on extinguishment of debt................              $ 1,925,312
                                                                          ===========
</Table>

     In addition, the Company has paid administrative and other fees to the
debtholders for maintenance and services related to the debt. Amounts paid in
the years ended December 31, 1999, 2000 and 2001 were $110,818, $109,531 and
$16,910, respectively.

4.  COMMITMENTS AND CONTINGENCIES

     The Company leases office space under operating leases which expire at
varying dates through 2004. Total rental expense, including month-to-month
rentals, was approximately $113,600, $112,600 and $125,700 for the years ended
December 31, 1999, 2000 and 2001, respectively.

     The Company is committed to monthly pole rentals of $48,469 as of December
31, 2001, to various utilities and cities. These agreements are subject to
termination rights by both parties.

5.  RELATED PARTY TRANSACTIONS

     The Company has an agreement with the general partner to operate and manage
its cable systems. The fee for management services, in accordance with the
Company's Partnership Agreement, is equal to 4% of annual revenues plus $5.00
per average annual subscriber. Management fees paid by the Company to the
general partner amounted to $1,868,165, $1,566,644 and $1,638,487 in the years
ended December 31, 1999, 2000 and 2001, respectively.

     Included in prepaid expenses and other assets are amounts receivable from
related parties which total $18,653 and $20,292 for the years ended December 31,
2000 and 2001, respectively.

     Included in accrued expenses are amounts payable to related parties which
total $1,632 and $0 for the year ended December 31, 2000 and 2001, respectively.

6.  REGULATORY AND LEGAL MATTERS

     The cable television industry is subject to extensive governmental
regulation on the federal, state and local levels (but principally by the
Federal Communications Commission ("FCC") and by local franchising authorities).
Many aspects of such regulation have recently been extensively revised and are
currently the subject of judicial proceedings and administrative rulemakings,
which are potentially significant to the Company. In this regard, the Company
believes that the regulation of cable television systems, including the rates
charged for cable services, remains a matter of interest to Congress, the FCC
and local regulatory officials. Critics of the cable television industry
continue to seek to maintain or even tighten cable rate regulation in the
absence of widespread effective competition. Accordingly, no assurance can be
given as to what future actions such parties or the courts may take or the
effect thereof on the Company.

     Under the FCC's rate regulations, most cable systems were required to
reduce their basic service and cable programming service tiers ("CPST") rates in
1993 and 1994, and have since had their rate increases governed by a complicated
price cap scheme. Operators also have the opportunity of bypassing this

                                      FS-10
<PAGE>
                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

"benchmark" regulatory scheme in favor of traditional "cost of service" in cases
where the latter methodology appears favorable. The FCC also established a
vastly simplified cost of service methodology for small cable companies. The
1996 Telecommunications Act terminated rate regulation of the CPST for all cable
systems on March 31, 1999, however, rate regulation as described below continues
to apply to the basic service tier.

     The Company, which qualifies as a small cable company under FCC rules, has
elected to rely on the cost-of service rules as and when the Systems are
required to justify their rates for regulated services and, therefore, has not
implemented the rate reductions that would otherwise have been required if it
were subject to the FCC's benchmarks. Under the cost-of-service rules applicable
to small cable companies, eligible systems can establish permitted rates under a
simple formula that considers total operating expenses (including amortization
expenses), net rate base, rate of return, channel count and subscribers. If the
per channel rate resulting from these inputs for a cable system is no more than
$1.24, the cable system's rates will be presumed reasonable. If the formula
generated rate exceeds the $1.24, the burden is on the cable operator to
establish the reasonableness of its calculations.

     Substantially all of the Company's rates are currently under the $1.24 per
channel level, and the Company believes that all of its rates in excess of the
$1.24 per channel level are reasonable using the formula described above.
However, FCC rules permit local franchise authorities to review basic service
rates, and under certain circumstances, challenge CPST rates at the FCC. An
adverse ruling in any such proceeding could require the Company to reduce its
rates and pay refunds. A reduction in the rates it charges for regulated
services or the requirement that it pay refunds could have a material adverse
effect on the Company. Once the maximum permitted rate allowed by FCC rules is
being charged by the Company in regulated communities, future rate increases may
not exceed an inflation-indexed amount, plus increases in certain costs beyond
the cable operator's control, such as taxes, franchise fees and increased
programming costs.

     In addition, certain provisions of the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act") could in the future have a
material adverse effect on the Company's business. In particular, the 1992 Cable
Act conveyed to broadcasters the right generally to elect either to require (i)
the local cable operator to carry their signal or (ii) that such operator obtain
the broadcaster's consent before doing so. To date, compliance with these
provisions has not had a material effect on the Company, although this result
may change in the future depending on such factors as market conditions, channel
capacity and similar matters when such arrangements are renegotiated. In this
regard, a rulemaking is now pending at the FCC regarding the imposition of dual
digital and analog must carry provisions.

     On August 18, 2000, the Company, through its membership in the Alabama
Cable Telecommunications Association, joined other Alabama cable operators in a
pole attachment Complaint against Alabama Power Company ("APC") which was filed
with the FCC's Cable Service Bureau (the "Bureau"). The complaint was initiated
as a result of APC's imposition of significant pole rental rate increases (more
than 500% for the Company), APC's refusal to engage in good faith negotiations
and the threat, by APC, to terminate existing pole attachment agreements. The
Bureau granted the Alabama cable operators, including the Company, all relief
requested in the Complaint. Specifically, the Bureau ruled that APC had failed
to make a persuasive argument on the merits that lawful just compensation was
greater than the current rate paid by the cable operators, including the
Company, under existing pole attachment agreements. Thus, the Bureau declared
APC's new pole attachment rental rates of $38.81 void and reinstated the $7.47
rate previously in effect, as well as other terms and conditions that APC had
sought to terminate. The Bureau also placed the parties under a bargaining order
requiring good faith negotiation of a new pole attachment agreement and a new
rental rate utilizing the FCC's established formulas.

     As expected, on September 11, 2000, APC appealed the Bureau's decision to
the FCC's five Commissioner panel. On May 25, 2001 the Panel issued a final
decision affirming the earlier order issued by the Bureau.

                                      FS-11
<PAGE>
                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In addition, on September 12, 2000 and May 25, 2001, APC appealed the
decisions discussed above to the U.S. Court of Appeals for the Eleventh Circuit,
which consolidated the appeals and has agreed to hear the case. Both parties
submitted full briefs and, on October 31, 2001, presented their oral arguments
before the court. A final decision from the court is not expected until 2002.

     It is also important to note that APC is not the only utility company to
propose significant pole attachment rental rate increases. For instance, Georgia
Power Company, which also provides pole attachments to the Company, has proposed
an even greater increase than APC, as well as an onerous new pole agreement.
Both the rates and the agreement are currently being challenged at the FCC,
although the Company is not involved as they are with the APC proceedings.
Depending on the final outcome of these proceedings, as well as others that may
arise in the future involving other utility companies, the Company could
experience a significant increase in its pole attachment rental costs and the
results of its operations could be negatively impacted if enough of its pole
attachment rental rates increased at this pace.

     On October 31, 2001, Echostar Satellite Corporation ("ESC") filed a suit
against James Cable Partners, L.P. in U.S. District Court for the District of
Colorado alleging, among other things, unfair trade practices, and violations of
the Federal Communications Act of 1934 and The Digital Millennium Copyright Act.

     In February 2002, the parties agreed to settle the case and entered into a
Confidential Settlement Agreement, which requires the Company to pay ESC
monetary consideration. The parties filed a Consent Motion for Entry of Final
Judgment and Permanent Injunction. On February 25, 2002, the court granted the
Consent Motion and entered the Final Judgment and Permanent Injunction as
submitted by the parties. The Final Judgment and Permanent Injunction included
only prospective injunctive relief and did not include any monetary judgment.
Under the Injunction, the Company will be enjoined in the future from taking
certain actions relating to Echostar's signals and satellites.

     The Company is a party to ordinary and routine litigation proceedings that
are incidental to the Company's business. Management believes that the outcome
of all pending legal proceedings will not, in the aggregate, have a material
adverse effect of the financial condition or results of operations of the
Company.

7.  SALES OF CABLE SYSTEMS

     On March 5, 1999, pursuant to an Asset Purchase Agreement dated as of July
31, 1998, the Company sold its cable television systems, serving approximately
9,500 subscribers, in Pickett County, Scott County, Morgan County, Roane County,
Fentress County and Cumberland County, Tennessee to Rapid Communications, L.P.
for $14.7 million in cash.

     On March 31, 1999, pursuant to an Asset Purchase Agreement dated as of
February 2, 1999, the Company sold its cable television system, serving
approximately 1,700 subscribers, in Forsyth and Monroe County, Georgia to the
City of Forsyth for $2.3 million in cash.

     The net gains on the above sales are calculated as follows:

<Table>
<Caption>
                                                  TENNESSEE     FORSYTH       TOTALS
                                                 -----------   ----------   -----------
<S>                                              <C>           <C>          <C>
Net sale proceeds..............................  $14,453,000   $2,292,000   $16,745,000
Basis of assets sold...........................      570,876      288,439       859,315
                                                 -----------   ----------   -----------
Gain on sale...................................  $13,882,124   $2,003,561   $15,885,685
                                                 ===========   ==========   ===========
</Table>

                                      FS-12
<PAGE>
                   JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     The following is a condensed summary of the Company's unaudited quarterly
results of operations for the years ended December 31, 2001 and 2000.

<Table>
<Caption>
                                                         YEAR ENDED DECEMBER 31, 2001
                                                ----------------------------------------------
                                                FIRST    SECOND     THIRD    FOURTH     TOTAL
                                                ------   -------   -------   -------   -------
                                                           (IN MILLIONS OF DOLLARS)
<S>                                             <C>      <C>       <C>       <C>       <C>
Revenues......................................  $9,881   $ 9,950   $ 9,886   $10,090   $39,807
System operating expenses (excluding
  depreciation and amortization)..............   5,966     6,156     6,495     6,447    25,064
Net income (loss).............................      94    (2,192)   (2,834)   (3,013)   (7,945)
</Table>

<Table>
<Caption>
                                                        YEAR ENDED DECEMBER 31, 2000
                                               -----------------------------------------------
                                                FIRST    SECOND     THIRD    FOURTH     TOTAL
                                               -------   -------   -------   -------   -------
                                                          (IN MILLIONS OF DOLLARS)
<S>                                            <C>       <C>       <C>       <C>       <C>
Revenues.....................................  $ 9,415   $ 9,522   $ 9,407   $ 9,549   $37,893
System operating expenses (excluding
  depreciation and amortization).............    5,394     5,416     5,521     5,680    22,011
Net loss.....................................   (1,473)   (1,447)   (1,856)   (1,962)   (6,738)
</Table>

     First quarter 2001 net income included an extraordinary gain due to debt
extinguishment of $1.9 million (see Note 3).

                                      FS-13
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
James Cable Finance Corp.
Bloomfield Hills, Michigan

     We have audited the accompanying balance sheets of James Cable Finance
Corp. (a wholly owned subsidiary of James Cable Partners, L.P., a Delaware
Limited Partnership) (the "Finance Corp.") as of December 31, 2001 and 2000.
These balance sheets are the responsibility of the Finance Corp.'s management.
Our responsibility is to express an opinion on these balance sheets based on our
audits.

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

     In our opinion, such balance sheets present fairly, in all material
respects, the financial position of James Cable Finance Corp. at December 31,
2001 and 2000 in conformity with accounting principles generally accepted in the
United States of America.

                                          DELOITTE & TOUCHE LLP
                                          March 1, 2002
                                          Detroit, Michigan

                                      FS-14
<PAGE>

                           JAMES CABLE FINANCE CORP.
  (A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
                                  PARTNERSHIP)

                                 BALANCE SHEETS

<Table>
<Caption>
                                                               DECEMBER 31,
                                                              ---------------
                                                               2000     2001
                                                              ------   ------
<S>                                                           <C>      <C>
                           ASSETS
Cash and cash equivalents...................................  $1,000   $1,000
                                                              ======   ======
                    SHAREHOLDER'S EQUITY
Shareholder's equity -- Common stock, no par value (1,000
  shares issued and outstanding)............................  $1,000   $1,000
                                                              ======   ======
</Table>

                          See notes to balance sheets.
                                      FS-15
<PAGE>

                           JAMES CABLE FINANCE CORP.
  (A WHOLLY-OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
                                  PARTNERSHIP)

                            NOTES TO BALANCE SHEETS

1.  ORGANIZATION

     James Cable Finance Corp. ("Finance Corp."), a Michigan corporation, is a
wholly-owned subsidiary of James Cable Partners, L.P. ("James"), a Delaware
limited partnership, and was organized on June 19, 1997 (the "Date of
Inception") for the sole purpose of acting as co-issuer with James of $100
million aggregate principal amount of the 10 3/4% Senior Notes. Finance Corp.
has nominal assets and does not have (and is not expected to have) any material
operations.

2.  STATEMENTS OF OPERATIONS, SHAREHOLDER'S EQUITY AND CASH FLOWS

     Since there were no operations in the Finance Corp. from the Date of
Inception through December 31, 2001, a Statement of Operations, a Statement of
Shareholder's Equity and a Statement of Cash Flows have not been presented.

                                      FS-16
<PAGE>

                           JAMES CABLE PARTNERS, L.P.
                                   SIGNATURES

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

                                          JAMES CABLE PARTNERS, L.P.

                                          By: James Communications Partners
                                              General Partner

                                          By: Jamesco, Inc.
                                              Partner

                                          By:     /s/ WILLIAM R. JAMES
                                            ------------------------------------
                                                      William R. James
                                                         President
Date: March 27, 2002

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

<Table>
<Caption>
                SIGNATURE                                   TITLE                         DATE
                ---------                                   -----                         ----
<S>                                         <C>                                      <C>



           /s/ WILLIAM R. JAMES             Person performing functions similar to   March 27, 2002
------------------------------------------   a director and a principal executive
             William R. James                              officer




         /s/ DANIEL K. SHOEMAKER            Person performing functions similar to   March 27, 2002
------------------------------------------    a director, a principal financial
           Daniel K. Shoemaker               officer, and a principal accounting
                                                           officer
</Table>

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

     (c) No annual report to security holders covering the registrants' last
         fiscal year or proxy material has been sent to security holders. If
         such report or proxy material is furnished to security holders
         subsequent to the filing of this form, the registrants will furnish
         copies of such material to the Commission when it is sent to security
         holders.
<PAGE>

                           JAMES CABLE FINANCE CORP.
                                   SIGNATURES

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

                                          JAMES CABLE FINANCE CORP.

                                          By:     /s/ WILLIAM R. JAMES
                                            ------------------------------------
                                                      William R. James
                                                         President
Date: March 27, 2002

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

<Table>
<Caption>
                SIGNATURE                                   TITLE                         DATE
                ---------                                   -----                         ----
<S>                                         <C>                                      <C>



           /s/ WILLIAM R. JAMES                      Director; President             March 27, 2002
------------------------------------------      (principal executive officer)
             William R. James




         /s/ DANIEL K. SHOEMAKER                     Director; Treasurer             March 27, 2002
------------------------------------------     (principal financial officer and
           Daniel K. Shoemaker                  principal accounting officer)
</Table>

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

     (c) No annual report to security holders covering the registrants' last
         fiscal year or proxy material has been sent to security holders. If
         such report or proxy material is furnished to security holders
         subsequent to the filing of this form, the registrants will furnish
         copies of such material to the Commission when it is sent to security
         holders.
<PAGE>

                                 EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT NUMBER   EXHIBIT DESCRIPTION
--------------   -------------------
<C>              <S>
      12         Statement re computation of ratios
      24         Powers of Attorney
</Table>