UIH AUSTRALIA PACIFIC INC, 10-K405, 1998-03-31

UIH AUSTRALIA PACIFIC INC
10-K405, 1998-03-31
CABLE & OTHER PAY TELEVISION SERVICES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the year ended December 31, 1997

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

For the transition period from _________ to _________

Commission File No. 333-05017

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

State of Colorado 84-1341958
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4643 South Ulster Street, #1300
Denver, Colorado 80237
(Address of principal executive offices) (Zip code)

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

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

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

The Company has no publicly-trading shares of capital stock. As of March
27, 1998, the Company had 13,864,941 shares of common stock outstanding.

<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
1997 ANNUAL REPORT ON FORM 10-K

Table of Contents

Page
Number
------
PART I
<S> <C> <C>
Item 1. Business.................................................................................... 2

Item 2. Properties.................................................................................. 18

Item 3. Legal Proceedings........................................................................... 19

Item 4. Submission of Matters to a Vote of Security Holders......................................... 19

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................... 20

Item 6. Selected Financial Data..................................................................... 20

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 21

Item 8. Financial Statements and Supplementary Data................................................. 31

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........ 31

PART III

Item 10. Directors and Executive Officers of the Registrant.......................................... 57

Item 11. Executive Compensation...................................................................... 59

Item 12. Security Ownership of Certain Beneficial Owners and Management.............................. 63

Item 13. Certain Relationships and Related Transactions.............................................. 63

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................. 64
</TABLE>

<PAGE>

ITEM 1. BUSINESS
- -----------------

(a) GENERAL DEVELOPMENT OF BUSINESS
-------------------------------

UIH Australia/Pacific, Inc. (the "Company") is a leading provider of
multi-channel television services in Australia, New Zealand and Tahiti. Through
its Australian operating companies CTV Pty Limited ("CTV") and STV Pty Limited
("STV") (collectively, "Austar"), the Company is the largest provider of
multi-channel television services in regional Australia, where it operates
wireless multi-point microwave distribution systems ("MMDS") and markets a
satellite-delivered direct-to-home ("DTH") service in franchise areas
encompassing approximately 1.6 million television homes, or 25% of the total
Australian market. In addition, the Company, through its 65%-owned New Zealand
operating company Saturn Communications Limited ("Saturn") is constructing a
wireline cable and telephony system in Wellington, New Zealand, a market
representing approximately 135,000 television homes. The Company's other assets
include a 25% interest in XYZ Entertainment Pty Limited ("XYZ Entertainment"), a
programming company that provides four channels to the Australian multi-channel
television market as part of the eight-channel Galaxy programming package (the
"Galaxy Package"), the most widely distributed programming package in Australia
and the core component of Austar's programming offering; up to a 90% economic
interest in Telefenua S.A. ("Telefenua"), the only provider of multi-channel
television services in Tahiti, with MMDS in a market of 31,000 television homes;
and a 100% interest in United Wireless Pty Limited ("United Wireless"), an
Australian company providing wireless mobile data services primarily in Sydney
and Melbourne.

The Company, a wholly-owned subsidiary of UIH Asia/Pacific Communications,
Inc. ("UAP"), which is an indirect 98%-owned subsidiary of United International
Holdings, Inc. (together with all of its subsidiaries other than the Company and
the Company's subsidiaries, "UIH"), was formed on October 14, 1994. Immediately
prior to the May 1996 offering of the Company's 14% senior discount notes due
2006 (the "May 1996 Notes"), certain subsidiaries of UIH that held its interests
in Australia, New Zealand and Tahiti were merged with and into the Company. The
information in this annual report on Form 10-K has been prepared as though the
Company had performed all foreign development activities and made all
acquisitions of UIH's ownership interests in multi-channel television,
programming and mobile data companies in Australia, New Zealand and Tahiti since
inception. The Company, as presented in this manner, commenced operations in
January 1994 when UIH began its development-related activities in the
Asia/Pacific region. UIH transferred the net assets of the above mentioned
subsidiaries, including capitalized development costs and investments in
affiliated companies, to the Company. The Company, in turn, reflected these
transfers as capital contributions from the parent company.

HISTORY OF ACQUISITIONS

In 1994, the Company acquired, through directly and indirectly held
interests, an effective 50% economic interest in two newly-formed companies that
constitute Austar. In December 1995, the Company acquired from other
shareholders of Austar an additional interest in Austar, thereby increasing its
total economic interest in Austar to 90%. In May 1996, as a result of additional
equity contributions, the Company's economic interest in Austar was increased to
94%, which was subsequently increased to 96%. In October 1996, the Company
acquired the remaining 4% economic interest in Austar.

In July 1994, the Company acquired a 50% interest in Saturn, which at the
time owned only a small cable television system outside of Wellington. Since the
Company's initial investment, Saturn has begun construction on a hybrid fiber
coaxial ("HFC") cable network planned to pass 135,000 homes in the Wellington
area. In July 1996, the Company acquired the remaining 50% interest in Saturn in
exchange for a 2.6% interest in the Company, which was exchanged for a 2%
interest in UAP in May 1997. In July 1997, SaskTel Holdings (New Zealand) Inc.
("SaskTel") purchased a 35% equity interest in Saturn by investing approximately
New Zealand $("NZ$")29.9 million ($19.6 million) for its shares (the "Saturn
Transaction"). The Company believes that SaskTel, a division of Saskatchewan
Telecommunications Holdings Corporation of Saskatchewan, Canada, will contribute
telephony expertise to Saturn in providing cable/telephony service in the
Wellington, New Zealand area.

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In October 1994, the Company and Century Communications Corporation
("Century") formed XYZ Entertainment, each retaining a 50% interest. In June
1995, the Company and Century formed the 50/50 joint venture Century United
Programming Ventures Pty Limited ("CUPV") to hold their investments in XYZ
Entertainment. In September 1995, a 50% interest in XYZ Entertainment was sold
to a third party, thereby diluting the Company's indirect interest in XYZ
Entertainment to 25%.

In January 1995, the Company acquired an indirect effective 90% economic
interest in Telefenua. The Company's economic interest will decrease to 75% and
64% once the Company has received a 20% and 40% internal rate of return on its
investment in Telefenua, respectively. The Company has funded the construction
and development of Telefenua's multi-channel television system.

In September 1995, the Company purchased a 100% interest in United
Wireless. The Company has since continued the development and funding of United
Wireless' business.

RELATIONSHIP WITH UIH

The Company is an indirect, 98%-owned subsidiary of UIH, a leading provider
of multi-channel television services and related businesses outside the United
States. In addition to the Company, UIH's operations include its 100% interest
in United Pan-Europe Communications N.V. ("UPC"), the largest privately-owned
multi-channel television operator in Europe, as well as its other investments in
Europe, Asia and Latin America. As of September 30, 1997, UIH's multi-channel
television systems had approximately 9.9 million television homes in their
respective service areas, passed approximately 7.4 million homes and had
approximately 5.3 million subscribers (of which 3.1 million are cable
subscribers and 2.2 million are programming subscribers).

ORGANIZATION OF COMPANY

The following chart summarizes the organizational structure of the Company.
The interests indicated below are summaries of the approximate direct and
indirect economic interests of the Company in its principal businesses. Some of
the Company's interests in such operating companies are held through various
partnerships and holding companies and the Company's voting rights with respect
to certain of such operating companies differ from the economic interest
indicated in the chart. See Item 1(c) "Corporate Organizational Structure."
<TABLE>
<CAPTION>
UIH Australia/Pacific, Inc.

Operating Ownership
System Principal Business Percentage
--------- --------------------------------------------------------------------- ----------
<S> <C> <C>
Austar Regional Australia, MMDS and DTH multi-channel systems 100% (1)
United Wireless Australia, wireless mobile data services 100%
Telefenua Tahiti and Moorea, MMDS 90% (2)
Saturn Greater Wellington, New Zealand area, wireline cable/telephony system 65%
XYZ Entertainment Australian programming 25%
</TABLE>

(1) The Company holds an effective 100% economic interest in Austar
through a combination of ordinary and convertible debentures.
(2) The Company holds an effective 90% economic interest in Telefenua.
The Company's economic interest will decrease to 75% and 64% once
it has received a 20% and 40% internal rate of return on its
investment in Tahiti, respectively.

(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
---------------------------------------------

The Company operates in the multi-channel television and telecommunications
industry through investing in, acquiring and managing multi-channel television,
telephony and programming operations. The Company's reportable segments are the
various countries in which it operates: Australia, New Zealand and Tahiti. These
reportable segments are managed separately because each country presents

3
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different marketing strategies and technology issues as well as distinct
economic climates and regulatory constraints. For additional information
applicable to this Item, see Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 9 to the consolidated
financial statements contained in Item 8 "Financial Statements and Supplementary
Data."

OVERVIEW

The Company is a leading provider of multi-channel television services in
Australia, New Zealand and Tahiti. Through its Australian operating company
Austar, the Company is the largest provider of multi-channel television services
in regional Australia, where it operates MMDS and markets a DTH service in
franchise areas encompassing approximately 1.6 million television homes, or 25%
of the total Australian market. In addition, the Company, through its 65%-owned
New Zealand operating company Saturn, is constructing a wireline cable and
telephony system in Wellington, New Zealand, a market representing approximately
135,000 television homes. The Company's other assets include a 25% interest in
XYZ Entertainment, a programming company that provides five channels to the
Australian multi-channel television market; a 90% economic interest in
Telefenua, the only provider of multi-channel television services in Tahiti,
with MMDS in a market with 31,000 television homes; and a 100% interest in
United Wireless, an Australian company providing wireless mobile data services
primarily in Sydney and Melbourne.

The Company believes that it is well-positioned to capitalize on the
rapidly increasing demand for multi-channel television and telephony services in
Australia, New Zealand and Tahiti. As of December 31, 1997, the Company had
invested $405.8 million in its networks and operating infrastructure and had
launched service in each of its markets. As of December 31, 1997, the Company's
multi-channel television operating systems had an aggregate of approximately 1.6
million television homes serviceable and approximately 206,000 subscribers,
compared to approximately 1.6 million television homes serviceable and
approximately 110,000 subscribers as of December 31, 1996 (with a substantial
majority of such growth resulting from Austar's expansion). During this same
period, programming subscribers of XYZ Entertainment increased from
approximately 340,000 to approximately 577,000. While the Company expects that a
substantial portion of its expected growth will come from the continued
development of Austar, the Company is also anticipating significant growth by
its other operating companies, each of which the Company believes has attractive
growth prospects.

The following table sets forth certain unaudited operating statistics of
the operating companies as of December 31, 1997:
<TABLE>
<CAPTION>
Television
Homes in Homes Basic Basic
Operating System Technology Service Area Serviceable Subscribers Penetration
---------------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Austar MMDS/DTH 1,635,000 1,589,000 196,205 12.3%
Saturn Cable/Telephony 141,000 23,518 3,059 13.0%
Telefenua MMDS 31,000 20,128 6,304 31.3%
XYZ Entertainment Programming N/A N/A 577,205 N/A
--------- --------- -------
Total 1,807,000 1,632,646 782,773
========= ========= =======
</TABLE>

AUSTAR (AUSTRALIA)

Austar is the largest provider of multi-channel television services in
regional Australia (areas outside Australia's six largest cities). Through 1997,
Austar had launched MMDS in all of its metropolitan markets and DTH service in
non-metropolitan markets. These markets represent 1.6 million franchise
television homes.

Austar has entered into franchise agreements with Australis Media Limited
("Australis") that grant it the right to provide the Galaxy Package within its
franchise areas through 2009 (extendible at Austar's option through 2019).

4
<PAGE>

OPERATING AND GROWTH STRATEGY. Due to the relatively small size and low
housing densities which characterize the markets in its franchise areas, Austar
is primarily utilizing MMDS and DTH wireless technologies to deliver its
service. In its metropolitan markets, Austar constructs and owns the
transmission facilities and installs and retains ownership of the in-home
subscriber equipment. In its non-metropolitan markets, Austar is marketing a DTH
service (consisting primarily of the Galaxy Package) and installs and retains
ownership of the in-home subscriber equipment. As a result, Austar did not incur
the costs necessary to own the facilities required to offer a DTH service and
only incurs capital costs when a DTH subscriber is installed. Approximately 60%
of the television homes in Austar's service area are in metropolitan markets
with sufficient size and density to justify the construction of MMDS networks.
Austar owns virtually all of the licenses in the MMDS spectrum currently
available in these markets for the provision of MMDS services. Because MMDS
service is less expensive to install than DTH, Austar services customers in
these metropolitan markets with its MMDS service whenever possible.
Approximately 35% of homes in these metropolitan markets, however, are out of
the line of sight of Austar's MMDS networks. Austar services these homes with
its DTH service. Austar markets its programming services via DTH in its
non-metropolitan franchise areas representing 532,000 television homes. These
are less densely populated areas outside its metropolitan markets that are more
effectively serviced by DTH technology. In addition, Austar has constructed a
wireline cable network in Darwin, a market containing approximately 27,000
serviceable homes, where dense vegetation makes an MMDS service impractical.

The deployment of MMDS networks in combination with DTH has allowed Austar
to roll out its service quickly and achieve rapid subscriber growth in its
franchise areas. Austar believes that the ability to be the first provider of
multi-channel television services in each of its markets has allowed Austar to
establish a significant market presence and strong brand awareness, factors
which management believes provide it with a competitive advantage. Austar is
currently the only provider of multi-channel television services in
substantially all of its franchise areas. See "Austar--Competition."

As of December 31, 1997, Austar had launched service in all of its
metropolitan and non-metropolitan markets. The following table sets forth the
summary operating statistics in Austar's markets:
<TABLE>
<CAPTION>
As of
December 31,
--------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Homes in service area:
Metropolitan homes.................................................. 1,103,000 997,000 241,000
Non-metropolitan homes.............................................. 532,000 532,000 --
--------- --------- -------
Total............................................................. 1,635,000 1,529,000 241,000
========= ========= =======

Net annual gain in basic subscribers.................................. 92,758 98,243 5,204
Total basic subscribers............................................... 196,205 103,447 5,204

Premium subscribers:
World Movies (launched March 1996).................................. 21,332 13,857 --
Nightmoves (launched November 1997)................................. 10,980 -- --
</TABLE>

To facilitate the rapid roll-out of its service, Austar has established
local offices in the majority of its metropolitan markets. These local offices
coordinate marketing, installation and customer service in Austar's metropolitan
markets and surrounding non-metropolitan areas. The local offices are supported
by four regional offices. Each regional office typically serves three to twelve
metropolitan markets. Austar estimates that approximately 50% of its potential
non-metropolitan customers are within 50 kilometers of its metropolitan service
areas. This proximity enables Austar to reduce installation and service costs
associated with DTH service to non-metropolitan subscribers and to focus
subscription sales through the use of marketing, promotional and sales tactics.

Austar has entered into contracts with a number of service companies to
install MMDS receivers, DTH satellite dishes and set-top decoders. Installers
collect the installation fee, install subscriber equipment and test reception
quality. Austar has trained and established certain guidelines for third party
service company employees who install Austar reception equipment. Austar has an
extensive quality assurance program and expends a significant amount of effort
to follow-up on installations to ensure customer satisfaction and, in the case

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of DTH equipment installed within its metropolitan markets, to verify that MMDS
technology is not more economical. Austar believes its efforts to resolve
service problems quickly has helped establish customer loyalty.

For the year ended December 31, 1997, Austar spent $83.8 million for
construction of MMDS head-end and transmission facilities for all of its
operating systems. Variable installation and equipment costs for each MMDS and
DTH subscriber are currently approximately $338 and $634 per subscriber,
respectively. These subscriber costs are partially offset by the Company's
metropolitan and non-metropolitan installation charges of $13 to $32 and $130,
respectively. Austar retains ownership of all MMDS and DTH customer premises
equipment.

PRICING. Austar is currently providing the eight-channel Galaxy Package
plus three to five additional channels of programming as its basic package at a
monthly rate of approximately $29, with a one-time installation charge ranging
from approximately $13 to $32 for metropolitan subscribers and $130 for
non-metropolitan DTH subscribers. Austar also integrates all available off-air
channels into its basic channel line up at no additional charge. In March 1996,
Austar began offering its first premium channel, World Movies, which consists
primarily of foreign movies, art films and features. Austar is charging
approximately $5 per month for World Movies. In November 1997, Austar began
offering Nightmoves, an adult premium channel, at $13 per month. As of December
31, 1997, Austar had 21,332 and 10,980 subscribers for its World Movies and
Nightmoves premium channels, respectively.

MARKETING; CUSTOMER SUPPORT. Austar has focused its marketing and sales
efforts to support its strategy of rapid system roll-out, which management
believes will provide it with a competitive advantage in each of its markets.
Austar has developed a comprehensive marketing and sales organization consisting
of a 180 person direct sales force and over 200 national customer service and
telemarketing personnel. The direct sales force, which operates out of local
offices in each of Austar's metropolitan markets, is currently generating sales
of approximately 2,500 subscriptions per week. The sales force at Austar's
National Customer Operations Center ("NCOC") is currently generating sales of
approximately 2,750 subscriptions per week from inbound and outbound calls. This
sales organization is supported by an integrated marketing program of
television, radio and print advertising.

The NCOC is a state-of-the-art fully-integrated subscriber management
system featuring a sophisticated digital wide-area network, Cable Data's
Intelecable platform, an automated response unit and predictive dialer
technology. The NCOC currently services all of Austar's MMDS and DTH subscribers
and has the capacity to service all future customers in its existing markets.
NCOC employees process installation orders, handle customer inquiries, including
programming and technical questions, and implement the customer retention
program, which includes telephone contact with customers following a
cancellation request, as well as making unprompted contact with customers
immediately following installation in an effort to ensure customer satisfaction.
Incoming calls from all of Austar's markets are directed to the NCOC where
customer service representatives are available to provide sales and service
information. The NCOC currently handles approximately 3,000 calls per day but
has scaleable capacity to handle at least 5,000 calls per day. The NCOC facility
currently employs 200 customer service professionals, which Austar intends to
increase as its subscriber base grows in its franchise areas. In addition,
Austar is exploring the possibility of using the NCOC to outsource customer
service to third parties in similar lines of business where appropriate.

Austar's monthly "churn" (calculated as total disconnects as a percentage
of average subscribers) averaged 5.4% during 1996 and declined to 4.2% during
1997. Austar believes that this ratio is likely to continue to decline in the
future due to several factors, although there can be no such assurances. Austar
plans to focus more on rural, non-metropolitan growth in future years.
Approximately 33% of Austar's total serviceable homes are in its
non-metropolitan franchise area, but only 21% of its total subscribers are rural
customers. Because non-metropolitan customers normally pay a higher installation
rate, churn is generally less than the churn for metropolitan subscribers.
During 1997, Austar's average monthly churn rate in its non-metropolitan markets
was approximately 2%. Furthermore, Austar has implemented several operational
plans to decrease churn, including direct debit banking for customers, customer
retention and loyalty programs, and complimentary installs on customer transfers
within the same service region. Finally, the Company is in the process of
improving the breadth and quality of its programming package through the
negotiation and launch of additional sports and other programming products.

PROGRAMMING. The Company believes that programming is an important
component in building successful multi-channel television systems. Accordingly,
Austar has secured the right to distribute the Galaxy Package in its service

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areas pursuant to franchise agreements with Australis with initial terms through
2009 (extendible at the option of Austar through 2019). Austar believes that the
terms of its franchise agreements with Australis are favorable to Austar and
that these terms provide Austar with a programming cost advantage over potential
competitors. See "Austar--Franchise Agreements."

The Galaxy Package is the most widely distributed programming package in
Australia and is the core programming offering of Austar, East Coast Television
Pty Limited ("ECT"), Australis and Foxtel Management Pty Limited ("Foxtel").
Management believes that approximately 75% of Australia's multi-channel
television subscribers subscribe to the Galaxy Package. The channels in the
Galaxy Package were developed exclusively for the Australian market by several
of the world's leading programming companies, including Paramount, Sony,
Universal, Fox and Viacom. The Galaxy Package consists of the following eight
channels:
<TABLE>
<CAPTION>

Galaxy Channels Programming Genre
--------------- -----------------
<S> <C>
Showtime................................................ premium feature movies
Encore.................................................. library movies
Fox Sports.............................................. sports
TV-1.................................................... general entertainment
Discovery............................................... documentary, adventure, history and lifestyle
Nickelodeon/Nick at Nite................................ children's and family entertainment
Arena................................................... general entertainment
Channel [V]............................................. music video
</TABLE>

Austar has also secured additional programming on a non-exclusive basis,
which it is distributing to its customers as part of its basic programming
package, and Austar integrates all available free-to-air channels into its basic
channel line-up at no additional charge. Austar's other "cable" channels include
the following:
<TABLE>
<CAPTION>

Other Channels Programming Genre
-------------- -----------------
<S> <C>
CMT.................................................... country music videos
BBC World.............................................. world news
CNBC................................................... business news
Lifestyle.............................................. personal and home improvement
The Comedy Channel..................................... comedy
TNT(1)................................................. library movies
Cartoon Network(1)..................................... cartoons
CNN International(2)................................... world news
The Value Channel(3)................................... shopping
Preview(3)............................................. programming guide
Fox Sports II.......................................... sports
</TABLE>

(1) TNT and Cartoon Network share one channel.
(2) The Gold Coast (MMDS) only.
(3) DTH only.

In March 1996, Austar began offering its first optional premium channel,
World Movies, which consists primarily of foreign movies, art films and
features. Austar is charging approximately $5 per month for World Movies.
Initial demand for this service has been strong with approximately 21,332
customers as of December 31, 1997, approximately 11% of Austar's basic
subscribers. In November 1997, Austar began offering Nightmoves, an adult
premium channel. Austar charges $13 per month for Nightmoves and had 10,980
subscribers as of December 31, 1997.

Austar intends to expand further the number of programming services
available on MMDS and expects that it will be marketing additional channels of
programming via DTH. Austar's MMDS networks have the capacity to transmit up to
19 analog channels (of which Austar currently uses 17 in its markets) in
addition to free-to-air channels, which are integrated into the programming
line-up at the rooftop. The DTH service marketed by Austar utilizes MPEG II
digital technology, which has over 100 channels of capacity. Besides any
additions to the Galaxy Package, the Company has secured, for a five-year

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period, a 54 MHz transponder capable of broadcasting between 10 and 15 digital
channels on the satellite ("Optus Satellite") that currently transmits the
Galaxy Package, and pursuant to the arrangement with Australis (see
"Austar--Franchise Agreements"), has the right to deliver such programming to
its customers through the Galaxy system. The Company is currently evaluating the
revenue generation potential for program carriage on this transponder and may
sublease all or a portion of its transponder capacity during the initial term of
the agreement. Such transponder payments are approximately $0.4 million per
month, beginning in September 1997, under the agreement with Optus Networks Pty
Limited ("Optus Networks"), owner of Optus Satellite.

FRANCHISE AGREEMENTS. Austar has entered into franchise agreements with
Australis. Each franchise agreement is for a term of 15 years commencing in
October 1994, and Austar has the option to renew the franchise agreements on
identical terms for another ten years. Under the franchise agreements, Australis
granted Austar the license and right to distribute the Galaxy Package in its
franchise areas. These franchise agreements provide exclusivity over wireless
technologies and provide that Australis will not grant rights to any other
person to use Australis' satellite infrastructure or system to transmit the
Galaxy Package in Austar's franchise areas.

Pursuant to the terms of its franchise agreements, Austar pays a percentage
of net revenue to Australis for the right to distribute the Galaxy Package. For
purposes of the franchise agreements, net revenue equals gross revenue received
from the Galaxy Package currently provided less certain agreed upon costs,
including depreciation of subscriber equipment, which the Company believes
results in a favorable programming pricing structure.

In March 1995, Australis granted Foxtel a license to distribute the Galaxy
Package over cable television systems throughout Australia, including Austar's
franchise areas. The Company believes that because of such action Australis was
in breach of its franchise agreements. Foxtel is currently distributing Galaxy
programming in only one of Austar's markets, the Gold Coast, which contains
approximately 116,000 serviceable homes. On June 19, 1996, Austar and the
Company agreed to settle their dispute with Australis with respect to this
matter (the "Australis Arrangement"). As part of the Australis Arrangement, the
parties agreed that Australis is entitled to grant Foxtel the non-exclusive
right to distribute Galaxy programming by cable, but that Foxtel may not
sublicense or assign this right without Austar's consent. Australis agreed to
pay to Austar an amount equal to the amount Australis received from Foxtel for
programming service for the period from March 1995 through June 30, 1996, less
the amount Australis paid to third party programming suppliers for such
programming with respect to Foxtel subscribers located in Austar's franchise
areas during such period. In addition, from June 30, 1996 through the term of
the franchise agreements, Austar has the right in its sole discretion, either to
(i) sublicense to Foxtel the right to transmit the services provided to it by
Australis (and any other services) by cable transmission in its franchise areas
or (ii) require Australis to pay Austar an amount each month equal to the sum of
(a) the greater of $3 per subscriber and all revenues (less programming costs)
per subscriber during such month received under the agreement between Foxtel and
Australis, with respect to Foxtel subscribers located in Austar's franchise
areas and (b) an additional amount (if any) to put Austar in the position that
it would have been in had it sublicensed the services provided to it by
Australis directly to Foxtel (which currently would be approximately $7 per
Foxtel subscriber per month). The Company believes that, because its programming
costs are less than the revenue to be generated by sublicensing such programming
to Foxtel, the benefits to be gained from this aspect of the Australis
Arrangement will be substantial over the years.

As part of the Australis Arrangement, Australis also agreed to extend the
term of the franchise agreements by five years to an initial 15-year term and
amended certain financial and strategic terms of the franchise agreements.
Australis also granted to Austar the right to use Australis' satellite
infrastructure to provide additional DTH services within Austar's franchise
areas. In addition, Australis agreed to provide all future Galaxy channels to
Austar at a price no less favorable than that charged other persons and in any
event at no more than Australis' cost (as charged by third parties with respect
to programming delivered by such party to Australis or the lowest price at which
Australis agrees to distribute Australis produced or compiled programming), plus
10%. In return, the Company agreed (i) to waive and release any claim arising
out of or in connection with Australis' execution and performance of its license
agreement with Foxtel and (ii) not to make any objection or claim against
Australis or Foxtel in connection with such license agreement. Management
believes the Australis Arrangement is favorable to Austar. In November 1997,
Australis and Austar entered into an agreement under which Austar waived its
right to receive payments with respect to the Foxtel compensation for the period
up to December 31, 1997. In February 1998, Australis and Austar entered into an
additional agreement under which Austar purchased equipment from Australis and
was granted certain rights in relation to the use of the Australis satellite
platform as an independent operator.

8
<PAGE>

Australis, Austar's primary supplier of programming, is engaged in a rapid
roll-out of service that has required a significant amount of capital and has
strained its liquidity. Australis has announced that it is continuing to
negotiate with its bondholders, certain of the movie studios that supply it with
programming and other third parties in order to implement long-term sources of
funding. If Australis is unable to make arrangements to satisfy its long-term
capital needs, Australis may have difficulty meeting contractual obligations
with respect to the four Galaxy channels distributed directly by Australis. The
Company believes that if Austar is no longer able to obtain the four Galaxy
channels provided by Australis on an exclusive basis and it were required to
seek replacement programming, it would have access to the same programming
directly from the suppliers of the four Galaxy channels not provided by XYZ
Entertainment or sufficient alternative programming on competitive terms. There
can be no assurance, however, that this would be the case and the inability of
Austar to procure the same or suitable alternative programming at competitive
rates and on an exclusive basis in its service areas could have a material
adverse effect on the Company.

COMPETITION. The substantial majority of Austar's metropolitan markets are
either small (i.e., approximately 20,000 homes), and/or have relatively low
household densities (generally 25 to 75 homes per square kilometer as compared
to 100 to 130 homes per square kilometer in Australia's largest cities). As a
result, Austar believes that its metropolitan markets generally do not have
sufficient density to justify the construction of competitive wireline cable
systems. While the Company believes household densities could potentially
support wireline cable construction in areas representing approximately 20% of
Austar's total franchise homes, the relatively small size of these markets
reduces the attractiveness of constructing a competitive cable network. In
addition, Austar, as a licensed subscription television provider, is authorized
to build wireline cable systems in its markets and, where appropriate, could
construct wireline cable systems. With the exception of the Foxtel cable
television system currently extending into Austar's 116,000-home Gold Coast
metropolitan market, Austar does not currently have any operational subscription
television competitors in its franchise areas. In the Gold Coast, Austar is
currently providing 17 channels of programming as its basic package, which
includes the Galaxy Package as well as nine additional channels, at a monthly
rate of approximately $23 with a one-time installation charge of approximately
$13. Foxtel offers the Galaxy Package as well as 17 other satellite or locally
originated channels for a monthly fee of $28 and an installation charge of $19.
At December 31, 1997, Austar had 17,000 subscribers in the Gold Coast and
estimates that Foxtel has 8,000 subscribers in this market.

Approximately 532,000 of Austar's 1.6 million franchise homes are in
non-metropolitan markets which generally have densities of fewer than 25
households per square kilometer. As a result, the Company believes that these
markets can only be served economically with DTH technology. Austar has the
exclusive right to market the Galaxy DTH service in its franchise area. Although
regulations will no longer prohibit additional DTH services after June 1997,
Austar will retain its exclusive right to market the Galaxy Package in its
franchise areas through 2009 (extendible to 2019 at Austar's option). In
addition, Austar believes it has an additional competitive advantage in offering
DTH service in these markets because over 50% of its serviceable homes are
within a 50 kilometer radius of its metropolitan markets, where it has available
sales personnel and installation technicians. Accordingly, Austar believes its
cost to market and install subscribers in these areas should be below that of
any potential competitor without similar infrastructure in place.

Management believes that Austar has established a significant subscriber
base, strong brand awareness and substantial operational and marketing
infrastructure, factors that provide it with a competitive advantage. In August
1996, Australis and Optus Vision Pty Limited ("Optus Vision") announced an
agreement to form a joint venture whereby Australis will contribute to the
venture its satellite infrastructure allowing for DTH transmission of Optus
Vision's programming services. In December 1997, a court ruling lifted an
injunction set in June 1997 which was preventing the implementation of the
proposed Australis and Optus Vision satellite infrastructure joint venture.
Following the lifting of this injunction, Australis publicly announced that it
intends to enforce this agreement. To date, Optus Vision has not made any public
announcement of its position in relation to this matter. The Company believes
that using the infrastructure by any entity other than Austar for the provision
of DTH services within Austar's franchise area would be in violation of its
franchise agreements with Australis and recently commenced proceedings seeking
injunctive relief preventing the use of Australis' infrastructure by Optus
Vision in Austar's franchise area. There can be no assurance that Austar will
prevail in its lawsuit or that, even if it is successful in obtaining an
injunction to prevent the consummation of the joint venture, Optus Vision or
others will not compete in Austar's franchise area. See Item 3 "Legal
Proceedings."

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<PAGE>

MANAGEMENT AND EMPLOYEES. Austar's senior management includes nine UIH
employees. Austar and UAP are parties to a 10-year technical assistance
agreement, renewable for up to an additional 15 one-year terms, pursuant to
which Austar pays UAP a monthly fee equal to 5% of its gross revenues through
the term of the agreement, for the provision of various management and technical
services. In addition, Austar reimburses UIH for certain direct costs incurred
by UIH, including the salaries and benefits relating to the senior management
team.

As of December 31, 1997, Austar had approximately 700 employees.
Substantially all of Austar's employees are parties to an "award" governing the
minimum conditions of their employment including probationary periods of
employment, rights upon termination, vacation, overtime and dispute resolution.

SATURN (NEW ZEALAND)

The Company owns 65% of Saturn, which launched service on the initial
portions of its HFC network that will allow it to provide multi-channel
television services as well as business and residential telecommunications
services in the Wellington area, encompassing 135,000 homes. Wellington is New
Zealand's capital and second largest city. The Company launched service in
portions of this system in September 1996 and expects construction to be
completed by mid-1999. Saturn plans to offer a full complement of telephone
services to both residential and business markets commencing in April 1998.
Saturn's cable system also passes approximately 6,000 homes on the Kapiti Coast
north of Wellington. As of December 31, 1997, Saturn's activated networks passed
approximately 23,518 homes and serviced approximately 3,059 subscribers. In
addition, Saturn has secured additional rights to use existing poles to attach
its network cable in markets representing 500,000 homes, subject to local
planning approval, and is exploring the possibility of expanding its networks
and services to these markets.

MARKET OVERVIEW. The Company believes that New Zealand, a market of 1.2
million television homes, is attractive for multi-channel television providers.
New Zealand has a demographic profile similar to Australia, including high per
capita income and strong television, VCR and cellular telephone penetration
rates. In addition, New Zealand imposes virtually no pricing regulation and only
limited program content regulation and permits operators to offer combined
multi-channel television and telephony services over one network. There is
currently only one significant multi-channel television provider that offers a
five-channel UHF-delivered subscription service.

OPERATING AND GROWTH STRATEGY. Saturn is constructing a 750 MHz HFC network
designed to service 500 homes per node with each home drop overlaid with copper
telephony plant. This architecture will allow the integrated delivery of pay TV,
telephony, internet access, high speed data and future interactive services. The
majority of Saturn's approximately 1,600 kilometers of plant will be constructed
on aerial utility poles which generally allow for quicker and more
cost-effective network construction than underground wireline. In addition,
because Wellington zoning generally permits only a single additional
communications cable on its aerial utility poles, Saturn's status as first
operator on such poles may limit use of these poles by other communications
providers. Because the only significant multi-channel television competitor in
the Wellington market offers a UHF-delivered service that is limited to only
five channels, management believes it will be able to build a significant
customer base by offering an attractive basic programming line-up of over 30
channels at competitive prices, as well as pay-per-view, data and telephony
services. Saturn has an interconnect agreement that will allow it to provide
local residential and business telephone services. By bundling both subscription
television and telephony services, Saturn will be able to offer pricing
discounts across both services, which management believes will provide an
advantage over competitors that offer only one service. Saturn is currently in
the preliminary stages of discussions with several telecommunications providers
in the New Zealand market concerning potential strategic partnership
arrangements. There can be no assurances, however, that Saturn will be able to
successfully conclude any such arrangements.

PROGRAMMING. Saturn's programming strategy is to offer a wide variety of
high-quality channels at competitive prices. Saturn is currently offering a
single tier of service consisting of 25 channels and is negotiating with a
number of programming services to expand its channel offering. The following is
a list of the programming currently offered by Saturn in its basic package:

10
<PAGE>
<TABLE>
<CAPTION>

Channel Programming Genre
------- -----------------
<S> <C>
TV1, TV2, TV3, TV4....................................... general entertainment (retransmitted)
MTV...................................................... music video
ONTV..................................................... Saturn community channel
BBC World................................................ world news
CNBC..................................................... world financial news
CNN International ....................................... world news
MCM...................................................... music video
Discovery................................................ science and nature
NBC Superchannel......................................... general entertainment
TNT...................................................... classic movies
Cartoon Network.......................................... children's cartoon programming
Trackside................................................ TAB racing
Kidzone.................................................. local children's programming
Weather Channel.......................................... live weather from NZ MetService
Program Guide............................................ programming line-up
TVSN..................................................... shopping
CMTV..................................................... country music video
Elijah Television........................................ non-denominational religious programming
Worldnet................................................. U.S. information service news and science
Saturn SportsNet(1)...................................... Local/international sports
The Golf Channel(1)...................................... 24 hours of golf events/news
Saturn Showcase(1)....................................... Saturn programming channels (split screen)
</TABLE>

(1) Saturn launched this channel during the first quarter of 1998.

Saturn also offers 19 channels of new release pay-per-view movies, branded
Saturn Home Cinema, provided by four leading Hollywood studios.

PRICING. With its cable television service, Saturn offers a single basic
service package with 25 channels in Wellington at a monthly subscription rate of
approximately $17. Saturn is currently packaging its cable and telephony
products and including promotional discounts and bundled retail pricing to
achieve significant penetrations. Sky TV ("Sky"), Saturn's primary competitor,
charges subscribers a monthly rate of approximately $31 for five channels of UHF
programming with a one-time installation fee of $29 per subscriber. Saturn's
residential and business telephony service will usually be priced below Telecom
New Zealand ("Telecom"); however, Saturn expects to generally offer "more for
less" due to its superior network and capacity.

MARKETING; CUSTOMER SUPPORT. Saturn's marketing strategy uses promotion
techniques proven in existing subscription television markets such as the United
States and Europe, including direct sales campaigns (door-to-door selling),
direct mail and telemarketing supported by a mass media brand awareness program.
Direct sales has proven to be the most effective technique in other cable
television markets, particularly in areas where multi-channel television is in
its introductory stage. Each of these techniques aims to communicate the selling
points of cable television: expanded choice, high entertainment value and
breadth of programming genre to potential subscribers. Homes are released for
marketing on a node by node basis as construction is completed, which allows for
a very targeted marketing program tailored to the unique demographic profile of
the territory, and enables Saturn to capitalize on the product awareness
resulting from its construction efforts. Saturn's sales strategy is designed to
include an emphasis on telephony services (once these can be offered) and to
capitalize on the value, quality and customer service advantages associated with
bundled services. Saturn has established a national customer services center at
its corporate headquarters in Wellington. The call management technology
employed by Saturn is scaleable and can be configured to support a national
network expansion. In addition, Saturn is currently developing a sophisticated
marketing database to assist the sales force in a targeted sales approach in
future marketing campaigns.

COMPETITION. There are currently four broadcast networks in New Zealand as
well as several other free-to-air regional channels. The largest provider of
subscription television services in New Zealand is Sky, which operates a
five-channel encrypted UHF subscription television service. Although Sky offers

11
<PAGE>

a popular sports channel on an exclusive basis, Sky does not currently offer the
programming diversity or television/telephony bundling that Saturn plans to
offer, services Saturn believes will drive its penetration. Sky has recently
announced, however, a launch of a digital direct broadcast service ("DBS") in
the second half of 1998, which will enable Sky to offer enhanced packages of
programs on a greater number of channels. In addition, Telecom, New Zealand's
largest telecommunications service provider with nearly a 100% share of local
loop revenues, 75% of national and international toll revenues and 90% of
cellular revenues, has existing networks using HFC technology, which will allow
it to offer video and data services to a total of approximately 70,000 homes in
various parts of New Zealand. Telecom has publicly announced that it does not
intend to continue with the expansion of its pay television service. Telecom is
expected to be the primary competition to Saturn's planned local loop telephony
service.

MANAGEMENT AND EMPLOYEES. UIH has appointed two of its employees to senior
management positions at Saturn, including Saturn's chief executive officer and
customer operations director. Saturn reimburses UIH for certain direct costs
incurred by UIH, including the salaries and benefits relating to these senior
management positions. In addition, Saturn and UAP are parties to a technical
assistance agreement, pursuant to which Saturn pays UAP a monthly fee equal to
2.5% of its gross revenues for the provision of various technical,
administrative and operational services.

As of December 31, 1997, Saturn had approximately 150 employees.
Substantially all of Saturn's employees are parties to a collective employment
contract governing certain conditions of their employment including probationary
periods of employment, termination, redundancy, overtime, holidays, leave and
dispute resolution.

XYZ ENTERTAINMENT (AUSTRALIAN PROGRAMMING)

Through its 25% interest in XYZ Entertainment, the Company provides four
channels (the "XYZ Channels") of the eight channels which are distributed as the
Galaxy Package, the most widely distributed programming package in Australia.
During 1997, XYZ Entertainment also launched another channel, Lifestyle. XYZ
Entertainment's program channels consist of the following:
<TABLE>
<CAPTION>

XYZ Channels Programming Genre
------------ -----------------
<S> <C>
Discovery................................................ documentary, adventure, history and lifestyle programming
Nickelodeon/Nick at Nite................................. children's educational, entertainment and cartoons/family-
oriented drama and entertainment
Channel [V].............................................. music video with local presenters
Arena.................................................... drama, comedy, general entertainment, programming, library
movies

Other Channel Programming Genre
------------- -----------------
Lifestyle................................................ personal and home improvement
</TABLE>

XYZ Entertainment provides the XYZ Channels to Continental Century Pay
Television Pty Limited (the "A Licenseholder"), which in turn, pursuant to
long-term carriage agreements, supplies them as part of the Galaxy Package to
Australis and its franchisees and to Foxtel. The Galaxy Package is available to
the majority of Australia's approximately six million television households,
including all households marketed via MMDS and DTH by Australis and its
franchisees, pursuant to a carriage agreement between Australis and the A
Licenseholder that has been warranted to XYZ Entertainment as having a term
through at least 2010. The XYZ Channels are also distributed to Foxtel pursuant
to a carriage agreement between Foxtel and the A Licenseholder that has been
warranted to XYZ Entertainment as having a term through 2020. XYZ
Entertainment's agreement with the A Licenseholder provides for fixed per
subscriber prices. The Company understands the carriage agreement between the A
Licenseholder and Foxtel provides for substantial minimum subscriber guarantees.
XYZ Entertainment currently receives monthly revenues of $3.15 per MMDS or DTH
subscriber and $4.15 per Foxtel subscriber. ECT, an affiliate of the A
Licenseholder, has guaranteed the performance of all of the A Licenseholder's
obligations to XYZ Entertainment under this agreement. As of December 31, 1997,
the XYZ Channels were distributed to approximately 577,000 multi-channel
television subscribers.

12
<PAGE>

OPERATING AND GROWTH STRATEGY. XYZ Entertainment is an independently
managed venture which purchases, edits, packages and transmits programming for
the XYZ Channels in exchange for a monthly fee per subscriber. The Company and
Century jointly manage Arena; the Company manages the Lifestyle channel; the
Company, Century and Foxtel manage Channel [V]; and the Company and Century,
together with Nickelodeon Australia, Inc. ("Nickelodeon") manage the
Nickelodeon/Nick at Nite channel. Each of these channels reports to a board
comprised of the Company, Century and Foxtel executives. The Discovery Channel
is managed by Discovery Asia and distributed by XYZ Entertainment.

XYZ Entertainment is focusing its marketing efforts on creating, building
and supporting channel identification and brand awareness. XYZ Entertainment's
goal is to acquire quality programming that will engender viewer loyalty. In
addition, XYZ Entertainment offers advertising on each of the XYZ Channels.

ACQUISITION OF PROGRAMMING. In July 1995, XYZ Entertainment and Discovery
Asia executed a twelve-year exclusive carriage agreement whereby a localized
version of the Discovery Channel replaced the existing documentary channel
developed by XYZ Entertainment. The Company believes that as a result of this
arrangement XYZ Entertainment is able to offer subscribers higher quality
programming at a lower cost to XYZ Entertainment.

XYZ Entertainment and Nickelodeon, a division of Viacom, are jointly
producing and distributing an Australian version of Nickelodeon/Nick at Nite,
which XYZ Entertainment began distributing in October 1995. XYZ Entertainment
pays a monthly per subscriber license distribution fee that is shared equally by
Nickelodeon and XYZ Entertainment.

XYZ Entertainment acquires programming and produces interstitials for
Arena, Lifestyle and Channel [V]. XYZ Entertainment has acquired a supply of
programming for Arena and Lifestyle at prices its management considers to be
favorable. XYZ Entertainment is pursuing supply agreements and potential joint
venture arrangements with a number of other international programming suppliers.

In March 1997, XYZ Entertainment and Channel [V] Music Networks ("CVMN"), a
joint venture between Star TV and several record companies including B.M.G.,
EMI, Sony and Warner Music, entered into an agreement to re-brand XYZ
Entertainment's music video channel under a license arrangement with the
international music video channel, Channel [V]. The arrangement, which has a
10-year term, allows XYZ Entertainment to use the Channel [V] trademarks,
interstitial materials and management and gives it access to Channel [V]'s
favorable record programming arrangements. XYZ Entertainment has agreed to pay a
management fee of approximately $0.7 million over the first two years as well as
a licensing fee based on gross subscriber revenues, ranging from 2.5% for the
first two years to 5% for the third through the tenth years. After the third
year, CVMN shall have a one-year option to acquire a 20% interest in Channel [V]
at a price equal to XYZ Entertainment's cost plus cost of capital at 11.5% per
annum. Upon such acquisition, CVMN will offset its licensing fee against current
and future profit shares.

EMPLOYEES. As of December 31, 1997, XYZ Entertainment had 74 employees and
the Nickelodeon joint venture had 21 employees. The programming joint venture
between the Company and Century had 13 employees who provide management services
to XYZ Entertainment.

TELEFENUA (TAHITI)

The Company has an up to 90% economic interest in Telefenua, which operates
a 16 channel MMDS in a franchise area that, as of December 31, 1997, included
approximately 20,128 serviceable homes. Telefenua is currently expanding its
network by selectively adding beam benders and repeaters that will allow its
signal to reach substantially all of the approximately 31,000 homes in its
franchise areas. Telefenua had 6,304 subscribers as of December 31, 1997,
representing a 31% penetration rate. The Company and its partners are in the
early stages of negotiations relating to the sale of all or a portion of
Telefenua to a local strategic investor, although there can be no assurance that
the Company will conclude such a transaction.

MARKET OVERVIEW. Tahiti and Moorea are the two largest and most populous
islands of French Polynesia, a self-governing territory of the Republic of
France. The French government contributes heavily to French Polynesia's economy
and approximately one-third of Tahiti's population is employed by the national
government. Television viewing alternatives are limited, but demand for
television is strong as demonstrated by the country's high television and VCR

13
<PAGE>

penetration rates, 99% and 66%, respectively, and average per capita television
viewing of nearly four hours per day. Prior to late 1994, television choice was
limited to two government broadcast channels.

OPERATING AND GROWTH STRATEGY. Telefenua is focusing on increasing its
penetration rates through continued direct marketing campaigns, including
door-to-door sales, and expanding its serviceable homes through select
deployment of beam benders and repeaters. Management is actively seeking to
expand its programming offering, including the planned introduction of premium
movie services. Telefenua is also expanding its network by adding additional
beam benders and repeaters. The Company anticipates this expansion will be
completed over the next 12 to 24 months.

PRICING. The subscription fee for Telefenua's basic tier is approximately
$45 per month, the expanded tier monthly rate is approximately $55 and the
premium movie service is an additional approximately $22 per month. To date,
nearly 99% of Telefenua's customers are subscribing to the expanded tier of
service. Telefenua also charges a one-time installation rate of approximately
$100.

PROGRAMMING. Telefenua offers a combination of French and English language
services. Telefenua's current channel line-up consists of 16 channels segregated
into three tiers of service--a basic service with 11 channels, an expanded tier
with an additional three channels and a premium service with two additional
channels. Telefenua's basic tier offers the two local broadcast channels as well
as French language childrens' entertainment, sports, general entertainment and
music channels and the English language CNN International channel. Telefenua
also offers a local public access channel. The expanded tier includes French
language movies, a documentary channel and ESPN International. The premium
service includes a French movie channel, Cinestar, and HBO International.

With the exception of CNN International, ESPN International, HBO
International and the two local broadcast channels, all programming consists of
taped French satellite services. Current French regulations require approval of
the national regulatory authority for all programming. The following is a list
of programming currently offered by Telefenua:
<TABLE>
<CAPTION>

Channel Programming Genre
------- -----------------
<S> <C>
RFO 1.................................................... government broadcast, general entertainment
RFO 2.................................................... government broadcast, general entertainment
CNN International........................................ world news
RTL...................................................... general entertainment
Eurosport................................................ sports
Canal J/Canal Jimmy...................................... adult and childrens'
Serie Club............................................... general entertainment
Paris Premiere........................................... arts, life
MCM...................................................... music video
M6....................................................... general entertainment
CMT...................................................... country music video
Planete.................................................. documentary (expanded basic tier)
Cine Cinemas............................................. movies (expanded basic tier)
ESPN International....................................... sports (expanded basic tier)
Cinestar................................................. premium movies
HBO International........................................ premium movies
</TABLE>

During 1997, Telefenua launched its first premium movie service consisting
of Cinestar and HBO International. As of December 31, 1997, over 2,300 customers
subscribed to this service.

MARKETING; CUSTOMER SUPPORT. Telefenua utilizes several marketing
techniques, proven in the U.S. multi-channel television industry, including
door-to-door, direct mail and local media. The Company's customer service center
also conducts telemarketing campaigns and has opened sales boutiques in high
traffic areas throughout Tahiti and Moorea. Marketing campaigns consist of
selected promotions targeting specific demographic groups throughout the year
and new markets as they are activated. Telefenua's customer service center is
located at its corporate headquarters. The center handles all customer
inquiries, coordinates installations and manages all maintenance activities.

14
<PAGE>

COMPETITION. Telefenua's only subscription television competitor is Canal
Plus, which offers a single channel UHF service offering a combination of
sports, movies and general entertainment programming. The Company estimated that
Canal Plus had approximately 3,800 subscribers, of which an estimated 1,000 are
also customers of Telefenua. The monthly subscription fee for Canal Plus'
service is approximately equal to the subscription fee for Telefenua's
16-channel expanded tier service. There is no existing competition in Tahiti
from DTH services due to limited satellite coverage in the region and lack of
available satellite-delivered French language programming.

MANAGEMENT AND EMPLOYEES. UAP and Telefenua are parties to a technical
assistance agreement, whereby UAP has agreed to provide technical,
administrative and operational assistance to Telefenua for reimbursement of
expenses and a fee equal to 5% of Telefenua's gross revenue through the end of
1996, 3% of gross revenue during 1997, and 2% thereafter. Telefenua also has a
similar technical assistance agreement with the Societe Francaise des
Communications et du Cable S.A. ("SFCC"), Telefenua's immediate parent. Although
UAP has assumed all of SFCC's rights and obligations under this agreement, SFCC
is still entitled to receive from Telefenua 0.5% of Telefenua's gross revenues
through the term of the agreement. UIH has appointed two of its employees to
serve as managing director and technical director of Telefenua. UIH pays these
employees' salaries and benefits and charges Telefenua for these amounts.

As of December 31, 1997, Telefenua had approximately 40 employees.

UNITED WIRELESS (AUSTRALIAN MOBILE DATA)

The Company owns a 100% economic interest in United Wireless, a provider of
two-way wireless mobile data services in Australia. Wireless data networks
provide for the two-way transmission of packet switched data between a
customer's terminal and a host computer. The transmission of wireless data
occurs over a network, similar in configuration to a cellular telephone network,
which is constructed and maintained by a local network carrier, such as United
Wireless.

BACKGROUND. In September 1995, the Company acquired a 100% interest in
BellSouth Mobile Data Australia Pty Limited which was renamed United Wireless.
United Wireless is in the second phase of its network deployment in the major
metropolitan markets of Australia. United Wireless' network is based on the
"Mobitex" technology, developed by Ericsson and Swedish Telekom and launched in
1984. Today, there are 13 operational Mobitex wireless data networks deployed
throughout Europe, North America and the Asia/Pacific region.

MARKET OVERVIEW. The Australian wireless mobile and fixed data industry is
in an early stage of development. Wireless data services were first introduced
in Australia in 1992 by United Wireless' predecessor. Today, there are two
public wireless data carriers in Australia with a total estimated installed base
of 5,500 customer terminals.

OPERATING AND GROWTH STRATEGY. United Wireless is aggressively expanding
its network coverage areas to encompass the metropolitan markets of Adelaide,
Brisbane, Canberra, the Gold Coast, Melbourne, Perth and Sydney. The Company
plans on spending approximately $2.8 million for network construction and
working capital needs through 1998.

MARKETING AND CUSTOMERS. United Wireless' target market includes large
companies with significant potential installed bases, such as utilities,
security alarm firms, commercial banks, transport companies, and courier and
delivery companies. Management believes that the most expeditious and economical
approach to building an installed customer terminal base is to target its
efforts on securing these large corporate accounts. Specific applications that
United Wireless plans to target include remote order entry (i.e., sales persons
and couriers), credit and debit card validation, remote meter reading for
utilities, security monitoring and vending machine inventory monitoring.

REVENUE AND PRICING. The majority of United Wireless' revenues are derived
from modem sales, connection revenues and monthly access fees charged on a per
terminal basis. The average customer pays a monthly rate of $45 per terminal.

SALES. United Wireless utilizes a network of systems integrators that act
as the primary interface with potential customers. These systems integrators
develop specific customer applications which utilize the Mobitex wireless
network for transmission of data. United Wireless works closely with these
systems integrators, providing technical, marketing and other general sales
support. United Wireless also anticipates developing specific network
applications direct to customers.

15
<PAGE>

COMPETITION. United Wireless competes primarily with Telstra Wireless Data,
a subsidiary of Telstra, whose wireless data network was developed by Motorola.
The Company estimates Telstra Wireless Data has an installed base of
approximately 5,250 customer terminals.

In addition to Telstra Wireless Data, United Wireless could face
competition in the future from certain companies that are attempting to
implement satellite-generated data transmission and paging services on a global
scale. The launch of low earth orbit satellite systems offering wide area public
data communications in Australia is expected between 1999 and 2002. The Company
believes, however, that the costs of both terminal equipment and data
transmission are expected to be significantly greater than those incurred by
United Wireless.

The Company believes that the Mobitex network provides certain competitive
advantages over other operating platforms including the following: (i) superior
transmission quality, (ii) broader redundancy capabilities, (iii) larger base
station coverage areas, (iv) lower maintenance and support requirements and (v)
a greater array of proven application solutions.

MANAGEMENT AND EMPLOYEES. UAP and United Wireless are parties to a
technical assistance agreement, pursuant to which UAP has agreed to provide
technical, administrative and operational assistance to United Wireless, and UAP
receives a management fee equal to 5% of the gross revenue of United Wireless
through December 2007. UIH has appointed the chief executive officer of United
Wireless, pursuant to the terms of this agreement. All costs related to the
employment of this individual are reimbursed to UIH by United Wireless.

As of December 31, 1997, United Wireless had 17 employees.

TECHNOLOGIES EMPLOYED BY THE COMPANY

The Company currently uses three principal transmission technologies in the
deployment of its multi-channel television services in Australia, New Zealand
and Tahiti. These technologies are as follows: (i) MMDS or wireless cable, (ii)
DTH satellite broadcast services and (iii) wireline cable or CATV, the
technology with which multi-channel television services are most frequently
delivered in the United States. The Company has carefully evaluated the
characteristics of the markets in which it is currently operating or planning to
operate multi-channel television systems and has chosen what it believes to be
the most appropriate transmission technology for each. While these transmission
technologies are, in general, similar with respect to picture quality, all such
technologies offer improved picture quality compared to what has historically
been offered by over-the-air broadcasters.

MMDS is a microwave distribution system for which frequency bands are
utilized for transmission of the programming services. MMDS signals originate
from a head-end facility, which receives satellite-delivered programming
services and delivers such programming via an encoded microwave signal from
transmitters located on a tower or on top of a building to a small receiving
antenna located at a subscriber's premises, where the microwave signals are
decoded. MMDS transmission requires a clear line-of-sight because microwave
frequencies will not pass through obstructions; however, many signal blockages
can be overcome through the use of low power signal repeaters which retransmit
an otherwise blocked signal over a limited area. The initial construction costs
of MMDS generally are significantly lower than a wireline cable or DTH system.
The Company is using MMDS transmission technology in Australia and Tahiti, where
housing density and topography make MMDS the most cost effective technology.

DTH transmits encoded signals directly from a satellite to a subscriber's
premises, where it is decoded. Currently in Australia, all DTH subscription
television services are transmitted via the Optus Satellite using High
Performance Beams ("HP Beams") covering certain geographic areas (commonly
referred to as a satellite "footprint"). All of Austar's franchise areas are
within the Optus Satellite footprint. Since this signal will be transmitted at a
high power level and frequency utilizing MPEG II digital technology, its
reception can be accomplished with a relatively small (26-35 inch) dish mounted
on a rooftop or in the yard for the households located within the innermost
satellite transmission footprint and with a slightly larger (35-47 inch) dish
for the households located outside the innermost footprint. Austar is using DTH
transmission technology for homes in its MMDS markets that are not reachable by
its MMDS signals as well as for homes in its franchise areas where household
densities do not support the construction of MMDS systems. Due to satellite

16
<PAGE>

coverage limitations, DTH service is currently not available in New Zealand or
Tahiti although Sky has recently announced plans to start delivering services to
New Zealand via the Optus Satellite in the second half of 1998.

A wireline cable television system is a network of coaxial or fiber-optic
transmission cables through which programming is transmitted to a subscriber's
premises from the system's head-end facility, which receives satellite and
tape-delivered programming. Wireline cable television offers a wide bandwidth
that generally allows the transmission of a larger number of channels than MMDS.
When constructed with a HFC network, as the Company plans to do in New Zealand,
the system's infrastructure can be used to deliver telephony and data services.
The primary disadvantages of a wireline cable network are the higher costs of
construction, especially in areas of low housing density, and the length of time
required to construct the network. The Company is constructing wireline cable
systems in New Zealand and, due to topography and housing densities, is
constructing a wireline cable system in one market in Australia.

EMPLOYEES

The Company has no employees. Certain management, technical,
administrative, accounting, tax, legal, financial reporting and other services
for the Company are currently provided by UIH and UAP pursuant to the terms of a
management agreement. In addition, UIH supplies certain employees to Austar,
Saturn, Telefenua and United Wireless pursuant to technical assistance
agreements with such operating companies. See Item 13 "Certain Relationships and
Related Transactions."

CORPORATE ORGANIZATIONAL STRUCTURE

The Company is a holding company with no operations of its own. The Company
holds majority economic interests in all of its operating companies other than
XYZ Entertainment. Below is a summary of the Company's ownership interests in
its operating companies.

AUSTAR

The Company holds a combined 100% economic interest in CTV and STV, which
operate together under the name Austar, through direct and indirect holdings of
convertible debentures and ordinary shares. The Company holds approximately 15%
of the ordinary shares of CTV and STV, which accounts for an approximately 0.3%
economic interest in Austar. The Company holds all of CTV's and STV's
convertible debentures, which accounts for an approximately 97.8% economic
interest in Austar. In addition, through the Company's holdings of certain
debentures of Salstel Media Holdings Pty Limited ("SMH") and Salstel Media
Investments Pty Limited ("SMI"), which in turn hold ordinary shares of CTV and
STV, UAP has an additional effective 1.9% economic interest in Austar. Although
the Company holds debentures and one share in each of SMH and SMI, it does not
control such entities or have controlling rights as a shareholder of such
entities. Through contractual arrangements and pursuant to the terms of CTV's
and STV's respective charter documents, the Company has the right to appoint all
of the six voting directors of each company.

SATURN

In 1994, the Company acquired a 50% interest in Saturn, a New Zealand
corporation. In July 1996, the Company acquired the remaining 50% interest in
Saturn in exchange for a 2.6% common equity interest in the Company, which was
exchanged for a 2% interest in UAP in May 1997. In July 1997, SaskTel purchased
a 35% equity interest in Saturn, reducing the Company's interest in Saturn to
65%.

TELEFENUA

UIH-SFCC Holdings, L.P. ("UIH-SFCC"), a limited partnership wholly-owned by
the Company, is the general partner of a limited partnership (the "Partnership")
that owns 100% of the preferred stock of SFCC, representing approximately 40% of
the share capital of SFCC. SFCC is the parent company of Telefenua, which owns
and operates the multi-channel television system in Tahiti. As holder of 100% of
the preferred stock of SFCC, the Partnership is entitled to certain preferential
distributions by SFCC. Through its general partner's interest in the
Partnership, UIH-SFCC will receive 90% of the distributions made by SFCC until
UIH-SFCC has received the return of its investment plus a 20% cumulative

17
<PAGE>

compounded annual return, 75% of distributions until it has received the return
of its investment plus a 40% cumulative compounded annual return and 64% of
distributions thereafter. Once UIH-SFCC's total equity investment exceeds $10.0
million, further equity investments would not be entitled to the 90% and 75%
distributions. Instead, equity investments above $10.0 million, to the extent
not matched pro rata by the Company's partners, would increase the 64% that UIH
receives after the preferential distributions are made on the first $10.0
million. As of December 31, 1996, UIH-SFCC had also advanced $7.0 million as a
bridge loan to SFCC, approximately $5.0 million of which was converted into
convertible debentures of SFCC, which are convertible into preferred stock of
SFCC. During 1997, UIH-SFCC converted approximately $3.2 million of such
debentures into preferred stock with the same terms as the existing preferred
stock of SFCC, to bring UIH-SFCC's total equity investment to $10.0 million.
UIH-SFCC has also invested $2.3 million in equipment, which has been leased to
Telefenua.

UNITED WIRELESS

United Wireless is a wholly-owned subsidiary of the Company.

XYZ ENTERTAINMENT

The Company has an indirect 25% interest in XYZ Entertainment through its
50% interest in CUPV, an Australian corporation owned equally by the Company and
Century. CUPV holds a 50% interest in XYZ Entertainment. The remaining 50%
interest in XYZ Entertainment is held by Foxtel.

For a discussion of risks associated with foreign operations, see Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
---------------------------------------------------------------------------

For information applicable to this Item, see the notes to the consolidated
financial statements contained in Item 8 "Financial Statements and Supplementary
Data."

ITEM 2. PROPERTIES
- -------------------

The Company's executive offices are located in Denver, Colorado, in space
leased by UIH and provided to the Company through the UAP Management Agreement
as described in Item 13 "Certain Relationships and Related Transactions." In
management's opinion, these facilities are sufficient to meet the current and
foreseeable future needs of its operating companies.

Austar leases office space in Sydney for its administrative offices and has
established four regional offices in leased space in certain areas where it has
launched service. Austar also leases locations for smaller local offices in most
of its markets to handle local customer maintenance, marketing and installation.
In addition, Austar leases facilities to house the head-end facility and
transmitter tower in each of its markets. The NCOC is located in leased
facilities in the Gold Coast. Generally, these Austar facilities are leased with
terms of three to six years, with renewal options in many instances. Austar
believes that its leased facilities are sufficient for its foreseeable needs and
that it has access to a sufficient supply of additional facilities in its
various markets, should it require more space.

Saturn has purchased property upon which it is constructing a
head-end/switching and operations facility in Petone, located north of
Wellington. Saturn also leases office and warehouse facilities for its
headquarters in Petone. This lease expires in 2001 with a six-year renewal
option.

XYZ Entertainment currently uses a portion of Foxtel's broadcasting
facilities located in Sydney. XYZ Entertainment pays its proportionate share of
Foxtel's leasing costs (based on space utilized). The Company believes this
arrangement results in operational cost savings. XYZ Entertainment believes its
facilities are sufficient for the foreseeable future.

Telefenua owns office space in Punaania, Tahiti. This facility also
contains the customer service center and the head-end equipment for the system,
including equipment for the receipt of satellite delivered programming and local

18
<PAGE>

broadcasts as well as play-back of taped programming. Telefenua compiles its
16-channel service at this facility and then transmits from its MMDS broadcast
tower located on the island of Moorea.

United Wireless leases corporate office space in Sydney and has a leased
regional sales office in Melbourne.

ITEM 3. LEGAL PROCEEDINGS
- --------------------------

Other than as described below, the Company is not a party to any material
legal proceedings, nor is it currently aware of any threatened material legal
proceedings. From time to time, the Company may become involved in litigation
relating to claims arising out of its operations in the normal course of its
business.

The territorial government of Tahiti (in French Polynesia) has legally
challenged the decree and authority of the Conseil Superieur de l'Audiovisuel
("CSA") to award Telefenua the authorizations to operate an MMDS service in
French Polynesia. The French Polynesian's challenge to France's authority to
award Telefenua an MMDS license in Tahiti was upheld by the Conseil d'Etat, the
supreme administrative court of France. The territorial government of Tahiti has
brought an action in French court seeking cancellation of the MMDS licenses
awarded by the CSA to Telefenua, although no such cancellation has yet taken
place. There can be no assurance that if the existing authorization is nullified
a new authorization will be obtained. If Telefenua does not obtain a new
authorization, there is no assurance that Telefenua will receive any
restitution. In addition, any available restitution could be limited and could
take years to obtain.

On November 6, 1996, Austar filed a complaint in the Supreme Court of New
South Wales, Commercial Division, seeking injunctive relief to prevent (i)
Australis from transferring its satellite delivery systems and associated
infrastructure to its joint venture with Optus Vision and (ii) Optus Vision from
using such infrastructure to deliver DTH services in Austar's franchise area.
Austar believes that the use of the infrastructure by any entity other than
Austar for the provision of DTH services within Austar's franchise areas
violates the terms of Austar's franchise agreement with Australis which granted
Austar an exclusive license and franchise to use the infrastructure within its
franchise areas. Austar is seeking injunctive relief or, in the alternative,
damages associated with this violation of its franchise agreements. On December
6, 1996, Australis filed counterclaims against Austar and the Company alleging
generally that Austar and the Company breached implied terms of the Australis
Arrangement by seeking such injunctive relief. In addition, Optus Vision claims
that the exclusive nature of Austar's franchise agreements violates Australia's
Trade Practices Act. On May 9, 1997, pursuant to the court's permission, Austar
amended its complaint to include claims that the agreement between Australis and
Optus Vision violates Australia's Trade Practices Act and that Austar is
entitled to damages arising from interference with its contractual relations
with Australis under the franchise agreements. Austar's complaint was also
amended to add as defendants two affiliates of Optus Vision: Publishing and
Broadcasting Limited and its subsidiary, Pay TV Options. In response, on
September 10, 1997, Australis lodged an amended cross-claim. On May 30, 1997,
the Supreme Court of New South Wales, in separate proceedings brought by FoxTel,
granted a permanent injunction restraining Australis from transferring such
assets to the joint venture. Both Optus Vision and Australis appealed the
decision. Optus Vision indicated, in the meantime, that it was pursuing its
claim that the exclusive nature of Austar's franchise agreements violate
Australia's Trade Practices Act. The New South Wales Court of Appeal, on
December 23, 1997, upheld the appeal brought by Optus Vision and Australis
against the granting of the permanent injunction. The Company intends to
vigorously defend its position.

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

On November 10, 1997, the sole stockholder of the Company approved an
amendment to the Company's articles of incorporation to increase the Company's
authorized capital.

19
<PAGE>
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
- --------------------------------------------------------------------------------

Upon its formation, the Company issued 100 shares of common stock to UAP's
predecessor. In July 1996, the Company issued 387 additional shares of common
stock to UAP as a stock dividend and 13 shares of common stock to Kiwi Cable
Company BVI, Inc. ("Kiwi") in exchange for Kiwi's 50% interest in Saturn. In May
1997, UAP acquired the remaining 13 shares of the Company from Kiwi in exchange
for a 2% interest in UAP. At that time, UAP owned all of the 500 shares of
issued and outstanding common stock of the Company. In November 1997, the
Company effected a stock split whereby the 500 shares of common stock then
outstanding were exchanged for 13,864,941 shares of common stock. On November
17, 1997, pursuant to the terms of the indentures governing the May 1996 Notes
and the September 1997 private placement of $46.3 million aggregate principal
amount of senior discount notes (the "September 1997 Notes") (collectively, the
"Notes"), the Company issued warrants to purchase a total of 488,000 shares of
its common stock to the holders of the Notes. Neither the common stock nor the
warrants are listed on any exchange.

The Company has paid no cash dividends to either UAP or Kiwi. The Company
is a holding company with no independent operations of its own and, as such, its
ability to pay cash dividends is dependent upon distributions from its operating
companies. Such distributions are limited by contractual or other obligations of
such operating companies. In addition, the ability of the operating companies to
distribute funds may be limited by the current or future regulations of the
countries in which they are located.

ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------

The following selected consolidated financial data as of and for the years
ended December 31, 1997, 1996, 1995 and 1994 have been derived from the
Company's audited consolidated financial statements. The data set forth below is
qualified by reference to and should be read in conjunction with the Company's
audited consolidated financial statements including the notes and Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------------------------------
1997 1996 1995 1994
-------- -------- -------- --------
(In thousands, except share and per share data)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Service and other revenue ............................... $ 68,961 $ 24,977 $ 1,883 --
System operating expense ................................ (52,703) (22,865) (3,230) --
System selling, general and administrative expense ...... (50,006) (32,665) (2,482) --
Corporate general and administrative expense ............ (3,306) (1,376) (920) (659)
Depreciation and amortization ........................... (80,802) (36,269) (1,003) --
Equity in losses of affiliated companies ................ (2,408) (5,414) (16,379) (1,015)
Interest expense and other, net ......................... (47,792) (14,374) 4,898 --
---------- ---------- ---------- ----------
Net loss ................................................ $ (168,056) $ (87,986) $ (17,233) $ (1,674)
========== ========== ========== ==========
Basic and diluted loss per common share ................. $ (12.12) $ (6.44) $ (1.28) $ (0.12)
========== ========== ========== ==========
Weighted-average number of shares outstanding ........... 13,864,941 13,670,832 13,504,453 13,504,453
========== ========== ========== ==========
OTHER DATA:
Capital expenditures .................................... $ 101,135 $ 187,100 $ 7,648 $ 1
</TABLE>
<TABLE>
<CAPTION>
As of
December 31,
--------------------------------------------------------
1997 1996 1995 1994
-------- -------- -------- --------
(In thousands)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C>
Cash, cash equivalents, restricted cash and short-term
investments .................................................. $ 25,089 $ 37,860 $ 8,730 $ --
Property, plant and equipment, net ............................. $ 183,101 $193,170 $27,630 $ 1
Total assets ................................................... $ 279,032 $319,323 $99,295 $24,084
Senior discount notes and other debt ........................... $ 387,094 $250,057 $ 742 $ --
Total liabilities .............................................. $ 433,718 $315,276 $21,714 $ 11
Total stockholder's (deficit) equity ........................... $(166,102) $ 4,047 $75,066 $24,073
</TABLE>

20
<PAGE>

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

THE FOLLOWING DISCUSSION CONTAINS, IN ADDITION TO HISTORICAL INFORMATION,
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES BEYOND
MANAGEMENT'S CONTROL. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED BELOW AND IN THE COMPANY'S REPORT ON FORM 8-K DATED MAY 15, 1997.

The following discussion and analysis of the Company's financial condition
and results of operations covers the years ended December 31, 1997, 1996 and
1995 and should be read in conjunction with the Company's consolidated financial
statements and related notes thereto included elsewhere herein. Such
consolidated financial statements provide additional information regarding the
Company's financial activities and condition.

The Company conducts no operations other than through its operating
companies in which it holds varying interests. Because the operating companies
have, since inception, been engaged primarily in organizational, start-up and
construction activities and have not yet achieved the expected subscriber
penetration levels anticipated with mature operating systems, the Company
believes that its historical results of operations discussed herein are not
indicative of its future results of operations.

INTRODUCTION

The Company currently holds (i) an effective 100% economic interest in
Austar, (ii) a 65% interest in Saturn, (iii) a 25% interest in XYZ
Entertainment, (iv) an up to 90% economic interest in Telefenua and (v) a 100%
interest in United Wireless. Because the Company accounts for its less than
majority-owned operating companies under the equity method, prior to September
1995 only the Company's Tahitian subsidiary Telefenua was consolidated. In
September 1995, the Company acquired a 100% interest in United Wireless at which
time it began consolidating its results of operations. In late December 1995,
the Company increased its economic interest in Austar from 50% to 90% (the
"Austar Transaction"). During 1996, the Company further increased its economic
interest in Austar to 100%. Prior to the Austar Transaction, the Company
accounted for its investment in Austar using the equity method of accounting.
The Company began consolidating the results of operations of Austar effective
January 1, 1996. Following its July 1996 acquisition of the remaining 50%
interest in Saturn, the Company began consolidating the results of operations of
Saturn, which had previously been accounted for using the equity method of
accounting. The Company's interest in Saturn was reduced to 65% in July 1997
with the Saturn Transaction. The Company accounts for its interest in XYZ
Entertainment using the equity method of accounting.

In connection with the offering of the May 1996 Notes, UIH merged into the
Company UIH's subsidiaries that held interests in certain operating properties
and early stage projects in Australia, New Zealand and Tahiti. The accompanying
financial statements have been prepared on a basis of reorganization accounting
as though the Company had performed all foreign development activities and made
all acquisitions of UIH's foreign multi-channel television, programming and
mobile data interests in Australia, New Zealand and Tahiti since inception. The
Company commenced operations in January 1994 when UIH began its
development-related activities in the Australia/Pacific region. The Company
reflected all of the transfers from UIH as a capital contribution from parent in
the accompanying consolidated financial statements. The Company reports on the
basis of generally accepted accounting principles in the United States ("U.S.
GAAP") and recognizes its proportionate share of affiliated company income
(loss) on the basis of U.S. GAAP results.

21
<PAGE>

As demonstrated by the following table, each of the operating companies has
experienced rapid growth in subscribers:
<TABLE>
<CAPTION>
As of
December 31, 1997
----------------------------------------------------------------
Subscriber
Company Service Basic Net Gain
Consolidated Subsidiaries: Ownership(1) Launch Date Subscribers During 1997
-------------------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Austar...................................... 100% August 1995 196,205 92,758
United Wireless............................. 100% September 1995 N/A N/A
Telefenua................................... 90% March 1995 6,304 1,117
Saturn...................................... 65% September 1995 3,059 1,362

Unconsolidated Affiliate:
-------------------------

XYZ Entertainment........................... 25% April 1995 577,205 237,205
</TABLE>

(1) For an explanation of the Company's interests in each of the operating
companies, see Item 1 "Narrative Description of Business--Corporate
Organizational Structure."

UAP, the Company's parent, provides various management, technical,
administrative, accounting, financial reporting, tax, legal and other services
for the Company pursuant to the terms of a management agreement between UAP and
the Company. In addition, UAP provides similar services to the Company's
operating systems, pursuant to the terms of various technical assistance
agreements with such operating systems. See Item 13 "Certain Relationships and
Related Transactions."

LIQUIDITY AND CAPITAL RESOURCES

The Company is responsible for its proportionate share of the capital
requirements of the operating companies. The Company has funded its
proportionate share to date with capital contributed by UIH and UAP and proceeds
from private debt offerings and has reduced its proportionate share to date with
subsidiary bank debt and strategic partner contributions. Through the private
placement of the May 1996 Notes, the Company raised total gross proceeds of
approximately $225.1 million. These notes will accrete to an aggregate principal
amount of $455.6 million at maturity. Through the private placement of the
September 1997 Notes, the Company raised total gross proceeds of approximately
$29.9 million. These notes will accrete to an aggregate principal amount of
$46.3 million at maturity. The Notes currently accrete interest at 14.75% per
annum and are due in May 2006. Upon the sale by the Company of securities
generating gross proceeds of at least $70.0 million, the Notes will accrete
interest at a rate of 14% compounded semi-annually.

In July 1997, Austar secured a financing facility from a bank for a senior
syndicated term debt facility in the amount of A$200.0 million (approximately
$155.0 million) (the "Austar Bank Facility"). The proceeds of the Austar Bank
Facility have been and will be used to fund Austar's subscriber acquisition and
working capital needs. The Austar Bank Facility consists of three
sub-facilities: (i) A$50.0 million revolving working capital facility, (ii)
A$60.0 million cash advance facility and (iii) A$90.0 million term loan
facility. This term loan facility will be available to the extent that any
drawdown, if added to the existing aggregate outstanding balance under
sub-facilities (i) and (ii), would not exceed five times annualized cash flow,
and upon Austar having achieved and maintained total subscribers of at least
200,000. The working capital facility is fully repayable on June 30, 2000. The
cash advance facility is fully repayable pursuant to an amortization schedule
beginning December 31, 2000 and ending June 30, 2004. As of December 31, 1997,
Austar had drawn the entire amount of the working capital facility and the cash
advance facility totaling A$110.0 million ($71.5 million converted using the
December 31, 1997 exchange rate). Austar expects to meet the requirements in
(iii) above and have access to the term loan facility by early 1999.

In July 1997, SaskTel purchased a 35% equity interest in Saturn by
investing NZ$29.9 million (approximately $19.6 million) directly into Saturn for
its newly-issued shares. The Company believes that SaskTel, a division of
Saskatchewan Telecommunications Holdings Corporation of Saskatchewan, Canada,
will contribute telephony expertise to Saturn in providing cable/telephony
service in the Wellington, New Zealand area.

22
<PAGE>

As of December 31, 1997, the Company had invested a total of approximately
$405.8 million in its projects as outlined below:
<TABLE>
<CAPTION>
As of
December 31,
1997
---------------
(In thousands)
<S> <C>
Austar................................................................. $338,990(1)(2)
Saturn................................................................. 28,376(1)(3)
Telefenua.............................................................. 16,738
XYZ Entertainment...................................................... 14,090
United Wireless........................................................ 7,637
--------
Total............................................................. $405,831
========
</TABLE>
(1) Does not include amounts contributed to Austar (approximately
$11,000) and Saturn (approximately $2,920) by shareholders other
than the Company, which amounts were contributed by such
shareholders prior to the acquisition of their respective
interests by the Company.
(2) Includes A$110,000 ($83,895 converted using the exchange rate on
each funding date) of amounts borrowed under the Austar Bank
Facility and $28,773 paid by the Company to increase its economic
interest in Austar to approximately 100%. Does not include the
$29,840 of non-cash issuance of preferred stock by the Company to
increase its economic interest in Austar to approximately 100%.
(3) Does not include the $7,800 of common stock exchanged for shares
of the Company to increase the Company's interest in Saturn to
100% effective July 1996.

AUSTAR

The Company anticipates the need for additional funding for
Austar in the future. The amount of capital needed is dependent
primarily upon three factors: (i) the number of new subscribers added;
(ii) the level of churn, that is, the level of existing subscribers
who disconnect from Austar's service; and (iii) the mix of DTH versus
MMDS installations. Substantially all fixed costs required to operate
Austar's service have already been incurred. The average cost to
install a subscriber includes variables such as equipment, marketing
and sales costs, and installation fees. The average cost of a
subscriber who disconnects is reduced by the recovery of certain
equipment (principally converters), and is further reduced if a new
subscriber is installed in a previously disconnected home. For the
year ended December 31, 1997, Austar experienced average monthly churn
of 4.2%, exceeding its budgeted figure for churn of 3.2%, which had a
negative $5.5 million impact on operating and capital costs. See Item
1(c) "Narrative Description of Business--Austar (Australia)--
Marketing; Customer Support."

Austar plans to continue to expand and add subscribers; however,
the timing of such expansion and the funds required for such expansion
are largely variable. Based upon current plans and budgeted churn,
Austar will require approximately $50-$75 million to continue on its
current expansion path for the period from April 1, 1998 to December
31, 1998 and approximately $50-$75 million for similar expansion plans
for 1999. The sources of funds for such expansion may include the
raising of private or public equity, continued investment by UIH, the
drawdown of the remaining amount ($58.5 million converted using the
December 31, 1997 exchange rate) under the Austar Bank Facility
(assuming that certain financial ratios are met, which ratios are not
currently being met) or the sale of non-strategic assets. There can be
no assurance that the Company will be successful in obtaining all or a
portion of its anticipated funding needs for the continued expansion
of Austar.

SATURN

The Company anticipates the need for additional funding for
Saturn in the future. Saturn's capital needs include capital for the
completion of the network required by Saturn to offer cable television
and telephony services and the capital required to install customers.
Management currently estimates that the Company's portion of the total
funding required for Saturn is approximately $50-$55 million for the
period from April 1, 1998 until Saturn has sufficient cash flows from
operations to cover such needs, although there can be no assurances
that further additional capital will not be required. Of this amount,
approximately $35 million is required as a fixed cost to complete the
construction of the network, and the remainder is required as a result

23
<PAGE>

of the installation of customers. The sources of funds for such
expansion may include the raising of private or public equity,
continued investment by UIH, the raising of equipment and/or bank
financing (where the Company has already commenced discussions with
several potential lenders) or the sale of non-strategic assets. There
can be no assurance that the Company will be successful in obtaining
all or a portion of its anticipated funding needs for Saturn.

OTHER

The Company anticipates that the aggregate future funding
requirements for Telefenua, XYZ Entertainment and United Wireless are
less than $5 million.

The indentures associated with UIH's senior secured discount notes due
February 2008 and the Company's Notes (collectively, the "Indentures") place
restrictions on the Company and its restricted subsidiaries with respect to
incurring additional debt. The Company and all of the operating companies are
currently restricted under the UIH indentures. The Company, Austar and Telefenua
are restricted under the Company's indentures. The restrictions imposed by the
Indentures will be eliminated upon the retirement of UIH's notes at their
maturity in February 2008 and upon the retirement of the Company's Notes at
their maturity in May 2006. In addition, pursuant to the Austar Bank Facility,
Austar can not (i) pay any dividends, (ii) make any payments of interest on the
Company's Notes or (iii) pay any fees under its technical assistance agreements
prior to December 31, 2000. Subsequent to December 31, 2000, the payments in
(i), (ii) and (iii) above may be made, subject to certain debt to cash flow
ratios.

On November 17, 1997, pursuant to the terms of the indentures governing the
Notes, the Company issued warrants to purchase a total of 488,000 shares of its
common stock, which represented 3.4% of its common stock. The warrants are
exercisable at a price of $10.45 per share which would result in gross proceeds
of approximately $5.1 million upon exercise. The warrants are exercisable
through May 15, 2006.

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1997

The Company incurred a net loss during the year ended December 31, 1997 of
$168.1 million, which includes non-cash items such as depreciation and
amortization expense totaling $80.8 million and accretion of interest on the
Notes and amortization of deferred financing costs totaling $38.7 million.

Cash and cash equivalents decreased $6.9 million from $19.2 million as of
December 31, 1996 to $12.3 million as of December 31, 1997. Principal sources of
cash during the year ended December 31, 1997 included borrowings on the Austar
Bank Facility of $85.2 million, gross proceeds from the issuance of the
September 1997 Notes of $29.9 million, the purchase of a 35% interest in Saturn
by SaskTel for $19.6 million, borrowings from parent of $10.0 million, capital
contributions from parent of $7.9 million and net proceeds from the net decrease
in short-term investments of $6.3 million.

During the year ended December 31, 1997, cash was used principally for
purchases of property, plant and equipment of $101.1 million to continue the
build-out of existing projects, primarily at Austar, a decrease in construction
payables of $29.6 million, investments in the Company's affiliated companies of
$3.3 million, deferred financing costs and other uses totaling $6.9 million and
the funding of operating activities of $24.9 million during the year.

FOR THE YEAR ENDED DECEMBER 31, 1996

The Company incurred a net loss during the year ended December 31, 1996 of
$88.0 million, which includes non-cash items such as depreciation and
amortization expense totaling $36.3 million and accretion of interest on the
Notes and amortization of deferred financing costs totaling $20.3 million.

Cash and cash equivalents increased $10.5 million from $8.7 million as of
December 31, 1995 to $19.2 million as of December 31, 1996. Principal sources of
cash during this period included gross proceeds from the issuance of the May
1996 Notes of $225.1 million, an increase in construction payables of $38.4
million, borrowings of $17.5 million and capital contributions from parent of
$10.7 million.

During the year ended December 31, 1996, cash was used principally for the
purchase of property, plant and equipment of $187.1 million to construct
Austar's and Telefenua's systems, repayments on related party debt of $25.0
million, the purchase of net short-term investments of $18.6 million,
investments in the Company's affiliated companies of $16.2 million, deferred
financing costs and other uses totaling $9.0 million, the purchase of the
approximately 4% remaining economic interest in Austar for $7.9 million and the
funding of operating activities of $17.4 million during the year.

24
<PAGE>

FOR THE YEAR ENDED DECEMBER 31, 1995

The Company incurred a net loss during the year ended December 31, 1995 of
$17.2 million, which includes non-cash depreciation and amortization expense
totaling $1.0 million.

Cash and cash equivalents increased from $0 as of December 31, 1994 to $8.7
million as of December 31, 1995. Principal sources of cash during this period
included capital contributions from parent of $38.6 million, borrowings on
related party debt of $9.9 million and proceeds of $4.1 million from the sale of
a portion of XYZ Entertainment, which diluted the Company's interest to 25%.

During the year ended December 31, 1995, cash was used principally for
investments in affiliated companies of $22.5 million, the purchase of an
additional 40% economic interest in Austar for a net $8.0 million, the purchase
of property, plant and equipment of $7.6 million to construct Austar's and
Telefenua's systems and the funding of operating activities and other totaling
$5.8 million during the year.

RESULTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

Service and Other Revenue. The Company's service and other revenue (including
installation revenues) increased $ 44.0 million and $23.1 million for the years
ended December 31, 1997 and 1996, respectively, compared to the corresponding
amounts in the prior years. Service and other revenue for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Austar............................................................ $63,848 $21,244 $ --
Saturn............................................................ 473 110 --
Telefenua......................................................... 4,118 3,513 1,882
United Wireless................................................... 522 110 1
------- ------- ------
Total service and other revenue.............................. $68,961 $24,977 $1,883
======= ======= ======
</TABLE>

AUSTAR

Service and other revenue at Austar increased $42.6 million, or
200.9%, from $21.2 million for the year ended December 31, 1996 to
$63.8 million for the year ended December 31, 1997. This increase was
primarily due to subscriber growth from an average of approximately
54,000 subscribers during 1996 to an average of approximately 150,000
subscribers during 1997, as Austar continues to roll-out its services.

The Company began consolidating the results of Austar's
operations effective January 1, 1996. Accordingly, the Company
reported no service and other revenue from Austar in 1995. Service and
other revenue at Austar increased $20.8 million from $0.4 million for
the year ended December 31, 1995 to $21.2 million for the year ended
December 31, 1996. This increase was primarily due to subscriber
growth (103,447 at December 31, 1996 compared to 5,204 at December 31,
1995) as Austar began the rapid roll-out of its services initially
launched in August 1995.

SATURN

The Company began consolidating the results of Saturn's
operations effective July 1, 1996. Accordingly, the Company reported
no service and other revenue from Saturn during the first half of
1996. Service and other revenue at Saturn increased $0.3 million, or
150% from $0.2 million for the year ended December 31, 1996 to $0.5
million for the year ended December 31, 1997. This increase was
primarily due to growth in subscribers from an average of
approximately 1,300 subscribers during 1996 to an average of
approximately 2,400 subscribers during 1997.

25
<PAGE>

The Company began consolidating the results of Saturn's
operations effective July 1, 1996. Accordingly, the Company reported
no service and other revenue from Saturn during the first half of 1996
or during 1995. Service and other revenue at Saturn increased $0.1
million, or 100%, from $0.1 million for the year ended December 31,
1995 to $0.2 million for the year ended December 31, 1996. This
increase was primarily due to growth in subscribers (1,697 at December
31, 1996 compared to 959 at December 31, 1995).

TELEFENUA

Telefenua's service and other revenue increased $0.6 million, or
17.1%, from $3.5 million for the year ended December 31, 1996 to $4.1
million for the year ended December 31, 1997. This increase was
primarily attributable to an increase in basic subscribers, from an
average of approximately 4,700 subscribers during 1996 to an average
of approximately 5,700 during 1997, and the launch of premium services
during 1997 (2,320 subscribers at December 31, 1997).

Service and other revenue at Telefenua increased $1.6 million, or
84.2%, from $1.9 million for the year ended December 31, 1995 to $3.5
million for the year ended December 31, 1996. This increase was
primarily due to subscriber growth (5,187 at December 31, 1996
compared to 4,126 at December 31, 1995).

SYSTEM OPERATING EXPENSE. The Company's operating expenses increased $29.8
million and $19.6 million for the years ended December 31, 1997 and 1996,
respectively, compared to the corresponding amounts in the prior years. System
operating expense for the years ended December 31, 1997, 1996 and 1995 was as
follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Austar........................................................... $42,792 $17,990 $ --
Saturn........................................................... 4,015 1,344 --
Telefenua........................................................ 2,040 2,118 2,836
United Wireless.................................................. 1,789 1,413 394
Other............................................................ 2,067 -- --
------- ------- ------
Total system operating expense.............................. $52,703 $22,865 $3,230
======= ======= ======
</TABLE>

AUSTAR

The Company reported an increase in system operating expense from
Austar of $24.8 million, or 137.8%, from $18.0 million for the year
ended December 31, 1996 to $42.8 million for the year ended December
31, 1997. This increase was primarily due to an increase in satellite
programming fees and copyright costs, which corresponds to the
increase in subscribers and additional basic programming services; an
increase in salaries and benefits related to the additional personnel
necessary to support Austar's launch of local and state offices in its
markets; and an increase in customer subscriber management expenses
related to the volume increases in telephone, billing and collection
costs. The remainder of the increase related to increases in system
travel, maintenance, vehicle costs and management fees.

Austar has experienced high operating expense relative to service
revenue due to certain fixed operating expenses. Austar expects
operating expense as a percentage of service revenue to decline in
future periods because a significant portion of Austar's distribution
facilities and network costs, such as local and state office staffing
levels, operating costs and wireless license costs, have already been
incurred and are fixed in relation to changes in subscriber volumes.
Other system operating expense, such as those related to programming
and subscriber management expense, will vary in direct proportion to
the number of subscribers.

The Company began consolidating the results of Austar's
operations effective January 1, 1996. Accordingly, the Company
reported no system operating expense from Austar in 1995. System
operating expense at Austar increased $15.0 million, or 500%, from
$3.0 million for the year ended December 31, 1995 to $18.0 million for
the year ended December 31, 1996. This increase was primarily
attributable to the rapid roll-out of Austar's services initially
launched in August 1995 and the corresponding increase in subscribers.

26
<PAGE>

SATURN

The Company began consolidating the results of Saturn's
operations effective July 1, 1996. Accordingly, the Company reported
no system operating expense from Saturn during the first half of 1996.
System operating expense at Saturn increased $1.7 million, or 73.9%
from $2.3 million for the year ended December 31, 1996 to $4.0 million
for the year ended December 31, 1997. This increase was primarily due
to an increase in personnel expenses in order to support Saturn's
build-out of its HFC network in the Wellington area.

The Company began consolidating the results of Saturn's
operations effective July 1, 1996. Accordingly, the Company reported
no system operating expense from Saturn during the first half of 1996
or during 1995. System operating expense at Saturn increased $1.2
million, or 109.1%, from $1.1 million for the year ended December 31,
1995 to $2.3 million for the year ended December 31, 1996. This
increase was primarily due to increases in payroll and office expenses
related to start-up activities, including system design and
engineering work, for the expansion of Saturn's Wellington system.

TELEFENUA

The Company reported a decrease in Telefenua's system operating
expense of $0.1 million, or 4.8%, from $2.1 million for the year ended
December 31, 1996 to $2.0 million for the year ended December 31,
1997. This slight decrease was primarily due to a weakening of the
local currency. Personnel headcount in 1997 was the same as in 1996.

System operating expense at Telefenua decreased $0.7 million, or
25.0%, from $2.8 million for the year ended December 31, 1995 to $2.1
million for the year ended December 31, 1996. This decrease resulted
from decreases in technical-related repairs and maintenance as well as
tape production costs, partially offset by the increase in
subscribers.

OTHER

In September 1997, the Company commenced transponder fee payments
for a satellite service of approximately $0.4 million per month as
part of its five-year agreement with Optus Networks. The Company
expects to launch programming services on the satellite during 1998.

SYSTEM SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. The Company's system
selling, general and administrative expense increased $17.3 million and $30.2
million for the years ended December 31, 1997 and 1996, respectively, compared
to the corresponding amounts in the prior years. System selling, general and
administrative expense for the years ended December 31, 1997, 1996 and 1995 was
as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Austar............................................................ $42,810 $26,948 $ --
Saturn............................................................ 3,581 2,008 --
Telefenua......................................................... 2,063 2,586 2,286
United Wireless................................................... 1,552 1,123 196
------- ------- ------
Total system selling, general and administrative expense..... $50,006 $32,665 $2,482
======= ======= ======
</TABLE>

AUSTAR

System selling, general and administrative expense from Austar
increased $15.9 million, or 59.1%, from $26.9 million for the year
ended December 31, 1996 to $42.8 million for the year ended December
31, 1997. This increase was primarily due to an increase in salaries
associated with the NCOC and Austar's corporate headquarters as a
result of additional personnel necessary to support the increase in
subscribers, an increase in marketing costs related to print, radio
and television advertisements associated with subscriber acquisition
and retention and an increase in direct sales commissions due to
subscriber growth. In addition, Austar experienced certain one-time
charges for the restructuring and consolidation of various regional
offices.

27
<PAGE>

Austar expects system selling, general and administrative expense
as a percentage of service revenue to decline in future periods
because a significant portion of Austar's infrastructure costs, such
as the NCOC, its corporate management staff and media-related
marketing costs, have already been incurred and are fixed in relation
to changes in subscriber volumes. Other system selling, general and
administrative expense relating to commissions and acquisition costs
is expected to vary in relation to the number of customer sales and
installations.

The Company began consolidating the results of Austar's
operations effective January 1, 1996. Accordingly, the Company
reported no system selling, general and administrative expense from
Austar in 1995. System selling, general and administrative expense at
Austar increased $22.4 million, or 497.8%, from $4.5 million for the
year ended December 31, 1995 to $26.9 million for the year ended
December 31, 1996. This increase was primarily attributable to the
rapid roll-out of Austar's services initially launched in August 1995
and the corresponding increase in subscribers.

SATURN

The Company began consolidating the results of Saturn's
operations effective July 1, 1996. Accordingly, the Company reported
no system selling, general and administrative expense from Saturn
during the first half of 1996. Saturn's system selling, general and
administrative expense increased $1.2 million, or 50.0%, from $2.4
million for the year ended December 31, 1996 to $3.6 million for the
year ended December 31, 1997. This increase was primarily due to
increases in direct sales commissions due to subscriber growth as well
as marketing and promotion costs for subscriber acquisition.

The Company began consolidating the results of Saturn's
operations effective July 1, 1996. Accordingly, the Company reported
no system selling, general and administrative expense from Saturn
during the first half of 1996 or during 1995. Saturn's system selling,
general and administrative expense increased $1.2 million, or 100%,
from $1.2 million for the year ended December 31, 1995 to $2.4 million
for the year ended December 31, 1996. This increase was primarily
attributable to increased marketing efforts to expand the subscriber
base as Saturn's system expands.

TELEFENUA

System selling, general and administrative expense at Telefenua
decreased $0.5 million, or 19.2%, from $2.6 million for the year ended
December 31, 1996 to $2.1 million for the year ended December 31,
1997. This decrease was primarily due to fewer marketing-related
campaigns during 1997, particularly related to general advertising, as
well as a weakening of the local currency.

System selling, general and administrative expense at Telefenua
increased $0.3 million, or 13.0%, from $2.3 million for the year ended
December 31, 1995 to $2.6 million for the year ended December 31,
1996. This increase was primarily attributable to increased marketing
efforts associated with Telefenua's March 1995 service launch.

CORPORATE GENERAL AND ADMINISTRATIVE EXPENSE. The Company's corporate general
and administrative expense increased $1.9 million, or 135.7%, from $1.4 million
for the year ended December 31, 1996 to $3.3 million for the year ended December
31, 1997. This increase was primarily due to an increase in the allocation of
UIH corporate general and administrative expenses to the Company, based on
increased activity at the operating system level.

The Company's corporate general and administrative expense increased $0.5
million, or 55.6%, from $0.9 million for the year ended December 31, 1995 to
$1.4 million for the year ended December 31, 1996. This increase related to an
increase in corporate staff dedicated to the region.

28
<PAGE>

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased
$44.5 million and $35.3 million for the years ended December 31, 1997 and 1996,
respectively, compared to the corresponding amounts in the prior years.
Depreciation and amortization expense for the years ended December 31, 1997,
1996 and 1995 was as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Austar............................................................ $76,913 $33,446 $ --
Saturn............................................................ 2,033 800 --
Telefenua......................................................... 1,212 1,382 960
United Wireless................................................... 644 641 43
------- ------- ------
Total depreciation and amortization.......................... $80,802 $36,269 $1,003
======= ======= ======
</TABLE>
AUSTAR

Depreciation and amortization expense from Austar increased $43.5
million, or 130.2% from $33.4 million for the year ended December 31,
1996 to $76.9 million for the year ended December 31, 1997. This
increase was primarily due to the larger fixed asset base due to the
significant deployment of operating assets to meet subscriber growth
as well as an increase in expense related to subscriber disconnects.

The Company began consolidating the results of Austar's
operations effective January 1, 1996. Accordingly, the Company
reported no depreciation and amortization expense from Austar in 1995.
Depreciation and amortization expense from Austar increased $32.1
million from $1.3 million for the year ended December 31, 1995 to
$33.4 million for the year ended December 31, 1996. This increase was
primarily attributable to the significant deployment of Austar's
operating assets beginning in early 1996 and continuing throughout the
year as Austar launched service and gained subscribers in a number of
new markets.

SATURN

The Company began consolidating the results of Saturn's
operations effective July 1, 1996. Accordingly, the Company reported
no depreciation and amortization expense from Saturn during the first
half of 1996. Depreciation and amortization expense from Saturn
increased $1.6 million, or 400%, from $0.4 million for the year ended
December 31, 1996 to $2.0 million for the year ended December 31,
1997. This increase was primarily due to the larger fixed asset base
as Saturn continues to build-out its HFC network in the Wellington
area.

EQUITY IN LOSSES OF AFFILIATED COMPANIES. The Company recognized decreases in
equity in losses of affiliated companies of $3.0 million and $11.0 million for
the years ended December 31, 1997 and 1996, respectively, compared to the
corresponding amounts in the prior years. Equity in losses of affiliated
companies for the years ended December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------
1997 1996 1995
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
XYZ Entertainment................................................. $2,408 $4,484 $11,729
Saturn............................................................ -- 930 1,438
Austar............................................................ -- -- 3,212
------ ------ -------
Total equity in losses of affiliated companies............... $2,408 $5,414 $16,379
====== ====== =======
</TABLE>
XYZ ENTERTAINMENT

Equity in losses from XYZ Entertainment decreased $2.1 million,
or 46.7%, from $4.5 million for the year ended December 31, 1996 to
$2.4 million for the year ended December 31, 1997. This decrease was
primarily attributable to higher revenue, resulting from XYZ
Entertainment's subscriber increases, and overall reductions in
staffing levels during 1997.

29
<PAGE>

Equity in losses from XYZ Entertainment decreased $7.2 million,
or 61.5%, from $11.7 million for the year ended December 31, 1995 to
$4.5 million for the year ended December 31, 1996. This decrease was
primarily attributable to the decrease in the Company's interest in
XYZ Entertainment from 50% to 25% in September 1995. XYZ Entertainment
also reported a lower net loss in 1996 due to higher revenues
resulting from an increase in programming subscribers in 1996 combined
with fewer start-up costs than incurred in 1995 associated with the
launch of its first four channels.

SATURN

The Company acquired an initial 50% interest in Saturn in July
1994. The Company increased its ownership in Saturn to 100% and began
consolidating its results effective July 1, 1996. Accordingly, the
Company recognized equity in losses for Saturn for only the first six
months of 1996 as compared to the full twelve months for the year
ended December 31, 1995.

AUSTAR

The Company acquired an initial interest in the two companies
that comprise Austar in the fall of 1994 and increased its economic
interest in these companies to 90% in late December 1995. The Company
began consolidating the results of Austar's operations effective
January 1, 1996. Accordingly, the Company reported no equity in losses
related to Austar in 1996 or 1997.

GAIN ON SALE OF INVESTMENT. In September 1995, the Company sold one-half of its
investment in XYZ Entertainment at cost, reducing its interest in XYZ
Entertainment from 50% to 25%. As the recognition of equity losses through that
date had reduced the Company's investment in XYZ Entertainment to zero, the
Company recognized a gain on the entire amount received of $4.1 million.

PROVISION FOR LOSS ON MARKETABLE EQUITY SECURITIES. In December 1997, based on
the financial difficulties and potential insolvency of Australis, the Company
determined that the loss relating to its investment in Australis was other than
temporary. As a result, the Company recorded a provision for this loss of $4,784
for the year ended December 31, 1997.

INTEREST INCOME. Interest income decreased $3.0 million, or 73.2%, from $4.1
million for the year ended December 31, 1996 to $1.1 million for the year ended
December 31, 1997. This decrease was primarily due to reduced cash and
short-term investment balances related to the funding of the Company's
investments in affiliated companies.

Interest income increased $3.9 million from $0.2 million for the year ended
December 31, 1995 to $4.1 million for the year ended December 31, 1996. The
increase was attributable to higher short-term investment balances resulting
from the issuance of the May 1996 Notes.

INTEREST EXPENSE. Interest expense, including related party expense, increased
$22.8 million, or 109.6%, from $20.8 million for the year ended December 31,
1996 to $43.6 million for the year ended December 31, 1997. This increase was
primarily due to the accretion of interest on the $46.3 million aggregate
principal amount September 1997 Notes and accretion of interest for an entire
year on the $455.6 million aggregate principal amount May 1996 Notes. The Notes
currently accrete interest at a rate of 14.75% compounded semi-annually. Upon
the sale by the Company of securities generating gross proceeds of at least
$70.0 million, the Notes will accrete interest at a rate of 14% compounded
semi-annually.

Interest expense was $20.8 million for the year ended December 31, 1996
primarily due to the accretion of interest on the May 1996 Notes. Prior to the
offering of the May 1996 Notes, the Company had no significant amount of
interest-bearing debt.

FOREIGN CURRENCY EXCHANGE RATE RISKS; HEDGING

The operating companies' monetary assets and liabilities are subject to
foreign currency exchange risk as certain equipment purchases and payments for
certain operating expenses, such as programming expenses, are denominated in
currencies other than their own functional currency. In addition, certain of the
operating companies have notes payable and notes receivable which are
denominated in a currency other than their own functional currency or
intercompany loans payable linked to the U.S. dollar.

30
<PAGE>

In general, the Company and the operating companies do not execute hedge
transactions to reduce the Company's exposure to foreign currency exchange rate
risks. Accordingly, the Company may experience economic loss and a negative
impact on earnings and equity with respect to its holdings solely as a result of
foreign currency exchange rate fluctuations, which include foreign currency
devaluations against the dollar. The Company may also experience economic loss
and a negative impact on earnings related to these monetary assets and
liabilities. In general, exchange rate risk to the Company related to the
operating companies' commitments for equipment purchases and operating expenses
is generally limited due to the insignificance of the related monetary asset and
liability balances; however, exchange rate risk to the Company of these notes
payable, notes receivable and debt linked to the U.S. dollar have and will
continue to impact the Company's reported earnings. Because of the manner in
which the Company currently accounts for its interest in XYZ Entertainment, any
adverse effects on reported earnings would impact the Company through its equity
in losses of affiliated companies. During the year ended December 31, 1997, the
Company recorded a change in cumulative translation adjustments of $30.8
million, primarily due to the fluctuation in the Australian dollar compared to
the U.S. dollar exchange rates from 1.2574 as of December 31, 1996 to 1.5378 as
of December 31, 1997, a change of 22%.

The countries in which the operating companies now conduct business
generally do not restrict the removal or conversion of local or foreign
currency; however, there is no assurance this situation will continue. The
Company may also acquire interests in companies that operate in countries where
the removal or conversion of currency is restricted.

YEAR 2000 CONVERSION

The Company has established a central committee to coordinate the
identification, evaluation and implementation of changes to computer systems and
applications necessary to achieve a year 2000 date conversion with no effect on
customers or disruption to business operations. These actions are necessary to
ensure that the systems and applications will recognize and process information
for the year 2000 and beyond. Major areas of potential business impact have been
identified and are being dimensioned, and initial conversion efforts are
underway. The Company also is communicating with suppliers, dealers, financial
institutions and others with which it does business to coordinate year 2000
conversion. The total cost of compliance and its effect on the Company's future
results of operations is being determined as part of the detailed conversion
planning. In addition, the Company could be materially adversely affected by the
failure of its vendors to achieve year 2000 date conversion.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------

The consolidated financial statements of the Company are filed under this
Item as follows:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
UIH AUSTRALIA/PACIFIC, INC.
Report of Independent Public Accountants................................................................. 32
Report of Independent Auditors........................................................................... 33
Independent Auditors' Report............................................................................. 34
Consolidated Balance Sheets as of December 31, 1997 and 1996............................................. 35
Consolidated Statements of Operations For the Years Ended December 31, 1997, 1996 and 1995............... 36
Consolidated Statements of Stockholder's (Deficit) Equity For the Years Ended December 31, 1997,
1996 and 1995.......................................................................................... 37
Consolidated Statements of Cash Flows For the Years Ended December 31, 1997, 1996 and 1995............... 38
Notes to Consolidated Financial Statements............................................................... 39
</TABLE>

The financial statement schedules required by Regulation S-X are filed
under Item 14 "Exhibits, Financial Statement Schedules and Reports on Form 8-K."

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

None.

31
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To UIH Australia/Pacific, Inc.:

We have audited the accompanying consolidated balance sheets of UIH
Australia/Pacific, Inc. (a Colorado corporation and wholly-owned subsidiary of
UIH Asia/Pacific Communications, Inc.) and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations, stockholder's
(deficit) equity and cash flows for the years ended December 31, 1997, 1996 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Telefenua S.A. as of and for the year ended December 31, 1995, a subsidiary
which is consolidated in the accompanying consolidated financial statements. UIH
Australia/Pacific, Inc.'s consolidated financial statements for the year ended
December 31, 1995 reflect revenues, expenses and a net loss related to Telefenua
S.A. of $1,882,000, $5,438,000 and $3,556,000, respectively. We did not audit
the financial statements of XYZ Entertainment Pty Limited ("XYZ Entertainment")
as of and for the year ended December 31, 1995, an investment which is reflected
in the accompanying consolidated financial statements on the equity method of
accounting. UIH Australia/Pacific, Inc.'s consolidated statement of operations
reflects equity in losses related to XYZ Entertainment of $11,729,000 for the
year ended December 31, 1995, and Note 4 to the consolidated financial
statements includes summarized financial data for XYZ Entertainment. The
financial statements of Telefenua S.A. and XYZ Entertainment as of and for the
year ended December 31, 1995 were audited by other auditors whose reports have
been furnished to us and our opinion, insofar as it relates to the summarized
financial data for Telefenua S.A. and XYZ Entertainment included in Notes 3 and
4 to the consolidated financial statements and to the amounts included in the
accompanying consolidated financial statements with respect to Telefenua S.A.
and XYZ Entertainment, is based solely on the reports of other auditors.

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

In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of UIH Australia/Pacific,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the years ended December 31, 1997, 1996 and
1995 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Denver, Colorado
March 27, 1998

32
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the shareholders of TELEFENUA SA:

We have audited the balance sheet of TELEFENUA SA as of December 31, 1995
and the related statement of income and changes in financial position for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards in France, which do not differ substantially from generally accepted
auditing standards in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TELEFENUA SA as of December
31, 1995 and the results of its operations and changes in its financial position
for the year then ended, in conformity with generally accepted accounting
principles in the United States of America.

The accounting practices of the Company used in preparing the accompanying
financial statements conform with generally accepted accounting principles in
the United States of America, but do not fully conform with accounting
principles generally accepted in France. As a consequence, those financial
statements differ from statutory financial statements that will be submitted for
the approval of the Company's shareholders in conformity with local corporate
laws.

A description of the significant differences between such principles and
those accounting principles generally accepted in the United States, and the
effect of those differences on net income, total assets and shareholders' equity
are set forth in Note 2(a) of the notes to the financial statements.

COOPERS & LYBRAND

Papeete, Tahiti
February 16, 1996

33
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors

We have audited the accompanying consolidated balance sheets of XYZ
Entertainment Pty Ltd as of December 31, 1994 and 1995 and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for the period from October 17, 1994 (date of inception) to December 31, 1994
and the financial year ended December 31, 1995, which are expressed in
Australian dollars. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in Australia which do not differ in any material respect from auditing
standards generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance as to whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
XYZ Entertainment Pty Ltd as of December 31, 1994 and 1995 and the results of
its operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in Australia.

Generally accepted accounting principles in Australia vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected amounts reported as stockholders' deficiency and net
loss as at and for the period from October 17, 1994 (date of inception) to
December 31, 1994 and the year ended December 31, 1995 to the extent summarized
in Note 12 to the financial statements.

Deloitte Touche Tohmatsu
Chartered Accountants

Sydney, Australia
March 15, 1996

34
<PAGE>
<TABLE>
<CAPTION>

UIH AUSTRALIA/PACIFIC, INC.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands, except share and per share amounts)

December 31,
----------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................................................... $ 12,344 $ 19,220
Restricted cash.................................................................... 420 --
Short-term investments............................................................. 12,325 18,640
Subscriber receivables............................................................. 2,548 1,625
Related party receivables.......................................................... 1,942 1,958
Other current assets............................................................... 3,405 1,995
-------- --------
Total current assets........................................................... 32,984 43,438

Marketable equity securities, including other investments in affiliated companies..... -- 1,372
Property, plant and equipment, net of accumulated depreciation of $78,179 and
$27,038, respectively.............................................................. 183,101 193,170
License fees, net of accumulated amortization of $3,773 and $2,520, respectively ..... 5,691 10,387
Goodwill, net of accumulated amortization of $8,044 and $3,911, respectively.......... 43,017 58,134
Deferred financing costs, net of accumulated amortization of $1,306 and $203,
respectively....................................................................... 13,393 9,805
Other non-current assets, net, including related party receivables of $0 and $1,600,
respectively....................................................................... 846 3,017
-------- --------
Total assets................................................................... $279,032 $319,323
======== ========

LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Current liabilities
Accounts payable and accrued liabilities, including related party payables of
$3,545 and $1,905, respectively................................................. $ 26,566 $ 20,336
Construction payables.............................................................. 6,008 38,407
Accrued funding obligation......................................................... 406 1,270
Related party note payable......................................................... 4,999 --
Current portion of long-term debt.................................................. 1,825 1,108
-------- --------
Total current liabilities...................................................... 39,804 61,121

Due to parent......................................................................... 5,394 2,758
Senior discount notes and other debt.................................................. 387,094 250,057
Other long-term liabilities........................................................... 1,426 1,340
-------- --------
Total liabilities.............................................................. 433,718 315,276
-------- --------

Minority interest in subsidiary....................................................... 11,416 --
-------- --------
Commitments and Contingencies (Notes 10 and 11)

Stockholder's (deficit) equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and
outstanding...................................................................... -- --
Common stock, $0.01 par value, 30,000,000 shares authorized, 13,864,941 and
13,864,941 shares issued and outstanding, respectively........................... 139 139
Additional paid-in capital......................................................... 137,672 112,346
Unrealized loss on investment...................................................... -- (3,412)
Cumulative translation adjustments................................................. (28,964) 1,867
Accumulated deficit................................................................ (274,949) (106,893)
-------- --------
Total stockholder's (deficit) equity........................................... (166,102) 4,047
-------- --------
Total liabilities and stockholder's (deficit) equity........................... $279,032 $319,323
======== ========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands, except share and per share amounts)

For the Years Ended
December 31,
-------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service and other revenue ....................................................... $ 68,961 $ 24,977 $ 1,883

System operating expense, including related party expense of $3,291,
$788 and $94, respectively ................................................... (52,703) (22,865) (3,230)
System selling, general and administrative expense .............................. (50,006) (32,665) (2,482)
Corporate general and administrative expense, including management
fees to related party of $2,739, $750 and $918, respectively ................. (3,306) (1,376) (920)
Depreciation and amortization ................................................... (80,802) (36,269) (1,003)
---------- ---------- ----------
Net operating loss ....................................................... (117,856) (68,198) (5,752)

Equity in losses of affiliated companies ........................................ (2,408) (5,414) (16,379)
Gain on sale of investment in affiliated company ................................ -- -- 4,132
Provision for loss on marketable equity securities .............................. (4,784) -- --
Interest income ................................................................. 1,144 4,106 157
Interest expense, including related party expense of $1,305, $458 and $0,
respectively ................................................................. (43,569) (20,756) (30)
Other (expense) income, net ..................................................... (1,601) 90 219
---------- ---------- ----------
Net loss before minority interest ........................................ (169,074) (90,172) (17,653)

Minority interest in subsidiaries ............................................... 1,018 2,186 420
---------- ---------- ----------

Net loss ................................................................. $ (168,056) $ (87,986) $ (17,233)
========== ========== ==========

Basic and diluted loss per common share ......................................... $ (12.12) $ (6.44) $ (1.28)
========== ========== ==========

Weighted-average number of common shares outstanding ............................ 13,864,941 13,670,832 13,504,453
========== ========== ==========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>

UIH AUSTRALIA/PACIFIC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S (DEFICIT) EQUITY
(Stated in thousands, except share amounts)

Common Stock Additional Unrealized Cumulative
----------------------- Paid-in Loss on Translation Accumulated
Shares Amount Capital Investment Adjustments Deficit Total
---------- -------- ----------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1995 ........... 13,504,453 $135 $ 25,207 $ -- $ 405 $ (1,674) $ 24,073

Capital contributions from
parent ........................... -- -- 68,440 -- -- -- 68,440
Change in cumulative
translation adjustments ............. -- -- -- -- (214) -- (214)

Net loss ............................ -- -- -- -- -- (17,233) (17,233)
---------- ---- -------- ------ -------- ---------- ---------

Balances, December 31, 1995 ......... 13,504,453 135 93,647 -- 191 (18,907) 75,066

Capital contributions from
parent ........................... -- -- 10,903 -- -- -- 10,903
Acquisition of remaining 50%
interest in Saturn ............... 360,488 4 7,796 -- -- -- 7,800
Unrealized loss on investment ....... -- -- -- (3,412) -- -- (3,412)
Change in cumulative
translation adjustments .......... -- -- -- -- 1,676 -- 1,676
Net loss ............................ -- -- -- -- -- (87,986) (87,986)
---------- ---- -------- ------ -------- ---------- ---------

Balances, December 31, 1996 ......... 13,864,941 139 112,346 (3,412) 1,867 (106,893) 4,047

Capital contributions from
parent ........................... -- -- 15,663 -- -- -- 15,663
Gain on sale of stock by
subsidiary .......................... -- -- 5,985 -- -- -- 5,985
Issuance of warrants to
purchase common stock ............ -- -- 3,678 -- -- -- 3,678
Provision for loss on marketable
equity securities, net ........... -- -- -- 3,412 -- -- 3,412
Change in cumulative
translation adjustments .......... -- -- -- -- (30,831) -- (30,831)
Net loss ............................ -- -- -- -- -- (168,056) (168,056)
---------- ---- -------- ------ -------- ---------- ---------

Balances, December 31, 1997 ......... 13,864,941 $139 $137,672 $ -- $(28,964) $(274,949) $(166,102)
========== ==== ======== ====== ======== ========== =========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
37

<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands)

For the Years Ended
December 31,
-------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................................................. $(168,056) $(87,986) $ (17,233)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization ......................................................... 80,802 36,269 1,003
Equity in losses of affiliated companies .............................................. 2,408 5,414 16,379
Gain on sale of investment in affiliated company ...................................... -- -- (4,132)
Provision for loss on marketable equity securities .................................... 4,784 -- --
Minority interest share of losses ..................................................... (1,018) (2,186) (420)
Loan guarantee fee .................................................................... -- (784) --
Accretion of interest on senior notes and amortization of deferred financing costs .... 38,747 20,270 --
Increase in subscriber receivables .................................................... (1,375) (1,487) --
Increase in related party receivables ................................................. (316) (51) (1,907)
Decrease (increase) in other assets ................................................... 68 (1,461) 420
Increase in technical assistance agreement payables ................................... 7,375 1,677 --
Increase in accounts payable, accrued liabilities and other ........................... 11,674 12,906 238
--------- -------- ---------
Net cash flows used in operating activities .............................................. (24,907) (17,419) (5,652)
--------- -------- ---------
Cash flows from investing activities:
Purchase of short-term investments ....................................................... (15,988) (199,242) --
Sale of short-term investments ........................................................... 22,303 180,602 --
Restricted cash deposited ................................................................ (420) -- --
Investments in and advances to affiliated companies and other investments ................ (3,272) (16,204) (22,472)
Purchase of additional interests in Austar, net of cash acquired in 1995 ................. -- (7,920) (8,017)
Proceeds from sale of investment in affiliated company ................................... -- -- 4,132
Purchase of property, plant and equipment ................................................ (101,135) (187,100) (7,648)
(Decrease) increase in construction payables ............................................. (29,621) 38,407 --
--------- -------- --------
Net cash flows used in investing activities .............................................. (128,133) (191,457) (34,005)
--------- -------- --------
Cash flows from financing activities:
Capital contributions from parent ........................................................ 7,863 10,664 38,600
Cash contributed from minority interest partner .......................................... 19,566 -- --
Proceeds from offering of senior discount notes .......................................... 29,925 225,115 --
Borrowings on related party payable to parent ............................................ 9,998 15,073 9,927
Payment of bridge loan payable to parent ................................................. -- (25,000) --
Deferred financing costs ................................................................. (5,643) (10,007) --
Borrowing on other debt .................................................................. 85,210 2,465 --
Payment on capital leases and other debt ................................................. (490) -- --
--------- -------- ---------
Net cash flows provided by financing activities .......................................... 146,429 218,310 48,527
--------- -------- ---------
Effect of exchange rates on cash ......................................................... (265) 1,056 (140)
--------- -------- ---------
(Decrease) increase in cash and cash equivalents ......................................... (6,876) 10,490 8,730
Cash and cash equivalents, beginning of period ........................................... 19,220 8,730 --
--------- -------- ---------
Cash and cash equivalents, end of period ................................................. $ 12,344 $ 19,220 $ 8,730
========= ======== =========
Non-cash investing and financing activities:
Gain on issuance of shares by Saturn .................................................. $ 5,985 $ -- $ --
========= ========= =========
Non-cash issuance of warrants to purchase common stock ................................ $ 3,678 $ -- $ --
========= ========= =========
Non-cash capital contributions from parent ............................................ $ 7,800 $ 25,000 $ --
========= ========= =========
Non-cash stock issuance for purchase of 50% interest in Saturn ........................ $ -- $ 7,800 $ --
========= ========= =========
Non-cash capital contribution of preferred stock from parent utilized in
purchase of additional 40% interest in Austar ....................................... $ -- $ -- $ 29,840
========= ========= =========
Increase in unrealized loss on investment ............................................. $ (985) $ (3,412) $ --
========= ========= =========
Assets acquired with capital leases ................................................... $ 548 $ 3,632 $ --
========= ========= =========
Supplemental cash flow disclosures:
Cash paid for interest ................................................................ $ 1,239 $ -- $ --
========= ========= =========
Cash received for interest ............................................................ $ 796 $ 3,578 $ --
========= ========= =========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
38
<PAGE>

UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
(Monetary amounts stated in thousands)

1. ORGANIZATION AND BACKGROUND

UIH Australia/Pacific, Inc. (the "Company"), a wholly-owned subsidiary of
UIH Asia/Pacific Communications, Inc. ("UAP"), which is in turn an indirect
98%-owned subsidiary of United International Holdings, Inc. ("UIH"), was formed
on October 14, 1994, for the purpose of developing, acquiring and managing
foreign multi-channel television, programming and telephony operations.

The following chart presents a summary of the Company's significant
investments in multi-channel television, programming and telephony operations as
of December 31, 1997.

*******************************************************************************
* *
* UIH *
* *
*******************************************************************************
*
100% *
*
*******************************************************************************
* *
* United International Properties, Inc. ("UIPI") *
* *
*******************************************************************************
*
98% *
*
*******************************************************************************
* *
* UAP *
* *
*******************************************************************************
*
100% *
*
*******************************************************************************
* *
* The Company *
* *
*******************************************************************************
*
*
*
*******************************************************************************
* CTV Pty Limited ("CTV") and STV Pty Limited (STV") *
* (collectively, "Austar")(Australia)(1) 100% *
* Austar Satellite Pty Limited ("Austar Satellite")(Australia)(2) 100% *
* United Wireless Pty Limited ("United Wireless")(Australia) 100% *
* Telefenua S.A. ("Telefenua")(Tahiti)(3) 90% *
* Saturn Communications Limited ("Saturn")(New Zealand") 65% *
* XYZ Entertainment Pty Limited ("XYZ Entertainment")(Australia) 25% *
*******************************************************************************

(1) The Company holds an effective 100% economic interest in Austar
through a combination of ordinary and convertible debentures.
(2) The Company indirectly owns a 100% interest in Austar Satellite, a
company recently formed to operate the Company's satellite business in
Australia.

(3) The Company owns an effective 90% economic interest in Telefenua. The
Company's economic interest will decrease to 75% and 64% once it has
received a 20% and 40% internal rate of return on its investment in
Tahiti, respectively.

Immediately prior to the May 1996 offering of the Company's 14% senior
discount notes due 2006 (the "May 1996 Notes"), UIH Australia, Inc., UIH
Australia II, Inc. and UIH Australia III, Inc. (the "UIH Australia
Subsidiaries"); UIH New Zealand, Inc. (the "UIH New Zealand Subsidiary");
UIH-SFCC, Inc. (the "UIH Tahiti Subsidiary"); and UIH Australia Holdings, Inc.
were merged with and into the Company. The UIH Australia Subsidiaries held UIH's
interest in the two companies that form Austar, the UIH New Zealand Subsidiary
held UIH's interest in Saturn, the UIH Tahiti Subsidiary held UIH's interest in
Telefenua, UIH Australia Holdings, Inc. held UIH's interest in United Wireless
and the Company held UIH's interest in XYZ Entertainment. The accompanying
financial statements have been prepared on a basis of reorganization accounting
as though the Company had performed all foreign development activities and made
all acquisitions of UIH's ownership interests in multi-channel television,
programming and mobile data companies in Australia, New Zealand and Tahiti since

39
<PAGE>
UIH AUSTRALIA/PACIFIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

inception. The reorganized Company commenced operations in January 1994 when UIH
began its development-related activities in the Asia/Pacific region. UIH
transferred the net assets of the above mentioned subsidiaries, including
capitalized development costs and investments in affiliated companies, to the
Company at its historical cost, which the Company reflected as capital
contributions from the parent company. The accompanying consolidated financial
statements have been prepared as though the Company made investments in the
following entities on the original date UIH or certain of its wholly-owned
subsidiaries made the investment:

* The Company acquired, through directly and indirectly held interests,
an effective 50% economic interest in the two companies that form
Austar in 1994. In December 1995, the Company increased its effective
economic interest in Austar (formerly CEtv) to 90%. In May 1996, the
Company increased its economic interest in Austar to 94% which was
subsequently increased to 96%. In October 1996, the Company acquired
the remaining 4% economic interest in Austar for $7,920. The companies
that comprise Austar have acquired multi-point microwave distribution
systems ("MMDS") licenses to supply subscription television services
to television households in the northern, northeastern and southern
regions of Australia outside of the country's largest cities. They are
currently constructing multi-channel television systems to service
many of the television homes in their license areas. Those homes that
cannot be served by MMDS will be serviceable by a direct-to-home
("DTH") satellite service marketed by Austar. The Company's ownership
interests are comprised of direct and indirect holdings of convertible
debentures and ordinary shares of CTV and STV. Ownership of the
debentures entitles the Company to vote for directors on the same
basis as ordinary shares. The Company is party to various
securityholder agreements which enable it to designate all of the six
voting directors of both CTV and STV. The Company began consolidating
Austar for balance sheet purposes effective December 31, 1995 and for
income statement purposes effective January 1, 1996. Prior to these
dates, the Company accounted for its investments in CTV and STV under
the equity method.

* In July 1994, the Company acquired a 50% interest in Kiwi
Communications Limited, which subsequently changed its name to Saturn.
Saturn is constructing a wireline multi-channel television system in
New Zealand, primarily in the greater Wellington area. In July 1996,
the Company acquired the remaining 50% interest in Saturn in exchange
for a 2.6% interest in the Company which was valued at approximately
$7,800. The holder of this 2.6% interest in the Company subsequently
exchanged it for a 2% interest in UAP. In July 1997, SaskTel Holdings
(New Zealand), Inc. ("SaskTel") purchased a 35% equity interest in
Saturn through a cash contribution to Saturn of $19,566, thereby
reducing the Company's equity interest in Saturn to 65% (see Note 3).
The Company has consolidated the operations of Saturn since July 1,
1996. Prior to that time, the Company accounted for its investment in
Saturn under the equity method.

* In October 1994, the Company and Century Communications Corporation
("Century") formed XYZ Entertainment, an Australian proprietary
company incorporated in New South Wales. In June 1995, the Company and
Century formed the 50/50 joint venture Century United Programming
Ventures Pty Limited ("CUPV"), an Australian corporation, to hold
their investments in XYZ Entertainment. In September 1995, a 50%
interest in XYZ Entertainment was sold to a third party, thereby
diluting the Company's indirect interest in XYZ Entertainment to 25%.
The Company accounts for its investment through CUPV in XYZ
Entertainment under the equity method.

* The Company acquired an effective 90% economic interest in Telefenua
in January 1995. The Company's economic interest will decrease to 75%
and 64% once the Company has received a 20% and 40% internal rate of
return on its investment in Telefenua, respectively. Since March 1995,
Telefenua has operated the only multi-channel subscription television
system on the islands of Tahiti and Moorea in French Polynesia.
Through its majority ownership of UIH SFCC LP, a Colorado limited
partnership that holds 100% of the preferred stock of Societe
Francaise des Communications et du Cable S.A. ("SFCC"), which in turn
is the parent company of Telefenua, the Company has the right to
appoint three of the six board members. Furthermore, by agreement with
the common shareholders, the Company has the right to appoint a fourth
director. The Company has consolidated its investment in Telefenua for
all periods presented. The Company is currently evaluating the
potential sale of its interest in Telefenua.

* In September 1995, the Company acquired a 100% interest in United
Wireless, a provider of wireless mobile data services in Australia,
primarily Sydney and Melbourne. The Company is currently developing a
distribution network and marketing its services. The Company accounted

40
<PAGE>

for its acquisition using the purchase method of accounting. The
Company has consolidated its investment in United Wireless subsequent
to August 1995.

* In September 1997, the Company commenced transponder fee payments for
a satellite service as part of a five-year agreement with Optus
Networks Pty Limited ("Optus Networks"). In November 1997, the Company
formed Austar Satellite to assume the rights and obligations of this
agreement. The Company owns an indirect 100% economic interest in
Austar Satellite. In November 1997, the Company transferred all such
costs to Austar Satellite and began consolidating the entity. The
Company expects to launch programming services on the satellite during
1998.

LIQUIDITY AND CAPITAL RESOURCES

A substantial portion of the Company's investments to date relate to its
investment in Austar, which is comprised primarily of MMDS and DTH satellite
operations. The Company has essentially completed the construction and
deployment of Austar's entire MMDS network infrastructure and has incurred
certain other significant expenditures, such as Austar's National Customer
Service Center, which contemplates provision of MMDS and DTH services to a
substantially larger customer base than currently exists. If additional capital
financings are not available to continue to connect new customers at Austar, the
Company's revenues will decline and the current net operating loss will increase
over time due to customer disconnections, which are normally experienced in
connection with multi-channel television operations. In order to complete the
anticipated build-out of Austar and the Company's other projects, the Company
will need a significant amount of additional capital, which is not currently
available.

As of December 31, 1997, the Company has a net working capital deficit of
$3,275, excluding related party payables of $3,545, which are primarily due to
UIH. Due to the nature of the operation, the Company is able to slow the rate of
subscriber connections at Austar and network construction at the Company's other
projects to adjust to the level of funding sources that are available. The
Company believes it can, if necessary, substantially reduce the capital required
at Austar as the majority of future capital expenditures will be for subscriber
installation and premises equipment, which are controllable by the Company based
upon the rate of new subscriber connections. However, the Company needs to
continue the present rate of new subscriber connections to offset current churn
rates at Austar. The Company is currently in the process of seeking additional
sources of funds, which could include private equity, bank and/or public debt
and the sale of certain non-strategic assets. The Company may or may not be
successful in completing all or any of such financings. The Company believes,
however, that committed financial support from UIH combined with, if necessary,
reductions in the Company's planned capital expenditures, are sufficient to
sustain its operations through at least early 1999.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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

In November 1997, the Company effected a stock split whereby the 500 shares
of common stock then outstanding were exchanged for 13,864,941 shares of common
stock. All share and per share amounts have been retroactively restated to
reflect this event.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and all subsidiaries where it exercises majority control and owns a
majority economic interest. The Company began consolidating United Wireless
subsequent to August 31, 1995. Due to the Company's acquisition of the majority
economic interest in Austar in late December 1995, the Company began
consolidating Austar's balance sheet effective December 31, 1995 and its
operations effective January 1, 1996. The Company recognized equity losses from
its investment in Austar through December 31, 1995. The Company has consolidated
the operations of Saturn since July 1, 1996. Prior to that time, the Company
accounted for its investment in Saturn under the equity method. All significant
intercompany accounts and transactions have been eliminated in consolidation.

41
<PAGE>

CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash and cash equivalents include cash and investments with original
maturities of less than three months. The portion of short-term investments and
the Company's investment in Australis Media Limited ("Australis") (see Note 5)
which are classified as available-for-sale in accordance with the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"), are accounted for at
fair market value. As of December 31, 1997, the Company held approximately
$12,325 of short-term investments, comprised primarily of certificates of
deposit and government securities. These short-term investments are classified
as available-for-sale securities and stated at amortized cost, which
approximates fair value, under the provisions of SFAS 115.

RESTRICTED CASH

Restricted cash includes $420 in Saturn's U.S. dollar funding account,
which is being held as collateral against certain letters of credit for Saturn.
These letters of credit and the related restriction on the cash balance will
expire within the next 12 months.

INVESTMENTS IN AND ADVANCES TO AN AFFILIATED COMPANY, ACCOUNTED FOR UNDER THE
EQUITY METHOD

For those investments in companies in which the Company's voting interest
is 20% to 50%, its investments are held through a combination of voting common
stock, preferred stock, debentures or convertible debt and the Company exerts
significant influence through board representation and management authority, the
equity method of accounting is used. Under this method, the investment,
originally recorded at cost, is adjusted to recognize the Company's
proportionate share of net earnings or losses of the affiliates, limited to the
extent of the Company's investment in and advances to the affiliates, including
any debt guarantees or other funding commitments. The Company's proportionate
share of net earnings or losses of affiliates includes the amortization of the
excess of cost over net tangible assets acquired.
Investments in and advances to an affiliated company are as follows:
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to an in Losses of an Translation
Affiliated Company Affiliated Company Adjustments Total
------------------ ------------------ ----------- -------
<S> <C> <C> <C> <C>
XYZ Entertainment......... $18,610(1) $(18,720) $110 $ --
======= ======== ==== ======
</TABLE>
<TABLE>
<CAPTION>

As of December 31, 1996
-----------------------------------------------------------------------------
Investments in Cumulative Equity Cumulative
and Advances to an in Losses of an Translation
Affiliated Company Affiliated Company Adjustments Total
------------------ ------------------ ----------- -------
<S> <C> <C> <C> <C>
XYZ Entertainment......... $16,202(1) $(16,312) $110 $ --
======= ======== ==== ======
</TABLE>
(1) Includes an accrued funding obligation of $406 and $1,270 at December
31, 1997 and 1996, respectively. The Company does not have a
contractual funding obligation to XYZ Entertainment; however, the
Company would face significant and punitive dilution if it did not make
the scheduled fundings.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Additions, replacements
and major improvements are capitalized, and costs for normal repair and
maintenance of property, plant and equipment are charged to expense as incurred.
All subscriber equipment and capitalized installation labor is depreciated over
three years. Upon disconnection of a subscriber, the remaining book value of the
subscriber equipment, excluding converters which are recovered upon
disconnection, and the capitalized labor are written off and accounted for as
additional depreciation expense. Depreciation expense is computed using the
straight-line method over the asset's estimated useful life as shown below:

42
<PAGE>
<TABLE>
<CAPTION>
As of
December 31,
---------------------------- Average
1997 1996 Life
-------- -------- -------
<S> <C> <C> <C>
Subscriber premises equipment and converters......... $160,413 $125,238 3
MMDS distribution facilities......................... 55,093 57,073 5-10
Cable distribution networks.......................... 16,770 11,672 5-10
Office equipment, furniture and fixtures............. 10,813 8,477 3-10
Buildings and leasehold improvements................. 5,647 6,545 6-10
Other................................................ 12,544 11,203 3-5
-------- --------
261,280 220,208
Accumulated depreciation......................... (78,179) (27,038)
-------- --------
Net property, plant and equipment................ $183,101 $193,170
======== ========
</TABLE>

Assets acquired under capital leases are included in property, plant and
equipment. The initial amount of the leased asset and corresponding lease
liability are recorded at the present value of future minimum lease payments.
Leased assets are amortized over the life of the relevant lease.

LICENSE FEES

The acquisition of MMDS licenses has been recorded at cost, and
amortization expense is computed using the straight-line method over the term of
the license. In Australia, the cost to acquire these licenses for a five-year
period is being amortized over the remaining license period. The licenses are
renewable every five years. In Tahiti, the license rights are amortized over a
10-year period.

GOODWILL

The Company's acquisition of an additional 40% economic interest in Austar
was recorded as a step acquisition. The majority of the purchase price was
recorded as goodwill as the underlying net book value of all tangible and
intangible assets approximated their respective fair values at that date.
Accordingly, goodwill is being amortized over 15 years beginning January 1,
1996. The Company's acquisition in July 1996 of the additional 50% interest in
Saturn resulted in additional goodwill which is being amortized over 15 years.

DEFERRED FINANCING COSTS

The Company capitalizes the costs associated with obtaining long-term debt.
These costs are expensed using the straight-line method over the term of the
debt instrument.

RECOVERABLE AMOUNTS OF TANGIBLE AND INTANGIBLE ASSETS

The carrying amount of all tangible and intangible assets is reviewed
periodically whenever events and circumstances indicate the carrying value of
the assets may exceed their recoverable amount. The recoverable amounts of all
tangible and intangible assets have been determined using net cash flows which
have not been discounted to their present values.

REVENUE RECOGNITION

Monthly service revenues are recognized as revenue in the period the
related services are provided to the subscribers. Installation fees are
recognized as revenue in the period in which the installation occurs, to the
extent installation fees are equal to or less than direct selling costs. To the
extent installation fees exceed direct selling costs, the excess would be
deferred and amortized over the average contract period.

43
<PAGE>

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of subscriber receivables.
Concentrations of credit risk with respect to subscriber receivables are limited
due to the large number of customers comprising the Company's customer base.

INCOME TAXES

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires recognition of deferred tax assets and liabilities for the
expected future income tax consequences of transactions which have been included
in the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Net deferred tax assets are then reduced by a valuation allowance for amounts
which do not satisfy the realization criteria of SFAS 109.

STAFF ACCOUNTING BULLETIN NO. 51 ("SAB 51") ACCOUNTING POLICY

Under SAB 51, the Company recognized a gain of $5,985 upon the issuance by
Saturn of its newly-issued shares in July 1997 for $19,566, diluting the
Company's interest in Saturn to 65% (see Note 3). The gain was credited directly
to equity. The Company has adopted a SAB 51 policy to record all gains as a
result of stock sales by its subsidiaries in the statement of operations, except
for any transactions which must be credited directly to equity in accordance
with the provisions of SAB 51.

BASIC AND DILUTED LOSS PER SHARE

The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128"), as required. The adoption of SFAS 128
had no effect on the Company's previously reported primary loss per share.
"Basic earnings (loss) per share" is determined by dividing net income (loss)
from continuing operations available to common shareholders by the
weighted-average number of common shares outstanding during each period.
"Diluted earnings per share" includes the effects of potentially issuable common
stock, but only if dilutive (i.e., a loss per share is never reduced). The
treasury stock method, using the average price of the Company's common stock for
the period, is applied to determine dilution from options and warrants. The
if-converted method is used for convertible securities. Because of reported
losses, there are no differences between basic and diluted loss per share
amounts for the Company for any of the years presented. The only potentially
dilutive securities excluded as antidilutive were the warrants issued in
November 1997 (see Note 6).

FOREIGN OPERATIONS

The functional currency for the Company's foreign operations is the
applicable local currency for each affiliate company. Assets and liabilities of
foreign subsidiaries are translated at the exchange rates in effect at
period-end, and the statements of operations are translated at the average
exchange rates during the period. Exchange rate fluctuations on translating
foreign currency financial statements into U.S. dollars that result in
unrealized gains or losses are referred to as translation adjustments.
Cumulative translation adjustments are recorded as a separate component of
stockholder's (deficit) equity. During the year ended December 31, 1997, the
Company recorded a change in cumulative translation adjustments of $30,831,
primarily due to the fluctuation in the Australian dollar compared to the U.S.
dollar exchange rates from 1.2574 as of December 31, 1996 to 1.5378 as of
December 31, 1997, a change of 22%.

Transactions denominated in currencies other than the local currency are
recorded based on exchange rates at the time such transactions arise. Subsequent
changes in exchange rates result in transaction gains and losses which are
reflected in income as unrealized (based on period-end translations) or realized
upon settlement of the transactions.

In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," cash flows from the Company's operations in foreign
countries are calculated based on their reporting currencies. As a result,
amounts related to assets and liabilities reported on the consolidated
statements of cash flows will not agree to changes in the corresponding balances
on the consolidated balance sheets. The effects of exchange rate changes on cash
balances held in foreign currencies are reported as a separate line below cash
flows from financing activities.

44
<PAGE>

NEW ACCOUNTING PRINCIPLES

The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), which is required to be adopted by affected companies for fiscal years
beginning after December 15, 1997. SFAS 130 requires that an enterprise (i)
classify items of other comprehensive income by their nature in a financial
statement and (ii) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. The Company does not believe that
the provisions of SFAS 130 will have a material effect on the Company's reported
income.

The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which requires that a public
business enterprise report certain financial and descriptive information about
its reportable segments. The Company elected to adopt SFAS 131 for the year
ended December 31, 1997 (see Note 9).

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform with the
current year presentation.

3. ACQUISITIONS AND DISPOSITIONS

TELEFENUA

In January 1995, the Company acquired an initial 90% economic interest in
Telefenua in exchange for a cash contribution into Telefenua of $6,060, the
contribution of a note and accrued interest due UIH of $817 and equipment leased
to Telefenua totaling $2,039. Details of the net assets acquired, which were
denominated in French Pacific francs and translated to U.S. dollars using the
exchange rate on the day of the acquisition, are as follows:

Tangible assets................................................ $4,213
Intangible assets.............................................. 1,835
Other.......................................................... 107
Cash........................................................... 6,181
Accounts payable and accrued liabilities....................... (783)
Due to affiliate............................................... (2,110)
Minority shareholders' interest................................ (527)
------
Total consideration........................................ $8,916
======

The purchase price was allocated to the net assets acquired based on
relative fair market values. The Company's consolidated revenues, expenses and
net loss after intercompany eliminations related to Telefenua for the year ended
December 31, 1995 totaled $1,882, $5,438 and $3,556, respectively.

As of December 31, 1997, the Company's cumulative investment in Telefenua
totaled approximately $16,738. The Company is currently evaluating the potential
sale of its interest in Telefenua.

45
<PAGE>

AUSTAR

In December 1995, the Company acquired an additional 40% effective economic
interest in Austar from other shareholders increasing its effective economic
interest to 90%. The Company paid $15,240 in cash and contributed 170,513 shares
of UIH's convertible preferred stock having an initial liquidation value and
fair value of $29,840 for the additional 40% effective economic interest.
Details of the net assets acquired, which were denominated in Australian dollars
and translated to U.S. dollars using the exchange rate on the day of the
acquisition, are as follows:

Tangible assets............................................... $18,267
Intangible assets............................................. 8,643
Receivables, prepaids and other............................... 2,704
Cash.......................................................... 7,222
Accounts payable and accrued liabilities...................... (6,140)
Other debt.................................................... (890)
Minority shareholders' interest............................... (2,363)
Net investment prior to acquisition of 40%.................... (27,153)
-------
290
Goodwill...................................................... 44,790
-------
Total consideration....................................... $45,080
=======

The Company invested approximately $53,009, $161,375 and $50,848 into
Austar during 1997, 1996 and 1995, respectively. As of December 31, 1997, the
Company's cumulative investment in Austar including amounts paid to acquire
interests from other shareholders, totaled approximately $284,935.

SATURN

In 1994, the Company acquired a 50% interest in Saturn. In July 1996, the
Company acquired the remaining 50% of Saturn by issuing 360,488 shares of its
common stock valued at $7,800. Details of the net assets acquired, which were
determined in New Zealand dollars and translated to U.S. dollars using the
exchange rate on the day of the acquisition, are as follows:

Tangible assets............................................... $8,509
Receivables, prepaids and other............................... 373
Cash.......................................................... 708
Accounts payable and accrued liabilities...................... (1,430)
Net investment prior to acquisition of 50%.................... (9,133)
------
(973)
Goodwill...................................................... 8,773
------
Total consideration....................................... $7,800
======

In July 1997, SaskTel purchased a 35% equity interest in Saturn by
investing approximately New Zealand $29,900 ($19,566) directly into Saturn for
its newly-issued shares (the "Saturn Transaction"). The Company believes that
SaskTel, a division of Saskatchewan Telecommunications Holdings Corporation of
Saskatchewan, Canada, will contribute telephony expertise to Saturn in providing
cable/telephony service in the Wellington, New Zealand area. As of December 31,
1997, the Company's cumulative investment in Saturn totaled approximately
$42,161.

4. INVESTMENTS IN AND ADVANCES TO AFFILIATED COMPANIES, ACCOUNTED FOR UNDER
THE EQUITY METHOD

Condensed financial information for the Company's significant equity
investees is presented below.

CTV

In September 1994, the Company began to fund its 40% economic interest in
CTV, an Australian company that currently holds MMDS licenses in Australia. The
Company then acquired an additional 10% economic interest in CTV from another
shareholder for $5,613. In December 1995, the Company purchased an additional
40% economic interest in CTV, which increased its economic interest to 90% and,

46
<PAGE>

accordingly, the Company has consolidated CTV since December 31, 1995 (see Note
1). Condensed consolidated income statement data for CTV, stated in U.S.
dollars, is as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1995
------------------
<S> <C>
Revenue.................................................................... $ 433
Operating, selling, general and administrative expenses.................... (4,804)
Depreciation and amortization.............................................. (1,113)
-------
Net operating loss..................................................... (5,484)
Interest, net.............................................................. 914
Other...................................................................... 245
-------
Net loss............................................................... $(4,325)
=======
</TABLE>

STV

In October 1994, the Company began to fund its 50% economic interest in
STV, an Australian company that holds MMDS licenses in Australia. In December
1995, the Company purchased an additional 40% economic interest in STV, which
increased its economic interest to 90%, and, accordingly, the Company has
consolidated STV since December 31, 1995 (see Note 1). Condensed consolidated
income statement data for STV, stated in U.S. dollars, is as follows:
<TABLE>
<CAPTION>

For the Year Ended
December 31, 1995
------------------
<S> <C>
Revenue.................................................................... $ 10
Operating, selling, general and administrative expenses.................... (2,670)
Depreciation and amortization.............................................. (158)
-------
Net operating loss..................................................... (2,818)
Interest, net.............................................................. 315
-------
Net loss............................................................... $(2,503)
=======
</TABLE>

XYZ ENTERTAINMENT

Condensed consolidated income statement data for XYZ Entertainment stated
in U.S. dollars, which was derived from financial statements audited by Deloitte
Touche Tohmatsu, is as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1995
------------------
<S> <C>
Revenue.................................................................... $ 1,266
Operating, selling, general and administrative expenses.................... (27,511)
Depreciation and amortization.............................................. (2,662)
--------
Net operating loss..................................................... (28,907)
Interest, net.............................................................. 145
--------
Net loss............................................................... $(28,762)
========
</TABLE>

47
<PAGE>

SATURN

Condensed consolidated income statement data for Saturn, stated in U.S.
dollars, is as follows:
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1995
------------------
<S> <C>
Revenue.................................................................... $ 148
Operating, selling, general and administrative expenses.................... (2,365)
Depreciation and amortization.............................................. (385)
--------
Net operating loss..................................................... (2,602)
Other...................................................................... (55)
-------
Net loss............................................................... $(2,657)
=======
</TABLE>

5. MARKETABLE EQUITY SECURITIES, INCLUDING OTHER INVESTMENTS IN AFFILIATED
COMPANIES

The Company used $10,000 of the proceeds from its offering of the May 1996
Notes (see Note 6) to acquire a UIH subsidiary which guaranteed $10,000 of debt
for Australis, Austar's primary supplier of programming. As consideration for
giving the guarantee, the Company received warrants valued at $784 to acquire
4,171,460 ordinary shares or convertible debentures of Australis. On October 31,
1996, the Company's $10,000 guarantee of Australis' debt expired. The Company
used $3,339 of the related cash to acquire 7,736,171 debentures of Australis.
Further, the Company exercised warrants to acquire Australis' common stock and
debentures at A$0.20 per share for 3,016,832 shares of Australis' common stock
and 1,154,628 debentures. Each debenture is convertible into one common share of
Australis. In December 1997, based on the financial difficulties and potential
insolvency of Australis, the Company determined that the unrealized loss
relating to its investment in Australis was other than temporary. As a result,
the Company recorded a provision for this loss of $4,784, reducing the carrying
value of the investment to $0.

6. SENIOR DISCOUNT NOTES AND OTHER DEBT

Senior discount notes and other debt consists of the following:
<TABLE>
<CAPTION>
As of
December 31,
---------------------------
1997 1996
-------- --------
<S> <C> <C>
May 1996 Notes, net of unamortized discount................................ $278,662 $245,182
September 1997 Notes (as defined below), net of unamortized discount....... 30,461 --
Austar Bank Facility (as defined below).................................... 71,531 --
Vendor financed equipment at Saturn........................................ 3,730 --
Capitalized lease obligations.............................................. 3,441 4,522
Mortgage note, interest at 7.548%, 7-year term............................. 1,094 1,461
-------- --------
388,919 251,165
Less current portion................................................... (1,825) (1,108)
-------- --------
$387,094 $250,057
======== ========
</TABLE>

On May 14, 1996, the Company received total gross proceeds of $225,115 from
the private placement of $443,000 aggregate principal amount of the 14% May 1996
Notes. On and after May 15, 2001, cash interest will accrue and will be payable
semi-annually on each May 15 and November 15, commencing November 15, 2001. The
May 1996 Notes are due May 15, 2006. Effective May 16, 1997, the interest rate
on these notes increased by an additional 0.75% per annum to 14.75%, until such
time as the Company consummates an issuance of its capital stock resulting in
gross proceeds to the Company of at least $70,000 (an "Equity Sale"). Due to
this increase in the interest rates, the May 1996 Notes will accrete to a
principal amount of $455,574 if an Equity Sale is not consummated prior to
maturity. The quoted fair market value of these notes was $292,380 and $230,360
as of December 31, 1997 and December 31, 1996, respectively.

On September 23, 1997, the Company received total gross proceeds of $29,925
from the private placement of $45,000 aggregate principal amount of 14% senior
discount notes, which were issued at a premium (the "September 1997 Notes"). On
and after May 15, 2001, cash interest will accrue and will be payable
semi-annually on each May 15 and November 15, commencing November 15, 2001. The

48
<PAGE>

September 1997 Notes are due May 15, 2006. Effective September 23, 1997, the
interest rate on these notes increased by an additional 0.75% per annum to
14.75%, until such time as the Company consummates an Equity Sale. Due to this
increase in interest rates, the September 1997 Notes will accrete to a principal
amount of $46,277 if an Equity Sale is not consummated prior to maturity. The
quoted fair market value of these notes was $29,700 as of December 31, 1997.

On November 17, 1997, pursuant to the terms of the indentures governing the
May 1996 Notes and the September 1997 Notes (collectively, the "Notes"), the
Company issued warrants to purchase 488,000 shares of its common stock, which
represented 3.4% of its common stock. The warrants are exercisable at a price of
$10.45 per share which would result in gross proceeds of approximately $5,100
upon exercise. The warrants are exercisable through May 15, 2006. The warrants
were valued at $3,678 and have been reflected as an additional discount to the
Notes on a pro-rata basis and as an increase in additional paid-in capital.

In July 1997, Austar secured a financing facility from a bank for a senior
syndicated term debt facility in the amount of Australian $("A$")200,000
($155,000) (the "Austar Bank Facility"). The proceeds of the Austar Bank
Facility have been and will be used to fund Austar's subscriber acquisition and
working capital needs. The Austar Bank Facility consists of three
sub-facilities: (i) A$50,000 revolving working capital facility, (ii) A$60,000
cash advance facility and (iii) A$90,000 term loan facility. This term loan
facility will be available to the extent that any drawdown, if added to the
existing aggregate outstanding balance under sub-facilities (i) and (ii), would
not exceed five times annualized cash flows, and upon Austar having achieved and
maintained total subscribers of at least 200,000. All of Austar's assets are
pledged as collateral for the Austar Bank Facility. In addition, pursuant to the
Austar Bank Facility, Austar can not (a) pay any dividends, (b) make any
payments of interest on the Company's Notes or (c) pay any fees under its
technical assistance agreements prior to December 31, 2000. Subsequent to
December 31, 2000, the payments in (a), (b) and (c) above may be made, subject
to certain debt to cash flow ratios. The working capital facility is fully
repayable on June 30, 2000. The cash advance facility is fully repayable
pursuant to an amortization schedule beginning December 31, 2000 and ending June
30, 2004. As of December 31, 1997, Austar had drawn the entire amount of the
working capital facility and the cash advance facility totaling A$110,000
($71,531 converted using the December 31, 1997 exchange rate). Management does
not expect to meet the requirements in (iii) above during 1998.
<TABLE>
<CAPTION>

The Company's maturities of its debt are as follows:
<S> <C>
1998....................................................................... $ 2,125
1999....................................................................... 2,984
2000....................................................................... 37,560
2001....................................................................... 12,671
2002 and thereafter........................................................ 334,017
--------
389,357
Future finance charges for capitalized lease obligations.............. (438)
--------
$388,919
========
</TABLE>

7. RELATED PARTY

Effective May 1, 1996, the Company and UIH Management, Inc. ("UIH
Management"), an indirect wholly-owned subsidiary of UIH, executed a 10-year
management services agreement (the "Management Agreement"), pursuant to which
UIH Management performed certain administrative, accounting, financial reporting
and other services for the Company, which has no separate employees of its own.
For the first four months of 1996 and the year ended December 31, 1995, UIH
Management allocated approximately $250 and $918, respectively, for such
services. Pursuant to the Management Agreement, the management fee was $750 for
the first year (beginning May 1, 1996), and it increases on each anniversary
date of the Management Agreement by 8% per year. Effective March 31, 1997, UIH
Management assigned its rights and obligations under the Management Agreement to
UAP, the Company's immediate parent, and extended the agreement for 20 years
from that date (the "UAP Management Agreement"). For the years ended December
31, 1997, 1996 and 1995, the Company recorded $2,739, $750 and $918,
respectively, in related party management fees and corporate general and
administrative expense.

UIH Management executed 10-year technical assistance agreements with CTV
and STV pursuant to which it provided various management and technical services.
These agreements are renewable for up to an additional 15 one-year terms. Under
the agreements, dated October 12, 1994, UIH Management was to receive a
management fee equal to 5% of CTV and STV's total revenue, less certain
deductions, for the first two years, 4% for the next six years, 3% for the
following two years and 2% thereafter. Effective March 31, 1997, UIH Management
assigned its rights and obligations under these agreements to UAP. In addition,
the management fee was revised to remain at 5% of CTV and STV's gross revenue

49
<PAGE>

through the term of the agreements. For the years ended December 31, 1997, 1996
and 1995, CTV and STV recorded a total of $2,533, $324 and $0, respectively, in
related party management fees. Austar's chief operating officer and director of
sales, marketing and programming are employees of UIH that have been seconded to
Austar. In addition, UIH has appointed seven other management personnel and all
six directors. Austar reimburses UIH for certain direct costs incurred by UIH,
including salaries and benefits relating to these senior management positions.

Telefenua and SFCC, the parent company of Telefenua, executed a 10-year
technical services agreement on January 11, 1995, whereby SFCC would provide
technical, administrative and operational assistance to Telefenua encompassing
the following areas: (i) engineering, design, construction and equipment
purchasing; (ii) marketing, selling and advertising; (iii) accounting, billing
and subscriber management systems and (iv) personnel management and training for
a fee equal to 5.5% of Telefenua's gross revenue through 1996, 3.5% of gross
revenue during 1997 and 2.5% thereafter. SFCC would also be reimbursed for all
direct and indirect costs associated with the services it provided. Effective
January 11, 1995, SFCC assigned all of its rights and obligations to UIH
Management, except that SFCC retained the right to receive 0.5% of Telefenua's
gross revenues through the term of the agreement. Accordingly, Telefenua would
pay UIH Management fees of 5%, 3% and 2% of Telefenua's gross revenues over the
same periods. Effective March 31, 1997, UIH Management assigned its rights and
obligations under this agreement to UAP. For the years ended December 31, 1997,
1996 and 1995, Telefenua recorded a total of $298, $375 and $94, respectively,
in related party management fees. UIH has appointed two of its employees to
serve as the managing director and the technical director of Telefenua.
Telefenua reimburses UIH for certain direct costs incurred by UIH, including
salaries and benefits relating to these senior management positions.

Saturn and UIH executed a technical services agreement pursuant to which
UIH provided technical, administrative and operational assistance to Saturn
encompassing the following areas: (i) engineering, design, construction and
equipment purchasing; (ii) marketing, pricing and packaging of services; (iii)
selection of programming and negotiations with suppliers and (iv) accounting,
billing and subscriber management systems. UIH receives a management fee equal
to 5% of Saturn's gross revenue through July 1999. Effective March 31, 1997, UIH
assigned all its rights and obligations under this agreement to UAP. In
connection with SaskTel's investment in Saturn on July 23, 1997, the management
fee payable to UAP was reduced to 2.5% of Saturn's gross revenue and the
management fee payable to SaskTel became 2.5% of Saturn's gross revenue under a
similar agreement. For the years ended December 31, 1997, 1996 and 1995, Saturn
recorded $435, $89 and $0, respectively, in related party management fees. The
managing director and customer operations director are employees of UIH that
have been seconded to Saturn. Saturn reimburses UIH for certain direct costs
incurred by UIH, including salaries and benefits relating to these senior
management positions.

United Wireless and UAP executed a technical services agreement, commencing
January 1, 1997, pursuant to which UAP has agreed to provide technical,
administrative and operational assistance to United Wireless encompassing the
following areas: (i) design, engineering and construction of the network; (ii)
marketing and sales of the service; (iii) network management, customer
management and information systems and (iv) personnel and training. UAP receives
a management fee equal to 5% of the gross revenue of United Wireless through
December 2007. For the year ended December 31, 1997, United Wireless recorded
$25 in related party management fees. The chief executive officer is an employee
of UIH that has been seconded to United Wireless. United Wireless reimburses UIH
for certain direct costs incurred by UIH, including salaries and benefits
relating to this senior management position.

Included in the due to parent payable is the following:
<TABLE>
<CAPTION>
As of
December 31,
--------------------------
1997 1996
-------- --------
<S> <C> <C>
Payable to UAP and UIH for management fees and invoices paid by UIH
on the Company's behalf................................................ $2,672 $ 317
Austar technical assistance agreement obligations........................ 2,629 1,135
Telefenua technical assistance agreement obligations..................... 2,659 1,879
Saturn technical assistance agreement obligations........................ 406 1,002
United Wireless technical assistance agreement obligations............... 487 330
Other.................................................................... 86 --
------ ------
8,939 4,663
Less current portion................................................... (3,545) (1,905)
------ ------
$5,394 $2,758
====== ======
</TABLE>

50
<PAGE>

As of December 31, 1997, UIPI had loaned $4,999 to UIH Australia/Pacific
Finance, Inc., a wholly-owned subsidiary of the Company. This loan accrues
interest at 15% and is due on demand.

8. INCOME TAXES

In general, a U.S. corporation may claim a foreign tax credit against its
federal income tax expense for foreign income taxes paid or accrued. Because the
Company must calculate its foreign tax credit separately for dividends received
from each foreign corporation in which the Company owns 10% to 50% of the voting
stock, and because of certain other limitations, the Company's ability to claim
a foreign tax credit may be limited, particularly with respect to dividends paid
out of earnings subject to a high rate of foreign income tax. Generally, the
Company's ability to claim a foreign tax credit is limited to the amount of U.S.
taxes the Company pays with respect to its foreign source income. In calculating
its foreign source income, the Company is required to allocate interest expense
and overhead incurred in the U.S. between its domestic and foreign activities.
Accordingly, to the extent U.S. borrowings are used to finance equity
contributions to its foreign subsidiaries, the Company's ability to claim a
foreign tax credit may be significantly reduced. These limitations and the
inability of the Company to offset losses in one foreign jurisdiction against
income earned in another foreign jurisdiction could result in a high effective
tax rate on the Company's earnings. The Company has an ownership interest in
Telefenua, which is located in Tahiti, a self-governing territory of France,
with which the United States does not have an income tax treaty. As a result,
the Company may be subject to increased withholding taxes on dividend
distributions and other payments from Telefenua and also may be subject to
double taxation with respect to income generated by Telefenua.

The Company is included as a member of UIH's consolidated tax return and,
after the offering of the Notes in May 1996, remained a member of the UIH
consolidated group. UIH and the Company are parties to a tax sharing agreement
that defines the parties' rights and obligations with respect to tax liabilities
and benefits relating to the Company and its operations as part of the
consolidated group of UIH. In general, UIH is responsible for filing
consolidated tax returns and paying the associated taxes, and the Company will
reimburse UIH for the portion of the tax cost relating to the Company and its
operations. For financial reporting purposes, the Company accounts for income
taxes in accordance with SFAS 109 as if it filed separate income tax returns in
accordance with the fundamental provisions of the tax sharing agreement. Any
differences in income tax expense (benefit) allocated to the Company by UIH in
accordance with the tax sharing agreement and the income tax expense (benefit)
which is recognized under SFAS 109 will be accounted for as a deemed capital
distribution or contribution. Because the Company holds certain of its foreign
investments through affiliates which hold investments accounted for under the
equity method in foreign corporations, taxable income (loss) generated does not
flow through to the Company for U.S. federal and state tax purposes even though
the Company records its allocable share of affiliate income (losses) for
financial reporting purposes. Accordingly, due to the indefinite reversal of
such amounts in future periods, no deferred tax assets have been established for
tax basis in excess of the Company's book basis (approximately $10,000 and
$9,000 as of December 31, 1997 and 1996, respectively) in investments in
affiliated companies who, in turn have equity investments in foreign
corporations.

The significant components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
As of
December 31,
------------------------
1997 1996
-------- --------
<S> <C> <C>
Basis differences in property, plant and equipment......................... $ 1,074 $ 625
Accrued interest expense on the Notes...................................... 17,435 6,853
U.S. tax net operating loss carryforward................................... 1,338 --
Basis difference in marketable equity securities........................... 1,818 --
Tax net operating loss carryforward of consolidated
foreign subsidiaries(1).................................................. 67,412 25,539
------- -------

Deferred tax asset......................................................... 89,077 33,017
Valuation reserve.......................................................... (89,077) (33,017)
------- -------
Deferred tax asset, net.................................................... $ -- $ --
======= =======
</TABLE>
(1)For Australian income tax purposes, the net operating loss
carryforward may be limited in the event of a change in control of
Austar or a change in the business.

51
<PAGE>

The difference between income tax expense provided in the financial
statements and the expected income tax expense (benefit) at statutory rates is
reconciled as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Expected income tax benefit at the U.S. statutory rate of 35%............. $(58,820) $(30,795) $(6,032)
Tax effect of permanent and other differences:
Change in valuation reserve........................................... 56,060 27,663 (85)
State tax, net of federal benefit..................................... (5,042) (3,520) (689)
International rate differences........................................ (615) (181) --

Non-deductible interest accretion on the Notes........................ 2,145 973 --
Amortization of outside basis differences............................. 1,570 1,324 --
Amortization of licenses.............................................. 1,312 625 157
Book/tax basis differences associated with foreign equity investments. 915 2,111 6,388
Other................................................................. 2,475 1,800 261
-------- ------- ------
Total income tax expense (benefit)........................................ $ -- $ -- $ --
======== ======= ======
</TABLE>

9. SEGMENT INFORMATION

SFAS 131 requires that a public business enterprise report certain
financial and descriptive information about its reportable operating segments.
Operating segments are components of an enterprise for which separate financial
information is available and is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. SFAS 131 requires disclosure of a measure of segment profit or
loss, certain revenue and expense items and segment assets. It requires
reconciliations of total segment revenues, total segment profit or loss, total
segment assets and other amounts disclosed for segments to corresponding amounts
in the enterprise's financial statements.

The Company's reportable segments are the various countries in which it
operates multi-channel television, programming and/or telephony operations.
These reportable segments are managed separately because each country presents
different marketing strategies and technology issues as well as distinct
economic climates and regulatory constraints. The Company has selected the
following reportable segments: (i) Australia, including the Company's
investments in Austar, Austar Satellite and United Wireless, (ii) New Zealand,
including the Company's investment in Saturn, (iii) Tahiti, including the
Company's investment in Telefenua and (iv) Corporate, including various holding
companies and eliminations. The Company's accounting policies for segment
reporting are consistent with those described in Note 2.

The Company's segment information is as follows:
<TABLE>
<CAPTION>

As of and For the Year Ended
December 31, 1997
-----------------------------------------------------------
Australia New Zealand Tahiti Corporate Total
--------- ----------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Service and other revenue.................... $ 64,370 $ 473 $ 4,118 $ -- $ 68,961
System operating expense..................... $ (46,648) $(4,015) $(2,040) $ -- $ (52,703)
Selling, general and administrative expense.. $ (44,362) $(3,581) $(2,063) $ (3,306) $ (53,312)
Depreciation and amortization................ $ (77,557) $(2,033) $(1,212) $ -- $ (80,802)
Equity in losses of affiliated companies..... $ -- $ -- $ -- $ (2,408) $ (2,408)
Provision for loss on marketable equity
securities................................ $ -- $ -- $ -- $ (4,784) $ (4,784)
Interest income.............................. $ 80 $ 380 $ 41 $ 643 $ 1,144
Interest expense, including related
party expense............................. $ (4,031) $ (23) $(1,343) $(38,172) $ (43,569)
Net loss..................................... $(108,133) $(6,930) $(4,304) $(48,689) $(168,056)
Cash and cash equivalents.................... $ 1,262 $ 9,881 $ 246 $ 955 $ 12,344
Property, plant and equipment, net........... $ 147,871 $26,484 $ 8,746 $ -- $ 183,101
Total assets................................. $ 202,325 $43,349 $11,359 $ 21,999 $ 279,032
</TABLE>

52
<PAGE>
<TABLE>
<CAPTION>

As of and For the Year Ended
December 31, 1996
----------------------------------------------------------
Australia New Zealand Tahiti Corporate Total
--------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Service and other revenue.................... $ 21,354 $ 110 $ 3,513 $ -- $ 24,977
System operating expense..................... $(19,403) $(1,344) $(2,118) $ -- $(22,865)
Selling, general and administrative expense.. $(28,071) $(2,008) $(2,586) $ (1,376) $(34,041)
Depreciation and amortization................ $(34,087) $ (800) $(1,382) $ -- $(36,269)
Equity in losses of affiliated companies..... $ -- $ -- $ -- $ (5,414) $ (5,414)
Interest income.............................. $ 287 $ 32 $ -- $ 3,787 $ 4,106
Interest expense, including related
party expense............................. $ (915) $ -- $ -- $(19,841) $(20,756)
Net loss..................................... $(58,274) $(4,126) $(4,230) $(21,356) $(87,986)
Cash and cash equivalents.................... $ 7,787 $ 410 $ 213 $ 10,810 $ 19,220
Property, plant and equipment, net........... $166,012 $16,309 $10,849 $ -- $193,170
Total assets................................. $236,259 $25,655 $14,386 $ 43,023 $319,323
</TABLE>

For the Year Ended
December 31, 1995
------------------------------------------------------------
Australia New Zealand Tahiti Corporate Total
--------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Service and other revenue.................... $ 1 $ -- $ 1,882 $ -- $ 1,883
System operating expense..................... $(394) $ -- $(2,836) $ -- $ (3,230)
Selling, general and administrative expense.. $(196) $ -- $(2,286) $ (920) $ (3,402)
Depreciation and amortization................ $ (43) $ -- $ (960) $ -- $ (1,003)
Equity in losses of affiliated companies..... $ -- $ -- $ -- $(16,379) $(16,379)
Gain on sale of investment in affiliated
company................................... $ -- $ -- $ -- $ 4,132 $ 4,132
Interest income.............................. $ -- $ -- $ -- $ 157 $ 157
Interest expense, including related
party expense............................. $ 2 $ -- $ (32) $ -- $ (30)
Net loss..................................... $(628) $ -- $(3,556) $(13,049) $(17,233)
</TABLE>

10. COMMITMENTS

The Company has MMDS license fees and programming license fees payable
annually as follows:

1998........................................... $2,212
1999........................................... 1,686
2000........................................... 1,444
2001........................................... 153
2002 and thereafter............................ --
------
$5,495
======
The Company has operating lease obligations as follows:

1998........................................... $2,507
1999........................................... 2,049
2000........................................... 1,642
2001........................................... 1,477
2002 and thereafter............................ 1,452
------
$9,127
======

As of December 31, 1997, Saturn had contractual arrangements with certain
vendors committing it to make capital expenditures of $2,613, primarily relating
to network distribution equipment. The majority of this amount will be vendor
financed.

<PAGE>

During 1994, CTV and STV entered into franchise agreements with Australis.
The agreements carry 15-year terms and may be extended for an additional 10
years. The agreements provide for an exclusive license and franchise for MMDS
and satellite services and a non-exclusive license and franchise for cable
services for all franchisor services including uplink and programming including
Channel [V] (a 24 hour music video channel), Arena, Showtime, Nickelodeon, TV1,
Encore, Discovery and Fox Sports (the "Galaxy Package"). Under the agreements,
minimum payments are due, which include service fees based on varying
percentages of net revenues as defined in the agreement, and subscription levies
which are dependent on the number of subscribers. During 1997, the Company had
exceeded its minimum subscriber requirements in relation to such agreements.

Although Austar's franchise agreements were formerly exclusive for all
multi-channel television including MMDS and cable television operations, the
Company and Austar have agreed to allow Foxtel Management Pty Limited ("Foxtel")
to carry the Galaxy Package on Foxtel's wireline cable television systems
throughout Australia. This agreement (the "Australis Arrangement") provides that
Austar will be compensated for any Foxtel subscriber in its franchise area in an
amount equal to the profit margin Austar would have received if it had
sublicensed such programming to Foxtel. In November 1997, Australis and Austar
entered into an agreement under which Austar waived its rights to receive
payments with respect to the Foxtel compensation for the period up to December
31, 1997.

Austar Satellite has a five-year agreement with Optus Networks to lease a
54 MHz transponder, including the Galaxy Package. Pursuant to the agreement,
which commenced September 1, 1997, Austar Satellite will pay approximately $393
per month in satellite service fees to Optus Networks. Satellite fees payable
annually are approximately as follows:

1998............................................... $ 4,716
1999............................................... 4,716
2000............................................... 4,716
2001............................................... 4,716
2002............................................... 3,144
-------
$22,008
=======

UIH and many of its employees serving as senior management in the Company's
operating companies are parties to employment agreements, typically with terms
of three to five years. The agreements generally provide for a specified base
salary as well as a bonus set at a specified percentage of the base salary. The
bonus is based on the performance of the respective company and the employee.
The agreements often provide for the grant of an incentive interest equal to a
percentage of the residual equity value of the respective company, which is
typically defined as the fair market value of the business less net liabilities
and a reasonable return on shareholders' investment. The Company has recorded a
liability for the estimated amount of the bonus earned during 1997 and 1996. The
employment agreements generally also provide for cost of living differentials,
relocation and moving expenses, automobile allowances and income tax
equalization payments, if necessary, to keep the employee's tax liability the
same as it would be in the United States.

11. CONTINGENCIES

Other than as described below, the Company is not a party to any other
material legal proceedings, nor is it currently aware of any other threatened
material legal proceedings. From time to time, the Company may become involved
in litigation relating to claims arising out of its operations in the normal
course of its business.

On December 6, 1996, Australis filed counterclaims against Austar and the
Company alleging generally that Austar and the Company breached implied terms of
the Australis Arrangement by seeking such injunctive relief. In addition, Optus
Vision claims that the exclusive nature of Austar's franchise agreements
violates Australia's Trade Practices Act. On May 9, 1997, pursuant to the
court's permission, Austar amended its complaint to include claims that the

54
<PAGE>

agreement between Australis and Optus Vision violates Australia's Trade
Practices Act and that Austar is entitled to damages arising from interference
with its contractual relations with Australis under the franchise agreements.
Austar's complaint was also amended to add as defendants two affiliates of Optus
Vision: Publishing and Broadcasting Limited and its subsidiary, Pay TV Options.
In response, on September 10, 1997, Australis lodged an amended cross-claim. On
May 30, 1997, the Supreme Court of New South Wales, in separate proceedings
brought by FoxTel against Australis, granted a permanent injunction restraining
Australis from transferring such assets to the proposed Australis/Optus Vision
joint venture. Both Optus Vision and Australis appealed the decision. Optus
Vision indicated, in the meantime, that it was pursuing its claim that the
exclusive nature of Austar's franchise agreements violate Australia's Trade
Practices Act. The New South Wales Court of Appeal, on December 23, 1997, upheld
the appeal brought by Optus Vision and Australis against the granting of the
permanent injunction. The Company intends to vigorously defend its position.

55
<PAGE>

12. PRO FORMA INFORMATION

The following unaudited pro forma information for the year ended December
31, 1995 gives effect to the acquisitions of the additional 50% economic
interests in Austar, the disposition of the 25% interest in XYZ Entertainment,
the acquisition of the additional 50% economic interest in Saturn and the
acquisition of United Wireless as if each had occurred on January 1, 1995. The
pro forma financial information does not purport to represent what the Company's
results of operations would actually have been if such transactions had in fact
occurred on such date. The pro forma adjustments are based upon currently
available information and upon certain assumptions that management believes are
reasonable under current circumstances.
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1995
------------------------------------------------------------------------------------
United
Austar XYZ Saturn Wireless Pro
Actual Transaction(1) Sale(2) Purchase(3) Purchase(4) Forma
--------- -------------- ------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service and other revenue ................ $ 1,883 $ 443 $ -- $ 148 $ 33 $ 2,507
System operating expense ................. (3,230) (793) -- (863) (687) (5,573)
System selling, general and
administrative expense ................ (2,482) (6,681) -- (1,502) (341) (11,006)
Corporate general and
administrative expense ................ (920) -- -- -- -- (920)
Depreciation and amortization ............ (1,003) (4,259) -- (997) (86) (6,345)
-------- ------- ------ -------- ------- --------
Net operating loss .................. (5,752) (11,290) -- (3,214) (1,081) (21,337)

Equity in losses of affiliated
companies ............................. (16,379) 3,212 4,132 1,438 -- (7,597)
Interest, net ............................ 127 1,230 -- -- -- 1,357
Other, net ............................... 4,771 244 (4,132) (55) 1 829
-------- -------- ------ ------ ------- --------
Net loss ............................ $(17,233) $(6,604) $ -- $(1,831) $(1,080) $(26,748)
======== ======== ====== ======= ======= ========
</TABLE>

(1) Amounts represent Austar's actual operating results for the year ended
December 31, 1995 as if Austar had been consolidated for the entire year
except for "Equity in losses of affiliated companies" which represents the
elimination of the Company's share of Austar's losses recognized during the
year, and except for a portion of "Depreciation and amortization" totaling
$2,988 which represents amortization related to the goodwill recorded in
connection with the acquisition of the additional 40% effective economic
interest, amortized over 15 years on a straight-line basis.
(2) Amounts represent elimination of the gain on sale of XYZ Entertainment and
25% of the equity in losses previously recognized.
(3) Amounts represent Saturn's actual operating results for the year ended
December 31, 1995 as if Saturn had been consolidated for the entire year
except for "Equity in losses of affiliated companies" which represents the
elimination of the Company's share of Saturn's losses recognized during the
year ended and except for a portion of "Depreciation and amortization,"
totaling $612 which represents amortization of goodwill recorded in
connection with the purchase of the additional 50% interest in Saturn,
which is amortized over 15 years on a straight-line basis.
(4) Amounts represent actual operating results of United Wireless during the
eight months ended August 1995, the period prior to the Company's
acquisition of its 100% interest.

56
<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------

MANAGEMENT

The directors and officers of the Company and the key employees of the
operating companies and their ages and positions are set forth below.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
The Company:
Gene W. Schneider 71 Chairman of the Board
Michael T. Fries 35 President, Chief Executive Officer and Director
J. Timothy Bryan 37 Chief Financial Officer, Treasurer and Director
John C. Porter 40 Chief Operating Officer
Kevin Ong 42 Vice President--Finance
Mark L. Schneider 42 Director
Ellen P. Spangler 49 Vice President and Secretary
Valerie L. Cover 41 Controller

Operating Companies:
Bruce Mann 42 Director of Sales, Marketing and Programming, Austar
Robert J. Birrell 35 Finance Director, Austar
Jack B. Matthews 46 Chief Executive Officer, Saturn
Michel Laurent 45 Managing Director, Telefenua
Joseph P. Gatto, Jr. 51 Chief Executive Officer, United Wireless
</TABLE>

DIRECTORS AND EXECUTIVE OFFICERS

GENE W. SCHNEIDER has served as Chairman of the Board of Directors of the
Company and UAP since their respective formations. He has served as Chairman of
the Board of Directors of UIH since May 1989 and UIH's Chief Executive Officer
since October 1995. Mr. Schneider was, until November 1991, Chairman of United
Artists Entertainment Company ("United Artists"), the third-largest U.S. cable
television company and the largest theater owner in the world. He was the
founder of United Cable Television Corporation ("United Cable") in the early
1950's and, as its Chairman and Chief Executive Officer, built United Cable into
the eighth-largest multiple system operator prior to merging with United Artists
in 1989. He has been active in cable television affairs and has served on
numerous National Cable Television Association ("NCTA") committees and special
projects since NCTA's inception in the early 1950's. He also has served on the
boards of directors of several other companies, including Turner Broadcasting
Corporation.

MICHAEL T. FRIES has served as Chief Executive Officer of the Company since
November 1996, as President of the Company and UAP since their respective
formations, and as a Director of the Company and UAP since November 1996. Mr.
Fries was President of UIH Asia/Pacific, Inc., the predecessor to the Company
previously responsible for all operating and development activities of the
Company in the Asia/Pacific region. Prior to assuming that position in 1995, Mr.
Fries served as Senior Vice President, Development, of UIH, in which capacity he
was responsible for managing UIH's worldwide acquisitions and new business
development activities since March 1990, including UIH's expansion into the
Asia/Pacific market. From 1985 to 1990, Mr. Fries was employed by PaineWebber
Incorporated (New York) where he spent approximately one year in the firm's
venture capital group and four years in the investment banking division,
specializing in domestic and international transactions for companies in the
media and telecommunications industry.

J. TIMOTHY BRYAN is the Chief Financial Officer and a Director of both the
Company and UAP, positions he has held since December 1996. Effective January 1,
1997, he became the Chief Financial Officer of UIH. Prior to joining UIH in
December 1996, Mr. Bryan served as Vice President of Finance and Treasurer of
Jones Financial Group, Inc., an affiliate of Jones International, Limited and
Jones Intercable, Inc. from 1993 to January 1996, and as Treasurer of Jones
Intercable, Inc. from 1990 to 1993. From 1988 through 1990, he served in the

57
<PAGE>

Communications Division of the Corporate Banking Department of NationsBank of
North Carolina and from 1983 to 1988, worked at Mellon Bank Corporation in the
Corporate and International Banking Departments.

JOHN C. PORTER has served as Chief Operating Officer of the Company since
November 1996 and Chief Operating Officer of Austar since March 1995, where he
directly manages the technical, operating and administrative aspects of Austar's
multi-channel systems and is the principal executive in the field responsible
for the launch of MMDS and cable systems, as well as Austar's DTH business. As
Chief Operating Officer of the Company, Mr. Porter will continue to participate
in the management and operations of Austar, along with the Company's other
operating companies. Prior to joining Austar, Mr. Porter spent 10 years serving
in various capacities for Time Warner Cable, a subsidiary of Time Warner, Inc.
Most recently, Mr. Porter acted as the Division President, Central Ohio, a
170,000 subscriber, 400 employee division. Mr. Porter has over 16 years of
management experience in the U.S. multi-channel television industry.

KEVIN ONG has served as Vice President--Finance of the Company since May
1996. Prior to joining UIH, Mr. Ong served in various financial and senior
management positions with U.S. and international cable television operators.
From 1988 to 1994, Mr. Ong served as Director with Jones Intercable, Inc. and
Treasurer of Jones International, Limited, where he was responsible for
financial operations and various accounting functions. From 1977 to 1988, Mr.
Ong was employed at KPMG Peat Marwick, attaining an audit senior manager
position.

MARK L. SCHNEIDER has been a Director of the Company since November 1996.
Mr. Schneider is also a Director of UIH and UAP. In December 1996, Mr. Schneider
became Executive Vice President of UIH and President and Chief Executive Officer
of UIH Europe/Middle East Communications, Inc. In April 1997, Mr. Schneider also
became President and Chief Executive Officer of UPC. From May 1996 to December
1996, Mr. Schneider was Chief of Strategic Planning and Operational Oversight of
UIH. He served as President of UIH from July 1992 until March 1995 and was
Senior Vice President of UIH from May 1989 until July 1992. During these
periods, Mr. Schneider was responsible for all of its international
multi-channel television system and programming activities. Prior to joining
UIH, he served as Vice President of Corporate Development at United Cable from
March 1987 until May 1989. In that position, he was responsible for United
Cable's acquisition and development of international cable television systems
and other businesses.

Gene W. Schneider and Mark L. Schneider are father and son. No other family
relationships exist between any other executive officers or directors of the
Company.

OTHER MANAGEMENT

ELLEN P. SPANGLER was appointed Vice President and Secretary of the Company
in July 1997. Ms. Spangler is responsible for the legal operations of the
Company. Prior to that time, she served as Assistant Secretary for the Company.
Prior to joining the Company in January 1991, she served as Director of Business
Affairs, Programming, at Tele-Communications, Inc. ("TCI") from 1987 to 1991,
and as Acquisitions Counsel at TCI from 1984 to 1987.

VALERIE L. COVER has served as Controller for the Company since its
formation in October 1994. Ms. Cover is responsible for the accounting and
financial reporting functions of the Company. She has served as Controller of
UIH since joining UIH in October 1990 and became a Vice President of UIH in
December 1996. Prior to joining UIH, she was Director of Corporate Accounting at
United Artists from May 1989 until October 1990 and Manager of Financial
Reporting at United Cable from June 1986 until May 1989.

BRUCE MANN has served as Sales, Marketing and Programming Director of
Austar since joining that company in April 1995. Mr. Mann is responsible for the
development of Austar's marketing, sales and programming techniques and has
played a critical role in the successful implementation of these plans
throughout Austar's franchise area. Mr. Mann has been involved in various
marketing capacities of communications and entertainment companies for the past
15 years including eight years at Time Warner Cable as Director of
Marketing-Brooklyn, Queens. From 1994 until joining Austar, Mr. Mann served as
President, National Division, of Cross Country Wireless, Inc., a U.S. provider
of wireless multi-channel television services. From 1991 to 1994, Mr. Mann
served as Vice President-Marketing of Washington Redskins/Jack Kent Cooke
Stadium, Inc., specializing in sports and entertainment related promotion,
advertising and marketing.

58
<PAGE>

ROBERT J. BIRRELL has served as Finance Director of Austar since January
1996 and has been involved with the development aspects of the Austar business
since April 1994. Mr. Birrell is responsible for the accounting, finance,
inventory control, investor relations and legal aspects of Austar's business.
Prior to joining Austar, Mr. Birrell has been involved with various activities
in large scale retailing in the Australian marketplace. From 1985 to 1993, Mr.
Birrell served as Treasurer of Industrial Equity Limited, an Australian based
investment company, and prior to that as Manager Arbitrage of Macquarie Bank
Limited. Mr. Birrell has over 14 years experience in the banking and business
environment in Australia.

JACK B. MATTHEWS has served as Chief Executive Officer of Saturn since
joining that company in January 1995. Mr. Matthews is responsible for the
technical, operating and marketing aspects of the business. Mr. Matthews has
served in various general management capacities with several U.S. multiple
system operators including Cox Cable Communications and Continental Cablevision.
From August 1993 until joining Saturn, Mr. Matthews was the Vice President-Sales
& Marketing of Arrowsmith Technologies, a cable technology company which
develops and installs advanced field operations management and operations
support systems for the cable television industry. From 1990 to 1993, Mr.
Matthews was the President of COMM/ONE, an entrepreneurial business marketing
sophisticated video and voice processing systems. Mr. Matthews has over 14 years
of U.S. multi-channel television industry experience.

MICHEL LAURENT has served as Managing Director of Telefenua since May 1995.
Since joining Telefenua, Mr. Laurent has been responsible for the launch of
Telefenua's service and rapid increase in its customer base. From 1991 until
joining Telefenua, Mr. Laurent held various positions with Videotron Limited,
the largest cable television and telecommunications company in the province of
Quebec and the second largest multiple system operator in Canada. Mr. Laurent
most recently served as Vice President of Operations for Videotron's Montreal
division and was responsible for technical, operating and marketing aspects of
the business. Mr. Laurent is fluent in French and English.

JOSEPH P. GATTO, JR. has been the Chief Executive Officer of United
Wireless since May 1996. Prior to May 1996, Mr. Gatto was the Vice
President--Development of UAP focusing on telecommunications business
development within the Asia/Pacific region. Prior to joining UIH, Mr. Gatto was
the Director of Sales of Plexsys International Corp., a cellular system network
manufacturer, where he was responsible for worldwide sales. Mr. Gatto has also
served in various sales and marketing capacities for U.S. and Asian
telecommunications and technology companies.

ITEM 11. EXECUTIVE COMPENSATION
- ---------------------------------

All of the officers of the Company are employed by UIH, the indirect 98%
stockholder of the Company. The Company pays no separate compensation to these
officers; however, the Company and UIH Management are parties to the Management
Agreement, pursuant to which the Company pays UIH Management a management fee
for certain services provided to the Company. Effective March 31, 1997, UIH
Management assigned its rights and obligations under the Management Agreement to
UAP in the UAP Management Agreement. UIH Management and UAP also became parties
to a similar management agreement (the "UIH Management Agreement") effective
March 31, 1997.

Certain members of senior management of Austar, Saturn, Telefenua and
United Wireless are U.S. or Canadian expatriates who are employed by UIH and
have been seconded to the respective operating companies. The respective
operating companies reimburse UIH for compensation paid to these employees. Gene
W. Schneider, the Company's Chairman, is also the Chairman and Chief Executive
Officer of UIH and spends only a portion of his time on matters pertaining to
the Company and its operations. The Chief Executive Officer of the Company,
Michael T. Fries, is also an officer and employee of UIH and spends
approximately 80% of his time on matters pertaining to the Company and its
operations. J. Timothy Bryan, the Company's Chief Financial Officer, is also an
officer and employee of UIH and spends only a portion of his time on matters
pertaining to the Company and its operations. The services of Messrs. Schneider,
Fries and Bryan are provided to the Company pursuant to the UIH Management
Agreement. While the Company and its operating companies do not reimburse UIH
directly for a specified portion of the compensation UIH pays to Messrs.
Schneider, Fries and Bryan, UAP pays a management fee to UIH under the UIH
Management Agreement for certain services, including those of Messrs. Schneider,
Fries and Bryan, performed on behalf of the Company. The following table sets
forth the compensation paid during the years ended December 31, 1997, 1996 and
1995 to the Company's Chief Executive Officer and the four most highly
compensated executive officers of the Company and the operating companies:

59
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
------------------------------
Annual Compensation Awards Payouts
----------------------------------------- -------------- -----------
Other Securities
Annual Underlying LTIP All Other
Name and Principal Position Year Salary Bonus Compensation(1) Options (#)(2) Payouts ($) Compensation
- ------------------------------ ---- ---------- --------- --------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gene W. Schneider(3) 1997 $369,904 $ -- $ -- -- $ -- $5,398(4)
CHAIRMAN 1996 $346,827 $ -- $ -- 100,000 $ -- $5,398(4)
1995 $324,577 $ -- $ -- 40,000 $ -- $5,340(4)

Michael T. Fries(3) 1997 $245,346 $ -- $ -- -- $ -- $5,398(5)
CHIEF EXECUTIVE OFFICER 1996 $230,577 $ -- $ -- 10,000 $ -- $5,398(5)
1995 $212,769 $ -- $ -- 35,000 $ -- $5,340(5)

J. Timothy Bryan(3) 1997 $234,038 $ -- $ -- 60,000 $ -- $5,398(7)
CHIEF FINANCIAL OFFICER 1996(6) $ 13,269 $ -- $ -- 105,000 $ -- $ --

Donald F. Hagans(8) 1997 $230,365 $ -- $ -- -- $ -- $ --
VICE PRESIDENT--AUSTRALIA 1996 $199,038 $35,000 $ -- -- $ -- $ --
1995 $175,000 $ -- $ -- 12,000 $ -- $ --

Robert G. McRann(3)(9) 1997 $225,000 $67,500 $30,015 -- $387,500 $5,398(10)
MANAGING DIRECTOR, AUSTAR 1996 $221,423 $49,392 $29,985 -- $ -- $5,398(10)
1995 $161,538 $ -- $24,279 -- $ -- $4,376(10)

John C. Porter 1997 $218,972 $60,000 $47,142 -- $ -- $5,398(12)
CHIEF OPERATING OFFICER 1996 $195,986 $42,402 $35,509 -- $ -- $5,398(12)
1995(11) $138,750 $ -- $25,748 -- $ -- $4,008(12)
</TABLE>

(1) Amounts represent additional cash compensation relating to overseas
assignment.
(2) Amounts represent the number of options with respect to shares of Class A
Common Stock of UIH granted to such executives as officers and employees of
UIH.
(3) Amounts represent total compensation paid by UIH for duties performed with
respect to the Company and other operations of UIH.
(4) Amounts consist of matching employer contributions made by UIH under UIH's
employee 401(k) plan of $4,750, $4,750 and $4,620 for the years ended
December 31, 1997, 1996 and 1995, respectively, with the remainder
consisting of term life insurance premiums paid by UIH for Mr. Schneider's
benefit.
(5) Amounts consist of matching employer contributions made by UIH under UIH's
employee 401(k) plan of $4,750, $4,750 and $4,620 for the years ended
December 31, 1997, 1996 and 1995, respectively, with the remainder
consisting of term life insurance premiums paid by UIH for Mr. Fries'
benefit.
(6) Mr. Bryan became an employee of UIH on December 2, 1996.
(7) Amount consists of a matching employer contribution made by UIH under UIH's
employee 401(k) plan of $4,750 with the remainder consisting of term life
insurance premiums paid by UIH for Mr. Bryan's benefit.
(8) Mr. Hagans resigned from UIH and the Company on January 1, 1998.
(9) Mr. McRann transferred to UIH's European region effective July 6, 1997 and
resigned from UIH on January 1, 1998.
(10) Amounts consist of matching employer contributions made by UIH under UIH's
employee 401(k) plan of $4,750, $4,750 and $3,836 for the years ended
December 31, 1997, 1996 and 1995, respectively, with the remainder
consisting of term life insurance premiums paid by UIH for Mr. McRann's
benefit.
(11) Mr. Porter became an employee of UIH on March 27, 1995.
(12) Amounts consist of matching employer contributions made by UIH under UIH's
employee 401(k) plan of $4,750, $4,750 and $3,468 for the years ended
December 31, 1997, 1996 and 1995, respectively, with the remainder
consisting of term life insurance premiums paid by UIH for Mr. Porter's
benefit.

60
<PAGE>

Messrs. Schneider, Fries, Bryan and Hagans, as employees and officers of
UIH, have been granted options to acquire stock of UIH. Messrs. McRann and
Porter have not been granted any options by UIH. The following tables set forth
information concerning options to purchase shares of UIH Class A Common Stock
granted to these executives during 1997 as well as the value of unexercised
options held by such executives as of December 31, 1997. No such executive has
exercised any options during the year ended December 31, 1997.

The following table sets forth information concerning options which were
granted by UIH to the officers named in the Summary Compensation Table above
during the year ended December 31, 1997.
<TABLE>
<CAPTION>
Option Grants in Last Year(1)

Individual Grants
-------------------------------------------------------- Potential Realizable Value
Number of Percentage of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
Underlying Granted to Exercise for Option Term(2)
Options Employees in Price Expiration -----------------------------
Name Granted (#) Last Year ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ---------------- --------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Gene W. Schneider..... -- -- -- -- -- --
Michael T. Fries...... -- -- -- -- -- --
J. Timothy Bryan...... 60,000 13.8% $10.25 06/06/07 $386,770 $980,152
Donald F. Hagans...... -- -- -- -- -- --
Robert G. McRann...... -- -- -- -- -- --
John C. Porter........ -- -- -- -- -- --
</TABLE>

(1) Stock options granted are for UIH Class A Common Stock. The stock options
granted during 1997 vest in equal monthly increments over the four-year
period following the date of grant. Vesting of the options granted would be
accelerated upon a change of control of UIH as defined in UIH's stock option
plan.
(2) The potential gains shown are net of the option exercise price and do not
include the effect of any taxes associated with exercise. The amounts shown
are for the assumed rates of appreciation only, do not constitute
projections of future stock price performance, and may not necessarily be
realized. Actual gains, if any, on stock option exercises depend on the
future performance of the UIH Class A Common Stock, continued employment of
the optionee through the term of the options, and other factors.

The following table sets forth information concerning unexercised options
held by officers named in the Summary Compensation Table above as of December
31, 1997.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Year and Year-End Option Values

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Year-End (#) Options at Year-End ($)
Name Exercisable/Unexercisable Exercisable/ Unexercisable
- ---- ------------------------- --------------------------
<S> <C> <C>
Gene W. Schneider.................................. 200,000/90,000 $300,000/$0
Michael T. Fries................................... 144,375/20,625 $340,000/$0
J. Timothy Bryan................................... 37,500/127,500 $41,875/$65,625
Donald F. Hagans................................... 87,500/92,000 --
Robert G. McRann................................... -- --
John C. Porter..................................... -- --
</TABLE>

61
<PAGE>

AGREEMENTS WITH EMPLOYEES

Many of the employees serving as senior management in the Company's
operating companies are parties to employment agreements typically with terms of
three to five years. The agreements generally provide for a specified base
salary as well as a bonus set at a specified percentage of the base salary,
which bonus is based on the performance of the respective company and employee.
The agreements often provide for the grant of an incentive interest equal to a
percentage of the residual equity value of the respective company which is
typically defined as the fair market value of the business less net liabilities
and a reasonable return on shareholders' investment. The employment agreements
generally also provide for cost of living differentials, relocation and moving
expenses, automobile allowances and income tax equalization payments, if
necessary, to keep the employee's tax liability the same as it would be in the
United States.

Of the persons identified in the Summary Compensation Table, Mr. McRann had
and Mr. Porter continues to have such an employment agreement with UIH. These
employment agreements provide for an annual base salary, which is to be reviewed
annually, and eligibility for an annual bonus of up to a fixed percentage of the
base salary, based on the performance of Austar as well as the individual's
performance. Mr. McRann and Mr. Porter were also granted incentive interests,
that vest over a four-year period, equal to 0.75% and 0.5%, respectively, of the
residual equity value of Austar, calculated as (i) ten times EBITDA from the
prior 12 months, less (ii) the sum of Austar's net liabilities and an amount
equal to the total shareholder investment in Austar, plus a 12% compounded
annual return on such investment. In the event of a change of control of Austar,
the residual equity value would be the greater of (a) the amount calculated
above or (b) the net gross proceeds to the shareholders from the event that
causes the change of control, less an amount equal to the total shareholder
investment in Austar, plus a 12% compounded annual return on such investment.
Austar reimburses UIH under the technical assistance agreement for employment
costs associated with Mr. McRann and Mr. Porter. Mr. McRann received a payout
for his incentive interest in July 1997 when he transferred out of the
Asia/Pacific region.

COMPENSATION OF DIRECTORS

All of the directors of the Company are also directors or officers of UIH,
UAP and/or officers of the Company. They receive no separate cash compensation
for serving as directors of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Board of Directors has no separate Compensation Committee as
the Company currently does not have any employees. UIH's Compensation Committee,
none of the members of which are employees or executive officers of the Company,
determine the compensation of the Company's executive officers in their capacity
as employees of UIH. Directors or executive officers of the Company may serve on
the Boards of Directors of Austar, Saturn, Telefenua, United Wireless and XYZ
Entertainment and as part of their duties may determine the compensation of
those operating companies' employees. However, none of the employees of such
operating companies are directors of the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Articles of Incorporation eliminate the personal liability of
its directors to the Company and its stockholders for monetary damages for
breach of the directors' fiduciary duties in certain circumstances. The
Company's Articles of Incorporation and Bylaws provide that the Company shall
indemnify its officers and directors to the fullest extent permitted by law. The
Company believes that such indemnification covers at least negligence and gross
negligence on the part of indemnified parties.

The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Articles of Incorporation and Bylaws. These agreements require the Company,
among other things, to indemnify the Company's directors and officers for
certain expenses (including attorney's fees), judgments, fines, penalties and
settlement amounts incurred by any such person in certain actions or
proceedings, including actions by or in the right of the Company, arising out of
such person's services as a director or officer of the Company, any subsidiary
of the Company or any other company or enterprise to which the person provides
services at the request of the Company. The Company believes that these
agreements are necessary to attract and retain qualified persons as directors
and officers.

62
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------

UAP owns 100% of the 13,864,941 shares of issued and outstanding common
stock of the Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------

RELATIONSHIP WITH UAP AND UIH

The Company is currently a direct, wholly-owned subsidiary of UAP,
which is an indirect, 98%-owned subsidiary of UIH. The Company's operations to
date have been funded by capital contributions from UIH and UAP as well as
proceeds from the Notes, minority shareholder contributions and subsidiary bank
debt.

The Company and UAP are parties to the UAP Management Agreement pursuant to
which UAP agreed to continue to perform certain administrative, accounting,
financial reporting and other services for the Company, which has no separate
employees of its own. Pursuant to the UAP Management Agreement, the management
fee was $750,000 for the first year of such agreement (beginning May 1, 1996),
and it increases on each anniversary date of the UAP Management Agreement by 8%
per year. The management fee for the first year of the UAP Management Agreement
was calculated based on an estimate of staff hours to accomplish the various
administrative, accounting, financial reporting and other services to be
provided to the Company under the UAP Management Agreement. Then the percentage
those hours constituted of the respective employees' annual work hours was
multiplied by the employment cost for such employees to UIH.

Each of Austar, Saturn, Telefenua and United Wireless are parties to
technical assistance agreements with UAP, pursuant to which the operating
companies receive certain technical assistance in connection with such operating
companies' design, development, construction, marketing and operation of their
respective multi-channel television systems. Fees paid under these technical
assistance agreements are a percentage (currently between 2.5% and 5%) of gross
revenues generated by the operating companies plus reimbursements for costs
associated with the seconded employees. As of December 31, 1997, Austar, Saturn,
Telefenua and United Wireless had accrued fees due to parent under their
technical assistance agreements of $2.6 million, $0.4 million, $2.7 million and
$0.5 million, respectively.

TAX SHARING AGREEMENT

The Company is included as a member of UIH's consolidated tax return and,
is a member of the UIH consolidated group (as long as non-UIH ownership of the
Company does not exceed 20%). UIH and the Company are parties to a tax sharing
agreement that defines the parties' rights and obligations with respect to tax
liabilities and benefits relating to the Company and its operations as part of
the consolidated group of UIH. In general, UIH is responsible for filing
consolidated tax returns and paying the associated taxes and the Company will
reimburse UIH for the portion of the tax cost relating to the Company and its
operations.

63
<PAGE>
PART IV

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

(a)(1) Financial Statements

INCLUDED IN PART II OF THE REPORT:
<TABLE>
<CAPTION>
Page No.
UIH AUSTRALIA/PACIFIC, INC.
<S> <C>
Report of Independent Public Accountants................................ 32
Report of Independent Auditors.......................................... 33
Independent Auditors' Report............................................ 34
Consolidated Balance Sheets as of December 31, 1997 and 1996............ 35
Consolidated Statements of Operations For the Years Ended
December 31, 1997, 1996 and 1995...................................... 36
Consolidated Statements of Stockholder's (Deficit) Equity For the
Years Ended December 31, 1997, 1996 and 1995......................... 37
Consolidated Statements of Cash Flows For the Years Ended
December 31, 1997, 1996 and 1995...................................... 38
Notes to Consolidated Financial Statements.............................. 39
</TABLE>
(a)(2) Financial Statement Schedules

INCLUDED IN PART IV OF THE REPORT:

(i) Financial Statement Schedules required to be filed
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
<S> <C>
Report of Independent Public Accountants................................ 68
Schedule I - Condensed Financial Information of the Registrant
(Parent only)......................................................... 69
</TABLE>
(ii) Separate Financial Statements and Related Schedules
<TABLE>
<CAPTION>
CTV PTY LIMITED
<S> <C>
Independent Audit Report................................................ 72
Balance Sheets as of December 31, 1994 and 1995......................... 73
Profit and Loss Accounts for the Period Ended
December 31, 1994 and the Year Ended December 31, 1995................ 74
Statements of Cash Flows for the Period Ended
December 31, 1994 and the Year Ended December 31, 1995................ 75
Notes to the Financial Statements....................................... 76
</TABLE>

<TABLE>
<CAPTION>
STV PTY LIMITED
<S> <C>
Independent Audit Report................................................ 87
Balance Sheets as of December 31, 1994 and 1995......................... 88
Profit and Loss Accounts for the Period Ended
December 31, 1994 and the Year Ended December 31, 1995................ 89
Statements of Cash Flows for the Period Ended
December 31, 1994 and the Year Ended December 31, 1995................ 90
Notes to the Financial Statements....................................... 91
</TABLE>

64
<PAGE>
<TABLE>
<CAPTION>
XYZ ENTERTAINMENT PTY LIMITED
<S> <C>
Independent Auditors' Report............................................ 101
Consolidated Statements of Operations for the Period from
October 17, 1994 (date of inception) to December 31, 1994 and the
Year Ended December 31, 1995.......................................... 102
Consolidated Balance Sheets as of December 31, 1995 and 1994............ 103
Consolidated Statements of Shareholders' Deficiency for the
Period from October 17, 1994 (date of inception) to December
31, 1994 and the Year Ended December 31, 1995......................... 104
Consolidated Statements of Cash Flows for the Period from
October 17, 1994 (date of inception) to December 31, 1994
and the Year Ended December 31, 1995.................................. 105
Notes to the Consolidated Financial Statements.......................... 106
</TABLE>

<TABLE>
<CAPTION>
SATURN COMMUNICATIONS LIMITED (FORMERLY KNOWN AS KIWI CABLE COMPANY
LIMITED)
<S> <C>
Auditors' Report........................................................ 119
Statement of Financial Performance for the Years Ended
December 31, 1994 and 1995............................................ 120
Statement of Movements in Equity for the Years Ended
December 31, 1994 and 1995............................................ 121
Statement of Financial Position as of December 31, 1994 and 1995........ 122
Statement of Cash Flows for the Years Ended December 31, 1994
and 1995.............................................................. 123
Notes to and Forming Part of the Financial Statements................... 124
</TABLE>
(a)(3) Exhibits

3.1 Articles of Incorporation of the Registrant, as amended. (1)

3.2 By-Laws of the Registrant. (1)

4.1 The Indenture dated as of May 14, 1996, between the Issuer and
American Bank National Association. (1)

4.2 The Indenture dated as of September 23, 1997, between the Issuer
and Firstar Bank of Minnesota, N.A. (2)

4.3 Warrant Agreement dated as of November 15, 1997, between the
Issuer and Firstar Bank of Minnesota, N.A. (1)

4.4 The Articles of Incorporation, as amended, and By-Laws of the
Registrant are included as Exhibits 3.1 and 3.2. (1)

10.1 Purchase Agreement dated May 8, 1996, among the Issuer,
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and
Merrill Lynch & Co., Merrill Lynch, Pierce Fenner & Smith
Incorporated ("Merrill Lynch"). (1)

10.2 Purchase Agreement dated September 16, 1997, between the Issuer
and DLJ. (2)

10.3 Memorandum of Variation dated December 21, 1995 to the
Subscription and Securityholders Agreement, among United
International Holdings, Inc., ("UIH"), UIH Australia, Inc.
("UIHA"), Salstel Media Holdings Pty Limited ("SMH"), Australis
Media Limited ("Australis") and CTV Pty Limited ("CTV"). (1)

10.4 Memorandum of Variation dated December 21, 1995 to the
Subscription and Securityholders Agreement dated October 12,
1994, among UIH, UIH Australia II, Inc. ("UIHA II"), Salstel
Media Investment Pty Limited ("SMI"), Australis and STV Pty
Limited ("STV"). (1)

10.5 Memorandum of Variation dated April 4, 1996 to the CTV
Securityholders Agreement, among UIH ,UIHA, Australis, SMH and
CTV. (1)

10.6 Memorandum of Variation dated April 4, 1996 to the STV
Securityholders Agreement, among UIH, UIHA II, Australis, SMI and
STV. (1)

65
<PAGE>

10.7 Agreement dated December 21, 1995, among UIH, UIHA and SMH. (1)

10.8 Amending Agreement dated April 4, 1996 to CTV Securityholders
Agreement, among UIH, UIHA and SMH. (1)

10.9 Agreement dated December 21, 1995, among UIH, UIHA II and SMI.
(1)

10.10 Amending Agreement dated April 4, 1996 to the STV Securityholders
Agreement, among UIH, UIHA II and SMI. (1)

10.11 Subscription and Investment Agreement dated July 21, 1997, among
SaskTel Holdings (New Zealand), Inc. ("SaskTel"), Saskatchewan
Telecommunications Holding Corporation, UIH New Zealand Holdings,
Inc. ("UIHNZ"), UIH Asia/Pacific Communications, Inc. ("UAP") and
Saturn Communications Limited ("Saturn"), as amended. (2)

10.12 Shareholders Agreement dated July 23, 1997, among SaskTel, UIHNZ
and Saturn. (2)

10.13 XYZ Shareholders Agreement dated September 6, 1995, among Century
United Programming Ventures Pty Limited ("CUPV"), Foxtel
Management Pty Limited ("Foxtel"), XYZ Entertainment Pty Limited
("XYZ"), Century United Programming Ventures ("CPVC") and the
Issuer. (1)

10.14 Shareholders Deed dated June 30, 1995, among Century
Communications Corporation, CPVC, UIH, the Issuer and CUPV. (1)

10.15 UIH-SFCC L.P. Amended and Restated Agreement of Limited
Partnership dated January 6, 1995, among UIH-SFCC Inc. and the
limited partners named therein. (1)

10.16 Master Agreement dated January 11, 1995, between UIH-SFCC L.P.
and the Societe Francaise des Communications et du Cable S.A.
("Societe"). (1)

10.17 Shareholder's Agreement dated January 11, 1995, among UIH-SFCC
L.P. and the shareholders named therein. (1)

10.18 A$200,000,000 Syndicated Senior Secured Debt Facility Agreement
dated July 31, 1997, among Austar Entertainment Pty Limited
("Austar"), Chase Securities Australia Limited, the Guarantors
named herein and the financial institutions named herein. (3)

10.19 Franchise Agreement dated October 12, 1994, between Australis and
CTV. (1)

10.20 Agreement dated June 19, 1996, among Australis, the Issuer and
Galaxy Communications Pty Limited ("Galaxy") re: CTV Franchise
Agreement. (1)

10.21 Franchise Agreement dated October 12, 1994, between Australis and
STV. (1)

10.22 Agreement dated June 19, 1996, among Australis, the Issuer and
Galaxy re: STV Franchise Agreement. (1)

10.23 Channel Supply Agreement dated June 30, 1995, among XYZ, CUPV and
East Coast Pay Television Pty Limited ("ECT"). (1)

10.24 Technical Assistance Agreement dated October 12, 1994, between
CTV and United International Management, Inc. ("UIMI"). (1)

10.25 Technical Assistance Agreement dated October 12, 1994, between
STV and UIMI. (1)

66
<PAGE>

10.26 Technical Assistance Agreement dated July 8, 1994, between Saturn
and UIH. (1)

10.27 Amendment No. 1 to Technical Assistance Agreement dated July 23,
1997, between Saturn and UAP. (2)

10.28 Technical Assistance Agreement dated July 23, 1997, between
SaskTel and Saturn. (2)

10.29 Technical Assistance Agreement dated January 11, 1995, between
Telefenua S.A. and Societe. (1)

10.30 Assignment of Rights and Delegation of Duties under Technical
Assistance Agreement dated January 11, 1995, between Societe and
UIMI. (1)

10.31 Management Agreement dated May 1, 1996, between UIH Management,
Inc. and the Registrant. (1)

10.32 Tax Allocation Agreement dated May 8, 1996, among UIH, UAP and
the Issuer. (1)

12.1 Statement re: Ratio of Earnings to Fixed Charges.

21.1 List of Subsidiaries.

23.1 Consent of Independent Public Accountants--Arthur Andersen LLP
(UIH Australia/Pacific, Inc.).

23.2 Consent of Independent Public Accountants--Arthur Andersen (CTV
Pty Limited).

23.3 Consent of Independent Public Accountants--Arthur Andersen (STV
Pty Limited).

23.4 Consent of Independent Public Accountants--Arthur Andersen
(Saturn Communications Limited (formerly Kiwi Cable Company
Limited)).

23.5 Consent of Independent Auditors--Deloitte Touche Tohmatsu (XYZ
Entertainment Pty Limited).

23.6 Consent of Independent Auditors--Coopers & Lybrand (Telefenua
S.A.).

24.1 Power of Attorney.

27.1 Financial Data Schedule.

- -----------------
(1) Incorporated by reference from the Company's Registration Statement on Form
S-4 (SEC File No. 333-05017) filed on May 31, 1996.
(2) Incorporated by reference from the Company's Registration Statement on Form
S-4 (SEC File No. 333-39707) filed on November 6, 1997.
(3) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-4 (SEC File No. 333-39707) filed on
December 5, 1997.

(b) Reports on Form 8-K filed during the quarter:

None.
67
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To UIH Australia/Pacific, Inc.:

We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements of UIH Australia/Pacific, Inc.
included in this Form 10-K and have issued our report thereon dated March 27,
1998. Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The following schedule is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements as indicated in our report with respect thereto and, in our opinion,
based on our audit and the reports of other auditors, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Denver, Colorado
March 27, 1998

68
<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
PARENT ONLY
SCHEDULE 1
Condensed Financial Information of the Registrant
(Stated in thousands, except share and per share amounts)

December 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................................................... $ 955 $ 10,810
Short-term investments............................................................. 12,325 18,640
Related party receivables.......................................................... 738 --
Other current assets............................................................... 195 349
-------- --------
Total current assets........................................................... 14,213 29,799

Investments in and advances to affiliated companies, accounted for under the equity
method............................................................................. 122,247 209,493
Deferred financing costs, net of accumulated amortization of $624 and $203,
respectively....................................................................... 9,757 9,805
Other non-current assets.............................................................. 77 2,047
-------- --------
Total assets................................................................... $146,294 $251,144
======== ========

LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Current liabilities
Related party payables............................................................. $ 2,672 $ 645
Accounts payable and accrued liabilities........................................... 195 --
Accrued funding obligation......................................................... 406 1,270
-------- --------
Total current liabilities...................................................... 3,273 1,915

Senior discount notes................................................................. 309,123 245,182
-------- --------
Total liabilities.............................................................. 312,396 247,097
-------- --------

For the Years Ended
December 31,
-------------------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Corporate general and administrative expense, including management
fees to related party of $2,739, $750 and $918, respectively ................. $ (3,189) $ (1,173) $ (918)
--------- -------- --------
Net operating loss .............................................................. (3,189) (1,173) (918)

Equity in losses of affiliated companies ........................................ (126,836) (69,989) (20,447)
Gain on sale of investment in affiliated company ................................ -- -- 4,132
Interest income ................................................................. 643 3,505 --
Interest expense ................................................................ (38,115) (20,270) --
Other expense, net .............................................................. (559) (59) --
--------- -------- --------
Net loss ................................................................... $(168,056) $(87,986) $(17,233)
========= ======== ========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
UIH AUSTRALIA/PACIFIC, INC.
PARENT ONLY
SCHEDULE 1
Condensed Information as to the Cash Flows of the Registrant
(Stated in thousands)
For the Years Ended
December 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss..................................................................... $(168,056) $(87,986) $(17,233)
Adjustments to reconcile net loss to net cash flows from operating activities:
Equity in losses of affiliated companies.................................. 126,836 69,989 20,447
Gain on sale of investment in affiliated company.......................... -- -- (4,132)
Accretion of interest on senior notes and amortization of deferred
financing costs......................................................... 38,115 20,270 --
Decrease (increase) in related party receivables and other assets......... 1,768 (2,112) (285)
Increase in accounts payable, accrued liabilities and other............... 4,159 70 1,834
--------- -------- --------
Net cash flows provided by operating activities.............................. 2,822 231 631
--------- -------- --------

Cash flows from investing activities:
Purchase of short-term investments........................................... (15,988) (199,242) --
Sale of short-term investments............................................... 22,303 180,602 --
Proceeds from sale of investment in affiliated company....................... -- -- 4,132
Investments in and advances to affiliated companies and other
investments............................................................... (61,024) (171,553) (43,363)
--------- -------- --------
Net cash flows used in investing activities.................................. (54,709) (190,193) (39,231)
--------- -------- --------

Cash flows from financing activities:
Capital contributions from parent............................................ 7,863 10,664 38,600
Proceeds from offering of senior discount notes.............................. 29,925 225,115 --
Borrowings on related party payable to parent................................ 4,999 -- --
Payment of bridge loan payable to parent..................................... -- (25,000) --
Deferred financing costs..................................................... (755) (10,007) --
--------- -------- --------
Net cash flows provided by financing activities.............................. 42,032 200,772 38,600
--------- -------- --------
(Decrease) increase in cash and cash equivalents............................. (9,855) 10,810 --
Cash and cash equivalents, beginning of period............................... 10,810 -- --
--------- -------- --------
Cash and cash equivalents, end of period..................................... $ 955 $ 10,810 $ --
========= ======== ========
Non-cash investing and financing activities:
Gain on issuance of shares by Saturn...................................... $ 5,985 $ -- $ --
========= ======== ========
Non-cash issuance of warrants to purchase common stock.................... $ 3,678 $ -- $ --
========= ======== ========
Non-cash capital contribution from parent................................. $ 7,800 $ 25,000 $ --
========= ======== ========
Non-cash stock issuance for purchase of 50% interest in Saturn............ $ -- $ 7,800 $ --
========= ======== ========
Non-cash capital contribution of preferred stock from parent utilized in
purchase of additional 40% interest in Austar........................... $ -- $ -- $ 29,840
========= ======== ========
Increase in unrealized loss of investment................................. $ (985) $ (3,412) $ --
========= ======== ========
</TABLE>

<PAGE>

INDEPENDENT AUDIT REPORT

To the Board of Directors of
CTV Pty Limited

We have audited the accompanying consolidated financial statements of CTV
Pty Limited and its subsidiaries for the period ended 31 December 1994 and the
year ended 31 December 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on those consolidated financial statements based on our audits.

We conducted our audits in accordance with Australian Auditing Standards,
which do not differ substantially from generally accepted auditing standards in
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatements. An audit includes examining, on a test
basis, evidence supporting amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the consolidated financial position of
CTV Pty Limited as of 31 December 1994 and 1995, and the consolidated results of
the group's operations and consolidated cash flows for the periods then ended in
accordance with Australian Accounting Standards.

There are certain differences between Australian Accounting Standards and
those generally accepted in the United States of America. Application of the
generally accepted accounting principles in the United States of America would
not result in material differences to these consolidated financial statements.

Arthur Andersen
Chartered Accountants

Sydney, Australia
29 March 1996

72
<PAGE>

<TABLE>
<CAPTION>
CTV PTY LIMITED AND ITS SUBSIDIARIES
BALANCE SHEETS
AS AT 31 DECEMBER 1995

Economic Entity
------------------------------
December 31,
------------------------------
Note 1994 1995
-------- --------
$A $A
<S> <C> <C> <C>
Current assets
Cash...................................................... 19,371,145 9,712,936
Receivables .............................................. 3 718,939 4,538,627
Inventory................................................. -- 679,628
Other..................................................... 4 25,582 830,133
----------- -----------
20,115,666 15,761,324
----------- -----------
Non-current assets
Investments .............................................. 5 2 2
Property, plant and equipment ............................ 6 2,746,809 17,955,579
Intangibles............................................... 7 5,021,630 7,906,674
----------- -----------
Total non-current assets ............................ 7,768,441 25,862,255
----------- -----------
Total assets ................................... 27,884,107 41,623,579
----------- -----------
Current liabilities
Creditors and borrowings ................................. 8 2,747,734 15,477,769
Provisions ............................................ -- --
----------- -----------
Total current liabilities ........................... 2,747,734 15,477,769
----------- -----------
Non-current liabilities
Creditors and borrowings ................................. 9 36,165 684,945
Provisions................................................ 10 -- 156,267
----------- -----------
Total non-current liabilities ....................... 36,165 841,212
----------- -----------
Total liabilities .............................. 2,783,899 16,318,981
----------- -----------
Net assets..................................................... 25,100,208 25,304,598
=========== ===========
Shareholders' equity
Share capital ............................................ 11 42,729 42,729
Reserves ................................................. 13 5,116,536 5,116,536
Retained profits/(accumulated losses) .................... 206 (5,795,404)
----------- -----------
5,159,471 (636,139)
Convertible debentures ................................... 12 19,940,737 25,940,737
----------- -----------
Total shareholders' equity ..................... 25,100,208 25,304,598
=========== ===========

The accompanying notes form an integral part of this balance sheet.
</TABLE>
73

<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>

Economic Entity
------------------------------------
Period Ended Year Ended
December 31, December 31,
------------ ------------
1994 1995
------------ ------------
$A $A
<S> <C> <C>
Revenue:
Service.............................................. -- 579,690
--------- ----------
-- 579,690
--------- ----------
Expenses:
General and administration........................... 321,494 6,406,782
Depreciation and amortization........................ 4,055 1,491,456
Management fees...................................... -- 29,651
--------- ----------
325,549 7,927,889
--------- ----------
Operating loss............................................ (325,549) (7,348,199)
--------- ----------
Non-operating income (expense)
Interest income...................................... 327,355 1,227,029
Interest expense and costs of finance................ (1,600) (2,180)
Other, net foreign exchange gains--non-speculative
trading........................................... -- 327,740
--------- ----------
325,755 1,552,589
--------- ----------
Net profit (loss) before tax.............................. 206 (5,795,610)
Income tax attributable to net profit/(loss).............. -- --
--------- ----------
Net profit/(loss)......................................... 206 (5,795,610)
--------- ----------
Retained profits/(accumulated losses) at beginning of
period................................................. -- 206
--------- ----------
Retained profits/(accumulated losses) at end of period.... 206 (5,795,404)
========= ==========
</TABLE>

The accompanying notes form an integral part of this profit and loss account.

<PAGE>
<TABLE>
<CAPTION>
CTV PTY LIMITED AND ITS SUBSIDIARIES
STATEMENTS OF CASH FLOWS

Economic Entity
-------------------------------------------
Period Ended Year Ended
December 31, December 31,
------------ ------------
Note 1994 1995
------------ ------------
$A $A
<S> <C> <C>
Cash flows from operating activities
Receipts from customers.................... -- 522,211
Payments to suppliers and employees........ (297,332) (3,973,333)
Interest received.......................... 327,355 1,227,029
Interest and other costs of finance paid... (1,600) (2,180)
---------- ----------
Net operating cash flows................... 28,423 (2,226,273)
---------- ----------
Cash flows from investing activities
Purchase of subsidiaries, net of cash
acquired................................ (12) (10)
Payments for plant and equipment........... (55,871) (15,326,279)
Payments for MDS and broadcast
licenses................................ (5,021,630) (3,437,458)
Decrease in inventory net of payables...... -- --
Loans granted.............................. (718,939) (3,768,962)
Payments for investments................... -- (2)
---------- -----------
Net investing cash flows................... (5,796,452) (22,532,711)
---------- -----------
Cash flows from financing activities
Proceeds from share issues................. 5,159,265 --
Proceeds from issue of convertible
debentures.............................. 19,940,737 6,000,000
Proceeds from intercompany loans........... -- --
Payment on intercompany loans.............. -- --
Proceeds from short term loans............. 39,781 8,818,202
Proceeds from lease financing.............. -- --
Repayment of finance lease principal....... (609) (45,167)
---------- -----------
Net financing cash flows................... 25,139,174 14,773,035
---------- -----------
Net increase/(decrease) in cash held............ 19,371,145 (9,985,949)
Cash at beginning of period..................... -- 19,371,145
Effect of different exchange rate............... -- 327,740
---------- -----------
Cash at the end of the period................... 8, 16 19,371,145 9,712,936
========== ===========

The accompanying notes form an integral part of this statement of cash flows.
</TABLE>

75
<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF ACCOUNTING

The financial statements have been prepared in accordance with the
historical cost convention using the Australian dollar ("$A") as the reporting
currency and using the accounting policies described below. They do not take
account of changes in either the general purchasing power of the dollar or in
the prices of specific assets.

The Company was incorporated on 21 April 1994. The comparative financial
statements have been prepared for the period 21 April 1994 to 31 December 1994
and for the year ended 31 December 1995.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
the parent entity, CTV Pty Limited, and its subsidiaries. The term "Economic
Entity" used throughout these financial statements means the parent entity and
its subsidiaries.

FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currencies are converted at the exchange rates in
effect at the date of each transaction.

Amounts payable to or by the economic entity in foreign currencies have
been translated into Australian currency at the exchange rates current at year
end.

Exchange differences relating to monetary items are brought to account in
the profit and loss account in the period when the exchange rates change, as
exchange gains or losses.

INCOME TAX

The economic entity follows the policy of tax-effect accounting. The income
tax expense in the profit and loss account represents the tax on the pre-tax
accounting profit adjusted for income and expenses never to be assessed or
allowed for taxation purposes. The provision for deferred income tax liability
and the future income tax benefit represent the tax effect of differences
between income and expense items recognized in different accounting periods for
book and tax purposes, calculated at the tax rates expected to apply when the
differences reverse.

The benefit arising from estimated carry forward tax losses has not been
recorded in the future income tax benefit account as realization of such benefit
is considered not to be virtually certain.

LEASED ASSETS

Assets of the economic entity acquired under finance leases are
capitalized. The initial amount of the leased asset and corresponding lease
liability are recorded at the present value of minimum lease payments. Leased
assets are amortized over the life of the relevant lease. Lease liabilities are
reduced by the principal component of lease payments. The interest component is
charged against operating profit.

Operating leases are not capitalized and rental payments are charged
against operating profit in the period in which they are incurred.

INVENTORY

Inventory consists of home subscriber equipment including cable, antennae
and decoders and is valued at cost.

<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

PROPERTY, PLANT AND EQUIPMENT

Land and buildings are valued at cost. The carrying amount of property,
plant and equipment is reviewed annually by directors to ensure that it is not
in excess of the recoverable amount from the assets.

Property, plant and equipment, excluding freehold land, are depreciated or
amortized at rates based upon their expected useful lives using the straight
line method.

Leasehold improvements................................. 6 years
Computer equipment..................................... 3 years
Motor vehicles......................................... 5 years
Furniture and fittings................................. 10 years

INTANGIBLES

The acquisition of MDS licenses has been brought to account at cost. The
cost to acquire these licenses, acquired for a 5 year period, will be amortized
over the remaining license period upon commencement of broadcasting operations.
They are renewable every 5 years.

The licenses have been issued for a term of five years, with the license
fee payable annually in advance. The license fee is payable to Spectrum
Management Agency, an agent of the Australian Federal Government.

RECOVERABLE AMOUNTS OF NON-CURRENT ASSETS

The carrying amount of all non-current assets are reviewed at least
periodically whenever events and circumstances indicate the carrying value of
the assets may exceed their recoverable amount. The recoverable amounts of all
non-current assets have been determined using net cash flows which have not been
discounted to their present values.

PROVISION FOR ANNUAL LEAVE

Provision has been made in the financial statements for benefits accruing
to employees in relation to such matters as annual leave.

REVENUE RECOGNITION

Monthly service revenues are recognized as revenue in the period the
related services are provided to the subscribers. The Company recognizes
installation revenues to the extent of direct selling costs in the period the
installation occurs. To the extent installation fees exceed direct selling
costs, the excess would be deferred and amortized over the average contract
period. Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base.

<PAGE>
CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 2. INCOME TAX

(a) Non-current deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>

Economic Entity
---------------------------------------
Period Ended Year Ended
December 31, December 31,
------------- ------------
1994 1995
------------- ------------
$A $A

<S> <C> <C>
Interest receivable and prepaids.................................... (14,367) (339,527)
------- ----------
Total non-current deferred tax liability......................... (14,367) (339,527)
Net operating loss carryforward..................................... -- 2,061,456
------- ----------
Total non-current deferred tax asset............................. -- 2,061,456
------- ----------
Net non-current deferred tax asset before valuation allowance....... (14,367) 1,721,929
Valuation allowance................................................. -- (1,721,929)
------- ----------
Net non-current deferred tax asset (liability)...................... (14,367) --
======= ==========
</TABLE>
Net operating loss carryforwards have an unlimited carryforward period for
Australian tax purposes.

(b) The difference between income tax expense provided in the financial
statements and the prima facie income tax expense is reconciled as
follows:
<TABLE>
<CAPTION>
Economic Entity
---------------------------------------
Period Ended Year Ended
December 31, December 31,
------------ ------------
1994 1995
------------ ------------
$A $A

<S> <C> <C>
Net profit/(loss).................................................. 206 (5,795,610)

Prima facie tax thereon @ 36%...................................... 74 (2,086,420)
Tax effect of permanent and other differences:
--Timing differences........................................... (14,367) (339,527)
--Amortization of licenses..................................... -- 198,873
--Entertainment non-deductible................................. 14,293 165,618
--Effect of tax losses not brought to account.................. -- 2,061,456
------- ----------
Total income tax attributable to net profit/(loss)................. -- --
======= ==========
</TABLE>
(c) Benefit of income tax losses not brought to account

As at 31 December 1995, the parent entity has unconfirmed unrecouped income
tax losses of $5,795,404 available to offset against future years' taxable
income. The benefit of these losses of $2,061,456 has not been brought to
account as realization is not virtually certain. The benefit will only be
obtained if:

(i) the company derives future assessable income of a nature and of an
amount sufficient to enable the benefits from the deductions for
the losses to be realized;

(ii) the company continues to comply with the conditions for
deductibility imposed by the law;

(iii) no changes in tax legislation adversely affect the company in
realizing the benefit from the deductions for the losses; and

(iv) any change in the business or control of the company does not
affect the ability to utilize the available losses.

<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 3. RECEIVABLES (CURRENT):
<TABLE>
<CAPTION>
Economic Entity
-------------------------
1994 1995
-------- --------
$A $A
<S> <C> <C>
Trade debtors.......................................................... -- 57,479
Less: provision for doubtful debts..................................... -- (5,792)
--------- ----------
-- 51,687
Related parties:
United International Holdings Inc.................................. 95,865 140,217
Other.............................................................. -- 712,554
Related body corporate--STV Pty Ltd.................................. 623,074 3,627,044
Other persons.......................................................... -- 7,125
--------- ----------
718,939 4,538,627
========= ==========
NOTE 4. OTHER ASSETS (CURRENT):

Prepaid expenses....................................................... 10,465 787,916
Security deposits...................................................... 15,117 42,217
--------- ----------
Total other assets (current)........................................... 25,582 830,133
========= ==========

NOTE 5. INVESTMENTS (NON-CURRENT):

Investments in associated companies (Note 18).......................... 2 2
========= ==========
NOTE 6. PROPERTY, PLANT AND EQUIPMENT:

Leasehold improvements:
At cost............................................................ -- 151,200
Accumulated depreciation........................................... -- (8,705)
--------- ----------
Total leasehold improvements, net...................................... -- 142,495
--------- ----------
Plant and equipment:
At cost............................................................ 55,881 15,737,143
Accumulated depreciation........................................... (4,055) (872,818)
--------- ----------
Total plant and equipment, net......................................... 51,826 14,864,325
--------- ----------
Plant and equipment under lease:
At capitalized cost................................................ 44,506 912,820
Accumulated depreciation........................................... -- (61,563)
--------- ----------
Total leased plant and equipment, net.................................. 44,506 851,257
--------- ----------
Capitalized network construction expenditures:
At cost............................................................ 2,650,477 2,097,502
Accumulated amortization........................................... -- --
--------- ----------
Total capitalized development expenditures, net:....................... 2,650,477 2,097,502
--------- ----------
Total property, plant and equipment, net:.............................. 2,746,809 17,955,579
========= ==========
</TABLE>
79
<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 7. INTANGIBLE ASSETS (NON-CURRENT):
<TABLE>
<CAPTION>
Economic Entity
----------------------------
1994 1995
-------- --------
$A $A
<S> <C> <C>
MDS licenses:
At cost............................................................. 5,018,215 8,196,618
Accumulated amortization............................................ -- (544,093)
------------ -----------
Total MDS licenses net:................................................. 5,018,215 7,652,525
------------ -----------
Program Rights fees at cost: -- 250,000
Accumulated amortization............................................ -- (8,333)
Other at cost........................................................... -- --
Organization costs at cost:............................................. 3,415 12,482
------------ -----------
Total intangible assets, net............................................ 5,021,630 7,906,674
============ ===========

NOTE 8. CREDITORS AND BORROWINGS (CURRENT):

Unsecured:
Overdraft.......................................................... -- --
Trade creditors.................................................... 1,684 5,727,304
Unearned Income.................................................... -- 29,062
Accrued Expenses................................................... 2,698,537 728,113
Due to related body corporate--United International
Holdings Inc.................................................... 39,781 8,857,983
Secured:
Finance lease liability (Note 15).................................. 7,732 135,307
----------- -----------
Total current creditors and borrowings.................................. 2,747,734 15,477,769
=========== ===========

NOTE 9. CREDITORS AND BORROWINGS (NON-CURRENT):

Secured
Finance lease liability (Note 15).................................. 36,165 684,945
----------- -----------
Total non-current creditors and borrowings.............................. 36,165 684,945
=========== ===========

NOTE 10. PROVISIONS (NON-CURRENT):

Annual leave............................................................
-- 156,267
========== ===========
NOTE 11. SHARE CAPITAL:

Authorized capital:
100,000,000 ordinary shares of $1 each.............................. 100,000,000 100,000,000
----------- -----------
Total authorized capital as at 31 December 1995......................... 100,000,000 100,000,000
Issued and paid up capital:
42,729 ordinary shares of $1 each................................... 42,729 42,729
----------- -----------
Total issued and paid up capital........................................ 42,729 42,729
=========== ===========

</TABLE>

<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

Movement in issued shares for the year:
<TABLE>
<CAPTION>
Number of Number of
Number of Redeemable Number of Redeemable
Ordinary Preference Ordinary Preference
Shares Shares Shares Shares
1994 1994 1995 1995
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Opening number of shares........................... 3 -- 42,729 --
Issued during the year............................. 42,726 13 -- --
Redeemed........................................... -- 13 -- --
------ --- ------ ----
Closing number of shares........................... 42,729 -- 42,729 --
====== === ====== ====
</TABLE>

NOTE 12. CONVERTIBLE DEBENTURES:

During the year ended 31 December 1995, the company issued 162,643
convertible debentures for $A6,000,000. These debentures confer rights upon the
holders as creditors of the company. They do not confer any right to attend or
vote at general meetings. Interest is payable to the holders equal to the amount
of the distribution that the holder would have received if, as at the date the
entitlement to the distribution was determined, all of the debentures of that
holder and all other holders had been converted into shares.

The convertible debentures have been included in shareholders' equity in
the balance sheet as debenture holders are entitled to an equivalent return to
the ordinary shareholders.

Conversion of debentures is permitted at anytime provided conversion would
not result in the breach of any Statute by the debenture holder or any other
person.

Debentures may be converted into fully paid ordinary shares on a one for
one basis unless the normal value of the issued shares is reconstructed which
would result in a different conversion factor. Debentures may not be redeemed
for cash.

In the event of a winding up of the company, the rights of the debenture
holders against the company in respect of the debentures are postponed until the
claims of all holders of senior indebtedness have been satisfied in full. Senior
indebtedness means secured obligations, unsecured and unsubordinated obligations
of the company, other than debentures and shares.

NOTE 13. RESERVES:

Economic Entity
-------------------------
December 31,
-------------------------
1994 1995
---------- ---------
$A $A
Share premium opening balance.................... -- 5,116,536
Premium on issues of shares...................... 5,116,536 --
Redemption of preference shares.................. -- --
--------- ---------
Total reserves................................... 5,116,536 5,116,536
========= =========

<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 14. EMPLOYEE ENTITLEMENTS:

SUPERANNUATION COMMITMENTS

The economic entity contributes to a defined contribution superannuation
plan for substantially all of its employees. Each participating entity in the
economic entity has a legal obligation to contribute to the schemes, which are
as follows:

(a) Hourly employees and commission employees--Employee Retirement Fund, a
fund administered by MLC. This is a defined contribution fund; and

(b) Salaried employees--CETV Superannuation Fund, a fund administered by
MLC (contributions 6%). This is a defined contribution fund.

NOTE 15. COMMITMENTS:
<TABLE>
<CAPTION>
Economic Entity
----------------------
1994 1995
--------- ---------
$A $A
<S> <C> <C>
(a) Annual license fees are payable as follows:
Not later than one year......................................................... 1,212,627 3,068,099
Later than one year but not later than two years................................ 1,212,627 3,068,099
Later than two years but not later than five years.............................. 3,637,881 5,121,828
Later than five years........................................................... -- --
--------- ----------
6,063,135 11,258,026
========= ==========
(b) Finance lease expenditure contracted for is payable as follows:
Not later than one year......................................................... 12,429 215,798
Later than one year but not later than two years................................ 12,429 233,412
Later than two years but not later than five years.............................. 30,044 553,335
Later than five years........................................................... -- --
--------- ----------
54,902 1,002,545
Future finance charges.......................................................... 11,005 182,293
--------- ----------
Net finance lease liability..................................................... 43,897 820,252
========= ==========
Reconciled to:
Current liability (Note 8)...................................................... 7,732 135,307
Non-current liability (Note 9).................................................. 36,165 684,945
--------- ----------
43,897 820,252
========= ==========
(c) Operating lease expenditure contracted for is payable as follows:
Not later than one year......................................................... 137,500 467,767
Later than one year but not later than two years................................ 137,500 467,767
Later than two years but not later than five years.............................. 412,500 1,405,357
Later than five years........................................................... -- 529,372
--------- ----------
687,500 2,870,263
========= ==========
</TABLE>
(d) On 24 July 1994, the Company entered into a franchise agreement with
Australis Media Limited. The agreement carries a 15 year term beginning on
24 July 1994 and may be extended for an additional 10 years. The agreement
provides for an exclusive license and franchise for MDS and Satellite and a
non-exclusive license and franchise for cable for all franchisor services
including uplink and programming including Channel [V] (a 24 hour music
video channel), Arena, Showtime, Nickelodeon, TV1, Encore, Discovery and
Fox Sports.

Under the agreement, minimum payments are due, which include service fees
based on varying percentages of net revenues as defined in the agreement,
and subscription levies which are dependent on the number of subscribers.

<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 16. NOTES TO THE STATEMENT OF CASH FLOWS:

(a) RECONCILIATION OF CASH

For the purposes of the statement of cash flows, cash includes cash on hand
and in banks and deposits at call, net of outstanding bank overdrafts. Cash
at the end of the financial year as shown in the Statement of Cash Flows is
reconciled to the related items in the balance sheet as follows:
<TABLE>
<CAPTION>

Economic Entity
-----------------------------
1994 1995
---------- -----------
$A $A
<S> <C> <C>

Cash.......................................................... 73,377 (261,963)
Short term money market deposits.............................. 19,297,768 9,974,899
---------- ---------
19,371,145 9,712,936
========== =========
</TABLE>
(b) Reconciliation of net cash provided by operating
activities to operating loss after income tax.
<TABLE>
<CAPTION>

Economic Entity
------------------------------
Period Ended Year Ended
December 31, December 31,
------------ ------------
1994 1995
------------ ------------
$A $A
<S> <C> <C>
Operating profit (loss) after income tax:..................... 206 (5,795,610)
Adjustments for non-cash income and expense items:
Depreciation and amortization expense.................... 4,055 1,491,456
Bad debts expense and provision for doubtful debts....... -- 5,792
Transfers to provisions:
Annual leave............................................. -- 156,267
Unrealized foreign exchange gain.............................. -- (327,740)
Increase in other receivables............................ -- (57,479)
Increase in trade creditors.............................. 49,744 3,785,221
Increase in inventory.................................... -- (679,628)
Increase in other assets................................. (25,582) (804,552)
------- ----------
Net cash from operating activities............................ 28,423 (2,226,273)
======= ==========
</TABLE>

<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

The following subsidiaries were acquired by the economic entity for cash
consideration. The fair value of net tangible assets acquired was as
follows:
Fair Value of
Net Tangible Assets
--------------------
1994 1995
-------- --------
Entity $A $A
------
Jacolyn Pty Limited............................... 2 --
Yanover Pty Limited............................... 2 --
Keansburg Pty Limited............................. 2 --
Orloff Pty Limited................................ 2 --
Maxi-Vu Pty Limited............................... 2 --
Vinatech Pty Limited.............................. 2 --
Palara Vale Pty Limited........................... -- 2
Auldana Pty Limited............................... -- 2
Grovern Pty Limited............................... -- 2
Lystervale Pty Limited............................ -- 2
Minorite Pty Limited.............................. -- 2
--- ---

Fair value of net identifiable assets............. 12 10
Goodwill on acquisition........................... -- --
--- ---
Total consideration............................... 12 10
=== ===

(d) Non-cash financing and investing activities

During the year the economic entity acquired plant and equipment with an
aggregate fair value of $A821,522 (1994: $A44,506) by means of finance
leases. These transactions are not reflected in the Statement of Cash
Flows.

NOTE 17. SUBSIDIARIES:

Book value of Contribution to
Parent Consolidated
Entity's % of Result for the
Investment Shares Held Period
------------- ----------- --------------
Place of 1994 1995 1994 1995 1994 1995
Incorporation Date of Type of ---- ---- ---- ---- ---- ----
Name of Controlled Entity Formation (a) Acquisition Shares $A $A % % $A $A
- ------------------------- ------------- ----------- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jacolyn Pty Limited........ Australia 14/6/94 Ordinary 2 100 --
Yanover Pty Limited........ Australia 21/7/94 Ordinary 2 100 --
Keansburg Pty Limited...... Australia 14/6/94 Ordinary 2 100 --
Orloff Pty Limited......... Australia 14/6/94 Ordinary 2 100 --
Maxi-Vu Pty Limited........ Australia 4/8/94 Ordinary 2 100 --
Palara Vale Pty Limited.... Australia 24/4/95 Ordinary 2 100 --
Auldana Beach Pty Limited.. Australia 24/4/95 Ordinary 2 100 --
Grovern Pty Limited........ Australia 24/4/95 Ordinary 2 100 --
Lystervale Pty Limited..... Australia 24/4/95 Ordinary 2 100 --
Vinatech Pty Limited....... Australia 29/7/94 Ordinary 2 100 --
Minorite Pty Limited....... Australia 24/4/95 Ordinary 2 100 --
-- ---
22 --
== ===
</TABLE>
(a) All entities operate solely in their place of incorporation/formation.

84
<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 18. ASSOCIATED COMPANIES:

Details of material interests in associated companies are as follows:
<TABLE>
<CAPTION>

Ownership Dividends
Name of Interest Received
Associated Principal Activity of ------------- Balance ----------------
Company Associated Company 1994 1995 Date 1994 1995
---------- --------------------- ---- ---- ------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Communication & Delivery of subscription
Entertainment television services to 31
Australia Pty regional Australia. 50% 50% December -- --
Limited
Ilona Investments Delivery of subscription
Pty Limited television services to 30
regional Australia 50% 50% June -- --
</TABLE>

Economic Entity
-----------------
1994 1995
---- ----
$A $A

Aggregate carrying amount of investments in associated 2 2
companies.............................................. --- ---

Aggregate amount of investments in associated
companies, as determined under the equity
method of accounting.................................. 2 2
=== ===

NOTE 19. RELATED PARTY DISCLOSURES:

(a) OTHER DIRECTOR TRANSACTIONS

Crase Partners, a director-related firm of J. K. Crase, provided general
accounting services to the company during the year. These services were provided
at an arms length basis.

J. K. Crase, a director, purchased equipment from the company during the
year. The purchase was made on an arms length basis.

(b) TRANSACTIONS WITH RELATED PARTIES IN THE WHOLLY OWNED GROUP

The parent entity entered into the following transactions during the year
with related parties in the wholly owned group:

loans were advanced to subsidiaries to fund the acquisition of MDS
licenses. Loans totaled $A5,021,618 and $A8,309,384 at December 31, 1994
and 1995, respectively.

These transactions were undertaken on commercial terms and conditions.

The parent entity entered into certain transactions with associated
companies, being loans advanced and received on an arms length basis. CTV has
amounts receivable from STV of $A623,074 and $A3,627,044 at December 31, 1994
and 1995, respectively.

<PAGE>

CTV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 20. US GAAP INFORMATION:

The accounting policies followed in preparation for the consolidated
financial statements differ in one respect to those generally accepted in the
United States of America (US GAAP). For US GAAP purposes, the convertible
debentures would be classified as a non-current liability and not equity.

The calculation of shareholder's equity in accordance with US GAAP is as
follows:

December 31,
------------------------
1994 1995
--------- --------
$A $A
Shareholder's equity as per balance sheet.... 25,100,208 25,304,598
Adjustments to reported equity:
Convertible debentures.................. (19,940,737) (25,940,737)
----------- -----------
Shareholder's equity in accordance with
US GAAP................................... 5,159,471 (636,139)
=========== ===========

<PAGE>

INDEPENDENT AUDIT REPORT

To the Board of Directors of
STV Pty Limited

We have audited the accompanying consolidated financial statements of STV
Pty Limited and its subsidiaries for the period ended 31 December 1994 and the
year ended 31 December 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on those consolidated financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the consolidated financial position of
STV Pty Limited as of 31 December 1994 and 1995, and the consolidated results of
the group's operations and consolidated cash flows for the periods then ended in
accordance with Australian Accounting Standards.

Arthur Andersen
Chartered Accountants

Sydney, Australia
29 March 1996

87
<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
BALANCE SHEET
AS AT 31 DECEMBER 1995
<TABLE>
<CAPTION>

Economic Entity
--------------------------
December 31,
--------------------------
Note 1994 1995
---------- ----------
$A $A
<S> <C> <C> <C>
Current assets
Cash.............................. 10,078,250 2,236
Receivables....................... 3 63,934 1,325,563
Prepayments and other............. -- 382,866
---------- ----------

Total current assets................... 10,142,184 1,710,665
---------- ----------
Non-current assets
Investments....................... 4 2 2
Property, plant and equipment..... 5 527,373 6,085,042
Intangibles....................... 6 3,562 3,727,654
---------- ----------
Total non-current assets............... 530,937 9,812,698
---------- ----------

Total assets........................... 10,673,121 11,523,363
---------- ----------

Current liabilities
Creditors and borrowings.......... 7 759,411 4,673,587
---------- ----------

Total current liabilities.............. 759,411 4,673,587
---------- ----------

Non-current liabilities
Creditors and borrowings.......... 8 36,165 313,981
Provisions........................ 9 -- 11,495
---------- ----------
Total non-current liabilities.......... 36,165 325,476
---------- ----------

Total liabilities...................... 795,576 4,999,063
---------- ----------

Net assets............................. 9,877,545 6,524,300
========== ==========
Shareholders' equity
Share capital..................... 10 133,296 133,296
Reserves.......................... 12 1,426,959 1,426,959
Accumulated losses................ (122,457) (3,475,702)
---------- ----------
1,437,798 (1,915,447)
Convertible debentures................. 11 8,439,747 8,439,747
---------- ----------
Total shareholders' equity............. 9,877,545 6,524,300
========== ==========
</TABLE>

The accompanying notes form an integral part of this balance sheet.

88
<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
PROFIT AND LOSS ACCOUNT

Economic Entity
-------------------------------
Period Ended Year Ended
Note December 31, December 31,
------------ ------------
1994 1995
------------ ------------
$A $A
Revenue:
Service........................... -- 13,819
-------- ----------
-- 13,819
-------- ----------
Expenses:
General and administration........ 258,991 3,576,688
Depreciation and amortization..... 4,055 212,635
-------- ----------
263,046 3,789,323
-------- ----------
Operating loss......................... (263,046) (3,775,504)
-------- -----------
Non-operating income (expense)
Interest income................... 142,189 422,563
Interest expense and costs of
finance........................ (1,600) (304)
-------- ----------
140,589 422,259
-------- ----------

Net loss before tax.................... (122,457) (3,353,245)
Income tax attributable to net loss.... -- --
-------- ----------
Net loss............................... (122,457) (3,353,245)
-------- ----------
Accumulated losses at beginning of
period.............................. -- (122,457)
-------- ----------
Accumulated losses at end of
period.............................. (122,457) (3,475,702)
======== ==========

The accompanying notes form an integral part of this profit and loss account.

89
<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Economic Entity
----------------------------------
Period Ended Year Ended
December 31, December 31,
------------- -----------
Notes 1994 1995
------------- -----------
$A $A
<S> <C> <C> <C>
Cash flows from operating activities:
Receipts from customers............... -- 74,749
Payments to suppliers and
employees.......................... (210,202) (3,876,242)
Interest received..................... 78,255 422,563
Interest and other costs of finance
paid............................... (1,600) (304)
---------- ------------

Net operating cash flows................... (133,547) (3,379,234)
---------- ------------

Cash flows from investing activities:
Purchase of subsidiaries, net of
cash acquired...................... (2) (12)
Payments for plant, equipment and
construction in process............ (486,922) (5,381,613)
Payments for MDS licenses............. (3,562) (3,757,962)
Payments for investments.............. -- (2)
Loans granted......................... -- (1,322,587)
---------- -----------

Net investing cash flows................... (490,486) (10,462,176)
---------- -----------

Cash flows from financing activities:
Proceeds from issues of shares........ 1,560,255 --
Proceeds from short-term loans........ 702,890 3,787,493
Proceeds from debenture issues........ 8,439,747 --
Repayment of finance lease
principal.......................... (609) (22,097)
---------- -----------

Net financing cash flows................... 10,702,283 3,765,396
---------- -----------

Net increase (decrease) in cash held....... 10,078,250 (10,076,014)
Cash at the beginning of the period........ -- 10,078,250
---------- -----------

Cash at the end of the period.............. 15 10,078,250 2,236
========== ===========

</TABLE>

The accompanying notes form an integral part of this statement of cash flows.

<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF ACCOUNTING

The financial statements have been prepared in accordance with the
historical cost convention using the Australian dollar ("$A") as the reporting
currency and using the accounting policies described below. Further, they do not
take account of changes in either the general purchasing power of the dollar or
in the prices of specific assets.

The Company was incorporated on 28 June 1994. The comparative financial
statements have been prepared for the period 28 June 1994 to 31 December 1994
and for the year ended 31 December 1995.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
the parent entity, STV Pty Limited, and its subsidiaries. The term "Economic
Entity" used throughout these financial statements means the parent entity and
its subsidiaries.

FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currencies are converted at the exchange rates in
effect at the date of each transaction.

Amounts payable to or by the economic entity in foreign currencies have
been translated into Australian currency at the exchange rates current at year
end.

Exchange differences relating to monetary items are brought to account in
the profit and loss account in the period when the exchange rates change, as
exchange gains or losses.

INCOME TAX

The benefit arising from estimated carry forward tax losses has not been
recorded in the future income tax benefit account as realization of such benefit
is considered not to be virtually certain.

LEASED ASSETS

Operating leases are not capitalized and rental payments are charged
against operating profit in the period in which they are incurred.

<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS-(Continued)

PROPERTY, PLANT AND EQUIPMENT

Leasehold improvements.................................. 6 years
Computer equipment...................................... 3 years
Motor vehicles.......................................... 5 years
Furniture and fixtures.................................. 10 years

Property, plant and equipment, excluding freehold land, are depreciated or
amortized at rates based upon their expected useful lives using the straight
line method.

INTANGIBLES

RECOVERABLE AMOUNTS OF NON-CURRENT ASSETS

The carrying amounts of all non-current assets are reviewed at least
periodically whenever events and circumstances indicate the carrying value of
the assets may exceed their recoverable amount. The recoverable amounts of all
non-current assets have been determined using net cash flows which have not been
discounted to their present values.

ANNUAL LEAVE

Provision has been made in the financial statements for benefits accruing
to employees in relation to such matters as annual leave.

REVENUE RECOGNITION

<PAGE>
STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 2. INCOME TAX

(a) Non-current deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
Economic Entity
-----------------------------
Period Ended Year Ended
December 31, December 31,
------------ ------------
1994 1995
------------ ------------
$A $A
<S> <C> <C>
Interest receivable and prepaids................................. -- (133,683)
---------- ---------
Total non-current deferred tax liability......................... -- (133,683)
Net operating loss carryforward................................ 42,500 1,195,261
---------- ---------
Total non-current deferred tax asset............................. 42,500 1,195,261
---------- ----------
Net non-current deferred tax asset before valuation allowance.. 42,500 1,061,578
Valuation allowance...................................... (42,500) (1,061,578)
---------- ----------
Net non-current deferred tax asset (liability)................... -- --
========== ==========
</TABLE>

Net operating loss carryforwards have an unlimited carryforward period for
Australian tax purposes.

(b) The difference between income tax expense provided in the financial
statements and the prima facie income tax expense is reconciled as follows:
<TABLE>
<CAPTION>
Economic Entity
----------------------------
Period Ended Year Ended
December 31, December 31,
------------ ------------
1994 1995
------------ ------------
$A $A

<S> <C> <C>
Net loss...................................................... (122,457) (3,353,245)
Prima facie tax thereon @ 36%................................. (44,085) (1,207,168)
Tax effect of permanent and other differences
Timing differences.......................................... -- (133,683)
Entertainment non deductible................................ 1,585 133,397
Amortization of licenses.................................... -- 12,193
Effect of losses not brought to account..................... 42,500 1,195,261
-------- ----------
Total income tax attributable to net loss..................... -- --
======== ==========
</TABLE>

As at 31 December 1995, the parent entity has unconfirmed unrecouped income
tax losses of $A3,475,702 available to offset against future years' taxable
income. The benefit of these losses of $A1,237,761 has not been brought to
account as realization is not virtually certain. The benefit will only be
obtained if:

(a) the company derives future assessable income of a nature and of an
amount sufficient to enable the benefits from the deductions for the
losses to be realized;

(b) the company continues to comply with the conditions for deductibility
imposed by the law;

(c) no changes in tax legislation adversely affect the company in
realizing the benefit from the deductions for the losses; and

(d) any change in the business or control of the company does not affect
the ability to utilize the available losses.

<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 3. RECEIVABLES (CURRENT):
<TABLE>
<CAPTION>

Economic Entity
--------------------------------
1994 1995
--------- ---------
$A $A
<S> <C> <C>
Accounts Receivable Trade.......................... -- 3,004
Allowance for Bad Debts.......................... -- (28)
Non-trade amounts owing by:
Related parties
Wholly owned group............................. -- --
Associated companies........................... -- 1,322,587
Other persons................................... 63,934 --
--------- ---------

Total current receivables.......................... 63,934 1,325,563
========= =========

NOTE 4. INVESTMENTS (NON-CURRENT):

Investments in associated companies (Note 17)...... 2 2
========= =========

NOTE 5. PROPERTY, PLANT AND EQUIPMENT:

Leasehold improvements:
At cost.......................................... -- 128,274
Accumulated amortization......................... -- (7,801)
--------- ---------

Total leasehold improvements, net.................. -- 120,473
--------- ---------
Plant and equipment:
At cost.......................................... 55,881 4,093,944
Accumulated depreciation......................... (4,055) (149,677)
--------- ---------
Total plant and equipment, net..................... 51,826 3,944,267
--------- ---------

Plant and equipment under lease:
At capitalized cost.............................. 44,506 408,832
Accumulated depreciation......................... -- (25,343)
----------- ----------
Total lease plant and equipment, net............... 44,506 383,489
----------- ----------

Capitalized network construction expenditures:
At cost.......................................... 431,041 1,636,813
Accumulated amortization......................... -- --
----------- -----------

Total capitalized development expenditures, net.... 431,041 1,636,813
----------- -----------

Total property, plant and equipment, net........... 527,373 6,085,042
=========== ===========
</TABLE>

<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 6. INTANGIBLE ASSETS (NON-CURRENT):
<TABLE>
<CAPTION>

Economic Entity
----------------------------------
1994 1995
----------- ------------
$A $A
<S> <C> <C>

MDS licenses....................................... 1,570 3,501,285
Accumulated Amortization......................... -- (25,536)
Other licenses..................................... -- 251,570
Accumulated Amortization......................... -- (8,333)
Other.............................................. 1,992 8,668
----------- -----------
Total intangible assets, net....................... 3,562 3,727,654
=========== ===========

NOTE 7. CREDITORS AND BORROWINGS (CURRENT):

Unsecured:
Trade creditors................................. 1,689 120,561
Accrued expenses................................ 47,100 --
Due to associated company--CTV Pty Limited...... 623,021 3,627,044
Due to related body corporate--United
International Holdings Inc.................... 79,816 863,341
Secured:
Secured: Finance lease liability (Note 14)...... 7,732 62,641
----------- -----------
759,358 4,673,587
=========== ===========

NOTE 8. CREDITORS AND BORROWINGS (NON-CURRENT):

Secured:
Finance lease liability (Note 14).............. 36,165 313,981
----------- -----------
Total non-current creditors and borrowings........ 36,165 313,981
=========== ===========

NOTE 9. PROVISIONS (NON-CURRENT):

Annual leave...................................... -- 11,495
=========== ===========

NOTE 10. SHARE CAPITAL:

Authorized capital:
100,000,000 ordinary shares of $1
each......................................... 100,000,000 100,000,000
----------- -----------
Total authorized capital.......................... 100,000,000 100,000,000
=========== ===========
Issued and paid up capital:
133,296 ordinary shares of $1.00 each........... 133,296 133,296
----------- -----------
Total issued and paid up capital.................. 133,296 133,296
=========== ===========
</TABLE>

95
<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

Opening number of shares....................... -- -- 133,296 --
Issued during the year (a)..................... 133,296 2 -- --
Redeemed....................................... -- 2 -- --
------- ---- ------- ----
Closing number of shares....................... 133,296 -- 133,296 --
======= ==== ======= ====

</TABLE>

NOTE 11. CONVERTIBLE DEBENTURES:

During the year ended 31 December 1995, the company had outstanding 986,707
convertible debentures for $A8,439,747. These debentures confer rights upon the
holders as creditors of the company. They do not confer any right to attend or
vote at general meetings. Interest is payable to the holders equal to the amount
of the distribution that the holder would have received if, as at the date the
entitlement to the distribution was determined, all of the debentures of that
holder and all other holders had been converted into shares.

The convertible debentures have been included in shareholders' equity in
the balance sheet as debenture holders are entitled to an equivalent return to
the ordinary shareholders.

Conversion of debentures is permitted at any time provided conversion would
not result in the breach of any Statute by the debenture holder or any other
person.

NOTE 12. RESERVES:
Economic Entity
---------------------------
Period Ended Year Ended
December 31, December 31,
------------ ------------
1994 1995
------------ ------------
$A $A

Share premium opening balance............. -- 1,426,959
Premium on issue of shares................ 1,426,959 --
--------- ---------
Total reserves............................ 1,426,959 1,426,959
========= =========

<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 13. EMPLOYEE ENTITLEMENTS:

Superannuation commitments
The economic entity contributes to a defined contribution superannuation
plan for substantially all of its employees. Each participating entity in the
economic entity has a legal obligation to contribute to the schemes, which are
as follows:

(a) Hourly employees and commission employees--Employee Retirement
Fund, a fund administered by MLC. This is a defined contribution fund.

(b) Salaried employees--CETV Superannuation Fund, a fund administered by
MLC (contributions 6%). This is a defined contribution fund.

NOTE 14. COMMITMENTS:
<TABLE>
<CAPTION>

Economic Entity
--------------------
1994 1995
-------- --------
$A $A
<S> <C> <C>
(a) Annual license fees are payable as follows:
Not later than one year........................................................ -- 1,227,291
Later than one year but not later than two years............................... -- 1,227,291
Later than two years but not later than five years............................. -- 1,686,787
Later than five years.......................................................... -- --
------ ---------
-- 4,141,369
====== =========
(b) Finance lease expenditure contracted for is payable as follows:
Not later than one year........................................................ 12,429 99,657
Later than one year but not later than two years............................... 12,429 117,272
Later than two years but not later than five years............................. 30,043 243,506
Later than five years.......................................................... -- --
------ ---------
54,901 460,435
Future finance charges.............................................................. 11,004 83,813
------ ---------

Net finance lease liability......................................................... 43,897 376,622
====== =========

Reconciled to:
Current liability (Note 7)..................................................... 7,732 62,641
Non-current liability (Note 8)................................................. 36,165 313,981
------ ---------
43,897 376,622
====== =========
(c) Operating lease expenditure contracted for is payable as follows:
Not later than one year........................................................ -- 169,642
Later than one year but not later than two years............................... -- 169,642
Later than two years but not later than five years............................. -- 510,984
Later than five years.......................................................... -- 148,112
------ ---------
-- 998,380
====== =========
</TABLE>

(d) On 12 October 1994, the Company entered into a franchise agreement with
Australis Media Limited. The agreement carries a 15 year term beginning on
12 October 1994 and may be extended for an additional 10 years. The
agreement provides for an exclusive license and franchise for MDS and
Satellite and a non-exclusive license and franchise for cable for all
franchisor services including uplink and programming including Channel [V]
(a 24 hour music video channel), Arena, Showtime, Nickelodeon, TV1, Encore,
Discovery and Fox Sports.

<PAGE>
STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 15. NOTES TO THE STATEMENT OF CASH FLOWS:

(a) Reconciliation of Cash

For the purposes of the statement of cash flows, cash includes cash on hand
and in banks and deposits at call, net of outstanding bank overdrafts. Cash at
the end of the financial year as shown in the Statement of Cash Flows is
reconciled to the related items in the Balance Sheet as follows:

Economic Entity
-----------------------
1994 1995
-------- --------
$A $A

Cash............................................. 5,994 2,236
Short-term money market deposits................. 10,072,256 --
---------- -----
10,078,250 2,236
========== =====

(b) Reconciliation of net cash provided by operating activities to operating
loss after income tax.
<TABLE>
<CAPTION>
Economic Entity
-------------------------------
Period Ended Year Ended
December 31, December 31,
------------ ------------
1994 1995
------------ ------------
$A $A
<S> <C> <C>
Operating loss after income tax.......................... (122,457) (3,353,245)
Adjustments for non-cash income and expense items:
Depreciation and amortization expense............... 4,055 212,635
Bad debts expense and provision for doubtful
debts............................................ -- 28
Unrealized foreign exchange gain.................... -- --
Transfers to provisions:
Annual leave........................................ -- 11,495
Increase in other receivables....................... (63,934) 60,930
Increase (decrease) in trade creditors.............. 48,789 71,789
Increase in other assets............................ -- (382,866)
-------- ----------
Net cash from operating activities.................. (133,547) (3,379,234)
======== ==========
</TABLE>

The following subsidiaries were acquired by the economic entity for cash
consideration. The fair value of net tangible assets acquired was as follows:

Fair Value
of Net Tangible
Assets Acquired
------------------------
1994 1995
-------- --------
Entity $A $A
------
Selectra Pty Limited....................... 2 --
Vermint Grove Pty Limited--cash............ -- 2
Kidilla Pty Limited--cash.................. -- 2
Dovevale Pty Limited--cash................. -- 2
Carryton Pty Limited--cash................. -- 2
Xtek Bay Pty Limited--cash................. -- 2
Windytide Pty Limited--cash................ -- 2
--- ---
Fair value of net identifiable assets...... 2 12
Goodwill on acquisition.................... --- ---
Total consideration........................ 2 12
=== ===

98
<PAGE>
STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

(d) Non-cash financing and investing activities.

During the year the economic entity acquired plant and equipment with an
aggregate fair value of $A354,822 (1994: $A44,506) by means of finance leases.
These transactions are not reflected in the Statement of Cash Flows.

NOTE 16. SUBSIDIARIES:

The following were subsidiaries at 31 December 1995, and have been included
in the consolidated financial statements. The financial years of all
subsidiaries are the same as that of the parent entity.
<TABLE>
<CAPTION>
Contribution to
Place of Book Value of Consolidated
Name of Incorporation/ Date of Type of Parent Entity's % of Result for the
Controlled Entity Formation(a) Acquisition Shares Investment Shares Held Year
----------------- ------------- ----------- ------- --------------- ------------ --------------
1994 1995 1994 1995 1994 1995
---- ---- ---- ---- ---- ----
$A $A % %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vermint Grove Pty Australia 26/4/95 Ordinary -- 2 100 -- -- --
Limited

Kidilla Pty Limited Australia 26/4/95 Ordinary -- 2 100 -- -- --

Dovevale Pty Limited Australia 26/4/95 Ordinary -- 2 100 -- -- --

Carryton Pty Limited Australia 26/4/95 Ordinary -- 2 100 -- -- --

Xtek Bay Pty Limited Australia 26/4/95 Ordinary -- 2 100 -- -- --

Selectra Pty Limited Australia 29/7/94 Ordinary 2 2 100 100 -- --

Windytide Pty Limited Australia 26/4/95 Ordinary -- 2 100 -- -- --
---- ---- --- ---
2 14 -- --
==== ==== === ===
</TABLE>

(a) All entities operate solely in their place of incorporation/formation.

NOTE 17. ASSOCIATED COMPANIES:

Details of material interests in associated companies are as follows:
<TABLE>
<CAPTION>

Name of Associated Principal Activity of Ownership Balance Dividends
Company Associated Company Interest Date Received
------------------ --------------------- ------------- ----------- --------------
1994 1995 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Communication & Delivery of subscription
Entertainment television services to
Australia Pty Limited regional Australia 50% 50% 31 December -- --

Chippawa Pty Limited Delivery of subscription
television services to
regional Australia 50% 50% 30 June -- --
--- ---
-- --
=== ===
</TABLE>

<TABLE>
<CAPTION>
Economic Entity
-------------------
1994 1995
-------- --------
$A $A

Aggregate carrying amount of investments in associated companies........ 2 2
----- ----
Aggregate amount of investment in associated companies, as determined
under the equity method of accounting................................ 2 2
===== ====
</TABLE>
99
<PAGE>

STV PTY LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS--(Continued)

NOTE 18. RELATED PARTY DISCLOSURES:

A. OTHER DIRECTOR TRANSACTIONS

Crase Partners, a director-related firm of J. K. Crase, a director,
provided general accounting services to the company during the period. These
services were provided at an arms length basis.

B. TRANSACTIONS WITH RELATED PARTIES IN THE WHOLLY OWNED GROUP

The parent entity entered into the following transactions during the year
with related parties in the wholly owned group:

Loans were advanced to subsidiaries to fund the acquisition of MDS
licenses and total $A0 and $A3,863,022. STV also has amounts payable to United
International Holdings, Inc. of $A79,816 and $A863,341 at December 31, 1994 and
1995, respectively.

These transactions were undertaken on commercial terms and conditions.

C. TRANSACTIONS WITH ASSOCIATED COMPANIES

The parent entity entered into certain transactions with associated
companies, being loans advanced and received on an arms length basis. STV has
receivables from associated companies totaling $A0 and $A1,322,587 at December
31, 1994 and 1995, respectively. STV has amounts payable to CTV of $A623,074 and
$A3,627,044 as of the same dates.

NOTE 19. US GAAP INFORMATION

The calculation of shareholders' equity in accordance with US GAAP is as
follows:
<TABLE>
<CAPTION>

December 31,
----------------------------
1994 1995
-------- --------
$A $A
<S> <C> <C>
Shareholders' equity as per balance sheet.............. 9,877,545 6,524,300
Adjustments to reported equity:
Convertible debentures............................ (8,439,747) (8,439,747)
---------- ----------
Shareholders' equity in accordance with US GAAP........ 1,437,798 (1,915,447)
========== ==========
</TABLE>
100
<PAGE>

XYZ ENTERTAINMENT PTY LTD

INDEPENDENT AUDITORS' REPORT

The Board of Directors

We have audited the accompanying consolidated balance sheets of XYZ
Entertainment Pty Limited as of December 31, 1994 and 1995 and the related
consolidated statements of operations, shareholders' deficiency and cash flows
for the period from October 17, 1994 (date of inception) to December 31, 1994
and the financial year ended December 31, 1995, which are expressed in
Australian dollars. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

In our opinion the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
XYZ Entertainment Pty Limited as of December 31, 1994 and 1995 and the results
of its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in Australia.

Generally accepted accounting principles in Australia vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected amounts reported as shareholders' deficiency and net
loss as at and for the period from October 17, 1994 (date of inception) to
December 31, 1994 and the year ended December 31, 1995 to the extent summarized
in Note 12 to the financial statements.

Deloitte Touche Tohmatsu
Chartered Accountants

Sydney, Australia
March 15, 1996

101
<PAGE>

XYZ ENTERTAINMENT PTY LTD
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

Revenue
Channel supply................................. Nil 1,117,091
Other.......................................... Nil 592,149
Interest....................................... 2,829 196,291
------- ----------
2,829 1,905,531
------- ----------
Operating expenses
Cost of services............................... Nil 24,677,575
Selling, general and administrative............ 236,703 12,475,597
Depreciation and amortization.................. 2 Nil 3,594,737
------- ----------

Cost of operations.................................. 236,703 40,747,909
------- ----------

Net loss before income taxes........................ 233,874 38,842,378
------- ----------

Income taxes........................................ 3 Nil Nil
------- ----------

Net loss............................................ 2 233,874 38,842,378
------- ----------

Net loss per share.................................. 116,937 19,421,189
======= ==========

Weighted average number of ordinary shares out-
standing during the period....................... 2 2
======= ==========

</TABLE>

The accompanying notes form part of these financial statements.

102
<PAGE>

XYZ ENTERTAINMENT PTY LTD
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>

1994 1995
-------- --------
Note $A $A

<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................... 670,754 3,105,803
Receivables........................................ 33,000 1,006,241
Amounts due from stockholder....................... Nil 21,219
Program material rights (net of accumulated
amortization of $Anil and $A1,430,000).......... Nil 2,298,935
------- ----------
Total current assets......................... 703,754 6,432,198
------- ----------
Non-current assets
Property, plant and equipment...................... 4 57,448 3,361,070
Investment in associated company................... 6 Nil 245,518
Amounts due from related party..................... 8 Nil 1,326,578
Program material rights (net of accumulated
amortization of $Anil and $A180,000)............ Nil 217,916
------- ----------
Total non-current assets..................... 57,448 5,151,082
------- ----------
Total assets............................. 761,202 11,583,280
======= ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Creditors, trade................................... Nil 20,792,868
Other creditors and accruals....................... Nil 75,656
Amounts due to related party....................... Nil Nil
------- ----------
Total current liabilities..................... Nil 20,868,524
------- ----------
Non-current liabilities
Creditors, trade................................... Nil 743,086
Amounts due to stockholders........................ 8 995,074 29,047,920
------- ----------
Total non-current liabilities................. 995,074 29,791,006
------- ----------
Total liabilities........................ 995,074 50,659,530
------- ----------
Commitments and Contingencies (See Notes)
Stockholders' deficiency
Redeemable preferences shares, par value $A1.00 per
share: Authorized 100,000 shares, none issued
and outstanding ............................ Nil Nil

Ordinary shares, par value $A1.00 per share:
Authorized 900,000 shares, 2 issued and 9 2 2
outstanding ................................ Nil Nil
Accumulated deficit................................ (233,874) (39,076,252)
--------- -----------
Total stockholders' deficiency........... (233,872) (39,076,250)
-------- -----------
Total liabilities and stockholders'
deficiency............................ 761,202 11,583,280
======== ===========
</TABLE>
The accompanying notes form part of these financial statements.

103

<PAGE>
XYZ ENTERTAINMENT PTY LTD
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIENCY
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
Ordinary Accumulated Total
-------- ----------- -----------
$A $A $A
<S> <C> <C> <C>
Balance at October 17, 1994.................... Nil
Issue of ordinary shares....................... 2 2
Net loss....................................... (233,874) (233,874)
----------- -----------

Balance at December 31, 1994................... 2 (233,874) (233,872)
--- ----------- -----------
Net loss....................................... (38,842,378) (38,842,378)
----------- -----------

Balance at December 31, 1995................... 2 (39,076,252) (39,076,250)
=== =========== ===========

</TABLE>

The accompanying notes form part of these financial statements.

104
<PAGE>
XYZ ENTERTAINMENT PTY LTD
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
1994 1995
-------- --------
$A $A
<S> <C> <C>
Cash flows from operating activities
Cash receipts in the course of operations............. Nil 370,348
Cash payments in the course of operations............. (269,703) (17,351,047)
Interest received..................................... 2,829 196,291
-------- -----------
Net cash used in operating activities................. (266,874) (16,784,408)
-------- -----------
Cash flows from investing activities
Payments for property, plant and equipment............ (57,448) (4,999,012)
Proceeds from sale of program material rights......... Nil 2,304,795
Payment for investment................................ Nil (1)
Payments for program material rights.................. Nil (7,164,583)
------- -----------
Net cash used in investing activities................. (57,448) (9,858,801)
------- -----------
Cash flows from financing activities
Proceeds from issues of shares........................ 2 Nil
Proceeds from stockholder loans....................... 995,074 29,078,258
------- -----------
Net cash provided by financing activities............. 995,076 29,078,258
------- -----------
Net increase in cash and cash equivalents held............. 670,754 2,435,049
Cash and cash equivalents at the beginning of the
period ................................................. Nil 670,754
------- -----------
Cash and cash equivalents at the end of the period......... 670,754 3,105,803
======= ===========
Reconciliation of Net Loss to Net Cash Used in
Operating Activities
Net loss ............................................. (233,874) (38,842,378)
Add non-cash items:
Amounts set aside to provisions.................. Nil 1,771,817
Depreciation and amortization.................... Nil 3,594,737
Gain on disposal of program material rights...... Nil (189,213)
Loss on disposal of program material rights...... Nil 1,511,315
Gain on disposal of fixed assets................. Nil (168,358)
Loss on disposal of fixed assets................. Nil 9,690
-------- -----------
Net cash used in operating activities before change
in assets and liabilities........................ (233,874) (32,312,390)
Change in assets and liabilities:
Increase in trade receivables.................... (33,000) (994,460)
(Increase) decrease in other receivables......... Nil (1,518,255)
Increase in creditors............................ Nil 18,040,697
-------- -----------
Net cash used in operating activities....... (266,874) (16,784,408)
======== ===========
</TABLE>
The accompanying notes form part of these financial statements.

105
<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

NOTE 1--STATEMENT OF ACCOUNTING POLICIES

The significant policies which have been adopted in the preparation of
these consolidated financial statements are:

(a) BASIS OF PREPARATION

This statement of significant accounting policies is given to assist in the
understanding of the consolidated financial statements. For the purposes of
these consolidated financial statements, XYZ Entertainment Pty Ltd (the
"Company") and its controlled entities (subsidiaries) (collectively, "XYZ") are
defined under Australian law as the Economic Entity. This term is used
throughout these Notes to the consolidated financial statements. The
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Australia (Australian GAAP), include
disclosures required by the United States Securities and Exchange Commission and
are presented in Australian dollars ($A). The accounting principles differ in
certain respects from accounting principles generally accepted in the United
States (US GAAP). The significant differences and the approximate related effect
on the consolidated financial statements are set out in Note 12. Although the
company is financially dependent on related bodies corporate for its ongoing
viability, the financial statements have been prepared on a going concern basis,
after considering undertakings by related bodies corporate to provide ongoing
financial support. The financial statements have been prepared on the basis of
historical costs and do not take into account changing money values. Consistent
accounting policies have been employed in the preparation and presentation of
the consolidated financial statements.

The company was incorporated on October 17, 1994 and commenced trading from
that date. Through its controlled entities, the company provides programming for
four of eight channels of the multi-channel base programming package (the
"Galaxy Package") offered and distributed by the Satellite A and B license
holders in Australia. The Galaxy Package is distributed via satellite, microwave
Multipoint distribution system and other transmission technologies by the
Satellite B license holder through distribution facilities in the six largest
capital cities in Australia and regional Western Australia, and by franchisees
to substantially all of the population in Australia.

The Company's programming for the four channels was first aired on April
23, 1995 by the Satellite A and B license holders. Regional distribution
commenced in New South Wales in August 1995 and in other states in October 1995.

Programming provided by the Company as at the date of this report includes
Red, a music video channel; ARENA, a general entertainment channel; NICKELODEON,
a children's/family/classic channel; and DISCOVERY, a documentary channel.

(b) PRINCIPLES OF CONSOLIDATION

The accounts have been prepared by consolidating the financial statements
of all the entities that comprise the Economic Entity, being the Company (the
chief entity) and its controlled entities. A list of controlled entities appears
in Note 7.

The purchase method of accounting has been used to account for subsidiaries
acquired during the period. The Company undertakes a valuation of the net assets
acquired in purchase transactions in accordance with generally accepted
accounting principles. Accordingly, the Company has stated the net assets
acquired from purchased companies at their estimated fair values at the
date of acquisition. The consolidated accounts include the information and
results of each controlled entity from the date on which the Company obtains
control and until such time as the Company ceases to control such entity.

In preparing the consolidated accounts, the intercompany balances and
transactions, and any unrealized profits arising within the Economic Entity have
been eliminated in full.

106

<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

Sales revenue comprises license fees earned from a related entity for
development and production of channels of programming for subscription
television broadcasting services. Revenue is recognized at the time subscription
services are provided to customers.

(d) RECOVERABLE AMOUNT OF NON-CURRENT ASSETS

The carrying amounts of all non-current assets are reviewed to determine
whether they are in excess of their recoverable amount as of the balance sheet
date. If the carrying amount of a non-current asset exceeds the recoverable
amount, the asset is written down to the lower amount. In assessing recoverable
amounts, the relevant net cash inflows arising from the continued use and
subsequent disposal of non-current assets have not been discounted to their
present value unless otherwise indicated.

(e) FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are translated to Australian currency at the
rates of exchange existing at the dates of the transactions. Amounts receivable
and payable in foreign currencies at the balance sheet date are translated at
the rates of exchange existing on that date.

Exchange differences relating to amounts payable and receivable in foreign
currencies are recorded in the profit and loss account as exchange gains or
losses in the financial year in which the exchange rates change.

(f) TAXATION

XYZ adopts the liability method of tax effect accounting. The tax effect of
temporary differences which arise from items recorded in different periods for
income tax and accounting purposes, are carried forward on the balance sheet as
deferred tax assets and deferred tax liabilities, as applicable. Deferred tax
assets arising from temporary differences are not recorded unless realization of
the asset is assured beyond a reasonable doubt. Deferred tax assets which
include tax losses are only recorded when their realization is virtually
certain.

The recovery of deferred tax assets (both recognized and unrecognized) is
contingent upon sufficient taxable income being earned in future periods,
continuation of the relevant tax laws and each relevant company continuing to
comply with the appropriate legislation.

(g) PLANT AND EQUIPMENT

ACQUISITION

Items of plant and equipment are recorded at historical cost and
depreciated as outlined below.

DEPRECIATION

Items of plant and equipment are depreciated over their estimated useful
lives on a straight-line basis. The estimated useful lives of such items range
from four to ten years. Items of plant and equipment are depreciated from the
date the asset commences earning revenue.

LEASES

Payments made under operating leases are charged against profits in equal
installments over the accounting periods covered by the lease term, except where
an alternative basis is more representative of the pattern of benefits to be
derived from the leased property.

107
<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

(h) SUPERANNUATION

XYZ contributes to one defined contribution fund for all employee groups.
Contributions of $A135,675 were made to the fund during the year as a percentage
of salaries based on statutory requirements.

(i) PROGRAM MATERIAL RIGHTS

Program material rights are recognized as an asset and stated at the lower
of unamortized cost and net realizable value. The rights represent the ability
to use television programs over a specified period of time, as set out in the
license agreements. Program material rights acquired under license agreements
are recognized when the license period begins and all of the following
conditions are met:

(i) The cost of each license fee for each program is known or is
reasonably determinable;

(ii) The program material has been accepted by the licensee in
accordance with the terms of the license agreement; and,

(iii) The licensor can deliver the program material rights, and the
licensee can exercise the rights.

Amortization of the cost of program material rights is charged to the
statement of operations based on the regular assessment of the benefit of
individual license agreements, over the term of the agreement. If the benefits
are reasonably determinable through the number of times a particular program is
aired, then costs are charged to the statement of operations accordingly. An
accelerated method of amortization is used when the first broadcast of a program
is estimated to be more valuable than its reruns. Costs are allocated on a
straight-line basis over the period of the agreement if each broadcast is
expected to produce approximately the same amount of revenue.

Program material rights are classified as current assets if they are
expected to be used within one year.

(j) STATEMENT OF CASH FLOWS

For the purposes of the statement of cash flows, cash and cash equivalents
includes bank overdrafts and all highly liquid investments which are readily
convertible to cash at the Company's option.

(k) LOSS PER SHARE

Loss per share is calculated by dividing net loss by the weighted average
number of issued ordinary shares outstanding during the period.

(l) PROVISIONS

EMPLOYEE ENTITLEMENTS

Provision is made for benefits accruing to employees in respect of wages
and salaries, annual leave, long service leave, and sick leave when it is
probable that settlement will be required and are capable of being measured
reliably.

Provisions made in respect of wages and salaries, annual leave, sick leave,
and other employee entitlements expected to be settled within twelve months, are
measured at their nominal values.

Provisions made in respect of other employee entitlements which are not
expected to be settled within twelve months are measured as the present value of
the estimated future cash outflows to be made by the economic entity in respect
of services provided by employees up to the reporting date.

108

<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

(m) DATE OF INCORPORATION

The company was incorporated on October 17, 1994 and accordingly
comparative figures cover the period from inception.

(n) INVESTMENTS

ASSOCIATED COMPANIES

The Company equity accounts for its investments in associated companies in
equity supplementary financial statements. Investments in which the Company has
a material interest and over which it exercises significant influence, but does
not control, are considered to be associated companies. The ability to exercise
significant influence over the strategic operating, investing and financing
policies of a company may be indicated by, for example, representation on the
board of directors, participation in policy-making processes, material
intercompany transactions, interchange of management personnel or provision of
technical information.

Investments in associated companies are carried at the lower of cost and
recoverable amount. Dividends are recorded in the profit and loss account after
they have been declared by the associated company in a general meeting.

During the year, the Company entered into an agreement with Nickelodeon
Australia, Inc to produce NICKELODEON AUSTRALIA, a children's channel. The
Company jointly controls Nickelodeon Australia Management Pty Limited with
Nickelodeon Australia, Inc, and as such has the capacity to significantly
influence decision-making in these companies. The term of the joint venture is
15 years.

Selected disclosures under the equity method of accounting relating to the
entity in which the Company is able to exercise significant influence are
provided in Note 6.

None of the shares in associated companies are listed on the Australian
Stock Exchange.

NOTE 2--EXPENDITURES

<TABLE>
<CAPTION>
1994 1995
-------- --------
$A $A
<S> <C> <C>
Expenses included in the net loss were:
Depreciation and amortization:
--plant and equipment......................... Nil 828,647
--program material rights..................... Nil 2,766,090
--- ---------
Total depreciation and amortization..... Nil 3,594,737
=== =========
Amounts set Aside to Provision:
--employee entitlements--annual leave......... Nil 75,656
--provision for doubtful debts................ Nil 1,696,160
--- ---------
Nil 1,771,816
=== =========
Exchange (gain) loss, net, on foreign currency
transactions:
Exchange gain on foreign currency
transactions.............................. Nil (368,670)
--- --------
Exchange (gain) loss, net.................... Nil (368,670)
=== ========
</TABLE>

NOTE 3--INCOME TAXES

At December 31, 1995 XYZ had accumulated tax losses carried forward of
approximately $A7,997,055 (1994: $A71,840). The losses may be carried forward
indefinitely under Australian income tax legislation.

109

<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

The tax effects of temporary differences, at the Australian statutory rate
of 36%, which give rise to significant portions of deferred tax assets or
liabilities and the corresponding valuation allowance at December 31, 1995 are
as follows:

1994 1995
-------- --------
$A $A
Deferred tax assets
Tax loss carryforward............. 77,978 9,816,188
Accrued expenses and other........ Nil 266,479
------ ----------
77,978 10,082,667
Deferred tax liabilities
Depreciation and amortization..... Nil 1,897,111
------ ----------
Net deferred tax assets........... 77,978 8,185,556
Less valuation allowance.......... 77,978 8,185,556
------ ----------
Nil Nil
====== ==========

Tax losses of $A1,897,111 (1994: $Anil) have been brought to account and
fully applied against deferred tax liabilities.

XYZ has provided a valuation allowance for the total amount of net deferred
tax assets since realization of these assets is not assured, principally due to
the Economic Entity being in the start-up phase of operations. For US GAAP
purposes as described in Note 12, a valuation allowance for the total amount of
the net deferred tax assets has also been provided.

NOTE 4--PROPERTY, PLANT AND EQUIPMENT

1994 1995
-------- --------
$A $A

Plant and equipment--at cost.................. 57,448 4,026,837
Less: accumulated depreciation............... Nil (665,767)
------ ---------
Total property, plant and equipment..... 57,448 3,361,070
====== =========

There have been no current valuations included in the above amounts.

110

<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

NOTE 5--COMMITMENTS AND CONTINGENCIES

1994 1995
-------- --------
$A $A
Contracts for Expenditure for Program Material Rights
Not later than one year................................ Nil 174,082
Later than one year but not later than two years....... Nil Nil
Later than two years but not later than three years.... Nil Nil
Later than three years but not later than four years... Nil Nil
Later than four years but not later than five years.... Nil Nil
Later than five years.................................. Nil Nil
--- -------
Nil 174,082
=== =======
Commitments Under Non-cancelable Operating Leases
Not later than one year................................ Nil 11,794
Later than one year but not later than two years....... Nil 12,362
Later than two years but not later than three years.... Nil 10,976
Later than three years but not later than four years... Nil 568
Later than four years but not later than five years.... Nil Nil
Later than five years.................................. Nil Nil
--- ------
Nil 35,700
=== ======

CONTINGENCIES

The Company and its controlled entities are party to matters involving
certain claims which arise in the normal course of business, none of which, in
the opinion of management, is expected to have a materially adverse effect on
the Company's consolidated financial position or results of operation.

REGULATION

Management asserts that no communication of any kind has been received from
the Australian Broadcasting Authority ("ABA"), the Australian Competition and
Consumer Commission of Australia ("ACCC"), or the Foreign Investment Review
Board of Australia ("FIRB"), or any other agency indicating that the Company
and/or its controlled entities is or may be in violation of any law or
regulation of the Commonwealth of Australia or any subdivision or agency
thereof.

NOTE 6--INFORMATION ABOUT INVESTMENTS IN ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
Equity-
Ownership Carrying Accounted
Name of Company Principal Activity Interest Amount Amount
--------------- ------------------ --------------- ------------- -----------
1994 1995 1994 1995 1994 1995
---- ---- ---- ---- ---- ----
Percent $A $A $A $A
<S> <C> <C> <C> <C> <C> <C>
Nickelodeon Australia Production and Development
Management Pty Limited of the Nickelodeon Channel N/A 50 Nil 245,518 Nil 245,518
</TABLE>

The balance date of the associate is June 30.

The carrying amount of the investment in the associated company is as
follows:
$A
Carrying amount of investment in shares in associate company....... 1
Amounts due from associated company at the balance date ........... 1,941,677
Provision for non-recoverability................................... (1,696,160)
----------
245,518
==========

The carrying amount of the investment equates to the equity-accounted
amount at December 31, 1995 as follows:

111
<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

$A
Carrying amount of investment in shares in
associated company........................................... 1
XYZ's maximum obligation to contribute to the
operating losses of the associated company. ................. (1,696,160)
----------
(1,696,159)
Amounts due from associated company at the balance date......... 1,941,677
----------
245,518
==========

NOTE 7--PARTICULARS IN RELATION TO CONTROLLED ENTITIES
<TABLE>
<CAPTION>

Book Value of Contribution to
Investment Consolidated Loss
Class Interest ---------------- ------------------
of Held 1994 1995 1994 1995
Share Percent ---- ---- ---- ----
$A $A $A $A
<S> <C> <C> <C> <C> <C> <C>
Chief Entity
XYZ Entertainment Pty
Limited..................... 233,874 38,842,378
Corporate Bodies Corporate
XYZ Programming Pty
Limited..................... Ord 100 Nil 2 Nil Nil
Arena Television Pty Limited...
Ord 100 Nil 2 Nil Nil
Quest Television Pty Limited...
Ord 100 Nil 2 Nil Nil
Max Television Pty Limited.....
Ord 100 Nil 2 Nil Nil
Red Television Pty
Limited..................... Ord 100 Nil 2 Nil Nil
------- ----------
Consolidated net loss.......... 233,874 38,842,378
======= ==========
</TABLE>

Each of the controlled entities are incorporated in, and carry on business
in, Australia.

NOTE 8--RELATED PARTY DISCLOSURES

OWNERSHIP INTERESTS IN RELATED PARTIES

Information in relation to ownership interests in controlled entities is
provided in Note 7.

REMUNERATION OF DIRECTORS

The directors of the Company during the period were:

D F Hagans (appointed 12/12/94)
A Tow (appointed 11/5/95)
R J Freudenstein(appointed 6/9/95)
R J Birrel(appointed 17/10/94, resigned 11/5/95)
M W Booth (appointed 17/10/94, resigned 12/12/94, reappointed 6/9/95)
D Garry (appointed 17/10/94, resigned 17/10/94)
L M Head (appointed 17/10/94, resigned 17/10/94)

112
<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

1994 1995
---- ----
$A $A
<S> <C> <C>
Total income received, or due and receivable, by directors of the Company from
the Company and any related body corporate, and by all directors of each
entity in the Economic Entity from corporations of which they are directors,
or related bodies corporate or an entity controlled by the chief entity................. 52,500 363,786
====== =======
The number of directors of the Company whose total income falls within the following
bands: No No
$ANil -- $A9,999........................................................................ 4 7
====== =======
</TABLE>

LOANS TO DIRECTORS

There were no loans in existence at balance date (or at December 31, 1994)
made, guaranteed or secured by the Company to directors of a corporation in the
Economic Entity or a related body corporate, their spouses, relatives or
relatives of spouses.

LOANS FROM DIRECTOR RELATED ENTITIES
<TABLE>
<CAPTION>

TERMS AND CONDITIONS 1995
TYPE OF OF NAME OF RELATED DIRECTOR ----
TRANSACTION TYPE OF TRANSACTION ENTITY RELATED $A
<S> <C> <C> <C> <C>

Non-interest bearing, Century United
Loans advanced no set terms over Programming Ventures D Hagans and 14,523,960
from stockholder.... payment Pty Limited A Tow

Loans advanced Non-interest bearing, Foxtel Management Pty R Freudenstein
from stockholder...... set terms of Limited and M Booth 14,523,960
repayment ----------
29,047,920
==========
</TABLE>

Loans from director related entities at December 31, 1994 amounted to
$995,074. Of this amount, $820,074 had been advanced by UIH Australia
Programming Inc. and $175,000 by Century Programming Ventures Corp., both being
joint and equal stockholders in the Company at that date.

LOANS TO DIRECTOR RELATED ENTITIES
<TABLE>
<CAPTION>

TERMS AND CONDITIONS 1995
TYPE OF OF NAME OF RELATED DIRECTOR ----
TRANSACTION TYPE OF TRANSACTION ENTITY RELATED $A
<S> <C> <C> <C> <C>

Non-interest bearing, Century United
Loans advanced to no set terms of Programming Ventures D Hagans and
stockholder......... repayment Pty Limited A Tow 881,633
=======
</TABLE>

There were no loans to Director Related Entities at December 31, 1994.

113

<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

OTHER TRANSACTIONS WITH DIRECTOR RELATED ENTITIES

<TABLE>
<CAPTION>
TERMS AND CONDITIONS 1995
TYPE OF OF NAME OF RELATED DIRECTOR ----
TRANSACTION TYPE OF TRANSACTION ENTITY RELATED $A
<S> <C> <C> <C> <C>

Establishment and
restructuring Normal commerical UIH Australia
fees paid......... terms and conditions Programming Inc. D Hagans 250,000

Establishment and
restructuring Normal commerical Century Programming
fees paid......... terms and conditions Ventures Corp. A Tow 250,000

Establishment,
operating and Century United
management Normal commercial Programming Ventures D Hagans and
fees.............. terms and conditions Pty Limited A Tow 860,444

Channel supply Continental Century
license fee Normal commercial Pay Television Pty
revenue........... terms and conditions Limited A Tow 943,358

Channel supply
license fee Normal commercial Foxtel Management R Freuderstein
revenue........... terms and conditions Pty Limited and M Booth 330,753
Continental Century
</TABLE>

There were no other transactions with Director Related Parties at December
31, 1994.

LOANS TO OTHER RELATED ENTITIES
<TABLE>
<CAPTION>
TERMS AND CONDITIONS 1995
TYPE OF OF NAME OF RELATED ----
TRANSACTION TYPE OF TRANSACTION ENTITY $A
<S> <C> <C> <C>
Loans advanced to Non-interest bearing,
associated no set terms of Nickelodeon Australia
company.............. repayment Management Pty Limited 1,941,677

Non-interest bearing,
Loans advanced to no set terms of
related party........ repayment Nickelodeon Australia Inc. 1,326,578
</TABLE>

There were no loans to Other Related Entities at December 31, 1994.

OTHER TRANSACTIONS WITH OTHER RELATED ENTITIES
<TABLE>
<CAPTION>
TERMS AND CONDITIONS 1995
TYPE OF OF NAME OF RELATED ----
TRANSACTION TYPE OF TRANSACTION ENTITY $A
<S> <C> <C> <C>

Nickelodeon Australia
Normal commercial Management Pty
Subscriptions payable.. terms and conditions Limited 113,219
</TABLE>

There were no other transactions with other related entities at December
31, 1994.

114
<PAGE>
XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

TRANSACTIONS WITHIN THE WHOLLY-OWNED GROUP

During the financial period, the company provided management services to
other entities in the wholly-owned group at no charge. In addition, the company
paid license fees and reimbursed certain costs to other entities in the
wholly-owned group in the ordinary course of business and on normal terms and
conditions.

CONTROLLING ENTITIES

The chief (parent) entity in the economic entity is XYZ Entertainment Pty
Limited.

The ultimate holding company in the wholly-owned group is XYZ Entertainment
Pty Limited.

The chief entity, at the year end, was jointly controlled by Century United
Programming Ventures Pty Limited ("CUPV") and Foxtel Management Pty Limited.
Both companies are incorporated in Australia.

CUPV is jointly owned by UIH Australia Programming Inc. ("UIH") and Century
Programming Ventures Corp. ("CPVC"). The ultimate parent entity of UIH is United
International Holdings, Inc. The ultimate parent entity of CPVC is Century
Communications Corporation.

Foxtel Management Pty Limited is jointly owned by The News Corporation
Limited and Telstra Corporation Limited.

NOTE 9--SHARE CAPITAL
<TABLE>
<CAPTION>

1994 1995
-------- --------
$A $A
<S> <C> <C>
Authorized Capital
900,000 ordinary shares of $A1.00 each.................... 900,000 900,000
100,000 redeemable preference shares of $A1.00 each....... 100,000 100,000
--------- ---------
1,000,000 1,000,000
--------- ---------
Issued and Paid-Up Capital
2 ordinary shares of $A1.00 each.......................... 2 2
========= =========
</TABLE>

Upon incorporation the Company issued two fully paid ordinary shares of $1
each.

NOTE 10--FINANCIAL REPORTING BY SEGMENTS

The Company predominantly operates in Australia and in one industry, being
programming for subscription television services.

115

<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

NOTE 11--NON-HEDGED FOREIGN CURRENCY BALANCES

The Australian dollar equivalent of foreign currency balances included in
the accounts which are not effectively hedged are as follows:

1994 1995
-------- --------
$A $A
US Dollars
Liabilities
Current............................ Nil 1,719,055
Non-current........................ 995,074 743,085
------- ---------
Total......................... 995,074 2,462,140
======= =========
Assets
Current............................ Nil 25,729
======= =========
Sterling
Liabilities
Current............................ Nil 10,949
======= =========

NOTE 12--SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED
IN AUSTRALIA AND THE UNITED STATES

As stated in note 1, the consolidated financial statements of XYZ have been
prepared in accordance with accounting principles generally accepted in
Australia, which differ in certain significant respects from those generally
accepted in the United States. A description of the major differences between
Australian GAAP and US GAAP affecting the Company follows:

(a) STATEMENT OF CASH FLOWS

Under US GAAP, a Statement of Cash Flows would not provide a subtotal for
"net cash used in operating activities before changes in assets and liabilities"
as shown in Reconciliation of Net Loss to Net Cash Used in Operating Activities.

(b) DEFERRED TAXATION

Australian GAAP adopts the full liability method of tax effect accounting
whereby deferred tax assets and liabilities arising from timing differences are
recorded in the balance sheet at the rate of tax expected to be applicable at
the time those timing differences reverse. A deferred tax asset in relation to
available tax losses may be recognized to the extent that there is virtual
certainty of its recovery against future taxable income.

Under US GAAP, deferred taxes are provided on all temporary differences.
Temporary differences encompass timing differences and other events that create
differences between the tax basis of an asset or liability and its reported
amount in the financial statements. A deferred tax asset is recorded in a loss
period and is reduced by a valuation allowance to the extent it is more likely
than not that the deferred tax asset will not be realized.

No deferred tax asset has been recognized in these accounts.

116

<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

The Economic Entity equity accounts for its investments in associated
companies in equity supplementary financial statements. Corporations in which
the Economic Entity has a material interest and over which the Economic Entity
exercises significant influence, but does not control, are considered to be
associated companies. The ability to exercise significant influence over the
strategic operating, investing and financing policies of a company may be
indicated by, for example, representation on the board of directors,
participation in policy-making processes, material intercompany transactions,
interchange of management personnel or provision of technical information.

Under US GAAP, the equity method of accounting is used for investments in
which the Company exerts significant influence. Under this method, the
investment, originally recorded at cost, is adjusted to recognize the Company's
share of net earnings or losses of the associates, limited to the extent of the
Company's investment in and advances to the associates, including any debt
guarantees or other contractual funding commitments.

Investments in and advances to associated companies are as follows:

$A
Investment......................................................... 1
Amounts due from associated company (net of provision
for non-recoverability of $A1,696,160).......................... 245,517
-------
245,518
=======

(d) RECONCILIATION OF NET LOSS AND STOCKHOLDERS' DEFICIENCY AS REPORTED
UNDER AUSTRALIAN GAAP TO US GAAP

A reconciliation of net loss and stockholders' deficiency as reported under
Australian GAAP to US GAAP is not required as there is no difference between the
results reported under Australian GAAP and US GAAP at the balance date.

FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS AND OTHER DISCLOSURES

The carrying amount of the following instruments approximate fair value
because of the short maturity of these instruments--cash at bank, promissory
notes, trade and other receivables, and trade creditors and accruals (including
amounts owing to related entities).

NEW ACCOUNTING PRINCIPLES

The US Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121")
which is required to be adopted by affected companies for fiscal years beginning
after December 15, 1995. The Company does not believe that the provisions of
SFAS 121 will have a material effect on the Company's reported results.

117
<PAGE>

XYZ ENTERTAINMENT PTY LTD
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FOR THE PERIOD FROM OCTOBER 17, 1994 (DATE OF INCEPTION) TO DECEMBER 31, 1994
AND THE YEAR ENDED DECEMBER 31, 1995

NOTE 13--REPORTING OF SIX MONTH PERIODS
Six Months
Six Months Ended
Ended December 31,
June 30, 1995 1995
------------- ------------
$A $A
Revenue
Channel Supply............................. 100,747 1,016,344
Other...................................... Nil 592,149
Interest................................... 62,587 133,704
---------- ----------
163,334 1,742,197
Operating Expenses
Cost of services........................... 15,732,400 8,945,175
Selling, general and administrative ....... 7,162,916 5,312,681
Depreciation and amortization.............. 1,366,875 2,227,862
---------- ----------
24,262,191 16,485,718
---------- ----------
NET LOSS........................................ 24,098,857 14,743,521
========== ==========

118

<PAGE>
AUDITORS' REPORT

To the shareholders of
Saturn Communications Limited (formerly Kiwi Cable Company Limited):

We have audited the accompanying financial statements of Saturn
Communications Limited (formerly Kiwi Cable Company Limited) for the years ended
31 December 1994 and 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on those
financial statements based on our audits.

We conducted our audits in accordance with New Zealand Auditing Standards,
which do not differ substantially from generally accepted auditing standards in
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatements. An audit includes examining, on a test
basis, evidence supporting amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects the financial position of Saturn Communications Limited
as of 31 December 1994 and 1995, and the results of the Company's operations for
the years then ended in accordance with New Zealand Accounting Standards.

There are certain differences between New Zealand Accounting Standards and
those generally accepted in the United States of America. Application of the
generally accepted accounting principles in the United States of America would
not result in material differences to these financial statements.

Arthur Andersen

Wellington, New Zealand
20 February 1996

119
<PAGE>

SATURN COMMUNICATIONS LIMITED
STATEMENT OF FINANCIAL PERFORMANCE

For the Years
Ended December 31
--------------------------
Note 1994 1995
-------- --------
NZ$ NZ$

Programming Revenue.............. 70,389 169,223
Other Revenue.................... -- 57,835
---------- -----------
Total Revenue.................... 70,389 227,058
Expenses
Programming Expenses............. 203,901 448,243
Selling, general & administration 684,811 1,306,969
Management fee expense to 309,426 17,209
related party.................
Other operating expenses......... 845,791 2,506,326
---------- -----------
Deficit before taxation for the 2 (1,973,540) (4,051,689)
year..........................
Income tax expense............... 11 -- --
----------- ----------
Net deficit for the year......... (1,973,540) (4,051,689)
=========== ==========

The accompanying notes form an integral part of these financial statements.

120
<PAGE>

SATURN COMMUNICATIONS LIMITED
STATEMENT OF MOVEMENTS IN EQUITY
FOR THE YEARS ENDED 31 DECEMBER 1994 and 1995

NZ$
----------
Balance, at December 31, 1993...................................... (2,314,485)
Contributions from owners.......................................... 7,155,259
Net deficit........................................................ (1,973,540)
-----------
Balance, at December 31, 1994...................................... 2,867,234
Net deficit........................................................ (4,051,689)
-----------
Balance, at December 31, 1995...................................... (1,184,455)
===========

The accompanying notes form an integral part of these financial statements.

121
<PAGE>

SATURN COMMUNICATIONS LIMITED
STATEMENT OF FINANCIAL POSITION

As at 31 December
------------------------
Note 1994 1995
----------- -----------
NZ$ NZ$
Owner's Equity
Share capital [Shares issued: 347,368
(1994: 347,368)]...................... 3 347,368 347,368
Reserves................................. 3 6,981,575 6,981,575
Retained earnings........................ (4,461,709) (8,513,398)
----------- -----------
2,867,234 (1,184,455)
Non-Current Liabilities
Related party loan....................... 8 -- 3,076,199

Current Liabilities
Accounts Payable & Accruals
Trade creditors..................... 103,584 135,894
Other............................... 110,868 122,207
---------- ----------
214,452 258,101
Employee Entitlements.................... 24,554 62,747
Converter Deposits....................... 24,356 --
Current-portion finance lease liability.. 9 23,701 14,270
Related party payables................... 8 -- 879,336
---------- ----------
287,063 1,214,454
---------- ----------
Total Liabilities And Equity............. 3,154,297 3,106,198
========== ==========
Non-Current Assets
Property, plant and equipment
Cost ............................. 3,297,551 4,150,307
Accumulated depreciation.......... (1,300,597) (1,887,172)
---------- ----------
4 1,996,954 2,263,135
Investments--Unlisted Shares.......... -- 5,000
---------- ----------
1,996,954 2,268,135
Current Assets
Cash . 733,407 379,547
Accounts receivables
Customers....................... -- 21,746
Employees....................... 34,472 32,545
Others.......................... 17,143 33,463
Provision for doubtful debts.... -- (10,000)
---------- ----------
51,615 77,754
Inventories.......................... 170,709 160,074
Prepayments.......................... -- 29,351
Related party receivables............ 8 201,612 191,337
---------- ----------
1,157,343 838,063
---------- ----------
Total Assets......................... 3,154,297 3,106,198
========== ==========

The accompanying notes form an integral part of these financial statements

122
<PAGE>

SATURN COMMUNICATIONS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 1995

For the years ended
31 December
-----------------------
Note 1994 1995
--------- ----------
NZ$ NZ$

<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
Customers......................................... 22,031 171,749
Cash was disbursed to:
Payments to suppliers and employees............... (1,496,891) (3,624,231)
----------- -----------
Net cash flows from operating activities............... 10 (1,474,860) (3,452,482)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
Proceeds from sale of fixed assets................ 142,306 69,829
Cash was applied to:
Purchase of fixed assets.......................... (726,123) (932,018)
Purchase of investments........................... -- (5,000)
---------- -----------
Net cash flows from investing activities............... (583,817) (867,189)

CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
Share issue....................................... 3 7,155,259 --
Related party loans............................... -- 3,965,811
Cash was applied to:
Related party loan repayment...................... (4,402,250) --
----------- ----------
Net cash flow from financing activities................ 2,753,009 3,965,811
Net increase/(decrease) in cash held................... 694,332 (353,860)
Add opening cash brought forward....................... 39,075 733,407
---------- ----------
Ending cash carried forward............................ 733,407 379,547
========== ==========

</TABLE>

The accompanying notes form an integral part of these financial statements.

123
<PAGE>

SATURN COMMUNICATIONS LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1995

1. STATEMENT OF ACCOUNTING POLICIES

a) The reporting entity changed its name subsequent to year end from Kiwi
Cable Company Limited to Saturn Communications Limited. These financial
statements have been prepared under the requirements of the Companies Act 1955
and the Financial Reporting Act 1993.

The measurement base adopted is that of historical cost and the New Zealand
dollar ("NZ$") as the reporting currency.

b) CURRENCY

These financial statements have been prepared in New Zealand dollars.

c) FIXED ASSETS

All fixed assets are recorded at cost. Additions, retirements and major
improvements are capitalized and costs for normal repair and maintenance are
charged to expense as incurred.

d) DEPRECIATION

Depreciation is provided on a straight line basis on all tangible fixed
assets at rates calculated to allocate the assets' cost, less estimated residual
value, over their estimated useful lives.

Major depreciation rates are:

Plant and equipment......... 10-20%
Leasehold improvements...... 20%
Office equipment............ 20%
Motor vehicles.............. 20%

e) INCOME TAX

The income tax expense charged to the statement of financial performance
includes both the current year liability and the income tax effects of timing
differences after allowing for non-assessable income and non-deductible
expenses.

Deferred taxation is calculated using the liability method on a
comprehensive basis. Debit balances in the deferred tax account arising from net
accumulated timing differences and future income tax benefits arising from
income tax losses carried forward are only recognised if realisation is more
likely than not.

f) INVENTORIES

Inventories are valued at lower of actual cost or net realisable value.

124
<PAGE>

SATURN COMMUNICATIONS LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1995

g) LEASES

Finance leases, which effectively transfer to the entity substantially all
of the risks and benefits incident to ownership of the leased item, are
capitalised at the lower of the fair value of the leased property, and the
present value of the minimum lease payments. The leased assets and corresponding
liabilities are disclosed and the leased assets are amortised over the period
the entity is expected to benefit from their use.

Operating lease payments, where the lessors effectively retain
substantially all the risks and benefits of ownership of the leased items, are
included in the determination of the operating surplus in equal instalments over
the lease term.

h) EXPENDITURE CARRIED FORWARD

Significant items of expenditure having a benefit or relationship to more
than one period are written off over the period to which they relate.

i) REVENUE RECOGNITION

Monthly service are recognised as revenue in the period the related
services are provided to the subscribers. Installation fees are recognised as
revenue to the extent of direct selling costs.

j) FOREIGN CURRENCIES

Transactions in foreign currencies are translated at the New Zealand rate
of exchange ruling at the date of transaction.

At balance date foreign monetary assets and liabilities are translated at
the closing rate, and exchange variations arising from these translations are
included in the statement of financial performance as operating items.

ADDITIONAL UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES DISCLOSURES

k) USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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 revenue and expenses during the reporting
period. Actual results could differ from these estimates.

l) CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and investments with original
maturities of less than three months.

m) NEW ACCOUNTING PRINCIPLES

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

The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 123 "Accounting for the Stock-Based

125

<PAGE>
SATURN COMMUNICATIONS LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1995

Compensation" ("SFAS 123") which is required to be adopted by affected companies
for fiscal years beginning after December 15, 1995. The Company does not believe
that the provisions of SFAS 123 will have a material effect on the Company's
reported results.

n) CHANGES IN ACCOUNTING POLICIEs

There have been no material changes in accounting policies during the year.
All policies have been applied on consistent bases with previous years.

2. DEFICIT BEFORE TAXATION

HAS BEEN DETERMINED

1994 1995
-------- --------
NZ$ NZ$
After charging:
Audit fees and expenses............ 15,080 6,000
Depreciation....................... 570,904 586,575
Interest........................... 8,151 82
Rental and leasing costs........... 71,804 77,489

3. SHARE CAPITAL

1994 1995
-------- --------
NZ$ NZ$
Issued 347,368 ordinary shares of $1.00 each
(1994 347,368 shares) fully paid......... 347,368 347,368
------- -------
347,368 347,368
======= =======

On 8 July 1994 United International Holdings, Inc, (UIH), a publicly listed
company incorporated in the USA, acquired a 50% interest in the company via the
issue of 173,684 shares by the company.

The shares were purchased by UIH at a price of $US14.39 ($NZ24.12), giving
rise to a share premium reserve at balance date of $US2,389,509 ($NZ4,005,883).

Also on the 8 July 1994 the balance of the Todd International loan account,
being $US 1,775,000 ($NZ2,975,692) after forgiveness of $US50,176 ($NZ84,117)
and repayment of $US900,000 ($NZ1,508,801), converted to equity.

126

<PAGE>

SATURN COMMUNICATIONS LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED 31 DECEMBER 1995

4. FIXED ASSETS
<TABLE>
<CAPTION>
1994
-----------------------------------
Accumulated Net Book
Cost Depreciation Value
-------- ------------ ----------
<S> <C> <C> <C>
Leasehold improvements................................. 121,516 (49,341) 72,175
Office equipment (including Finance Lease Assets)...... 227,909 (74,638) 153,271
Plant and equipment.................................... 2,895,750 (1,159,362) 1,736,388
Motor vehicles......................................... 52,376 (17,256) 35,120
--------- ---------- ---------
3,297,551 (1,300,597) 1,996,954
========= ========== =========
</TABLE>

<TABLE>
<CAPTION>
1995
-----------------------------------
Accumulated Net Book
Cost Depreciation Value
-------- ------------ ----------
<S> <C> <C> <C>
Leasehold improvements................................. 127,912 (74,197) 53,715
Office equipment (including Finance Lease Assets)...... 445,160 (143,085) 302,075
Plant and equipment.................................... 3,477,675 (1,640,460) 1,837,215
Motor vehicles......................................... 99,560 (29,430) 70,130
--------- ---------- ---------
4,150,307 (1,887,172) 2,263,135
========= ========== =========
</TABLE>

5. CONTINGENT LIABILITIES

There are no contingent liabilities outstanding at year end (1994: nil).

6. CAPITAL EXPENDITURE COMMITMENTS

Estimated capital expenditure contracted for at balance date but not
provided for NZ$659,235 (1994: nil).

7. OPERATING LEASE COMMITMENTS

At balance date the Company had the following operating lease commitments
for office space and certain vehicles:
<TABLE>
<CAPTION>
1995 1994
-------- --------
NZ$ NZ$
<S> <C> <C>
Payable:
within 1 year................................................ 449,982 84,985
between 1 and 2 years........................................ 457,468 82,535
between 2 and 3 years........................................ 357,915 80,031
between 3 and 4 years........................................ 233,425 52,487
between 4 and 5 years........................................ 233,425 52,487
greater than 5 years......................................... 571,989 393,653
--------- -------
2,304,204 746,178
========= =======

</TABLE>

127

<PAGE>

SATURN COMMUNICATIONS LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED 31 DECEMBER 1995

8. RELATED PARTIES

During the year ended December 31, 1995, Saturn Communications Limited were
involved in the following related party transactions:

United International Holdings, Inc
(significant shareholder)
Received funding.........................NZ$3,910,256 (1994: nil)

Funding was provided by United International Holdings for Saturn to
meet its day to day obligations. The funding has been provided interest free and
repayable on demand. Although the amount is repayable on demand, a call will not
be made until Saturn can afford to meet its day to day obligations and pay back
this funding.

An affiliate of Todd International
Limited (significant shareholder)
Received funding................... NZ$45,279 (1994: nil)

Todd provided funding allowing Saturn to meet its day to day obligations.

An affiliate of United International Holdings
Received payment of prior year balance
Cash Received........................... NZ$22,195 (1994: nil)
Balance Receivable...................... NZ$12,227 (1994: $34,422)

Saturn also have a receivable balance owing from:

Todd International Limited (significant
shareholder)
Receivable........................... NZ$191,337(1994: NZ$201,613)

The receivable from Todd International is denominated in US dollars and is
on interest free terms.

Funding was provided by United International Holdings for Saturn to meet
its day to day obligations. The funding has been provided interest free and
repayable on demand. Although the amount is repayable on demand a call will not
be made until Saturn can afford to meet its day to day obligations and pay back
this funding.

United International Holdings--Tahiti
(subsidiary of United International
Holdings, Inc.) Received payment of
prior year balance
Cash Received........................... NZ$ Nil (1994: $22,195)
Balance Receivable...................... NZ$ 12,227 (1994: $12,227)

Saturn also has the following balances with:

Todd International Limited (significant shareholder)
Receivable.............................. NZ$191,337(1994: $201,612)
Payable................................. NZ$ 45,279(1994: Nil)

The receivable from Todd International is denominated in US dollars and is
on interest free terms. The payable is denominated in New Zealand dollars and is
interest free repayable on demand.

128

<PAGE>

SATURN COMMUNICATIONS LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED 31 DECEMBER 1995

9. FINANCE LEASES

At 31 December the following finance lease existed:

Asset Lease
Value Liability
----- ---------
NZ$ NZ$

Canon photocopier and fax
1995........................................ 19,263 14,270
1994........................................ 24,400 23,701

The finance lease payment commitments as at balance date were payable:

1995 1994
---- ----
NZ$ NZ$

within 1 year................................ 7,752 9,431
between 1 and 2 years........................ 6,518 7,752
between 2 and 3 years........................ -- 6,718
------ ------
14,270 23,901
====== ======

10. RECONCILIATION OF NET DEFICIT AFTER TAXATION TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------
1994 1995
-------- --------
NZ$ NZ$
<S> <C> <C>
Net deficit after taxation................................... (1,973,540) (4,051,509)
Add non-cash items:
Depreciation............................................ 570,905 586,575
Provision for doubtful debts............................ -- 10,000
Add/(less) movements in working capital items
(Increase) in receivables and prepayments............... (48,358) (65,489)
(Increase)/decrease in inventories...................... (170,709) 10,635
Increase/(decrease) in accounts payable and accruals.... 134,897 19,293
Increase in employee entitlements....................... 11,945 38,193
---------- ----------
Net cash outflow from operations................... (1,474,860) (3,452,302)
========== ==========
</TABLE>

11. INCOME TAXATION

The Company has accumulated tax losses of approximately NZ$7,500,000 (1994:
NZ$3,785,650), tax effect NZ$2,475,000 (1994:NZ$1,249,330), carried forward and
available to offset against future assessable income. The benefit of these
losses has not been brought to account. The ability to utilise these losses will
not expire, subject to the company maintaining continuity of ownership and
meeting other requirements of income tax legislation.

The Company's net deferred tax asset is as follows:

As at December 31,
--------------------------
1994 1995
-------- --------
Net operating loss carryforward................ 1,249,330 2,475,000
Valuation allowance............................ (1,249,330) (2,475,000)
---------- ----------
Net deferred tax asset......................... -- --
========== ==========

129
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Denver,
State of Colorado, on this 31st day of March 1998.

UIH Australia/Pacific, Inc.
a Colorado corporation

By: /S/ J. Timothy Bryan
-------------------------------------
J. Timothy Bryan
Chief Financial Officer and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Report to be signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Title of Position
Signature Held With the Registrant
- --------- ------------------------
<S> <C> <C>
*
- ---------------------------------
Gene W. Schneider Chairman of the Board March 31, 1998

*
- ---------------------------------
Michael T. Fries Director, President and
Chief Executive Officer March 31, 1998
/S/ J. Timothy Bryan
- ---------------------------------
J. Timothy Bryan Director, Chief Financial
Officer and Treasurer March 31, 1998
/S/ Valerie L. Cover
- ---------------------------------
Valerie L. Cover Controller (Principal
Accounting Officer) March 31, 1998
*
- ---------------------------------
Mark L. Schneider Director March 31, 1998

* By: /S/ J. Timothy Bryan
---------------------------
J. Timothy Bryan
Attorney-in-fact
</TABLE>

130

<TABLE>
<CAPTION>
EXHIBIT 12.1 RATIO OF EARNINGS TO FIXED CHARGES.

For the Years Ended
December 31,
-------------------------------------------------------
1997 1996 1995 1994
--------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Pretax loss from continuing operations.................... $(168,056) $(87,986) $(17,233) $(1,674)

Add back:
Losses from less-than-50%-owned persons................ 2,286 4,503 4,327 551
Fixed charges:
Interest, whether expensed or capitalized, including
amortization of deferred financing costs........... 43,569 20,756 30 --
--------- -------- -------- -------

Adjusted earnings......................................... (122,201) (62,727) (12,876) (1,123)
Fixed charges............................................. (43,569) (20,756) (30) --
--------- -------- -------- -------
Ratio of earnings to fixed charges........................
Amount of coverage deficiency............................. $(165,770) $(83,483) $(12,906) $(1,123)
========= ======== ======== =======
</TABLE>

EXHIBIT 21.1 LIST OF SUBSIDIARIES.

Subsidiary Jurisdiction of Formation
---------- -------------------------

Auldana Beach Pty Limited Australia
Austar Entertainment Pty Limited Australia
Austar Retail Pty Limited Australia
Austar Satellite Pty Limited Australia
Austar Services Pty Limited Australia
Carryton Pty Limited Australia
Century United Programming Ventures Pty Limited Australia
CTV Pty Limited Australia
Dovevale Pty Limited Australia
Grovern Pty Limited Australia
Ilona Investments Pty Limited Australia
Jacolyn Pty Limited Australia
Keansburg Pty Limited Australia
Kidillia Pty Limited Australia
Kiwi Cable Company Limited New Zealand
Lystervale Pty Limited Australia
Maxi-Vu Pty Limited Australia
Minorite Pty Limited Australia
Orloff Pty Limited Australia
Palara Vale Pty Limited Australia
Saturn Communications Limited New Zealand
Selectra Pty Limited Australia
Societe Francaise des Communications et du Cable S.A. France
STV Pty Limited Australia
Telefenua S.A. French Polynesia
UIH AML, Inc. Colorado
UIH Austar, Inc. Colorado
UIH Austar Transponder, Inc. Colorado
UIH Australia Holdings, Inc. Colorado
UIH Australia/Pacific Finance, Inc. Colorado
UIH New Zealand Holdings, Inc. Colorado
UIH-SFCC, L.P. Colorado
UIH-SFCC Holdings, L.P. Colorado
UIH-SFCC II, Inc. Colorado
UIH XYZ Holdings, Inc. Colorado
United Wireless, Inc. Colorado
United Wireless Pty Limited Australia
Vermint Grove Pty Limited Australia
Vinatech Pty Limited Australia
Windytide Pty Limited Australia
Xtek Bay Pty Limited Australia
Yanover Pty Limited Australia

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------

As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated March 27, 1998 on UIH Australia/Pacific, Inc.
included in this Annual Report on Form 10-K, into previously filed Registration
Statement File No. 333-37651.

ARTHUR ANDERSEN LLP

Denver, Colorado
March 27, 1998

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference of our report dated 29 March 1996 on the consolidated financial
statements of CTV Pty Limited included in this Annual Report on Form 10-K, into
UIH Australia/Pacific, Inc.'s previously filed Registration Statement File No.
333-37651.

ARTHUR ANDERSEN

Sydney, Australia
March 27, 1998

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference of our report dated 29 March 1996 on the consolidated financial
statements of STV Pty Limited included in this Annual Report on Form 10-K, into
UIH Australia/Pacific, Inc.'s previously filed Registration Statement File No.
333-37651.

ARTHUR ANDERSEN

Sydney, Australia
March 27, 1998

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference of our report dated 20 February 1996 on the financial statements of
Saturn Communications Limited (formerly Kiwi Cable Company limited) included in
this Annual Report on Form 10-K, into UIH Australia/Pacific, Inc.'s previously
filed Registration Statement File No. 333-37651.

ARTHUR ANDERSEN

Wellington, New Zealand
March 27, 1998

CONSENT OF INDEPENDENT AUDITORS

As independent auditors, we hereby consent to the incorporation by reference of
our report dated 15 March 1996 on the financial statements of XYZ Entertainment
Limited included in UIH Australia/Pacific, Inc.'s ("UIH A/P") December 31, 1997
Annual Report on Form 10-K, into UIH A/P's previously filed Registration
Statement File No. 333-37651.

DELOITTE TOUCHE TOHMATSU

Sydney, Australia
March 26, 1998

CONSENT OF INDEPENDENT AUDITORS

As independent auditors, we hereby consent to the incorporation by reference of
our report dated 16 February 1996 on the financial statements of TELEFENUA S.A.
included in this Annual Report on Form 10-K, into UIH Australia/Pacific, Inc.'s
previously filed Registration Statement File No. 333-37651.

COOPERS & LYBRAND TAHITI

Jean-Pierre Gosse
Papeete, Tahiti
March 27, 1998

Power of Attorney

KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints J. Timothy Bryan his attorney-in-fact, with full
power of substitution, for him in any and all capacities, to sign the 1997
annual report on Form 10-K of UIH Australia/Pacific, Inc., a Colorado
corporation (the "Company"), to be filed with the Securities and Exchange
Commission (the "Commission"), and all amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Commission; granting unto said attorney-in-fact full power and authority to
perform any other act on behalf of the undersigned required to be done in the
premises, whereby ratifying and confirming all that said attorney-in-fact may
lawfully do or cause to be done on behalf of the Company by virtue hereof.

/S/ Gene W. Schneider
- -----------------------------
Gene W. Schneider March 25, 1998

/S/ Michael T. Fries
- -----------------------------
Michael T. Fries March 25, 1998

/S/ Mark L. Schneider
- -----------------------------
Mark L. Schneider March 25, 1998

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UIH
AUSTRALIA/PACIFIC, INC.'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 12,344
<SECURITIES> 0
<RECEIVABLES> 2,548
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,984
<PP&E> 261,280
<DEPRECIATION> 78,179
<TOTAL-ASSETS> 279,032
<CURRENT-LIABILITIES> 39,804
<BONDS> 387,094
0
0
<COMMON> 139
<OTHER-SE> (137,277)
<TOTAL-LIABILITY-AND-EQUITY> 279,032
<SALES> 0
<TOTAL-REVENUES> 68,961
<CGS> 0
<TOTAL-COSTS> 52,703
<OTHER-EXPENSES> 80,802
<LOSS-PROVISION> 4,784
<INTEREST-EXPENSE> 43,569
<INCOME-PRETAX> (168,056)
<INCOME-TAX> 0
<INCOME-CONTINUING> (168,056)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (168,056)
<EPS-PRIMARY> (12.12)
<EPS-DILUTED> 0

</TABLE>