JAMES CABLE FINANCE CORP, 10-K405, 1998-03-12

JAMES CABLE FINANCE CORP
10-K405, 1998-03-12
CABLE & OTHER PAY TELEVISION SERVICES

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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
/X/ SECURITIES EXCHANGE ACT OF 1934

For the fiscal 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 numbers 333-35183 and 333-35183-01

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

Delaware 38-2778219
Michigan 38-3182724
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

710 North Woodward Avenue, Suite 180 48304
Bloomfield Hills, Michigan (Zip Code)
(Address of Principal Executive Offices)

Registrants' telephone number, including area code: (248) 647-1080

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

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

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

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

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

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

The number of shares of James Cable Finance Corp. outstanding as of February
27, 1998 was 1,000.

DOCUMENTS INCORPORATED BY REFERENCE

None.

<PAGE> 2
TABLE OF CONTENTS

Page No.
<S> <C> <C>
PART I
Item 1. Business......................................................................... 2
General.................................................................. 2
Business Strategy........................................................ 2
Industry Overview........................................................ 4
The Systems.............................................................. 5
Programming and Subscriber Rates......................................... 8
Customer Service and Marketing........................................... 10
Technical Overview....................................................... 10
Franchises............................................................... 11
Competition.............................................................. 12
Legislation and Regulation............................................... 14
Insurance................................................................ 18
Employees................................................................ 19
Item 2. Properties....................................................................... 19
Item 3. Legal Proceedings................................................................ 19
Item 4. Submission of Matters to a Vote of Security Holders.............................. 20

PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters............ 20
Item 6. Selected Financial Data.......................................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 24
Overview.................................................................. 24
Results of Operations..................................................... 25
Liquidity and Capital Resources........................................... 26
Impact of Inflation and Changing Prices................................... 28
Year 2000 Compliance...................................................... 29
Effects of New Accounting Pronouncements.................................. 29
Forward-Looking Statements................................................ 29
Item 7A. Quantitative and Qualitative Disclosures About Market Risk....................... 32
Item 8. Financial Statements and Supplementary Data...................................... 32
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................................. 32

PART III
Item 10. Directors and Executive Officers................................................. 33
Item 11. Executive Compensation........................................................... 34
Item 12. Security Ownership of Certain Beneficial Owners and Management................... 35
Item 13. Certain Relationships and Related Transactions................................... 36

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................. 36

</TABLE>

<PAGE> 3

PART I

ITEM 1. BUSINESS

GENERAL:

James Cable Partners, L.P. ("James," and together with its wholly owned
subsidiary James Cable Finance Corp., the "Company") owns, operates and develops
cable television systems (the "Systems") serving rural communities in seven
geographically and economically diverse clusters. The Company's Systems are
operated under the name "CommuniComm Services" and are located in Oklahoma,
Texas, Georgia, Louisiana, Colorado, Wyoming, Tennessee, Alabama and Florida. As
of December 31, 1997, the Systems passed an estimated 129,291 homes and served
78,197 basic subscribers, representing a basic penetration of 60.5%. The
Company's goal is to maintain its position as the preferred provider of video
services, and to become the single hard wire broadband provider of enhanced
video services, advanced telecommunication services and telephony, in the
markets that it serves. James' principal executive offices are located at 710 N.
Woodward Avenue, Suite 180, Bloomfield Hills, Michigan 48304, and its telephone
number is (248) 647-1080.

James was formed as a limited partnership pursuant to the provisions of the
Delaware Revised Uniform Limited Partnership Act, a certificate of limited
partnership that was filed with the Secretary of State of Delaware on January
12, 1988, and an Amended and Restated Agreement of Limited Partnership dated as
of June 30, 1995, as amended (the "Partnership Agreement"). The purpose of
James' formation, as set forth in the Partnership Agreement, is to realize
capital appreciation through the ownership, control and operation of assets
comprising cable television systems. James will be dissolved upon the earliest
to occur of (i) December 31, 2005 (the "Term"), (ii) a determination by the
General Partner of James that James should be dissolved, with the approval of
60% of the Limited Partner interests, (iii) the sale or disposition by James of
substantially all of its assets, (iv) the consent of holders of 66 2/3% of the
Limited Partner interests of James, (v) the removal of the General Partner
pursuant to the terms of the Partnership Agreement, or (vi) the bankruptcy,
insolvency, dissolution or withdrawal of the General Partner. The Term can be
extended upon the affirmative vote of 66 2/3% of the Limited Partner interests
and the consent of the General Partner. In certain of the foregoing cases, the
Limited Partners may elect under the Partnership Agreement to reconstitute the
business of James in a new limited partnership with a new General Partner
elected by the Limited Partners.

Since its inception in 1988, James' business and affairs have been managed
and controlled by its general partner, James Communications Partners, a Michigan
co-partnership (the "General Partner"). The General Partner is managed and
controlled by its three general partners, Jamesco, Inc., Trenary Corp., Ltd, and
DKS Holdings, Inc. See "Part III-Item 10. Directors and Executive Officers." The
General Partner's principal executive office is located at 710 N. Woodward
Avenue, Suite 180, Bloomfield Hills, Michigan 48304 and its telephone number is
(248) 647-1080.

James Cable Finance Corp. ("Finance Corp.") is a wholly-owned subsidiary of
James that was incorporated under the laws of the State of Michigan on June 19,
1997 for the purpose of serving as a co-issuer with James of (i) the $100
million aggregate principal amount of 10 3/4% Senior Notes due 2004 that were
sold for cash on August 15, 1997 (the "Notes") and (ii) the $100 million
principal amount of 10 3/4% Series B Senior Notes due 2004 that the Company
exchanged for the Notes during the fourth quarter of 1997 (the "Exchange
Notes"). (For further descriptions of the Notes and the Exchange Notes, see
"Part II - Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters.") Finance Corp.'s only asset consists of $1,000 cash and there are
substantial contractual restrictions on its activities. Finance Corp.'s
principal executive office is located at 710 North Woodward Avenue, Suite 180,
Bloomfield Hills, Michigan 48304, and its telephone number is (248) 647-1080.

BUSINESS STRATEGY:

The Company believes that there are competitive and economic advantages to
owning and operating cable television systems in rural markets. Due to lower
population densities and higher per household plant installation

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costs, rural markets are more likely than larger urban and suburban
markets to have a single hard wire broadband video and telecommunications
service provider. In addition, cable television systems in rural markets are
typically characterized by lower churn rates and greater penetration than larger
urban and suburban markets. In rural markets, cable service often is required
for adequate reception of a full range of over-the-air television stations.
Moreover, fewer entertainment alternatives are available, and cable television
provides a major source of entertainment.

The Company focuses on maintaining and improving system operating results.
The Company has implemented extensive management, operational and technical
changes designed to improve operating efficiencies, enhance operating cash flow
and reduce overhead through economies of scale. To this end, the Company has
"clustered" its Systems in concentrated geographic areas, which allows fixed
costs to be spread over an expanded subscriber base. In an effort to further
enhance its operational and financial performance, the Company from time to time
considers opportunities to acquire or exchange its assets for cable television
systems located near its existing markets.

Management intends to solidify the Company's position as the preferred
provider of video services and to become the single hard wire broadband provider
of advanced telecommunications services and telephony in the communities that it
serves. The Company's business strategy is to (i) selectively upgrade the
Company's Systems, (ii) provide enhanced digital video, (iii) deliver advanced
telecommunications services, including Internet access, and (iv) pursue
strategic acquisitions.

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

In addition, the Company is upgrading the cable plant in a number of its
other Systems. The Company is nearing completion of the 750 MHz upgrade
of its cable plant in Hawkinsville and Cochran, Georgia (which serves
approximately 2,500 subscribers), and the 750 MHz upgrade of its cable
plant in Douglas, Torrington, Wheatland and Lingle, Wyoming (which
serves approximately 5,700 subscribers). Mapping and engineering are
underway to upgrade cable plants serving an additional 3,000 subscribers
in Georgia and 2,300 subscribers in Alabama. At December 31, 1997, the
Company had expended nearly $7 million upgrading its cable plant serving
approximately 12,500 subscribers to 750 MHz. The Company expects to
expend approximately $13 million to upgrade its cable plant in certain
systems serving an additional 19,000 subscribers to 750 MHz. The Company
may expend additional funds to upgrade additional cable plant if it is
economically feasible.

- Provide Enhanced Digital Video. The Company intends to provide
enhanced digital video in the upgraded Systems and certain other Systems
using Headend In The Sky(REGISTERED TRADEMARK) ("HITS"), a digital
compression service developed by National Digital Television Center,
Inc., a subsidiary of Telecommunications, Inc. HITS will enable the
Company to deliver video services such as pay-per-view programming and
a tier or multiple tiers

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of niche satellite programming. The Company believes that these enhanced
digital video services will allow it to provide a system comparable to
DBS at a lower cost. The Company plans to introduce HITS services in its
Durant System during the second quarter of 1998. The Company may
schedule introduction in other Systems after evaluating the success of
HITS services in Durant.

- Deliver Advanced Telecommunications Services, Including Internet
Access. The Company believes that upgraded advanced telecommunications
services will provide additional revenue opportunities with relatively
small incremental capital investment. The Company further believes that
cable infrastructure will provide the fastest, most cost-effective
delivery mechanism for Internet access, inter- and intra- network data
services and telephony. These advanced services should enable
subscribers to receive the Internet at a peak data transmission speed up
to 300 times faster than typical dial-up connections. The Company began
offering Internet services in Durant, Oklahoma during the fourth quarter
of 1997 and, at December 31, 1997, had approximately 44 Internet
customers. This new line of business, which is still in the early stages
of implementation, generated revenues of approximately $12,800 during
the fourth quarter of 1997. The Company is planning to launch Internet
services in certain other Systems during 1998.

In anticipation of providing telephony, the Company is seeking
switching capabilities. The Company has installed the required switch
interface equipment and installed customer premises equipment at
selected sites in the Durant System and plans to begin testing during
the first quarter of 1998. Although the Company does not currently have
the certification necessary to provide telephone service in Oklahoma and
must be certified by the Oklahoma Corporation Commission prior to doing
so, the Company believes that it can obtain the necessary certification.
However, there can be no assurance as to if or when such certification
will be obtained.

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

INDUSTRY OVERVIEW:

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

The cable television industry developed in the United States in the late
1940s and early 1950s in response to the needs of residents in predominantly
rural and mountainous areas of the country where the quality of off-air
television reception was inadequate due to factors such as topography and
remoteness from television broadcast towers. In the 1960s, cable systems also
developed in small and medium-sized cities and suburban areas that had a limited
availability of clear off-air television station signals. All of these markets
are regarded within the cable industry as "classic" cable television system
markets. In more recent years, cable television systems have been constructed in
large urban cities and nearby suburban areas, where good off-air reception from
multiple television stations usually

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is already available, in order to offer customers the numerous
satellite-delivered channels typically carried by cable systems that are not
otherwise available through broadcast television reception.

Cable television systems offer customers various levels (or "tiers") of
cable services consisting of broadcast television signals of local network
affiliates, independent and educational television stations, a limited number of
television signals from so-called "super stations" originating from distant
cities (such as WGN), various satellite-delivered, non-broadcast channels (such
as Cable News Network ("CNN"), MTV: Music Television ("MTV"), the USA Network
("USA"), ESPN and Turner Network Television ("TNT")), programming originated
locally by the cable television system (such as public, governmental and
educational access programs) and informational displays featuring news, weather
and public service announcements. For an extra monthly charge, cable television
systems also offer "premium" television services to customers on a per-channel
basis. These services (such as Home Box Office ("HBO"), Showtime and selected
regional sports networks) are satellite channels that consist principally of
feature films, live sporting events, concerts and other special entertainment
features, usually presented without commercial interruption.

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

THE SYSTEMS:

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

<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Homes passed(1) 127,863 127,943 128,908 129,291 129,291
Basic subscribers(2) 79,414 80,529 80,190 78,449 78,197
Basic penetration(3) 62.1% 62.9% 62.2% 60.7% 60.5%
Basic revenues(4) $24,693 $ 25,096 $ 26,914 $ 29,087 $ 29,978
Average monthly basic
revenues per subscriber(5) $ 25.90 $ 26.16 $ 27.93 $ 30.47 $ 31.92
Premium subscriptions(6) 28,064 28,765 28,900 25,652 24,076
Premium penetration(7) 35.3% 35.7% 36.0% 32.7% 30.8%
Average monthly total revenues
per subscriber(5) $ 31.49 $ 32.17 $ 34.56 $ 36.89 $ 38.10
Average annual system operating
cash flow per subscriber(8) $ 200 $ 206 $ 227 $ 238 $ 235
Average annual EBITDA
per subscriber(9) $ 172 $ 179 $ 199 $ 207 $ 202
Miles of plant 3,430 3,430 3,483 3,483 3,483

</TABLE>

- ----------

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

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(2) For purposes of all information presented herein, and unless otherwise
indicated, the number of basic subscribers for the Systems has been
computed by adding the actual number of subscribers for all non-bulk
accounts and the equivalent subscribers for all bulk accounts. The number
of such equivalent subscribers has been calculated by dividing aggregate
basic service revenues for bulk accounts by the full basic service rate for
the community in which the account is located

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

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

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

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

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

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

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

The Company's Systems are divided into seven geographic groups
("Clusters"). The following table summarizes certain operating data at and for
the year ended December 31, 1997 for the individual Clusters.

<TABLE>
<CAPTION>
ANNUALIZED
PERCENT OF AVERAGE SYSTEM
ALL MONTHLY OPERATING SYSTEM
SYSTEMS TOTAL CASH FLOW OPERATING
HOMES BASIC BASIC BASIC PREMIUM PREMIUM REVENUE PER PER CASH FLOW
CLUSTER PASSED SUBSCRIBERS SUBSCRIBERS PENETRATION SUBSCRIPTIONS PENETRATION SUBSCRIBER SUBSCRIBER MARGIN
------- ------ ----------- ----------- ----------- ------------- ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oklahoma/Texas.. 33,413 16,979 21.7% 50.8% 3,954 23.3% $ 37.43 $ 216 48.1%
Georgia......... 19,586 13,896 17.8 70.9 5,231 37.6 38.22 243 53.1
Louisiana....... 22,451 12,792 16.4 57.0 4,154 32.5 39.16 238 50.6
Colorado/Wyoming 15,000 9,897 12.6 66.0 3,389 34.2 36.71 221 50.2
Tennessee....... 14,470 9,628 12.3 66.5 2,256 23.4 38.02 261 57.3
Alabama......... 13,955 8,472 10.8 60.7 2,235 26.4 36.35 238 54.6
Florida......... 10,416 6,533 8.4 62.7 2,857 43.7 42.10 237 46.8
------- ------ ------ ------
Totals...... 129,291 78,197 100.0% 60.5% 24,076 30.8% $ 38.10 $ 235 51.4%
======= ====== ====== ======
</TABLE>

The Oklahoma/Texas Cluster. The Oklahoma/Texas Cluster is comprised of
Systems that were acquired in 1988 and 1989, and serves rural communities in
southeastern Oklahoma north of Dallas, Texas and in northern Texas northwest of
Fort Worth. Since 1988, the Company has made $10.8 million in capital
expenditures improving the plant and operations in this Cluster. These
improvements include upgrading many of the Systems to 450 MHz 60-channel
capacity plant, installing three microwave complexes (eliminating the need for
eight separate headends), and upgrading the Durant System to a 750 MHz hybrid
fiber optic-backbone/coaxial ("HFC") cable system.

The Company has consolidated the administrative and customer service
operations for these Systems into one main office located in Durant, Oklahoma.
This office provides all customer support, billing, marketing and technical
operations for the Oklahoma/Texas Cluster.

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The primary employer in the Oklahoma/Texas Cluster's area is the oil and
gas industry. Small manufacturing companies also provide employment, as does
farming and ranching. At December 31, 1997, the number of homes passed in the
Oklahoma/Texas Cluster was estimated to be 33,413 and the number of basic
subscribers and premium subscriptions were 16,979 and 3,954, respectively.

The Georgia Cluster. The Georgia Cluster is comprised of Systems that were
acquired in three transactions in 1988 and serves rural communities in central
Georgia located east of Atlanta and south of Macon. Since 1988, the Company has
made $6.2 million in capital improvements to the Georgia Cluster. The Company is
nearing completion of the 750 MHz upgrade of its cable plant in Hawkinsville and
Cochran, Georgia. As part of its contemplated $13 million cable plant upgrade,
the Company is developing plans to upgrade its cable plant in other Georgia
communities.

The Georgia Cluster, as of December 31, 1997, passed an estimated 19,586
homes and had 13,896 basic subscribers and 5,231 premium subscriptions. The
Systems in this Cluster operate primarily out of one office located in Eatonton,
Georgia, where all customer service, billing, marketing and technical operations
are centralized. These Systems have seen subscriber growth of roughly 18% since
acquisition.

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

The Louisiana Cluster. The Louisiana Cluster is comprised of Systems that
were acquired in three transactions in 1988 and serves rural communities in
Louisiana and Texas located near Lake Charles, Louisiana. Since its acquisition
of the Systems in this Cluster, the Company has made $7.5 million in capital
expenditures, upgrading virtually all of these Systems to 450 MHz 60-channel
plants and installing three microwave complexes eliminating the need for eight
headends. At December 31, 1997, the estimated number of homes passed for this
Cluster was 22,451 and the number of basic subscribers and premium subscriptions
was 12,792 and 4,154, respectively.

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

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

The Colorado/Wyoming Cluster. The Colorado/Wyoming Cluster is comprised of
Systems that were acquired in 1988 and serves rural communities located east of
Denver, Colorado and north and west of Cheyenne, Wyoming. This geographically
diverse group of Systems is operated from an administrative office in Fort
Collins, Colorado, with technical operations centrally located in Wheatland,
Wyoming. Since these Systems were acquired, the Company has made $4.3 million in
capital expenditures to improve plant reliability, reception and service. The
Company is nearing completion of the 750 MHz upgrade of the Systems serving
approximately 5,700 subscribers in Douglas, Torrington, Wheatland and Lingle,
Wyoming.

The economy in the Colorado/Wyoming Cluster's area is largely dependent on
ranching and farming, the oil and gas industry, and mining. At December 31,
1997, the estimated number of homes passed in this Cluster was 15,000 and the
number of basic subscribers and premium subscriptions was 9,897 and 3,389,
respectively.

The Tennessee Cluster. The Tennessee Cluster is comprised of Systems that
were acquired in July, 1988 and serves rural communities north and west of
Knoxville, Tennessee. Since its acquisition of the Systems in this Cluster, the
Company has made $5.0 million in capital expenditures, improving plant
reliability, reception and service as well as providing for the availability of
additional channels. Approximately half of these Systems have been upgraded to
450 MHz 60-channel capacity plants. In addition, the Company has installed a
microwave complex

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serving over 95% of the subscribers in this Cluster, thereby eliminating
the need for three of the original headends. All customer service, technical,
administrative and marketing services are centralized in one office in Wartburg,
Tennessee.

The economy in the Tennessee Cluster is largely supported by a number of
small manufacturing plants. The Tennessee Valley Authority and the Departments
of Energy and Defense also provide employment in the Tennessee Cluster's
communities. At December 31, 1997, the estimated number of homes passed in this
Cluster was 14,470; the number of basic subscribers and premium subscriptions
was 9,628 and 2,256, respectively.

The Alabama Cluster. The Company acquired the Systems comprising the
Alabama Cluster primarily in four transactions in 1988 and 1989. These Systems
are divided into two groups, with one group serving the rural communities
located on the western edge of the state west of Birmingham, Alabama, and the
other group serving communities located south and east of Birmingham, between
Birmingham and Atlanta, Georgia. Since its acquisition of the Systems in this
Cluster, the Company has made $3.4 million in capital expenditures, improving
the channel capacity in many of these Systems and improving reliability and
channel offerings. In the Systems serving eastern Alabama, six separate headends
have been consolidated into one microwave complex. Additionally, engineering is
underway to upgrade the cable plant serving Roanoke, Alabama to 750 MHz.

The operations of the Alabama Cluster are managed from one main office
located in Roanoke, Alabama. All customer service, administrative, technical and
marketing functions have been centralized into the main office. The Alabama
Cluster, as of December 31, 1997, passed an estimated 13,955 homes and had 8,472
basic subscribers and 2,235 premium subscriptions.

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

The Florida Cluster. The Florida Cluster is comprised of Systems that were
acquired in 1988 and serves several rural communities located near Gainesville,
Florida. Since May 1988, the Company has made $5.4 million in capital
expenditures in this Cluster. The Company has installed a microwave complex,
which eliminated the need for three headends, and has upgraded the majority of
its cable television plant in this Cluster to 450 MHz with 60 channels of
capacity. The majority of the Systems in this Cluster have been consolidated on
one microwave complex, which reduced maintenance and equipment costs.

The Company's Florida Cluster operates from a centralized office in High
Springs, Florida. All administrative, customer service, technical and marketing
functions are coordinated from this location. The Florida Cluster, as of
December 31, 1997, passed an estimated 10,416 homes and had 6,533 basic
subscribers and 2,857 premium subscriptions.

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

PROGRAMMING AND SUBSCRIBER RATES:

The Company has various contracts to obtain basic, satellite and premium
programming for the Systems from program suppliers, including, in limited
circumstances, some broadcast stations, with compensation generally based on a
fixed fee per customer or a percentage of the gross receipts for the particular
service. Some program suppliers provide volume discount pricing structures
and/or offer marketing support. In addition, the Company is a member of a
programming consortium consisting of small to medium sized multiple system
operators and individual cable systems serving, in the aggregate, over eight
million cable subscribers. The consortium helps create efficiencies in the areas
of securing and administering programming contracts, as well as to establish
more favorable programming rates and contract terms for small and medium sized
cable operators. The Company does not have long-term programming contracts for
the supply of a substantial amount of its programming, due in part to ongoing
negotiations with a number of its programming suppliers, but also due to the
Company's belief that it is in its best

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interests to enter into long-term programming contracts only if
additional benefits are derived from the contractual arrangements. In cases
where the Company does have such contracts, they are generally for fixed periods
of time ranging from one to five years and are subject to negotiated renewal.
While the loss of contracts with certain of the Company's programming suppliers
could have an adverse effect on its results of operations, management does not
believe the risk of such a loss is particularly great due to the substantial
motivation of programming suppliers to obtain the widest possible audience for
their products.

Cable programming costs are expected to continue to increase primarily due
to additional programming being provided to customers, increased costs to
purchase cable programming and inflationary increases. In 1995, 1996 and 1997,
programming costs as a percentage of revenues were 17.2%, 16.9% and 18.3%,
respectively. No assurance can be given that the Company's programming costs
will not increase substantially in the near future or that other materially
adverse terms will not be added to its programming contracts.

The Systems offer their customers programming that includes the local
network, independent and educational television stations, a limited number of
television signals from distant cities, numerous satellite-delivered,
non-broadcast channels (such as CNN, MTV, USA, ESPN and TNT) and in some systems
local information and public access channels. The programming offered by the
Company varies among the Systems depending upon each System's channel capacity
and viewer interests. Primarily for competitive reasons, the Company generally
endeavors to offer a single level of basic service containing all broadcast and
satellite-delivered programming. In a few Systems, however, the Company does
offer up to three tiers of basic cable television programming: a broadcast basic
programming tier (consisting generally of network and public television signals
available over-the-air), a satellite programming tier (consisting generally of
satellite-delivered programming such as CNN, USA, ESPN and TNT) and a super
station tier consisting of the so-called "super stations" (for example, WGN).
The Company also offers premium programming services, both on a per-channel
basis and in many Systems as part of premium service packages designed to
enhance customer perceived value.

Monthly customer rates for services vary from market to market, primarily
according to the amount of programming provided. At December 31, 1997, the
Company's monthly full basic service rates for residential customers ranged from
$13.95 to $35.00 and per-channel premium service rates (not including special
promotions) ranged from $5.95 to $12.95 per service. At December 31, 1997, the
weighted average price for the Company's monthly full basic service was
approximately $32.70.

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

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

Other potential sources of revenue for cable television systems include the
lease of tower space to cellular telephone, personal communications services
("PCS"), and paging companies and other transmission businesses and the sale of
programming featuring movies and special events to customers on a pay-per-view
basis, which requires the use of addressable technology not presently employed
by the Company. Although the Company does not currently offer pay-per-view
programming, it intends to do so in the future in those Systems where it plans
to launch the HITS service.

While the Company plans to offer advanced telecommunications services and
telephony in certain of its Systems, it anticipates that monthly customer fees
from cable television will continue to constitute the majority of its total
revenues for the foreseeable future.

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<PAGE> 11

CUSTOMER SERVICE AND MARKETING:

The Company emphasizes customer service, which it believes is increasingly
important to the successful operation of its business. To meet its objective of
providing high levels of customer service, the Company offers its customers a
full line-up of programming, timely and reliable service (with virtually all
service inquiries responded to within 24 hours) and good picture quality. The
Company's employees receive ongoing training in customer service, sales and
subscriber retention and technical support. Customer service representatives and
technicians are also trained to market upgrades at the point of sale or service.
In addition, the Company has attempted to establish and to maintain a local
presence and visibility within the communities it serves.

As part of its efforts to maximize cash flow, the Company has sought to add
and retain subscribers and increase cash flow per subscriber by aggressively
marketing its basic and premium service offerings. The Company utilizes a number
of coordinated marketing techniques, including (i) direct door to door sales,
(ii) local newspaper and radio advertising and cable system promotional
advertising insertion in certain satellite programs, (iii) direct mail, (iv)
telemarketing, primarily for premium service subscriptions, and (v) monthly
billing statement inserts.

TECHNICAL OVERVIEW:

The following table sets forth certain information regarding the analog
channel capacities and miles of plant of the Systems:

<TABLE>
<CAPTION>
300 MHZ 330 MHZ(1) 400 MHZ 450 MHZ 750 MHZ(1)
UP TO 36 UP TO 42 UP TO 54 UP TO 62 UP TO 100
CHANNELS CHANNELS CHANNELS CHANNELS CHANNELS TOTAL
-------- ---------- -------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Number of headends....... 13 22 2 13 2 52
Number of subscribers as
of December 31, 1997.... 14,637 21,767 2,095 32,915 6,783 78,197
% of subscribers......... 18.7% 27.8% 2.7% 42.1% 8.7% 100.0%
Miles of plant........... 739 988 46 1,504 206 3,483
% miles of plant......... 21.2% 28.4% 1.3% 43.2% 5.9% 100.0%

</TABLE>

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

(1) At December 31, 1997 only the Systems serving Durant, Oklahoma and
Hawkinsville and Cochran, Georgia were at 750 MHz, and the upgrading of the
Systems serving Douglas, Torrington, Wheatland and Lingle, Wyoming was nearing
completion. If the latter upgrading had been completed at December 31, 1997,
then three headends, 5,740 subscribers and 148 miles of plant would have been
upgraded from 330 MHz to 750 MHz. The upgrading of the Systems serving Douglas,
Torrington, Wheatland and Lingle, Wyoming is expected to be completed by the end
of the second quarter of 1998.

The Company completed the upgrade of its Durant System to 750 MHz in 1997.
The upgrade of this cable plant, which serves approximately 4,300 subscribers,
improved picture quality and reliability and enabled the Company to increase the
number of channels offered by the Durant System from 40 to 60, with the
potential for future expansion to 100 channels (or more using digital
technology). In addition, the Company is upgrading the cable plant in a number
of its other Systems. The Company is nearing the completion of the 750 MHz
upgrade of its cable plant in Hawkinsville and Cochran, Georgia (which serves
approximately 2,500 subscribers), and the 750 MHz upgrade of its cable plant in
Douglas, Torrington, Wheatland and Lingle, Wyoming (which serves approximately
5,700 subscribers). Mapping and engineering are underway to upgrade cable plants
serving an additional 3,000 subscribers in Georgia and 2,300 subscribers in
Alabama. At December 31, 1997, the Company had expended nearly $7 million
upgrading its cable plant serving approximately 12,500 subscribers to 750 MHz.
The Company expects to expend approximately $13 million to upgrade its cable
plant in certain systems serving an additional 19,000 subscribers to 750 MHz.
The Company may expend additional funds to upgrade additional cable plant if it
is economically feasible.

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<PAGE> 12

The Company's Systems have an average capacity of 55 channels. The Company
currently does not use any addressable technology. The Company utilizes a "trap"
scheme whereby a technician installs filters, or traps, at each cabled home
enabling the technician to configure the programming received by each
subscriber. Upon completion of a System upgrade, the Company will enable digital
addressable technology to certain of its subscribers to take advantage of the
HITS service. That service transmits digitally compressed signals of niche
satellite programming, multiplexed premium services, pay-per-view movies and
music for reception by cable systems, which in turn deliver them to their
subscribers.

The majority of the Company's Systems are wired exclusively with coaxial
cable; the remaining Systems utilize fiber optic cable in conjunction with
coaxial cable. Fiber optic strands are capable of carrying hundreds of video,
data and voice channels over extended distances without the extensive signal
amplification typically required for coaxial cable. The Company plans to use an
HFC design across those portions of its cable plant that serve its highest
subscriber densities to most efficiently upgrade the Systems to 750 MHz.
Additionally, the Company plans to use fiber optic technology to interconnect
certain headends and install fiber backbones to reduce amplifier cascades,
thereby gaining operational efficiencies and improved picture quality and system
reliability.

FRANCHISES:

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

At December 31, 1997, the Company held 132 franchises. These franchises,
substantially all of which are non-exclusive, generally provide for the payment
of fees to the issuing authority. Annual franchise fees range up to 5% of the
gross revenues generated by a System. For the past three years, franchise fee
payments made by the Company have averaged approximately 2.5% of total gross
System revenues. Franchise fees are generally passed directly through to the
customers on their monthly bills. General business or utility taxes may also be
imposed in various jurisdictions. The 1984 Cable Act prohibits franchising
authorities from imposing franchise fees in excess of 5% of gross revenues and
also permits the cable operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances. Most of the
Company's franchises can be terminated prior to their stated expirations for
uncured breaches of material provisions.

The following table sets forth the number of franchises by year of
franchise expiration and the number and percentage of basic subscribers at
December 31, 1997:

<TABLE>
<CAPTION>
NUMBER PERCENTAGE NUMBER PERCENTAGE
YEAR OF OF OF TOTAL OF BASIC OF BASIC
FRANCHISE EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS
-------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to 2000 8 5.5% 4,744 6.1%
2000-2004 44 30.3 27,472 35.1
2005-2008 31 21.4 20,090 25.7
2009 and after 45 31.0 20,230 25.9
No expiration 4 2.8 1,371 1.7
--- ---- ------ ------
Subtotal 132 91.0 73,907 94.5
No franchise required 13 9.0 4,290 5.5
--- ---- ------ ------
Total 145 100.0% 78,197 100.0%
=== ===== ====== =====
</TABLE>

-11-
<PAGE> 13

The Company believes that it has good relationships with its franchising
authorities. To date, the Company has never had a franchise revoked for any of
its Systems, and no request of the Company for franchise renewals or extensions
has been denied, although such renewed or extended franchises have frequently
resulted in franchise modifications on satisfactory terms.

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

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

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

COMPETITION:

Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast programming,
DBS services, wireless cable services, newspapers, movie theaters, live sporting
events, online computer services and home video products, including videotape
cassette recorders. The extent to which a cable communications system is
competitive depends, in part, upon the cable system's ability to provide, at a
reasonable price to customers, a greater variety of programming and other
communications services than those which are available off-air or through other
alternative delivery sources and upon superior technical performance and
customer service.

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

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

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<PAGE> 14

remains small, there appears to be an increasing trend in cities authorizing
such direct municipal competition with cable operators. (One such city is
Forsyth, Georgia. See "Item 3. Legal Proceedings.")

In recent years, the Federal Communications Commission ("FCC") and the
Congress have adopted policies providing a more favorable operating environment
for new and existing technologies that provide, or have the potential to
provide, substantial competition to cable television systems. These technologies
include, among others, DBS service, whereby signals are transmitted by satellite
to receiving facilities located on customer premises. Programming is currently
available to the owners of DBS dishes through conventional, medium and
high-powered satellites. DBS systems have increased channel capacity to over
100, enabling them to provide movies, broadcast stations, and other program
service comparable to those of cable television systems. The 1992 Cable Act
contains provisions, which the FCC has implemented with regulations, to enhance
the ability of cable competitors to purchase and make available to home
satellite dish owners certain satellite delivered cable programming at
competitive costs. Digital satellite service ("DSS") offered by DBS systems has
certain advantages over cable systems with respect to programming and digital
quality, as well as disadvantages that include high upfront costs and a lack of
local programming, service and equipment distribution. With respect to the
inability of DBS to provide local broadcast television programming to
subscribers in their local markets, Echostar and other potential DBS providers
have announced their intention to retransmit local broadcast television stations
back into a subscriber's local market. Both Congress and the U.S. Copyright
Office are currently reviewing proposals to allow such transmission and it is
possible that in the near future, DBS systems will be retransmitting local
television broadcast signals back into local television markets. The Company's
strategy of providing pay-per-view and perhaps satellite niche programming via
the HITS application in certain of its Systems is designed to combat DSS
competition. "Bundling" of the Company's video service with advanced
telecommunications services in certain of the Company's Systems may also be an
effective tool for combating DSS competition. The principal DBS systems with
which the Company's Systems compete are DirectTV, Echostar and Primestar.

Cable television systems also compete with wireless program distribution
services such as multichannel multipoint distribution service ("MMDS") which
uses low power microwave to transmit video programming over the air to
customers. Additionally, the FCC is expected to license Local Multipoint
Distribution Service ("LMDS") systems this year, which can provide multichannel
wireless video services in the 28 gigahertz ("GHz") band. LMDS is also suited
for providing wireless data services, including the possibility of Internet
access. Wireless distribution services generally provide many of the programming
services provided by cable systems, and digital compression technology may
increase significantly the channel capacity of the systems. Because MMDS service
requires unobstructed "line of sight" transmission paths, the ability of MMDS
systems to compete may be hampered in some areas by physical terrain and
foliage. Although prohibitive topography and limited "line of sight" access have
limited competition from MMDS systems in a majority of the Company's franchise
service areas, the Company has experienced such competition in portions of its
Systems in Oklahoma, Texas, Louisiana and Florida.

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

The 1996 Telecom Act's provisions promoting facilities-based broadband
competition are primarily targeted at larger markets, and its prohibition on buy
outs and joint ventures between incumbent cable operators and LECs exempts small
operators and carriers meeting certain criteria. The Company believes that
significant growth opportunities exist by establishing cooperative rather than
competitive relationships with LECs within service areas, to the extent
permitted by law.

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<PAGE> 15

Other new technologies may become competitive with non-entertainment
services that cable television systems can offer. The FCC has authorized
television broadcast stations to transmit textual and graphic information useful
both to consumers and businesses. The FCC also permits commercial and
noncommercial FM stations to use their subcarrier frequencies to provide
nonbroadcast services including data transmissions. The FCC has established an
over-the-air Interactive Video and Data Service that will permit two-way
interaction with commercial and educational programming along with informational
and data services. The expansion of fiber optic systems by LECs and other common
carriers is providing facilities for the transmission and distribution to homes
and businesses of video services, including interactive computer-based services
like the Internet, data and other nonvideo services. The FCC has held spectrum
auctions for licenses to provide PCS. PCS will enable license holders, including
cable operators, to provide voice and data services.

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

LEGISLATION AND REGULATION:

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

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

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

Although the FCC rules control, local government units (commonly referred
to as local franchising authorities or "LFAs") are primarily responsible for
administering the regulation of the lowest level of cable - the basic service
tier ("BST"), which typically contains local broadcast stations and public,
educational, and government ("PEG") access channels. Before an LFA begins BST
rate regulation, it must certify to the FCC that it will follow applicable
federal rules, and many LFAs have voluntarily declined to exercise this
authority. LFAs also have primary responsibility for regulating cable equipment
rates. Under federal law, charges for various types of cable equipment must be
unbundled from each other and from monthly charges for programming services. The
1996 Telecom Act allows operators to aggregate costs for broad categories of
equipment across geographic and functional lines. This change should facilitate
the introduction of new technology.

The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only if
an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.

Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel

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<PAGE> 16

carriage. The FCC has modified its rate adjustment regulations to allow
for annual rate increases and to minimize previous problems associated with
regulatory lag. Operators also have the opportunity of bypassing this
"benchmark" regulatory scheme in favor of traditional "cost-of-service"
regulation in cases where the latter methodology appears favorable. Premium
cable services offered on a per-channel or per-program basis remain unregulated,
as do affirmatively marketed packages consisting entirely of new programming
product. Federal law requires that the BST be offered to all cable subscribers,
but limits the ability of operators to require purchase of any CPST before
purchasing premium services offered on a per-channel or per-program basis.

In an effort to ease the regulatory burden on small cable systems, the FCC
has created special rate rules applicable for systems with fewer than 15,000
subscribers owned by an operator with fewer than 400,000 subscribers. The
special rate rules allow for a vastly simplified cost-of-service showing. The
Company is eligible for these simplified cost-of-service rules, and has
calculated its rates generally in accordance with those rules. The 1996 Telecom
Act provides additional relief for small cable operators. For franchising units
with less than 50,000 subscribers and owned by an operator with less than one
percent of the nation's cable subscribers (i.e., approximately 600,000
subscribers) that is not affiliated with any entities with aggregate annual
gross revenues exceeding $250 million, CPST rate regulation is automatically
eliminated. The Company does not now qualify for this additional relief because
certain investors in the Company exceed the annual gross revenue standard and
are deemed to be "affiliates" under current FCC rules. This definition of
"affiliate" is under review by the FCC, and may be modified in the future to
qualify the Company as a small cable operator.

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

Cable Entry Into Telecommunications. The 1996 Telecom Act provides that no
state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles (beginning in
2001) if the operator provides telecommunications service, as well as cable
service, over its plant.

Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. In July 1997, the Eighth
Circuit Court of Appeals vacated certain aspects of the FCC's initial
interconnection order and that decision is now pending before the Supreme Court.
However, the underlying statutory obligation of local telephone companies to
interconnect with competitors remains in place.

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

Under the 1996 Telecom Act, a LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects

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<PAGE> 17

to provide its programming via an "open video system" ("OVS"). To
qualify for OVS status, the LEC must reserve two-thirds of the system's
activated channels for unaffiliated entities.

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

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

Additional Ownership Restrictions. The 1996 Telecom Act eliminates
statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems. The 1996 Telecom Act also eliminates the three year holding
period required under the 1992 Cable Act's "anti-trafficking" provision. The
1996 Telecom Act leaves in place existing restrictions on cable cross-ownership
with satellite master antenna television ("SMATV") and MMDS facilities, but
lifts those restrictions where the cable operator is subject to effective
competition. FCC regulations permit cable operators to own and operate SMATV
systems within their franchise area, provided that such operation is consistent
with local cable franchise requirements.

Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services. A companion rule establishing
a nationwide ownership cap on any cable operator equal to 30% of all domestic
cable subscribers has been stayed pending further judicial review. The FCC is
currently conducting a reconsideration of its national subscriber ownership
rules and it is possible the FCC will revise both the national subscriber reach
percentage limitation and the manner in which it attributes ownership to a cable
operator.

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

Must Carry/Retransmission Consent. The 1992 Cable Act conveyed to a
commercial broadcaster the right generally to elect every three years either to
require (i) the local cable operator to carry its signals ("must carry") or (ii)
that such operator obtain the broadcaster's retransmission consent before doing
so. The Company has been able to reach agreements with all of the broadcasters
who elected retransmission consent and has not been required by broadcasters to
remove any broadcast stations from the cable television channel line-ups. The
Company has, however, agreed in limited circumstances to the direct payment of
nominal fees for carriage and, again in limited circumstances, to carry
satellite-delivered cable programming which is affiliated with the network
carried by such stations. To date, compliance with the "retransmission consent"
and "must carry" provisions of the 1992 Cable Act has not had a material effect
on the Company, although this result may change in the future depending on such
factors as market conditions, channel capacity and similar matters when such
arrangements are renegotiated. In particular, the burden associated with
must-carry obligations could dramatically increase if television broadcast
stations proceed with planned conversions to digital transmissions and if the
FCC determines that cable systems must carry all analog and digital signals
transmitted by the television stations.

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

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<PAGE> 18

In February 1997, the FCC released revised rules which mandated a
modest rate reduction which has made commercial leased access a more attractive
option for third party programmers, particularly for part-time leased access
carriage. Further, a group of commercial leased access users has challenged the
FCC's February 1997 Order as failing to reduce commercial leased access rates
by an appropriate amount. If this pending court challenge is successful, the
FCC will be forced to undertake a further rulemaking which could result in
significantly reduced commercial leased access rates thereby encouraging a much
more significant increase in the use of commercial leased access channels.

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

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

Other FCC Regulations. In addition to the FCC regulations noted above,
there are other FCC regulations covering such areas as equal employment
opportunity, subscriber privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local
sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards and consumer electronics equipment compatibility. FCC requirements
imposed in 1997 for Emergency Alert Systems and for providing hearing impaired
Closed Captioning on programming will result in new and potentially significant
costs for the Company. The FCC has the authority to enforce its regulations
through the imposition of substantial fines, the issuance of cease and desist
orders and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
used in connection with cable operations.

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

Internet Service Regulation. The Company began offering high-speed Internet
service to subscribers in 1997. At this time, there is no significant federal or
local regulation of cable system delivery of Internet services. However, as the
cable industry's delivery of Internet services develops, it is possible that
greater federal and/or local regulation could be imposed.

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

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<PAGE> 19

programming. In addition, the cable industry pays music licensing fees to BMI
and is negotiating a similar arrangement with ASCAP. Copyright clearances for
nonbroadcast programming services are arranged through private negotiations.

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

The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. Although LFAs have
considerable discretion in establishing franchise terms, there are certain
federal limitations. For example, LFAs cannot insist on franchise fees exceeding
5% of the system's gross revenues, cannot dictate the particular technology used
by the system, and cannot specify video programming other than identifying broad
categories of programming.

Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises. However, there
can be no assurance that renewal will be granted or that renewals will be made
on similar terms and conditions.

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

INSURANCE:

The Company has insurance covering risks incurred in the ordinary course of
business, including general liability, property coverage and business
interruption insurance. As is typical in the cable television industry, the
Company does not maintain insurance covering its underground plant. Furthermore,
on the advice of its insurance agent, to avoid the expense of being "over
insured," in 1994 the Company reduced its casualty insurance coverage (which
covers losses due to damage to its facilities and related business interruption)
from $15 million per occurrence to $10 million per occurrence for each of its
Systems (other than those in Florida and Louisiana). Because of the
industry-wide casualty insurance reductions that resulted from insurers' loss
experience with several hurricanes in the southeastern portion of the United
States, the Company's casualty insurance in Florida and Louisiana was ultimately
reduced to $1 million per occurrence. All of the Company's casualty insurance
coverage is subject to deductibles ranging between $10,000 and $100,000 per
occurrence. The Company believes that its Systems in Florida and Louisiana are
located in areas that are not subject to a high degree of risk from hurricanes,
or from ice storms (which do pose a significant risk for its Systems in other
areas), and that losses in excess of its existing coverage would be unlikely. If
the Company is unable to maintain adequate casualty insurance it will be subject
to a potential reduction in cash flow in the event of a loss in excess of its
policy limits, and if a significant loss were to occur, it could have a material
adverse effect on the Company's financial condition and results of operations.
Notwithstanding the foregoing, the Company believes that the amounts and types
of its insurance coverage are commercially reasonable given the nature and types
of the Company's business and properties.

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<PAGE> 20

EMPLOYEES:

At December 31, 1997, the Company had approximately 138 full-time employees
and 11 part-time employees. None of the Company's employees is represented by a
labor union. The Company considers its relations with its employees to be good.

ITEM 2. PROPERTIES

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

The Company's principal physical assets consist of cable television
systems, including signal-receiving, encoding and decoding apparatus, headends,
distribution systems and subscriber house drop equipment for each of its
Systems. The signal receiving apparatus typically includes a tower, antenna,
ancillary electronic equipment and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, are located near the
receiving devices. The Company's distribution systems consist primarily of
coaxial cable and related electronic equipment. As the upgrades are completed,
the Systems will incorporate fiber optic cable. Subscriber equipment consists of
taps, house drops and converters. The Company owns its distribution systems,
various office fixtures, test equipment and certain service vehicles. The
physical components of the Systems require maintenance and periodic upgrading to
keep pace with technological advances.

The Company's cables generally are attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in underground ducts or trenches. The FCC regulates
most pole attachment rates under the federal Pole Attachment Act.

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

ITEM 3. LEGAL PROCEEDINGS

In January 1992, in an action initiated by the Company, the Chancery Court
for Fentress County, Tennessee ordered the City of Jamestown, Tennessee
("Jamestown") to cease the operation of its municipally-owned cable television
system (which overbuilt approximately 900 of the Company's subscribers) for the
remaining term of the Company's exclusive franchise (which runs through March
14, 2002), and Jamestown ceased operation of its system. Subsequently, on
Jamestown's motion, the Chancery Court dissolved its order on the ground that
the 1992 Cable Act preempted the exclusivity provision of the Company's
exclusive franchise, and Jamestown resumed operation of its system. On April 7,
1993, in an action commenced by the Company, the United States District Court
for the Middle District of Tennessee entered an order enjoining Jamestown from
competing with the Company. Jamestown appealed to the United States Court of
Appeals for the Sixth Circuit, which affirmed the order. The Sixth Circuit Court
of Appeals subsequently ruled that Jamestown is required to correct violations
of the National Electric Safety Code with respect to its cable plant, and
remanded the case to the District Court for further proceedings consistent with
the Court of Appeals' decision.

On October 7, 1997, the City Council of Forsyth, Georgia ("Forsyth"), a
community in which the Company provides service, voted to spend $2.7 million to
build a broadband telecommunications plant in competition with the Company. On
December 2, 1997, Forsyth passed a resolution to sell $3 million in revenue
bonds to finance the proposed project. In order to protect its customer base in
Forsyth and surrounding Monroe County, Georgia, the Company sued Forsyth under
the Georgia Open Records Act to force the public disclosure of various documents

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<PAGE> 21

concerning, among other things, the feasibility and risk of Forsyth's proposed
project. Forsyth responded by counterclaiming to preliminarily enjoin the
Company from seeking further information under the Georgia Open Records Act and
from making further statements to the public concerning Forsyth's proposed
project. At a hearing before the Superior Court for Monroe County on January 27,
1998, the Court denied Forsyth's motion for preliminary injunction. The Company
has moved to have Forsyth's counterclaim dismissed.

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

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

There were no matters submitted to a vote of James' limited partners or
Finance Corp.'s sole shareholder during the fourth quarter of 1997.

PART II

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

EQUITY INTERESTS:

Equity interests in James consist of a general partnership interest and
limited partnership interests. The general partnership interest represents 0.97%
of James' total partnership interest and the limited partnership interests
represent the balance of James' total partnership interest. James has been a
privately held entity since its formation in 1988 and no trading market exists
for either the general partnership interest or the limited partnership
interests. At December 31, 1997 there was one holder of the general partnership
interest and 26 holders of the limited partnership interests. See also "Part III
- - Item 10. Directors and Executive Officers" and " - Item 12. Security Ownership
of Certain Beneficial Owners and Management." James has not made any
distributions of cash or property to any of its partners since the date of its
inception.

Equity interests in Finance Corp. consist of shares of its common stock, no
par value per share. Finance Corp. has been a privately held entity since its
formation and no trading market exists for such common stock. At December 31,
1997, 1,000 shares of common stock were issued and outstanding, all of which
were owned of record and beneficially by James. Finance Corp. has never paid or
declared a dividend.

THE NOTES AND EXCHANGE NOTES:

During the fourth quarter of 1997, the Company exchanged an aggregate
principal amount of $100,000,000 of its 10 3/4% Series B Senior Notes due 2004
for an equal principal amount of its outstanding 10 3/4% Senior Notes due 2004.
The Notes were initially sold by the Company for cash on August 15, 1997 in
transactions not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act. The Notes were sold to
CIBC Wood Gundy Securities Corp. and First Chicago Capital Markets, Inc. and
then subsequently resold to qualified institutional buyers in reliance upon Rule
144A under the Securities Act and to a limited number of institutional
accredited investors in a manner exempt from registration under the Securities
Act.

The proceeds to the Company from the sale of the Notes, net of the initial
purchasers' discount of $3.0 million, was $97.0 million (before deducting
expenses payable by the Company, estimated to be $1.1 million). These net
proceeds were used (i) to repay all indebtedness outstanding under the Company's
then existing bank credit facility (approximately $66.7 million), (ii) to repay
the Company's existing subordinated debt, including additional interest
(approximately $18.1 million), (iii) to repurchase certain warrants previously
issued by the Company in conjunction with its then existing subordinated debt
($4.4 million), and (iv) for general corporate purposes (including capital
expenditures to upgrade certain Systems) (approximately $6.7 million) (All of
the foregoing transactions being the "Refinancing".).

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<PAGE> 22

the offer and sale of the Exchange Notes was registered under the Securities
Act of 1933, as amended (the "Securities Act"), and (ii) holders of
Exchange Notes are not entitled to certain rights of holders of the Notes under
the Registration Rights Agreement of the Company dated as of August 15, 1997
(which terminated upon the exchange of the Exchange Notes for the Notes). Each
of the Notes and the Exchange Notes were issued under an indenture (the
"Indenture") dated as of August 15, 1997 among the Company and United States
Trust Company of New York, as trustee (the "Trustee"). The Company did not
receive any proceeds from the exchange. The Exchange Notes are the joint and
several obligations of James and Finance Corp.

The Exchange Notes are general senior unsecured obligations of the Company
that mature on August 15, 2004 and rank equally in right of payment with all
other existing and future unsubordinated indebtedness of the Company and senior
in right of payment to any subordinated obligations of the Company. The Exchange
Notes are effectively subordinated in right of payment to all secured
indebtedness of the Company. Interest on the Exchange Notes accrues at the rate
of 10 3/4% per annum and is payable semi-annually in cash in arrears on February
15 and August 15, commencing on February 15, 1998 to holders of record on the
immediately preceding February 1 and August 1. Interest on the Exchange Notes
accrues from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest is computed
on the basis of a 360-day year comprised of twelve 30-day months.

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

THE NEW BANK CREDIT FACILITY:

Simultaneously with the sale of the Notes, the Company entered into a
Credit Agreement dated August 15, 1997 (the "New Bank Credit Facility"), with
Canadian Imperial Bank of Commerce, an affiliate of CIBC Wood Gundy Securities
Corp., and NBD Bank, an affiliate of First Chicago Capital Markets, Inc., acting
as the lenders. The New Bank Credit Facility is a $20 million revolving credit
facility (with an option to increase the amount of credit available thereunder
to $30 million). The New Bank Credit Facility matures on August 15, 2002.
Proceeds under the New Bank Credit Facility will be available (i) to provide for
working capital and general corporate purposes, (ii) to fund certain permitted
acquisitions of cable television systems, (iii) to provide for certain permitted
repurchases of up to $5 million in the aggregate of limited partnership
interests in the Company, and (iv) to pay transaction fees and expenses. As no
borrowings under the New Bank Credit Facility were necessary to complete the
Refinancing, upon completion of the Refinancing (and subject to the terms of the
New Bank Credit Facility and the Company's Partnership Agreement) the Company
had the ability to borrow up to $20 million (with an option to increase the
amount up to $30 million) under the New Bank Credit Facility. The New Bank
Credit Facility requires the Company to maintain the ratio of its total debt to
annualized six-month EBITDA at no more than 7.0 to 1. As of December 31, 1997,
this covenant limited the Company's maximum borrowings thereunder to
approximately $8 million. The New Bank Credit Facility requires payments of
accrued interest on a monthly basis throughout the term, with principal payment
due at maturity.

The New Bank Credit Facility is secured by a first priority lien on and
security interest in substantially all of the assets of the Company. The New
Bank Credit Facility contains certain covenants and provides for certain events
of default customarily contained in facilities of a similar type. The financial
covenants which the Company considers most significant require it to: (a)
maintain an interest coverage ratio (that is, the ratio of annualized six-month
EBITDA to interest expense) of at least 1.1 to 1; (b) maintain a senior debt
ratio (that is, the ratio of debt under the New Bank Credit Facility to
annualized six-month EBITDA) of no more than 2.5 to 1; and (c) maintain the
total debt ratio described above. The Company is in compliance with each of
these covenants.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth certain historical financial data for the
Company for each of the years in the five-year period ended December 31, 1997.
The financial data for the years ended December 31, 1993 to 1997 were derived
from the financial statements of the Company which have been audited by Deloitte
& Touche LLP, independent auditors. The financial statements of the Company at
December 31, 1996 and 1997 and for each of the years in the three-year period
ended December 31, 1997, together with the report of Deloitte & Touche LLP
thereon, appear elsewhere in this Form 10-K.

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<PAGE> 23
SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)

<TABLE>
<CAPTION>
Year Ended December 31,
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues $ 30,025 $ 30,864 $ 33,305 $ 35,213 $ 35,778
System operating expenses(1) 14,129 14,408 15,073 16,249 17,400
Non-system operating
expenses(2) 2,251 2,136 2,280 2,480 2,585
Depreciation and amortization 16,915 14,102 12,214 9,272 7,930
----------- ----------- ---------- ----------- ------------
Operating (loss) income (3,270) 218 3,738 7,212 7,863
Interest expense, net 8,174 8,416 9,659 8,852 9,470
Other expenses, net 58 607 141 254 233
----------- ----------- ---------- ----------- ------------
Loss before
extraordinary item (11,502) (8,805) (6,062) (1,894) (1,840)
Extraordinary loss due to debt
refinancing - - 548 - 3,125
----------- ----------- ---------- ----------- ------------
Net loss $ (11,502) $ (8,805) $ (6,610) $ (1,894) $ (4,965)
=========== =========== ========== =========== ============
OTHER DATA:
EBITDA(3) $ 13,645 $ 14,320 $ 15,952 $ 16,484 $ 15,793
System operating cash flow(4) 15,896 16,456 18,232 18,964 18,378
Capital expenditures 1,041 1,391 2,405 3,942 7,596
EBITDA margin(5) 45.4% 46.4% 47.9% 46.8% 44.1%
Ratio of earnings to fixed
charges(6) - - - - -
CASH FLOW DATA:
Cash provided by operating
activities $ 6,476 $ 7,812 $ 6,901 $ 9,066 $ 8,403
Cash used in investing
activities (1,050) (1,105) (2,405) (3,942) (7,596)
Cash (used in) provided by
financing activities (5,706) (7,611) (3,844) (6,079) 8,995
----------- ----------- ---------- ----------- ------------
Net (decrease) increase in
cash $ (280) $ (904) $ 652 $ (955) $ 9,802
=========== =========== ========== =========== ============
SUMMARY SUBSCRIBER DATA:
Homes passed(7) 127,863 127,943 128,908 129,291 129,291
Basic subscribers(8) 79,414 80,529 80,190 78,449 78,197
Basic penetration(9) 62.1% 62.9% 62.2% 60.7% 60.5%
Premium subscriptions(10) 28,064 28,765 28,900 25,652 24,076
Premium penetration(11) 35.3% 35.7% 36.0% 32.7% 30.8%
Average monthly total revenues
per subscriber(12) $31.49 $32.17 $34.56 $36.89 $38.10
System operating cash flow per
subscriber(13) $200 $206 $227 $238 $235
EBITDA per subscriber(14) $172 $179 $199 $207 $202

<CAPTION>
At December 31,
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 1,309 $ 404 $ 1,056 $ 101 $ 9,903
Total assets..................... 61,845 46,746 39,727 32,844 43,912
Total debt....................... 95,000 88,284 88,573 82,494 100,000
Partners' deficit................ (37,613) (47,022) (54,452) (56,346) (65,711)

</TABLE>

(see footnotes on the following page)

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<PAGE> 24

NOTES TO SELECTED FINANCIAL DATA

(1) System operating expenses exclude depreciation and amortization.

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

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

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

(5) EBITDA margin represents EBITDA divided by revenues.

(6) For purposes of calculating the ratio of earnings to fixed charges,
earnings include loss before extraordinary items plus interest expense
(which includes amortization of debt issuance costs). Fixed charges consist
of interest expense incurred (including amortization of debt issuance
costs) and the estimated interest component of rent expense. Earnings were
inadequate to cover fixed charges by $11.5 million, $8.8 million, $6.1
million, $1.9 million and $1.8 million for the years ended December 31,
1993, 1994, 1995, 1996 and 1997, respectively.

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

(8) For purposes of all information presented herein, unless otherwise
indicated, the number of basic subscribers for the Systems has been
computed by adding the actual number of subscribers for all non-bulk
accounts and the equivalent subscribers for all bulk accounts. The number
of such equivalent subscribers has been calculated by dividing aggregate
basic service revenues for bulk accounts by the full basic service rate for
the community in which the account is located.

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

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

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

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

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

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

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<PAGE> 25

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

The following discussion provides information regarding the Company's
financial condition and results of operations for each of the years ended
December 31, 1995, 1996 and 1997. This discussion should be read in conjunction
with the consolidated financial statements of the Company, and the notes
thereto, which appear elsewhere herein.

OVERVIEW:

Revenues. The Company's revenues are primarily attributable to subscription
fees charged to subscribers to the Company's basic and premium cable television
programming services. Basic revenues consist of monthly subscription fees for
all services (other than premium programming and Internet service) as well as
monthly charges for customer equipment rental. Premium revenues consist of
monthly subscription fees for programming provided on a per-channel basis. In
addition, other revenues are derived from installation and reconnection fees
charged to subscribers to commence or discontinue service, late payment fees,
franchise fees, advertising revenues and commissions related to the sale of
goods by home shopping services. At December 31, 1997, the Company had 78,197
basic subscribers and 24,076 premium subscriptions, representing basic
penetration of 60.5% and premium penetration of 30.8%. The table below sets
forth for the periods indicated the percentage of the Company's total revenues
attributable to the various sources:

YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Basic ............................. 80.8% 82.6% 83.8%
Premium ........................... 11.2 10.0 9.2
Other ............................. 8.0 7.4 7.0
----- ----- -----
Total Revenues ............... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>

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

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

Significant Leverage. At December 31, 1997, the Company's indebtedness was
$100.0 million, its total assets were $43.9 million, and its partners' deficit
was $65.7 million. Due to the Company's high degree of leverage: (a) a
substantial portion of its cash flow from operations will be committed to the
payment of its interest expense and will not be available for other purposes;
(b) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or other purposes may be
limited; and (c) the Company is more highly leveraged than many cable television
companies and certain DBS and telephone companies, which may limit the Company's
flexibility in reacting to changes in its business.

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<PAGE> 26
RESULTS OF OPERATIONS:

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

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
System operating expenses 45.3 46.1 48.6
Non-system operating expenses 6.8 7.0 7.2
Depreciation and amortization 36.7 26.3 22.2
----- ----- -----
Operating income 11.2 20.6 22.0
Interest expense, net 29.0 25.1 26.5
Other expenses 0.4 0.7 .7
----- ----- -----
Loss before extraordinary item (18.2) (5.2) (5.2)
Extraordinary loss due to
debt refinancing 1.6 - 8.7
----- ----- -----
Net loss (19.8)% (5.2)% (13.9)%
===== ===== =====
EBITDA margin 47.9% 46.8% 44.1%
</TABLE>

RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1997 VERSUS YEAR ENDED DECEMBER
31, 1996:

Revenues. Revenues in 1997 were $35.8 million, an improvement of $600,000,
or 1.6%, over revenues of $35.2 million in 1996. In 1997, basic revenues
increased by $900,000, or 3.1%, primarily due to increases in subscription
rates. Average basic revenues per subscriber per month increased from $30.47 to
$31.92, or 4.8%, between 1996 and 1997.

Subscribers. During 1997 the Company experienced a decline of 252
subscribers (from 78,449 at December 31, 1996 to 78,197 at December 31, 1997).
The Company believes that this decline resulted from the increased availability
and affordability of competitive video services and generally reflects the cable
industry's experience as a whole with respect to increased competition from
satellite dishes and wireless cable services. The Company has responded with
increased and more concentrated marketing and certain strategic capital
improvement projects.

System Operating Expenses. System operating expenses increased 7.1% from
$16.2 million in 1996 to $17.4 million in 1997. This increase was primarily due
to $600,000 of variable cost increases associated with higher programming fees
(which increased from $6.0 million in 1996 to $6.6 million in 1997). In
addition, selling, service and administrative expenses of the Systems increased
5.1%, from $8.8 million in 1996 to $9.3 million in 1997, due to increased fixed
costs (including approximately $380,000 of additional marketing costs related to
the marketing initiative implemented by the Company during the fourth quarter of
1996).

Non-System Operating Expenses. Non-system operating expenses, which consist
primarily of amounts paid to the General Partner for management expenses
increased 4.2% to $2.6 million in 1997 from $2.5 million in 1996, primarily due
to increases in legal and other professional fees.

EBITDA. As a result of the foregoing, EBITDA in 1997 was $15.8 million, a
decrease of 4.2% from EBITDA in 1996 of $16.5 million.

Depreciation and Amortization. Depreciation and amortization decreased
14.5% from $9.3 million in 1996 to $7.9 million in 1997, primarily due to
certain assets becoming fully depreciated.

Interest Expense, Net. Interest expense, net (including the effects of
interest rate hedging instruments) increased to $9.5 million in 1997 from $8.9
million in 1996. This increase reflects the consummation of the Refinancing on
August 15, 1997 and the resulting increase in the Company's debt from $82
million at December 31, 1996 to $100 million at December 31, 1997. The interest
rate hedging instruments were eliminated as a result of the Refinancing.

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<PAGE> 27

Net Loss. Net loss increased $3.1 million from $1.9 million in 1996 to $5.0
million in 1997. This increase is attributable to $3.1 million of extraordinary
losses related to the Refinancing.

RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1996 VERSUS YEAR ENDED DECEMBER
31, 1995:

Revenues. Revenues in 1996 were $35.2 million, an improvement of $1.9
million, or 5.7%, over revenues of $33.3 million in 1995. In 1996, basic
revenues increased by $2.2 million or 8.1%, primarily due to increases in
subscription rates. Average basic revenues per subscriber per month increased
from $27.93 to $30.47, or 9.1%, between 1995 and 1996.

Subscribers. During 1996 the Company experienced a decline of 1,741
subscribers, or 2.2% (from 80,190 at December 31, 1995 to 78,449 at December 31,
1996). The Company believes that this decline resulted from the increased
availability and affordability of competitive video services and generally
reflects the cable industry's experience as a whole with respect to increased
competition from satellite dishes and wireless cable services. The Company has
responded with an increased and more concentrated marketing emphasis in each of
its Systems, along with certain strategic capital improvement projects.

System Operating Expenses. System operating expenses increased 7.8% from
$15.1 million in 1995 to $16.2 million in 1996. This increase was primarily due
to $218,000 of variable cost increases associated with higher programming fees
(which increased from $5.7 million in 1995 to $6.0 million in 1996). In
addition, selling, service and administrative expenses of the Systems increased
7.3%, from $8.2 million in 1995 to $8.8 million in 1996, due to increased fixed
costs (including approximately $140,000 of additional marketing costs related to
the marketing initiative implemented by the Company during the fourth quarter of
1996).

Non-System Operating Expenses. Non-system operating expenses, which consist
primarily of amounts paid to the General Partner for management expenses
increased 8.8% to $2.5 million in 1996 from $2.3 million in 1995, primarily due
to increased management expense and legal expenses relating to the modification
of the Company's then current loan agreement and certain potential acquisitions.

EBITDA. As a result of the foregoing, EBITDA in 1996 was $16.5 million, an
increase of 3.3% over EBITDA in 1995 of $16.0 million.

Depreciation and Amortization. Depreciation and amortization decreased
24.1% from $12.2 million in 1995 to $9.3 million in 1996 primarily due to
certain assets becoming fully depreciated.

Interest Expense, Net. Interest expense, net (including the effects of
interest rate hedging instruments) decreased to $8.9 million in 1996 from $9.7
million in 1995. This decrease reflects a decline in the Company's average
outstanding borrowings during 1996 versus 1995.

Net Loss. As a result of the foregoing factors, the Company's net loss
decreased by $4.7 million, or 71.3%, from $6.6 million in 1995 to $1.9 million
in 1996.

LIQUIDITY AND CAPITAL RESOURCES:

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

Net cash from operating activities was $6.9 million, $9.1 million and $8.4
million for the years ended December 31, 1995, 1996 and 1997, respectively. Net
cash used in investing activities was $7.6 million for the year ended December
31, 1997 as compared to $3.9 million for the year ended December 31, 1996. This
increase

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<PAGE> 28

was primarily due to capital expenditures associated with the Company's
selective upgrades during 1997. Cash flows from financing activities were $9.0
million for the year ended December 31, 1997 as compared to cash flows used in
financing activities of $6.1 million for the year ended December 31, 1996. This
increase reflects the consummation of the Refinancing on August 15, 1997 and the
resulting increase in the Company's debt from $82 million at December 31, 1996
to $100 million at December 31, 1997. As a result of the Refinancing the Company
obtained approximately $6.7 million for additional working capital needed for
the Company's new business strategies. See "Item 5. Market for Registrant's
Common Equity and Related Shareholder Matters."

Total assets were $32.8 million at December 31, 1996 and increased to $43.9
million at December 31, 1997. This $11.1 million increase resulted from
significant changes in the Company's cash, property and equipment, deferred
financing costs and intangible assets. Cash increased by $9.8 million as a
result of the Refinancing. Property and equipment increased by $4.7 million as a
result of the Company's selective upgrades during 1997. Deferred financing costs
increased $1.6 million due to the Refinancing. These increases, totalling $16.1
million, were partially offset by a $5.0 million decrease in intangible assets
which resulted from normal amortization expense.

Total debt increased from $82.5 million at December 31, 1996 to $100.0
million at December 31, 1997. This $17.5 million increase in debt was the direct
result of the consummation of the Refinancing on August 15, 1997.

The Company is selectively upgrading certain of its Systems to 750 MHz. At
December 31, 1997, the Company had expended nearly $7 million upgrading its
cable plant serving approximately 12,500 subscribers to 750 MHz. The Company
expects to expend approximately $13 million to upgrade its cable plant serving
an additional 19,000 subscribers to 750 MHz. The Company does not have any
significant commitments relating to its planned upgrading program. The Company
orders required materials, pays for them on ordinary credit terms and places
them in inventory until used, at which time they are capitalized. Installation
work is performed under short-term contracts which the Company may cancel at any
time without significant penalty or cost.

The Notes and Exchange Notes. During the fourth quarter of 1997, the
Company exchanged an aggregate principal amount of $100,000,000 of its 10 3/4%
Series B Senior Notes due 2004 for an equal principal amount of its outstanding
10 3/4% Senior Notes due 2004. The Notes were initially sold by the Company for
cash on August 15, 1997 in transactions not registered under the Securities Act
in reliance upon the exemption provided in Section 4(2) of the Securities Act.
The Notes were sold to CIBC Wood Gundy Securities Corp. and First Chicago
Capital Markets, Inc. and then subsequently resold to qualified institutional
buyers in reliance upon Rule 144A under the Securities Act and to a limited
number of institutional accredited investors in a manner exempt from
registration under the Securities Act.

The Exchange Notes were registered by the Company under the Securities Act
of 1933 on November 5, 1997 (registration nos. 333-35183 and 333-35183-01). The
Exchange Notes are substantially identical (including principal amount, interest
rate, maturity and redemption rights) to the Notes for which they were
exchanged, except that (i) the offer and sale of the Exchange Notes was
registered under the Securities Act, and (ii) holders of Exchange Notes are not
entitled to certain rights of holders of the Notes under the Registration Rights
Agreement of the Company dated as of August 15, 1997 (which terminated upon the
exchange of the Exchange Notes for the Notes). Each of the Notes and the
Exchange Notes were issued under an indenture dated as of August 15, 1997 among
the Company and United States Trust Company of New York, as trustee. The Company
did not receive any proceeds from the exchange. The Exchange Notes are the joint
and several obligations of James and Finance Corp.

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<PAGE> 29

The New Bank Credit Facility. Simultaneously with the sale of the Notes,
the Company entered into the New Bank Credit Facility, with Canadian Imperial
Bank of Commerce, an affiliate of CIBC Wood Gundy Securities Corp., and NBD
Bank, an affiliate of First Chicago Capital Markets, Inc., acting as the
lenders. The New Bank Credit Facility is a $20 million revolving credit facility
(with an option to increase the amount of credit available thereunder to $30
million). The New Bank Credit Facility matures on August 15, 2002. Proceeds
under the New Bank Credit Facility will be available (i) to provide for working
capital and general corporate purposes, (ii) to fund certain permitted
acquisitions of cable television systems, (iii) to provide for certain permitted
repurchases of up to $5 million in the aggregate of limited partnership
interests in the Company, and (iv) to pay transaction fees and expenses. As no
borrowings under the New Bank Credit Facility were necessary to complete the
Refinancing, upon completion of the Refinancing (and subject to the terms of the
New Bank Credit Facility and the Company's Partnership Agreement) the Company
had the ability to borrow up to $20 million (with an option to increase the
amount up to $30 million) under the New Bank Credit Facility. The New Bank
Credit Facility requires the Company to maintain the ratio of its total debt to
annualized six-month EBITDA at no more than 7.0 to 1. As of December 31, 1997,
this covenant limited the Company's maximum borrowings thereunder to
approximately $8 million. The New Bank Credit Facility requires payments of
accrued interest on a monthly basis throughout the term, with principal payment
due at maturity.

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

IMPACT OF INFLATION AND CHANGING PRICES:

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

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<PAGE> 30

YEAR 2000 COMPLIANCE

The Company does not expect the cost of converting its computer systems to
year 2000 compliance will be material to its financial condition. The Company
believes that it will be able to achieve year 2000 compliance by the end of
1999, and does not currently anticipate any disruption in its operations as the
result of any failure by the Company to be in compliance. The Company does not
currently have any information concerning the year 2000 compliance status of its
suppliers.

EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS:

In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued. SFAS No. 131 establishes standards for the
way that public business enterprises report financial and descriptive
information about their reporting operating segments. The Company has not yet
determined the impact on its financial statement disclosure. SFAS No. 131 is
effective for the Company's financial statements for the year ending December
31, 1998.

FORWARD-LOOKING STATEMENTS:

From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, new products, and similar matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the Company notes that a
variety of factors could cause its actual results and experiences to differ
materially from the anticipated results or other expectations expressed in its
forward-looking statements. The risks and uncertainties that may affect the
operations performance, development and results of the Company's business
include those discussed elsewhere herein (such as competition and regulation)
and the following:

Competition and Loss of Subscribers. Beginning in 1995, the Company has
experienced a loss of subscribers to its Systems, due primarily to increased
competition from new technologies such as wireless cable services and DBS
services. Total subscribers decreased by approximately 2.5% between December 31,
1995 and December 31, 1997. While the Company believes its strategy of upgrading
certain Systems (so as to provide enhanced video programming, Internet access
and telephony and other advanced telecommunications services) will be successful
in reversing this trend, there can be no assurance that this will be the case.
Many of the providers of DBS services and other new technologies are supported
by corporate parents with significant financial resources.

In addition to competition from wireless cable services providers and DBS
systems, the Company faces potential competition from telephone companies, which
generally have significantly greater financial resources than the Company. The
1996 Telecom Act eliminated earlier statutory barriers that had prohibited most
telephone companies from providing video services, including cable service,
within their telephone service areas. Therefore, in addition to upgrading their
own facilities to provide services similar to those offered by the Company,
telephone companies are now able to purchase existing video distribution
systems, including in some limited instances cable systems, and enter into
business relationships with existing video programming distributors.

New Lines of Business. Providing Internet access and telephony will be new
lines of business for the Company. The Company launched commercial Internet
service in its Durant System and is scheduled to launch a test of telephony
services by the end of the first quarter of 1998. Cable delivered Internet and
telephony were first introduced commercially by some cable operators only in the
past 24 months, and neither the Company nor any other cable operator has
extensive experience with either line of business.

Some of the uncertainties associated with offering Internet access through
cable are: (1) customer acceptance of cable as an alternative to traditional
dial-up Internet access; (2) the competitive response of traditional ISPs,
online services (such as Microsoft Network, CompuServe and America Online) and
long distance inter-exchange carriers (such as AT&T Corp., MCI Communications
Corporation and Sprint Corporation), all of which currently offer Internet
access on a large scale; and (3) the possibility that new technologies may be
developed which offer improved performance or other desirable features.

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<PAGE> 31

Entering the telephone business will require, among other things, access to
switching capability (which the Company hopes to accomplish through arrangements
with telephone companies in neighboring communities), appropriate governmental
certifications and successful marketing of its services to existing telephone
company customers.

While the Company is optimistic about the prospects for these new lines of
business, there can be no assurance that it will be able to enter them
successfully or generate additional cash flow.

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

The principal federal statute governing cable television is the
Communications Act of 1934, as amended (the "Communications Act"). Amendments to
the Communications Act in 1984 and 1992 and amendments in 1996 (codified as the
1996 Telecom Act) have had particular impact on the way in which cable systems
are regulated. The 1984 and 1992 amendments added materially to the regulatory
burdens of cable operators, particularly in the areas of (i) cable system rates
for both basic and certain nonbasic services; (ii) programming access and
exclusivity arrangements; (iii) access to cable channels by unaffiliated
programming services; (iv) leased access terms and conditions; (v) horizontal
and vertical ownership of cable systems; (vi) customer service requirements;
(vii) franchise renewals; (viii) television broadcast signal carriage and
retransmission consent; (ix) technical standards; (x) customer privacy; (xi)
consumer protection issues; (xii) cable equipment compatibility; (xiii) obscene
or indecent programming; and (xiv) requiring subscribers to subscribe to tiers
of service other than basic service as a condition of purchasing premium
services. The 1996 Telecom Act substantially amended the Communications Act by,
among other things, removing barriers to competition in the cable television and
telephone markets and reducing the regulation of cable television rates.

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

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

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<PAGE> 32

rate allowed by FCC rules is being charged by the Company in regulated
communities, future rate increases may not exceed an inflation-indexed amount,
plus increases in certain costs beyond the cable operator's control, such as
taxes, franchise fees and increased programming costs. The 1996 Telecom Act
provides for regulation of the CPST to expire for all cable systems on March 31,
1999. However, certain members of Congress and FCC officials have called for the
delay of this regulatory sunset and further have urged more rigorous rate
regulation (including limits on programming cost pass-throughs to cable
subscribers) until a greater degree of competition to incumbent cable operators
has developed.

In addition, other provisions of the 1992 Cable Act could in the future
have a material adverse effect on the Company's business. In particular, the
1992 Cable Act conveyed to broadcasters the right generally to elect either to
require (i) the local cable operator to carry their signal or (ii) that such
operator obtain the broadcaster's consent before doing so. To date, compliance
with these provisions has not had a material effect on the Company, although
this result may change in the future depending on such factors as market
conditions, channel capacity and similar matters when such arrangements are
renegotiated.

Non-Exclusive Franchises; Non-Renewal or Termination of Franchises. Cable
television companies operate under franchises granted by local authorities which
are subject to renewal and renegotiation from time to time. The Company's
business is dependent upon the retention and renewal of its local franchises. A
franchise is generally granted for a fixed term ranging from five to 15 years
but in many cases is terminable if the franchisee fails to comply with the
material provisions thereof. The Company's franchises typically impose
conditions relating to the use and operation of the cable television system,
including requirements relating to the payment of fees, system bandwidth
capacity, customer service requirements, franchise renewal and termination. As
of December 31, 1997, the Company had 8 franchises (representing 6.1% of the
Company's basic subscribers) expiring prior to 2000 and 44 franchises
(representing 35.1% of its basic subscribers) expiring between 2000 and 2004.

The 1992 Cable Act prohibits franchising authorities from granting
exclusive cable television franchises and from unreasonably refusing to award
additional competitive franchises; it also permits municipal authorities to
operate cable television systems in their communities without franchises. The
1984 Cable Act provides, among other things, for an orderly franchise renewal
process in which franchise renewal will not be unreasonably withheld or, if
renewal is denied and the franchising authority acquires ownership of the system
or effects a transfer of the system to another person, the operator generally is
entitled to the "fair market value" for the system covered by such franchise.
Although the Company believes that it generally has good relationships with its
franchising authorities, no assurance can be given that the Company will be able
to retain or renew such franchises or that the terms of any such renewals will
be on terms as favorable to the Company as the Company's existing franchises.
The non-renewal or termination of franchises relating to a significant portion
of the Company's subscribers could have a material adverse effect on the
Company's results of operations.

No Assurance of Successful Acquisitions. An element of the Company's
business strategy is to achieve operational efficiencies by providing advanced
telecommunications services and video services over an expanded subscriber base
within a concentrated geographic area. Consequently, the Company intends to
consider potential opportunities to acquire or trade cable television systems.
Any acquisition or trade could have an adverse effect upon the Company's results
of operations or cash flow, particularly acquisitions of new systems which must
be integrated with the Company's existing operations. There can be no assurance
that the Company will be able to integrate successfully any acquired systems
with its existing operations or realize any efficiencies from any acquisition or
trade. There can also be no assurance that any acquisition or trade, if
consummated, will improve operating results or that the Company will be able to
obtain any financing that may be necessary to fund any acquisition or trade in
the future. In addition, any acquisition or trade will be subject to, among
other things, the satisfaction of customary closing conditions and the receipt
of certain third-party or governmental approvals, including the consent of
franchising authorities.

Reduction in Insurance. On the advice of its insurance agent, to avoid the
expense of being "over insured," in 1994, the Company reduced its casualty
insurance coverage (which covers losses due to damage to its facilities and
related business interruption) from $15 million per occurrence to $10 million
per occurrence for each of its Systems (other than those in Florida and
Louisiana). Because of the industry-wide casualty insurance reductions that
resulted

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<PAGE> 33

from insurers' loss experience with several hurricanes in the southeastern
portion of the United States, the Company's casualty insurance in Florida and
Louisiana was ultimately reduced to $1 million per occurrence. All of the
Company's casualty insurance coverage is subject to deductibles ranging
between $10,000 and $100,000 per occurrence. The Company believes that its
Systems in Florida and Louisiana are located in areas that are not subject to a
high degree of risk from hurricanes, or from ice storms (which do pose a
significant risk for its Systems in other areas), and that losses in excess of
its existing coverage would be unlikely. If the Company is unable to maintain
adequate casualty insurance it will be subject to a potential reduction in cash
flow in the event of a loss in excess of its policy limits, and if a significant
loss were to occur, it could have a material adverse effect on the Company's
financial condition and results of operations.

Reliance on Management. The Company relies significantly on the services of
the General Partner and the personnel employed by or on behalf of the General
Partner. The Company maintains $5 million of key-man life insurance on Mr.
William R. James, who effectively controls the General Partner. The Company
could be adversely affected, however, if Mr. James or any of Messrs. Trenary,
Shoemaker and Madison were unwilling or unable to continue to make their
services available to the Company.

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

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

By virtue of General Instruction 1 to Item 305 of Regulation S-K, and
because it is neither a bank nor a thrift and its market capitalization on
January 28, 1997 did not exceed $2.5 billion, the Company is not required at
this time to provide disclosures under this Item 7A .

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Pages FS-1 through FS-14, which pages are included in Item 14.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K of this Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.

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

None.

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<PAGE> 34

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>
NAME AGE FUNCTIONS PERFORMED
<S> <C> <C>
William R. James........................ 64 President and
Chief Executive Officer
C. Timothy Trenary...................... 41 Chief Operating Officer
Daniel K. Shoemaker..................... 35 Chief Financial Officer
Scott A. Madison........................ 40 Director of Engineering

</TABLE>

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

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

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

Mr. James is a graduate of Princeton University and graduated from the
Harvard University Business School with distinction.

C. Timothy Trenary was a partner in the General Partner from the formation
of the Company until July 1, 1997, when he contributed his partnership interest
to his wholly-owned corporation, Trenary Corp., Ltd. From 1988 to 1989, Mr.
Trenary performed the functions of Chief Financial Officer for the Company, and,
since 1989, he has performed the functions of its Chief Operating Officer. He
has also been a Vice President of Finance Corp. since its formation in 1997. Mr.
Trenary was Vice President of Finance of JCI during 1987. From 1983 to 1986, he
was Operations Manager of the Northern Region of Capital Cities Cable, and from
1981 to 1983, he was Manager of Financial Controls for Capital Cities Cable.
Prior to joining Capital Cities Cable, Mr. Trenary was an auditor with Arthur
Young & Co.

Daniel K. Shoemaker was a partner in the General Partner from 1989 until
July 1, 1997, when he contributed his partnership interest to his wholly-owned
corporation, DKS Holdings, Inc. He has performed the functions of

-33-

<PAGE> 35

Chief Financial Officer for the Company since 1993, and from 1988 to 1993,
he served as its Director of Management Information Systems. He has also
been the Treasurer and Secretary of Finance Corp. since its formation in 1997.
From 1985 to 1988, Mr. Shoemaker was a systems engineer in a management
consulting group of Electronic Data Systems Corporation.

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

ITEM 11. EXECUTIVE COMPENSATION

The Company does not pay any compensation to the Directors or Executive
Officers. The Partnership Agreement provides compensation to the General Partner
for management services. Under the terms of the Partnership Agreement, the
General Partner is entitled to an annual management fee equal to 4% of the
Company's annual revenues, plus $5 multiplied by the average aggregate number of
subscribers to the systems owned by the Company during such year. The amount of
the management fee was approximately $1,734,000, $1,806,000 and $1,822,000 in
1995, 1996 and 1997, respectively. No other amounts were paid to the General
Partner by the Company in those years.

The General Partner is entitled to compensation from the Company pursuant
to an Incentive Compensation Agreement dated as of December 31, 1994 (the "1994
Incentive Compensation Agreement"). The 1994 Incentive Compensation Agreement
provides that, in the event that all of the Company's cable television systems
are sold, the General Partner is entitled to a cash incentive compensation award
equal to 2% of the fair market value of all of the assets of James, less James'
debts and other accrued liabilities, other than those owed to the partners of
James, and without regard to any liability arising under the 1994 Incentive
Compensation Agreement, as of the date of such sale.

-34-

<PAGE> 36
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

James is the record and beneficial owner of all of the issued and
outstanding shares of Finance Corp. The following table sets forth, at December
31, 1997, the partnership interests in James beneficially owned by: (a) each
person known to James to beneficially own 5% or more of James' total partnership
interests; and (b) each Director, each Executive Officer, and all Directors and
Executive Officers as a group:

<TABLE>
<CAPTION>
NAME AND ADDRESS OF
BENEFICIAL OWNER TYPE OF INTEREST(1) % OF CLASS
------------------------------------------------- ------------------- ----------
<S> <C> <C>
William R. James(2)............................................... General partnership *
710 North Woodward Avenue, Suite 180 Limited partnership 1.1%
Bloomfield Hills, Michigan 48304
C. Timothy Trenary(3)............................................. General partnership *
710 North Woodward Avenue, Suite 180 Limited partnership *
Bloomfield Hills, Michigan 48304
Daniel K. Shoemaker(4)............................................ General partnership *
710 North Woodward Avenue, Suite 180 Limited partnership *
Bloomfield Hills, Michigan 48304
Scott A. Madison.................................................. None
710 North Woodward Avenue, Suite 180
Bloomfield Hills, Michigan 48304
The Prudential Insurance Company of America....................... Limited partnership 24.4%
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
State Farm Mutual Automobile Insurance Company.................... Limited partnership 24.4%
One State Farm Plaza
Bloomington, Illinois 61710
Teachers Insurance and Annuity Association of America............. Limited partnership 12.2%
730 Third Avenue
New York, New York 10017
Bessemer Securities Corporation................................... Limited partnership 12.2%
630 Fifth Avenue
New York, New York 10111
The Dysson-Kissner-Moran Corporation.............................. Limited partnership 6.1%
230 Park Avenue
New York, New York 10169
Brown University-Third Century Fund............................... Limited partnership 5.9%
Room 101 - University Hall, Box C
Providence, Rhode Island 02912
Citicorp.......................................................... Limited partnership 5.6%
599 Lexington Avenue
New York, New York 10043
All Directors and Executive Officers as a group................... General partnership *
Limited partnership 1.2%
</TABLE>
- ----------
* Less than 1.00%.
(1) The general partnership interest represents 0.97% of the Company's total
partnership interest.

(2) Reflects ownership of all of the capital stock of Jamesco Inc., which holds
a 91.5% interest in the General Partner. Mr. James performs the functions
of a Director of the Company. He also performs the functions of Chief
Executive Officer of the Company.

(3) Reflects ownership of all of the capital stock of Trenary Corp., Ltd.,
which holds a 7.5% interest in the General Partner. Mr. Trenary performs
the functions of a Director of the Company. He also performs the functions
of Chief Operating Officer of the Company.

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

-35-
<PAGE> 37

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain affiliates of Sandler Media Group, Inc. were, collectively, the
holders of two-thirds in outstanding principal amount of certain subordinated
debt of the Company, together with related warrant interests in the Company,
which subordinated debt was prepaid and warrant interests were redeemed with
approximately $14.9 million out of the net proceeds of the Offering. Michael J.
Marocco, a member of the Company's Partnership Advisory Board, is an officer of
Sandler Media Group, Inc. Affiliates of Sandler Media Group, Inc. continued to
hold their limited partnership interests in the Company after the Refinancing.

PART IV

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

EXHIBITS:

ITEM 601
REGULATION S-K
EXHIBIT REFERENCE
NUMBER EXHIBIT DESCRIPTION
------------------ -------------------
(3)(a) Amended and Restated Agreement of
Limited Partnership of the Company dated
as of June 30 , 1995 (incorporated by
reference to Exhibit 3.1 of the
registrant's Registration Statement on
Form S-4 as filed with the Securities
and Exchange Commission on September 8,
1997 (registration no. 333-35183)).

(3)(b) Certificate of Limited Partnership of
the Company (incorporated by reference
to Exhibit 3.2 of the registrant's
Registration Statement on Form S-4 as
filed with the Securities and Exchange
Commission on September 8, 1997
(registration no. 333-35183)).

(3)(c) Articles of Incorporation of Finance
Corp. (incorporated by reference to
Exhibit 3.3 of the registrant's
Registration Statement on Form S-4 as
filed with the Securities and Exchange
Commission on September 8, 1997
(registration no. 333-35183)).

(3)(d) Bylaws of Finance Corp. (incorporated
by reference to Exhibit 3.4 of the
registrant's Registration Statement on
Form S-4 as filed with the Securities
and Exchange Commission on September 8,
1997 (registration no. 333-35183)).

(4)(a) Indenture dated as of August 15, 1997
among the Company, Finance Corp., and
United States Trust Company of New York,
as Trustee (including form of Notes)
(incorporated by reference to Exhibit
4.1 of the registrant's Registration
Statement on Form S-4 as filed with the
Securities and Exchange Commission on
September 8, 1997 (registration no.
333-35183)).

(4)(b) Credit Agreement dated as of August 15,
1997 among the Company, the lenders
party thereto, NBD Bank as documentation
agent and Canadian Imperial Bank of
Commerce as co-agent (incorporated by
reference to Exhibit 4.3 of the
registrant's Registration Statement on
Form S-4 as filed with the Securities
and Exchange Commission on September 8,
1997 (registration no. 333-35183)).

(4)(c) Company Security Agreement dated as of
August 15, 1997 between the Company and
NBD Bank as documentation agent
(incorporated by reference to Exhibit
4.4 of the registrant's Registration
Statement on Form S-4 as filed with the
Securities and Exchange Commission on
September 8, 1997 (registration no.
333-35183)).

-36-
<PAGE> 38
ITEM 601
REGULATION S-K
EXHIBIT REFERENCE
NUMBER EXHIBIT DESCRIPTION
----------------- -------------------
(4)(d) Guaranty Agreement dated as of August
15, 1997 by Finance Corp. in favor of
the Lenders and Agents named therein
(incorporated by reference to Exhibit
4.5 of the registrant's Registration
Statement on Form S-4 as filed with the
Securities and Exchange Commission on
September 8, 1997 (registration no.
333-35183)).

(4)(e) Guarantor Security Agreement dated as of
August 15, 1997 between Finance Corp.
and NBD Bank as documentation agent
(incorporated by reference to Exhibit
4.6 of the registrant's Registration
Statement on Form S-4 as filed with the
Securities and Exchange Commission on
September 8, 1997 (registration no.
333-35183)).

(10)(a) 1994 General Partner Incentive
Compensation Agreement dated as of
December 31, 1994 between the Company
and the General Partner (incorporated
by reference to Exhibit 10.3 of the
registrant's Registration Statement on
Form S-4 as filed with the Securities
and Exchange Commission on September 8,
1997 (registration no. 333-35183)).

12 Statement re computation of ratios.*

21 List of subsidiaries of James: James
Cable Finance Corp. (James Cable
Finance Corp. has no subsidiaries.)

24 Powers of Attorney.*

27 Financial Data Schedule.*
--------------------------

* Filed herewith.

Management contracts and compensatory plans or arrangements:

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

(3)(a) Amended and Restated Agreement of Limited Partnership of the
Company dated as of June 30 , 1995 (incorporated by reference to
Exhibit 3.1 of the registrant's Registration Statement on Form S-4
as filed with the Securities and Exchange Commission on September
8, 1997 (registration no. 333-35183)).

(3)(b) Certificate of Limited Partnership of the Company (incorporated by
reference to Exhibit 3.2 of the registrant's Registration Statement
on Form S-4 as filed with the Securities and Exchange Commission on
September 8, 1997 (registration no. 333-35183)).

(10)(a) 1994 General Partner Incentive Compensation Agreement dated as of
December 31, 1994 between the Company and the General Partner
(incorporated by reference to Exhibit 10.3 of the registrant's
Registration Statement on Form S-4 as filed with the Securities and
Exchange Commission on September 8, 1997 (registration no.
333-35183)).

-37-
<PAGE> 39
REPORTS ON FORM 8-K:

None.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:

<TABLE>
<CAPTION>
10-K
Report
page(s)
---------
<S> <C>
James Cable Partners, L.P. and Subsidiary:
Independent Auditor's Report............................................................. FS-1
Consolidated balance sheets as of December 31, 1996 and 1997............................. FS-2
Consolidated statements of operations for each of the years ended December 31, 1995,
1996 and 1997............................................................................ FS-3
Consolidated statements of partners' deficit for each of the years ended December 31,
1995, 1996 and 1997...................................................................... FS-4
Consolidated statements of cash flows for each of the years ended December 31, 1995,
1996 and 1997............................................................................ FS-5
Notes to consolidated financial statements............................................... FS-6
James Cable Finance Corp.:
Independent Auditor's Report............................................................. FS-12
Balance sheet as of December 31, 1997.................................................... FS-13
Notes to balance sheet................................................................... FS-14

</TABLE>

Financial Statement Schedules:
Any schedules for which provision is made in Regulation S-X either (i) are
not required under the related instructions or are inapplicable and,
therefore, have been omitted, or (ii) the information required is included
in the consolidated financial statements or the notes thereto that are a
part hereof.

-38-

<PAGE> 40
[DELOITTE & TOUCHE LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of James
Cable Partners, L.P. (a Delaware Limited Partnership) (the "Company") at
December 31, 1996 and 1997, and the related consolidated statements of
operations, partners' deficit and cash flows for each of the three years in the
period ended December 31, 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of James Cable Partners, L.P. at
December 31, 1996 and 1997, and the results of their operations and their cash
flows for the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.

Deloitte & Touche LLP

February 6, 1998
Detroit, Michigan

FS-1
<PAGE> 41
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1997
---- ----
<S> <C> <C>
ASSETS (NOTE 3)
Cash and cash equivalents $ 100,813 $ 9,902,842
Accounts receivable - Subscribers (net of allowance for doubtful
accounts of $14,668 in 1996 and $20,872 in 1997) 3,307,074 3,344,345
Prepaid expenses and other assets (Note 5) 215,944 213,816
Property and equipment:
Cable television distribution systems and equipment 71,802,231 79,248,360
Land and land improvements 229,704 229,704
Buildings and improvements 932,760 932,760
Office furniture and fixtures 1,147,281 1,216,867
Vehicles 3,046,103 3,126,367
------------- -------------
Total 77,158,079 84,754,058
Less accumulated depreciation (69,153,781) (72,086,368)
------------- -------------
Total 8,004,298 12,667,690
Deferred financing costs (net of accumlated amortization of $5,210,047
in 1996 and $227,206 in 1997) 2,314,896 3,883,956
Intangible assets, net (Note 2) 18,881,070 13,883,699
Deposits 20,037 15,782
------------- -------------
Total assets $ 32,844,132 $ 43,912,130
============= =============

LIABILITIES AND PARTNERS' DEFICIT
Liabilites:
Debt (Note 3) $ 82,494,236 $100,000,000
Accounts payable 362,636 245,835
Accrued expenses (Note 5) 3,428,776 2,333,228
Accrued interest on 10-3/4% Senior Notes (Note 3) 0 4,031,249
Unearned revenue 2,877,029 2,987,979
Subscriber deposits 27,673 25,279
------------- -------------
Total 89,190,350 109,623,570
Commitments and contingencies (Note 4) --- ---
Partners' deficit:
Limited Partners ("L.P.") (50,587,123) (59,500,005)
General Partner ("G.P.") (5,759,095) (6,211,435)
------------- -------------
Total (56,346,218) (65,711,440)
------------- -------------
Total liabilities and partners' deficit $ 32,844,132 $ 43,912,130
============= =============
</TABLE>

See notes to consolidated financial statements.

FS-2
<PAGE> 42
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Revenues $ 33,304,839 $ 35,212,735 $ 35,777,675
System operating expenses (excluding
depreciation and amortization) 15,072,941 16,248,981 17,399,790

Non-system operating expenses:
Management fee (Note 5) 1,733,693 1,806,226 1,822,417
Other 546,509 673,994 762,304
------------- ------------- -------------
Total non-system operating expenses 2,280,202 2,480,220 2,584,721

Depreciation and amortization 12,213,985 9,272,014 7,929,986
------------- ------------- -------------
Operating income 3,737,711 7,211,520 7,863,178
Interest and other:
Interest expense (9,717,511) (8,878,285) (9,646,679)
Interest income 58,822 26,852 176,136
Other (Note 3) (140,780) (254,331) (232,845)
------------- ------------- -------------
Total interest and other (9,799,469) (9,105,764) (9,703,388)
------------- ------------- -------------

Loss before extraordinary items (6,061,758) (1,894,244) (1,840,210)

Extraordinary loss due to debt
refinancing (Note 3) (548,564) 0 (3,125,012)
------------- ------------- -------------

Net loss $ (6,610,322) $ (1,894,244) $ (4,965,222)
============= ============= =============
</TABLE>

See notes to consolidated financial statements.

FS-3
<PAGE> 43
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT

<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------------- ------------- --------------
<S> <C> <C> <C>
Balance, December 31, 1994 $ (41,704,025) $ (5,317,587) $ (47,021,612)
Net loss (6,298,356) (311,966) (6,610,322)
Repurchase of partnership interests (781,990) (38,050) (820,040)
-------------- ------------- --------------
Balance, December 31, 1995 (48,784,371) (5,667,603) (54,451,974)
Net loss (1,802,752) (91,492) (1,894,244)
-------------- ------------- --------------
Balance, December 31, 1996 (50,587,123) (5,759,095) (56,346,218)
Net loss (4,725,402) (239,820) (4,965,222)
Repurchase of warrants (Note 3) (4,187,480) (212,520) (4,400,000)
-------------- ------------- --------------
Balance, December 31, 1997 $ (59,500,005) $ (6,211,435) $ (65,711,440)
============== ============= ==============
</TABLE>

See notes to consolidated financial statements.

FS-4

<PAGE> 44
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,
--------------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (6,610,322) $ (1,894,244) $ (4,965,222)
Adjustments to reconcile net loss
to net cash from operating activities:
Depreciation 4,797,498 3,050,080 2,932,587
Amortization 7,416,487 6,221,934 4,997,399
Noncash interest expense 875,030 672,667 647,623
Extraordinary item, net of additional
interest 548,564 0 1,894,451
(Increase) decrease in assets:
Accounts receivable (302,855) (61,980) (37,271)
Prepaid expenses 100,049 (72,624) 2,128
Deposits (45,339) 59,995 4,255
Increase (decrease) in liabilities:
Accounts payable (785,614) 283,987 (116,801)
Accrued expenses 692,697 754,434 (1,095,548)
Accrued interest on 10-3/4%
Senior Notes 0 0 4,031,249
Unearned revenue 220,322 55,253 110,950
Subscriber deposits (5,170) (3,392) (2,394)
------------- ------------- -------------
Total adjustments 13,511,669 10,960,354 13,368,628
------------- ------------- -------------
Net cash flows from
operating activities 6,901,347 9,066,110 8,403,406

Cash Flows used in Investing Activities:
Additions to property and equipment (2,405,183) (3,942,330) (7,595,978)
------------- ------------- -------------
Net cash flows used in investing
activities (2,405,183) (3,942,330) (7,595,978)

Cash Flows (used in) from Financing Activities:
Principal payments on debt (89,000,000) (6,745,563) (82,407,796)
Proceeds from debt borrowings 89,000,000 100,000,000
Deferred interest increase 375,000 778,359
Payments on capital lease obligation (85,513) (111,679) (86,441)
Purchase of interest rate protection (148,000)
Deferred financing costs (3,166,002) (4,111,162)
Repurchase of warrants (4,400,000)
Repurchase of partnership interests (820,040)
------------- ------------- -------------
Net cash flows (used in) from
financing activities (3,844,555) (6,078,883) 8,994,601
------------- ------------- -------------
Net Increase (Decrease) in Cash and
Cash Equivalents 651,609 (955,103) 9,802,029

Cash and Cash Equivalents, Beginning
of Period 404,307 1,055,916 100,813
------------- ------------- -------------

Cash and Cash Equivalents, End of
Period $ 1,055,916 $ 100,813 $ 9,902,842
============= ============= =============

Supplemental Disclosure of Cash Flow
Information - Cash paid for interest
during the period $ 7,878,875 $ 6,928,827 $ 5,651,010
============= ============= =============
</TABLE>

See notes to consolidated financial statements.

FS-5

<PAGE> 45
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

PARTNERSHIP AGREEMENT - The following represents certain provisions of the
James Cable Partners, L.P. Amended and Restated Agreement of Limited
Partnership as amended (the "Partnership Agreement"):

Term of Agreement - James will be dissolved upon the earliest to occur
of (i) December 31, 2005 (the "Term"), (ii) a determination by the general
partner that James should be dissolved, with the approval of 60% of the
Limited Partner interests, (iii) the sale or disposition by James of
substantially all of its assets, (iv) the consent of holders of 66-2/3% of
the Limited Partner interests, (v) the removal of the general partner
pursuant to the terms of the Partnership Agreement, or (vi) the bankruptcy,
insolvency, dissolution or withdrawal of the general partner. The Term can
be extended upon the affirmative vote of 66-2/3% of the Limited Partner
interests and the consent of the general partner. In certain of the
foregoing cases, the Limited Partners may elect under the Partnership
Agreement to reconstitute the business of James in a new limited
partnership with a new general partner elected by the Limited Partners.

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

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

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

FS-6

<PAGE> 46

PROPERTY, PLANT AND EQUIPMENT are recorded at cost. Depreciation is
computed using accelerated methods and includes amounts charged to expense
under capital lease obligations. Estimated useful lives for major
categories are as follows:

<TABLE>
<CAPTION>
Years
<S> <C>
Buildings and improvements 31.5 and 39
Cable television distribution systems 7
Office furniture and fixtures 5 - 7
Vehicles 5
</TABLE>

INTANGIBLE ASSETS consist of subscriber lists, franchise operating rights
and covenants not to compete acquired in connection with acquisitions.
Also included is goodwill, which is the amount by which the cost of
acquisitions exceeded the fair values assigned to assets acquired.
Intangible assets are amortized using the straight-line method over periods
up to 33 years.

DEFERRED FINANCING COSTS in connection with the refinancing that was
effective June 30, 1995 were being amortized on the straight-line method
over a 5 year life. These costs were written-off in connection with the
refinancing that occurred in connection with the issuance of the Notes
which was effective August 15, 1997. Deferred financing costs in
connection with the refinancing are being amortized on the straight-line
method over 5 years for the new bank credit facility and 7 years for the
10-3/4% Senior Notes due 2004 (Note 3).

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

PROFITS AND LOSSES are generally allocated in accordance with James'
Partnership Agreement. Currently, profits are allocated approximately 99%
to the limited partners and 1% to the general partner, and losses are
allocated approximately 95% to the limited partners and 5% to the general
partner.

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

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

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

IMPACT OF RECENTLY ADOPTED ACCOUNTING PRINCIPLES - Effective January 1,
1996, The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, which establishes accounting standards for the impairment
of long-lived-assets, certain identifiable intangibles and goodwill related
to these assets to be held and used. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company periodically evaluates the carrying value for

FS-7

<PAGE> 47

impairment based principally on the undiscounted cash flows of the
operations to which the long-lived assets and intangibles relate. The
Company's adoption of SFAS No. 121 in 1996 had no impact on the
accompanying financial statements.

In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued. SFAS No. 131 establishes standards
for the way that public business enterprises report financial and
descriptive information about their reporting operating segments. The
Company has not determined the impact on its financial statement
disclosure. SFAS No. 131 is effective for the Company's financial
statements for the year ending December 31, 1998.

FAIR VALUES OF FINANCIAL INSTRUMENTS - The carrying amounts of cash and
cash equivalents approximate their fair value due to the nature and length
of maturity of the investments.

The estimated fair value of the Company's debt instruments is based on
borrowing rates that approximate existing rates at December 31, 1997 and
1996 and, in the opinion of management, there is no material difference
between the fair market value and the carrying value of such debt
instruments.

2. INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Franchise operating rights $ 60,292,548 $ 60,292,548
Subscriber lists 13,631,000 13,631,000
Covenants not to compete 13,622,318 13,622,318
Goodwill 10,635,327 10,635,327
Organization costs 1,248,020 1,248,020
--------------- ---------------
Total 99,429,213 99,429,213
Less accumulated amortization (80,548,143) (85,545,514)
--------------- ---------------

Total $ 18,881,070 $ 13,883,699
=============== ===============
</TABLE>

3. DEBT

Debt consists of the following:

<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
10-3/4% Senior Notes due 2004 $ --- $ 100,000,000
Bank Credit Facilitiy 66,254,437 ---
Subordinated notes 16,153,359 ---
Capital lease obligation 86,440 ---
---------------- ---------------
Total $ 82,494,236 $ 100,000,000
================ ===============
</TABLE>

10-3/4% Senior Notes - The $100 million principal amount 10-3/4% Senior
Notes due 2004 (the "Notes") were issued by the Company on August 15, 1997
pursuant to a contract entered into on August 12, 1997. The Notes are
unsecured and bear interest at 10.75% per annum, payable semi-annually on
February 15 and August 15. The Notes were issued in transactions exempt
from the registration requirements of the Securities Act of 1933 (the
"Securities Act") and consequently are subject to certain transfer
restrictions; however, in accordance with a Registration Rights Agreement
entered into in connection with the issuance of the Notes, on November 5,
1997, the Company

FS-8

<PAGE> 48

registered under the Securities Act $100 million principal amount of
10-3/4% Series B Senior Notes due 2004 (the "Exchange Notes"), and shortly
thereafter commenced an offer to holders of the Notes to exchange the Notes
for the Exchange Notes in equal principal amounts (the "Exchange Offer").
During the Exchange Offer period, all Notes were tendered and exchanged for
Exchange Notes. Except for the absence of transfer restrictions, the terms
of the Exchange Notes will be substantially identical to those of the
Notes.

Retirement of Prior Debt and Warrants - A portion of the proceeds from the
issuance of the Notes was used to repay $66.4 million principal, plus
interest, that was then outstanding under the Company's prior bank credit
facility and $16.6 million principal, plus interest, that was then
outstanding under the subordinated notes. In addition, $4.4 million of the
Note proceeds were used to repurchase warrants that had been issued to the
subordinated noteholders in conjunction with the subordinated notes.

The subordinated notes were not redeemable by the Company prior to June 30,
1998. In order to retire the subordinated notes, the Company was required
to pay the subordinated noteholders an additional amount agreed by them to
be the equivalent of the additional interest that would have been payable
to them had the subordinated notes remained outstanding until June 30,
1998. This amount has been treated as an extraordinary item by the Company
in the third quarter of 1997.

Had the warrants become exercisable, they would have entitled the
subordinated noteholders to purchase a percentage of equity in James, when
and if certain criteria were met. They also had certain put and call
features with repurchase amounts to be calculated pursuant to specific
formulas, which would have become exercisable under certain conditions.
Neither the warrants nor the put and call features had become exercisable
by the time the Notes were issued, but the subordinated noteholders were
unwilling to permit prepayment of the subordinated notes at that time
unless the warrants were also purchased by the Company. Consequently, the
Company agreed to purchase them at the $4.4 million price required by the
subordinated noteholders. This payment has been treated as an equity
transaction by the Company in the third quarter of 1997.

New Bank Credit Facility - In conjunction with the issuance of the Notes,
the Company entered into a new bank credit facility (the "New Facility").
The New Facility provides for additional borrowings of up to $20 million
(with an option to increase the amount to $30 million), subject to
maintaining a specified ratio of total debt to annualized six-month EBITDA
and maintaining certain other specified ratios. The New Facility is
secured by a first priority lien and security interest in substantially all
the assets of the Company. The interest rate on the New Facility is based
on one to six month LIBOR rates plus a certain percentage based on
provisions related to debt to earnings ratios and events of default, as
defined. At December 31, 1997 no borrowings under the New Facilities had
occurred. Due to ratio requirements, the maximum borrowings as of December
31, 1997 permissible under the New Facility were approximately $8 million.

Extraordinary Loss - In connection with the prepayment of the prior bank
credit facility and the subordinated notes, the Company realized an
extraordinary loss as follows:

<TABLE>
<S> <C>
Write-off of deferred financing costs $1,894,451
Additional interest $1,230,561
------------
Total extraordinary loss $3,125,012
============
</TABLE>

In addition, the Company has paid administrative and other fees to the
debtholders for maintenance and services related to the debt. Amounts paid
in the years ended December 31, 1995, 1996 and 1997 were $157,933, $278,031
and $234,446 respectively.

FS-9

<PAGE> 49

In 1994, the Company incurred capital lease obligations of $291,746 related
to various vehicles. The agreements have been capitalized in accordance
with the provisions of SFAS No. 13, "Accounting for Leases." Total
depreciation expense in the years ended December 31, 1995, 1996 and 1997
related to this capital lease obligation was $93,359, $56,013 and $33,610
respectively. All capital lease obligations were settled by December 31,
1997.

4. COMMITMENTS

The Company leases office space under operating leases which expire at
varying dates through 2000. Total rental expense, including month-to-month
rentals, was approximately $67,750, $78,519 and $80,353 for the years ended
December 31, 1995, 1996 and 1997 respectively.

The Company is committed to monthly pole rentals of $47,395 as of December
31, 1997, to various utilities and cities. These agreements are subject to
termination rights by both parties.

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

5. RELATED PARTY TRANSACTIONS

The Company has an agreement with the general partner to operate and manage
its cable systems. The fee for management services, in accordance with the
Company's Partnership Agreement, is equal to 4% of annual revenues plus
$5.00 per average annual subscriber. Management fees paid by the Company
to the general partner amounted to $1,733,693, $1,806,226 and $1,822,417 in
the years ended December 31, 1995, 1996 and 1997 respectively.

Included in prepaid expenses and other assets are amounts receivable from
related parties which total $16,056 and $16,017 for the years ended
December 31, 1996 and 1997 respectively.

Included in accrued expenses are amounts payable to related parties which
total $155,049 and $4,930 for the years ended December 31, 1996 and 1997
respectively.

6. REGULATORY MATTERS

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

FS-10

<PAGE> 50

Under the FCC's rate regulations, most cable systems were required to
reduce their basic service and cable programming service tiers ("CPST")
rates in 1993 and 1994, and have since had their rate increases governed by
a complicated price cap scheme. Operators also have the opportunity of
bypassing this "benchmark" regulatory scheme in favor of traditional "cost
of service" in cases where the latter methodology appears favorable. The
FCC also established a vastly simplified cost of service methodology for
small cable companies.

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

Substantially all of the Company's rates are currently under the $1.24 per
channel level, and the Company believes that all of its rates in excess of
the $1.24 per channel level are reasonable using the formula described
above. However, FCC rules permit local franchise authorities to review
basic service rates, and under certain circumstances, challenge CPST rates
at the FCC. An adverse ruling in any such proceeding could require the
Company to reduce its rates and pay refunds. A reduction in the rates it
charges for regulated services or the requirement that it pay refunds could
have a material adverse effect on the Company. Once the maximum permitted
rate allowed by FCC rules is being charged by the Company in regulated
communities, future rate increases may not exceed an inflation-indexed
amount, plus increases in certain costs beyond the cable operator's
control, such as taxes, franchise fees and increased programming costs.
The 1996 Telecommunications Act provides for regulation of the CPST to
expire for all cable systems on March 31, 1999. However, certain members
of Congress and FCC officials have called for the delay of this regulatory
sunset and further have urged more rigorous rate regulation (including
limits on programming cost pass-throughs to cable subscribers) until a
greater degree of competition to incumbent cable operators has developed.

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

FS-11
<PAGE> 51
[DELOITTE & TOUCHE LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying balance sheet of James Cable Finance Corp. (A
wholly-owned subsidiary of James Cable Partners, L.P., a Delaware Limited
Partnership) ("Finance Corp.") at December 31, 1997. This balance sheet is the
responsibility of the management of Finance Corp. Our responsibility is to
express an opinion on this balance sheet based on our audit.

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

In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of James Cable Finance Corp. at December 31, 1997 in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

February 6, 1998
Detroit, Michigan

FS-12
<PAGE> 52
JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
PARTNERSHIP)

BALANCE SHEET DECEMBER 31, 1997

ASSETS
Cash and cash equivalents $1,000
======

SHAREHOLDER'S EQUITY
Shareholder's equity - Common stock, no par value (1,000 shares issued
and outstanding) $1,000
======

See notes to balance sheet.

FS-13
<PAGE> 53
JAMES CABLE FINANCE CORP.
(A WHOLLY-OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
PARTNERSHIP)

NOTES TO BALANCE SHEET

1. ORGANIZATION

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

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

Since there were no operations in the Finance Corp. from the Date of
Inception through December 31, 1997, a Statement of Operations, a Statement of
Shareholder's Equity and a Statement of Cash Flows have not been presented.

FS-14
<PAGE> 54
JAMES CABLE PARTNERS, L.P.
SIGNATURES

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

JAMES CABLE PARTNERS, L.P.

By: James Communications Partners
General Partner

By: Jamesco, Inc.
Partner

By: /s/ William R. James
-------------------------------------
William R. James
President

Date: March 11, 1998

Signature Title Date
--------- ----- ----
Person performing functions similar to
/s/ William R. James a director and a principal executive March 11, 1998
- ----------------------- officer
William R. James

/s/ C. Timothy Trenary Person performing functions similar to
- ----------------------- a director March 11, 1998
C. Timothy Trenary

Person performing functions similar March 11, 1998
/s/ Daniel K. Shoemaker to a director, a principal financial
- ----------------------- officer, and a principal accounting
Daniel K. Shoemaker officer

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

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

-39-
<PAGE> 55
JAMES CABLE FINANCE CORP.
SIGNATURES

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

James Cable Finance Corp.

By: /s/ William R. James
------------------------------------
William R. James
President

Date: March 11, 1998

Signature Title Date
--------- ----- ----
Director; President (principal March 11, 1998
/s/ William R. James executive officer)
- ------------------------
William R. James

/s/ C. Timothy Trenary
- ------------------------ Director; Vice President March 11, 1998
C. Timothy Trenary

/s/ Daniel K. Shoemaker
- ------------------------ Director; Treasurer (principal March 11, 1998
Daniel K. Shoemaker financial officer and principal
accounting officer)

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

-40-
<PAGE> 56

EXHIBIT INDEX

EXHIBIT NUMBER

12 Statement re computation of ratios.

24 Powers of Attorney.

27 Financial Data Schedule.

<PAGE> 1
EXHIBIT 12

RATIO OF EARNINGS TO FIXED CHARGES

The ratio of earnings to fixed charges for the each of the years in the
five-year period ended December 31, 1997 is presented below. Ratio of Earnings
to Fixed Charges means the ratio of pretax income from continuing operations
(with certain adjustments described below) to the total of: (i) interest and
(ii) such portion of rental expense as can be demonstrated to be representative
of the interest factor in the particular case.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNING BEFORE FIXED CHARGES:
Net Loss ($11,502,923) ($8,805,280) ($6,061,758) ($1,894,244) ($1,840,210)
Add: Interest Expense 8,225,311 8,492,134 9,717,511 8,878,285 9,646,679
Interest factor in rental
expense 205,642 201,224 223,099 233,243 243,890
-----------------------------------------------------------------------------------------

Earning Before Fixed Charges ($3,071,970) ($111,922) $3,878,852 $7,217,284 $8,050,359
=========================================================================================

FIXED CHARGES:
Interest Expense $8,225,311 $8,492,134 $9,717,511 $8,878,285 $9,646,679
Interest factor in rental expense 205,642 201,224 223,099 233,243 243,890
-----------------------------------------------------------------------------------------
TOTAL FIXED CHARGES $8,430,953 $8,693,358 $9,940,610 $9,111,528 $9,890,569
=========================================================================================

RATION OF EARNINGS TO FIXED CHARGES - - - - -

DEFICIENCY IN EARNINGS AVAILABLE TO
COVER FIXED CHARGES $11,502,923 $8,805,280 $6,061,758 $1,894,244 $1,840,210
=========================================================================================
</TABLE>

<PAGE> 1

EXHIBIT 24

KNOW ALL MEN by these presents that each of the undersigned does hereby
make, constitute and appoint William R. James, C. Timothy Trenary and Daniel K.
Shoemaker and each of them, the true and lawful attorney-in-fact of the
undersigned, with full power of substitution and revocation, for and in the
name, place and stead of the undersigned, to execute and deliver the Annual
Report on Form 10-K of James Cable Partners, L.P. and James Cable Finance Corp.
for the year ended December 31, 1997, and any and all amendments thereto; such
Form 10-K and each such amendment to be in such form and to contain such terms
and provisions as said attorney or substitute shall deem necessary or desirable;
giving and granting unto said attorney, or to such person or persons as in any
case may be appointed pursuant to the power of substitution herein given, full
power and authority to do and perform any and every act and thing whatsoever
requisite, necessary or, in the opinion of said attorney or substitute, able to
be done in and about the premises as fully and to all intents and purposes as
the undersigned might or could do if personally present, hereby ratifying and
confirming all that said attorney for such substitute shall lawfully do or cause
to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has duly executed this instrument as of
the twenty-fourth day of February, 1998.

/s/ William R. James
--------------------------------------
William R. James

/s/ C. Timothy Trenary
--------------------------------------
C. Timothy Trenary

/s/ Daniel K. Shoemaker
--------------------------------------
Daniel K. Shoemaker

<ARTICLE> 5
<CIK> 0000926283
<NAME> JAMES CABLE FINANCE CORP.

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,902,842
<SECURITIES> 0
<RECEIVABLES> 3,365,217
<ALLOWANCES> 20,872
<INVENTORY> 0
<CURRENT-ASSETS> 13,461,003
<PP&E> 84,754,058
<DEPRECIATION> 72,086,368
<TOTAL-ASSETS> 43,912,130
<CURRENT-LIABILITIES> 9,623,570
<BONDS> 100,000,000
0
0
<COMMON> 0
<OTHER-SE> (65,711,440)
<TOTAL-LIABILITY-AND-EQUITY> 43,912,130
<SALES> 0
<TOTAL-REVENUES> 35,777,675
<CGS> 0
<TOTAL-COSTS> 27,914,497
<OTHER-EXPENSES> 56,709
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,646,679
<INCOME-PRETAX> (1,840,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,840,210)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,125,012)
<CHANGES> 0
<NET-INCOME> (4,965,222)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>